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A few years ago, the United Arab Emirates and Saudi Arabia came up with a secret plan for political union.
While a confederation did not materialize, the autocratic Gulf states fought the rebels in Yemen and remained united in a boycott in Qatar for their alleged support for Islamism.
In recent days, however, the cracks in this unit have become apparent as the interests of Riyadh and Abu Dhabi diverge again on issues ranging from oil production, Yemen, normalization with Israel and the way to fight the pandemic.
A videoconference meeting of members and allies of Opec (Opec +) ended on Friday after a stalemate after Saudi Arabia and Russia asked producers to increase production in the coming months. The request was designed to facilitate the rise in oil prices and expand an existing supply agreement to ensure stability as the world embarks on a fragile recovery from the coronavirus pandemic.
But the United Arab Emirates refused, delving into a question of its own share of production that it considers unfair. OPEC members meet again on Monday.
“Strong competition within the Gulf states has several economic policy issues,” said Karen Young, a senior member of the Middle East Institute. “Saudi Arabia has clearly increased pressure, while the UAE is pushing to achieve its own profit targets in this tight market. These energy giants are preparing for the next ten years of export earnings to maintain their political economies ”.
Other OPEC + countries incorporate the plan to increase production by 400,000 barrels per day each month, from August to December, and to extend the agreement beyond the expected end date of April 2022.
Deteriorating relations with the United Arab Emirates have been combined with the UAE’s determination to expand production capacity to support oil diversification plans. The power struggle among OPEC members now jeopardizes the cartel’s ability to unify in the long run and provide stability in oil prices.
In a rare public intervention on Sunday, the UAE Ministry of Energy said it supported an increase in production, but called for the country’s benchmark production (from which its cuts in supply) take into account their higher production capacities and be reviewed to ensure justice “for all party”.
Abu Dhabi’s tough stance on OPEC comes amid broader interest diversion between the two Gulf superpowers.
Although the United Arab Emirates and Saudi Arabia have built a “strategic alignment repository” over the past decade, “economic competition is intensifying among Gulf states,” said Marwan Alblooshi, a candidate for teaching in the UAE at the University of Edinburgh.
The UAE in 2019 withdrew most of its military forces from Yemen, leaving Saudi Arabia alone in its battle against Iran-backed Houthi rebels. Southern separatist forces allied to the United Arab Emirates clashed with Yemeni-backed Yemeni government forces.
Although the United Arab Emirates has accepted a Saudi-led effort to end the trade and travel embargo on Qatar, Abu Dhabi has been alarmed at the speed of reconciliation with Doha. Similarly, Israel’s embrace by the UAE after the normalization of relations last year has raised eyebrows at Saudi Arabia.
A different treatment of the pandemic has also been a source of frustration in both states. Riyadh since Sunday has decided to ban travel from the UAE to its trips, where the Delta variant accounts for a third of all new cases. Saudi Arabia has not approved the Chinese-made vaccine on which the United Arab Emirates largely depends for its mass vaccination.
Saudi Arabia’s threat to cut multinationals from lucrative government contracts if they do not relocate their headquarters to Riyadh has been perceived as an implicit attack on Dubai, the UAE’s shopping center where the majority is located.
The Saudis downplay the discussion about tensions, noting that OPEC spaces are a “business” and that coronavirus restrictions are about “security” and not about politics.
“For the past 40 years, the UAE has consistently followed Saudi leadership in OPEC,” said Abdulkhaleq Abdulla, a Dubai-based political science professor. “But lately, the UAE has been firmer on its fair share and is now flexing its muscles on that front.”
Under the proposed Opec + agreement, the United Arab Emirates would proportionally reduce its production by 18%, compared to a 5% reduction for the kingdom and a 5% increase for Russia. The UAE said it has closed about 35 percent of its current production capacity, compared to an average of 22 percent for other people in the deal.
The United Arab Emirates had called for a review of basic production benchmarks at a later meeting. The request was denied.
“The Joint Ministerial Monitoring Committee (of OPEC) unfortunately presented only one option to increase production on the condition of an extension of the current agreement, which would extend the United Arab Emirates reference line of unfair production United States until December 2022, “the UAE energy ministry said in a statement.
Amrita Sen of Energy Aspects said: “The growing differences of opinion on foreign, economic and security policies between Riyadh and Abu Dhabi, as well as on oil policy itself, will complicate future discussions and efforts. ‘Opec to maintain the Opec + agreement “.
Interns say there has been a debate in Abu Dhabi at the highest levels of the national oil company over whether to leave the oil cartel. An exit would allow the United Arab Emirates to finance plans to diversify the economy, from refinery and petrochemical production to a newly created stock exchange and its own crude oil benchmark that requires access to volumes to make it a success.
The departure of the United Arab Emirates from the cartel could lead to free production that would harm the purpose of Opec +, according to energy analysts.
“The UAE has sacrificed more,” UAE Energy Minister Suhail Al Mazrouei told CNBC on Sunday. “We cannot make a new agreement on the same terms: we have a sovereign right to negotiate.”
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