The United Arab Emirates has announced its withdrawal from the Organization of the Petroleum Exporting Countries (Opec) after six decades of membership, dealing a significant blow to the cartel and its de facto leader, Saudi Arabia, amid the biggest supply crisis in history. The decision, reported by The Guardian, is seen as a geopolitical move rather than purely economic, reflecting Abu Dhabi's growing assertiveness and frustration with Riyadh's cautious regional approach.
Geopolitical Rift and Oil Quotas
The UAE has increasingly challenged Saudi dominance, with tensions escalating publicly—including Saudi airstrikes on what it called a UAE-linked arms shipment in Yemen in December. Abu Dhabi, as a primary target of Iranian strikes among Gulf states, is angered by what it perceives as a feeble regional response to the current conflict and has privately pushed for counterattacks. Long-standing grievances over oil quotas also fueled the decision: the UAE sought to pump more, while Saudi Arabia insisted on production cuts to maintain prices.
Immediate Market Impact Limited
The Iran crisis provided an opportunity rather than the cause for the exit. The closure of the Strait of Hormuz has choked oil supplies, so the announcement had limited immediate impact on markets. Even after the conflict ends, the effects of restarting production, rebuilding infrastructure, and refilling strategic reserves are likely to cushion prices. However, the decision wounds a cartel already far from its peak power. Opec accounted for about half of global crude oil output in the 1970s but now represents only around a quarter, due to surging production in the Americas.
Weakened Cartel, Volatile Prices
Without the UAE—a key contributor to Opec's spare capacity—the group will find it harder to shape markets, leading to potentially more volatile prices. This could backfire for the UAE itself. Some analysts suggest Saudi Arabia might retaliate by flooding the market with refined products, accepting short-term revenue losses. Additionally, any deal with Iran would increase oil supply. US President Donald Trump, who has accused Opec of “ripping off the rest of the world,” will likely welcome the weakening of the cartel.
Risks for the UAE and Global Transition
The UAE may seek rewards from the US, such as investment and priority in restocking missile interceptors, but it will face greater regional isolation and increased dependence on an unpredictable US administration. Abu Dhabi is widely believed to be the main backer of Sudan's paramilitary Rapid Support Forces, despite denials, which have committed atrocities in the ongoing war. The broader danger is that cheaper oil could slow the global shift to renewables, when acceleration is urgently needed. Paradoxically, this transition may have spurred the UAE to act now; though it has diversified its economy, oil remains central, and it may be maximizing revenue while possible.
Renewable Transition Must Accelerate
The announcement came as 57 countries met for the world's first conference on the transition to renewables. The climate case for action is clear. Oil-importing countries may find that the economic impact stems more from unpredictable prices than lower ones. This week's news is no excuse to ease off on the transition but rather a reason to press ahead with increased urgency. The world must accelerate the shift to renewables, regardless of the economic effects of Abu Dhabi's decision.
