- Samir Hashmi
- BBC News Middle East Economic Correspondent
A public dispute between the United Arab Emirates and Saudi Arabia over the allocation of oil production this week led to the abandonment of negotiations between the world’s largest producing nations, leaving energy markets without limits and pushing resource prices to an all-time high.
The 23-nation OPEC +, which includes the Organization of the Petroleum Exporting Countries and its associated producers such as Russia, had to postpone talks indefinitely, raising fears about the group’s stability. Over the past 18 months, countries have managed to tackle the global economic crisis related to the corona virus epidemic.
Last week, when the leaders of the United Arab Emirates (OPEC), Saudi Arabia and Russia rejected production, restrictions on production were to be extended for another eight months.
The UAE wanted to reconsider its current fundamentals – the amount of calculated production cuts or increases – in order to gain the freedom to produce more oil. However, Saudi Arabia and Russia opposed it.
The talks took an unexpected turn when the energy ministers of the United Arab Emirates and Saudi Arabia, who are close allies, made their differences public.
“The split was a surprise, but the fight may be inevitable,” says Ben Cahill, a senior researcher at the Center for Strategic and International Studies in Washington.
“Abu Dhabi’s productivity is at odds with its OPEC allocation. It has invested a lot of money to increase its production. Demand is growing now. That is why last year the UAE was frustrated by its inability to increase production.”
Over the years, the partnership between Saudi Arabia and the United Arab Emirates has shaped the geopolitics of the Arab world.
The personal bond between Saudi Crown Prince Mohammed bin Salman and Abu Dhabi Crown Prince Mohammed bin Saeed helped to cement this alliance.
Both are seen as the true rulers of their country and have ambitious visions.
For many years, there has been deep cooperation in strategic matters. They formed an Arab military alliance in 2015 to wage war against the Houthi rebel movement, joined Iran in Yemen, and imposed a diplomatic, trade and travel ban on Qatar in 2017.
But two years ago, the Saudis were outraged when the United Arab Emirates withdrew most of its troops from Yemen.
Emirates has been reluctant to accept a deal with the Saudis to end the embargo on Godar, although they fear they will trust Doha. Saudi Arabia does not like the UAE’s decision to normalize relations with Israel last year.
As these differences began to deepen in February this year, Saudi Arabia issued a final warning to multinational corporations to move their regional headquarters to the Kingdom in 2024 under threat of losing their government contracts. It was considered an indirect attack on Dubai (in the United Arab Emirates), the region’s commercial hub.
After the United Arab Emirates blocked the proposed OPEC deal, the Saudis appeared to retaliate by suspending flights to the UAE. The country is concerned about the spread of variants of the corona virus. But the decision came shortly before the Islamic holiday, with many going to Dubai for the holidays.
Saudi Arabia has announced a waiver of imports from free zones or has been linked to Israel from a priority tariff agreement with other Gulf states, which is a blow to the UAE economy, which revolves around a free zone model.
The OPEC + controversy is marked by growing economic competition, with both countries seeking to diversify their economies and reduce their dependence on hydrocarbon exports.
While Saudi Arabia under Mohammed bin Salman has pursued a more aggressive economic strategy, countries are now competing in areas such as tourism, financial services and technology.
“It’s a huge Saudi Arabia that has emerged in the region.
“If Saudi Arabia becomes a dynamic economy in 15 to 20 years, it will pose a threat to the Emirates’ economic model.”
It is not yet clear whether Saudi Arabia and the United Arab Emirates can reach an OPEC + agreement.
But Ali Shihabi, a Saudi analyst close to the state court, did not believe the split would harm the relationship in the long run, saying the emirate’s tough stance was a “shock” to Saudis.
“Both sides have had huge differences in the past,” he says.
“Every relationship goes through ups and downs, including in the United States and the United Kingdom. But the basics of that relationship really exist [muito] Strong to do any permanent damage to this alliance. “
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