The United Arab Emirates will have a busy 2023. The Gulf state wants to pump more oil, shore up its status as the main destination for Western capital in the region, and make a big splash when Dubai hosts the COP28 climate conference in November. That may lead President Mohammed bin Zayed al-Nahyan, known as MbZ, to re-examine one of his country’s oldest alliances.
The UAE has been a key member of the Organization of the Petroleum Exporting Countries for 55 of the 62 years that the club has existed. But current OPEC policy is far from helpful for MbZ. The state is only allowed to pump 3 million barrels a day, considerably below its 4-million-barrel capacity. It’s even further below a 5-million-barrel daily production target that the Abu Dhabi National Oil Company recently brought forward to 2027 from 2030.
The UAE has chafed at OPEC restrictions before, in 2020 and 2021. But the oil cartel’s de facto leader, Saudi Crown Prince Mohammed bin Salman, has taken it in a particularly destabilising direction of late. Ostensibly, OPEC’s current cuts are supposed to offset the risk of an oil price slump as the United States and Europe enter a recession. But they also offer a way for MbS to needle U.S. President Joe Biden, who wants producers to pump more. OPEC’s alliance with Russia, as part of the wider OPEC+ group, similarly risks lumping its members in with a wider anti-Western bloc.
MbZ could change that by quitting, as Qatar did in 2019. The UAE would then get the proceeds from being able to pump whatever it likes, while also benefitting from a warm fuzzy glow in the eyes of the United States and its allies. That would help to secure Abu Dhabi and Dubai’s places as the primary Gulf destinations for Western capital and corporate headquarters, fending off Saudi efforts to displace them.
Officially, OPEC thinks crude demand will keep growing until 2035. But ADNOC’s accelerated oil production timetable is arguably more in keeping with a different outlook, preferred by the International Energy Agency, whereby oil demand peaks much sooner. If MbZ were to use the COP28 conference to make that more explicit, it could push the UAE further away from OPEC.
All this can be true without the two actually parting ways in 2023. And quitting OPEC to pump more oil would be awkward while hosting a climate conference. But that might not trouble MbZ, who could use COP28 to champion technologies that reduce the damage from oil emissions, while also charting a more convincing route away from fossil fuels in the long term. Distancing the UAE from the oil producing club would represent a hugely powerful signal.
Source: Hellenic Shipping News
