Will oil ignite a dispute between Saudi Arabia and the UAE and disintegrate “OPEC Plus”?

July 05, 2021
Is Saudi Arabia boycotting its Gulf ally, for the sake of Russia? Is Saudi Arabia boycotting its Gulf ally, for the sake of Russia?

Daily Times, Dubai United Arab Emirates:- It seems that a great chasm of differences has begun to widen between the two Gulf allies, Saudi Arabia and the UAE, and even international fears have begun that may prompt major countries to quickly intervene to heal the rifts, in order to save the collapsed oil markets, due to fears that Abu Dhabi will withdraw from the “OPEC Plus” organization.

While the Gulf allies are accustomed to not revealing their differences to the public, statements by officials of the two countries indicated a major escalation that could reach a stage where diplomatic solutions would be difficult.

The UAE rejected the proposed plan to increase oil production by 400,000 barrels per day every month, from August to December, so that the additional amount of oil put on the market by the end of the year would reach two million barrels per day.

The lack of consensus among members about production quantities was a reason for postponing the resumption of remote talks, according to the Spanish news agency Efe, and an official in the Kazakh Energy Ministry.

Saudi Arabia and Russia are pushing for the adoption of this agreement until December 2022, but the UAE says it is too early to agree to the extension until the end of next year, and wants production levels to be re-discussed by the end of the current agreement in April 2022.

Discussions were complicated by the last-minute objection of the UAE, whose oil revenues constitute about 30 percent of its gross domestic product, to the Russian-Saudi deal during the meeting of the 23 "OPEC Plus" countries.

"It's the whole group versus one country, and this is sad for me, but this is the reality," Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg TV on Sunday evening.

In an interview with Al-Arabiya channel, the Saudi minister confirmed the existence of a “consensus” in the “OPEC Plus” group, but added that “consensus exists and exists, except for one country,” and called for “some concession and some rationality” to reach an agreement.

Since May, the alliance has re-pumped black gold in a timid manner, after tightening severely at the beginning of the spread of the Corona virus, which contributed to raising prices, which are now revolving around the threshold of $ 75, following its collapse more than a year ago.

Despite the increase stipulated in the Saudi-Russian plan, the UAE considered that adhering to it until the end of 2022 is "unfair".

The UAE Minister of Energy and Infrastructure, Suhail Al Mazrouei, said in strongly worded statements on Sunday, that the UAE’s demand is only justice in the new agreement after April, and he continued, in an interview with “Sky News Arabia” channel, which is based in Abu Dhabi: “It is unreasonable that we accept The continuation of injustice and sacrifice is more than we have been patient and sacrificed.”

At the heart of the dispute between Riyadh and Abu Dhabi is the issue of the volume of production, through which each country's share is calculated.

The UAE insists on raising the main production line by 0.6 million barrels per day to 3.8 million barrels, considering that the current ratio (3.17 million) in October 2018 does not reflect its full production capacity.

But the Saudi Energy Minister expressed his reservations about this demand, saying, "I have attended OPEC meetings for 34 years, I have not seen a similar request." Such reciprocal public statements are rare in a region where disputes between allies are generally settled with the utmost discretion.

The Saudi minister refuses to comply with Abu Dhabi's demands, arguing that extending the agreement as it is until the end of 2022 is necessary for market stability, and explained to Bloomberg TV, "We have to extend."

Failure to reach an agreement could lead to a sharp rise in crude oil prices, threatening the weak global recovery due to the Covid-19 pandemic. The dispute also threatens to dismantle "OPEC Plus", which may cause a price war that will lead to global economic chaos.

In the past year 2020, a dispute between Moscow and Riyadh led to the decline in the price of American crude to below zero for the first time in history. Experts express concern about the Emirati-Saudi dispute.

The two Gulf countries have established very close diplomatic relations for decades, but the differences have intensified recently, especially with regard to the fierce economic competition in the sectors of technology, transportation, and others, and investment.

In 2019, the UAE withdrew the majority of its forces in Yemen, after it was a key component of the military coalition led by the Kingdom in this country against the Iranian-backed Houthi rebels since 2015.

Abu Dhabi also appeared completely unsatisfied with the conditions for the January 2021 reconciliation with Qatar, after more than three years of diplomatic spat in the Gulf.

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