OPEC+ Production Cut Extension Proposal Sparks Clash Between Saudi Arabia and UAE

[Asia Economy Reporter Byunghee Park] Saudi Arabia, the leader of the Organization of the Petroleum Exporting Countries (OPEC), has started pressuring the United Arab Emirates (UAE) following the failure to reach an agreement at the OPEC Plus (OPEC+) meeting.

According to major foreign media on the 4th (local time), Abdul Aziz bin Salman, Saudi Energy Minister, stated at the OPEC+ meeting that it is time for the UAE to show compromise and rationality, following the consecutive failures to reach an agreement.

OPEC+ is a consultative body consisting of OPEC and major non-OPEC oil-producing countries such as Russia. OPEC+ held consecutive meetings on the 1st and 2nd to discuss future oil production plans but failed to reach an agreement. Unusually, OPEC+ extended the meetings twice and will meet again on the 5th to attempt to reach an agreement.

Abdulaziz bin Salman, Saudi Energy Minister
Photo by Reuters-Yonhap News

Both Saudi Arabia and the UAE agree on increasing production. UAE Energy Minister Suhail Al Mazrouei emphasized in an interview with CNBC on the 4th that "all OPEC+ member countries want to increase production," and that the UAE unconditionally supports production increases.

Therefore, it is expected that there will be no disagreement regarding the currently discussed production increase plan. OPEC+ plans to increase daily oil production by 400,000 barrels each month starting in August, totaling 2 million barrels over five months until December.

The point of contention lies in whether to extend the agreement to cut production by 5.8 million barrels. OPEC+ decided on large-scale production cuts at a meeting in April last year, right after the COVID-19 pandemic began. At that time, it was agreed to reduce daily oil production by 5.8 million barrels from January 2021 to April 2022. The 5.8 million barrel cut is still in effect, so even with the 2 million barrel increase this December, the net cut remains 3.8 million barrels.

OPEC+ is currently considering extending the 5.8 million barrel production cut, which is scheduled to end in April next year, until December next year?an extension of eight months?in exchange for increasing production by 2 million barrels in the second half of this year. The UAE opposes this extension of the production cut.

The UAE has significantly expanded its production capacity over the past few years. By investing billions of dollars, it increased daily oil production from 3.16 million barrels in October 2018 to 3.84 million barrels as of April last year, a 21.5% increase. However, due to the COVID-19 pandemic, the UAE has not fully benefited from this capacity expansion. Therefore, Minister Mazrouei argues that the UAE is currently in the most disadvantageous position within OPEC+ and suggests deciding on the production increase first and discussing the extension of the 5.8 million barrel cut later.

Saudi Arabia wants to decide on both the production increase and the extension of the 5.8 million barrel cut together. Saudi Energy Minister bin Salman emphasized that extending the deadline for easing production cuts is not a secondary agenda but a foundational issue for discussions, stating that the efforts over the past 14 months have yielded fantastic results, and failing to maintain these achievements would be shameful.

Suhail Al Mazrouei, UAE Minister of Energy
[Photo by AP Yonhap News]

As conflicts between Saudi Arabia and the UAE have surfaced, recent clashes between the two in a series of incidents have also come under renewed scrutiny.

Just a few years ago, Saudi Arabia and the UAE maintained a close relationship to the extent of secretly planning a political alliance. They also joined forces in the Yemen civil war, which has taken the form of a proxy war between Saudi Arabia and Iran. To suppress the Houthi rebels supported by the Iranian government, Saudi Arabia formed a coalition with nine Sunni countries, including the UAE, and intervened in the Yemen civil war in 2015. However, in 2019, the UAE withdrew most of its troops from the Yemen conflict, leaving Saudi Arabia to fight alone. Subsequently, the Southern Transitional Council (STC), a separatist group in southern Yemen supported by the UAE, clashed with government forces backed by Saudi Arabia.

Saudi Arabia and the UAE also showed divergent approaches in handling the COVID-19 pandemic. The UAE signed a vaccine cooperation agreement with China, administered the Sinopharm vaccine to its citizens, and mass-produced the Sinopharm vaccine domestically. In contrast, Saudi Arabia did not approve the use of Chinese vaccines. Additionally, starting from the 4th, Saudi Arabia banned tourists arriving from the UAE to prevent the spread of the Delta variant.

Middle East political expert Professor Abdulkhaleq Abdulla diagnosed, "For the past 40 years, the UAE has followed Saudi Arabia's opinions within OPEC, but recently, it has shown signs of asserting its power to protect its own interests."

This content was produced with the assistance of AI translation services.