The Organization of the Petroleum Exporting Countries (OPEC), which had gripped and shaken global oil prices for 66 years since its founding in 1960, has effectively become a figurehead. After already taking three critical hits this year, it has looked helpless, unable to mount any response.
In January, OPEC saw member Venezuela abandon the Chavista-style resource nationalization policy it had held for more than 20 years and open the door to foreign capital. In February, another member, Iran, came under airstrikes by the United States and Israel. As Iran blocked passage through the Strait of Hormuz, OPEC did nothing beyond granting an exemption from production cut quotas. Other Gulf members such as Saudi Arabia, Kuwait, and Iraq, which had relied on OPEC, saw their export routes blocked one after another.
The United Arab Emirates (UAE) drove a stake into a wavering OPEC on the 28th (local time). The UAE said that day it would withdraw from OPEC and OPEC Plus effective May 1. Within OPEC, the UAE is a core producer with spare capacity second only to leader Saudi Arabia. Energy Minister Suhail Al Mazroui told CNBC that "now is the best time to leave," adding, "there was no prior consultation with other members, including Saudi Arabia, about the withdrawal." It means there was no consultation, sanctions, or dissuasion among key members.
This withdrawal is not a one-off decision. Experts said it was the result of accumulated tensions between Saudi Arabia and the UAE over oil production quotas controlled by OPEC. Before the war with Iran on Feb. 28, the UAE was already pumping about 3.7 million barrels a day, roughly 3% of global oil supply. Its actual producible capacity is more than 20% higher, around 4.5 million barrels. State oil company ADNOC plans to raise that to 5 million barrels by the end of 2027.
The Wall Street Journal (WSJ), citing experts, said the UAE can pump 1.4 million barrels a day more than its OPEC-assigned quota (3.0 million to 3.5 million barrels a day). Assuming current oil at $100 a barrel, it calculates that more than $51 billion (about 75.2 trillion won) in potential annual revenue is tied up by OPEC discipline.
Saudi Arabia and the UAE are both pro-U.S. Gulf monarchies, but their economic structures and calculations differ. Saudi Arabia must defend high oil prices to fund mega state projects like Neom City. In November 2023, Saudi Arabia agreed with Russia at the OPEC Plus meeting to voluntarily cut 1.5 million barrels a day. It has since extended the cuts each quarter, trying to keep prices around $100 a barrel. Russia, the world's No. 2 oil producer after the United States, pumps 9.87 million barrels a day. Combined with No. 3 Saudi Arabia (9.51 million barrels), they account for about 23% of global oil production.
The gap is wider in capital mobilization. The UAE has diversified into finance, aviation, logistics, tourism, and sovereign wealth funds. According to the Federal Competitiveness and Statistics Centre (FCSC), as of 2024, the UAE's non-oil institutional sector accounted for 75.5% of gross domestic product (GDP). In particular, in Dubai, the financial hub, oil accounts for less than 1% of GDP. During the same period, Saudi Arabia drew 60% of government revenue and 42% of GDP from oil.
The difference between the two countries is even starker in capital mobilization. The combined assets under management of sovereign wealth funds such as Mubadala, ADQ, and ADIA exceed $2 trillion (about 2,950 trillion won). That is more than double Saudi Arabia's Public Investment Fund (PIF) at around $930 billion. Factoring in the UAE's foreign reserves of about $300 billion (about 442 trillion won), the UAE's national finances would not be shaken by lower oil prices in terms of both industrial structure and capital. Rather, it is rational to extract every last drop before oil demand peaks and redirect it into next-generation sectors such as artificial intelligence (AI), semiconductors, and clean energy.
The two countries had already clashed head-on over production cuts at an OPEC Plus meeting in 2021. The meeting was suspended for days in disarray after the UAE yielded to Saudi pressure. Beyond energy, they have collided over political issues such as handling the Yemen civil war, involvement in the Sudan crisis, and lifting the blockade on Qatar. Karen Young, a researcher at Columbia University's Center on Global Energy Policy, told Reuters, "This withdrawal is a move by the UAE to build flexible ties with major energy consumers and to position itself more competitively against Saudi Arabia."
The Iran war became a decisive moment for the UAE to voice doubts about the traditional Gulf alliance. The UAE sits 200 kilometers across the Persian Gulf from Iran. Throughout the war, it was the most exposed to Iranian missile attacks. Debris from intercepted missiles fell on civilian and industrial facilities such as Zayed International Airport, Jebel Ali Port, Fujairah Port, Dubai International Airport, and the ADNOC Ruwais refinery complex, causing fires and casualties.
During the Iranian bombardment, the UAE developed deep doubts about the collective security function claimed by the Gulf Cooperation Council (GCC). Anwar Gargash, a UAE diplomatic adviser, criticized on the 27th, the day before the withdrawal, that "the GCC has historically responded inadequately to Iran's attacks on UAE territory." By publicly signaling that the Gulf's single security umbrella did not function, it is interpreted as also expressing concern about the continuity of the economic alliance.
The UAE chose the United States and Israel as alternatives to Gulf states. According to U.S. political outlet Axios, the UAE and Israel are showcasing closeness by sharing Iron Dome air defense networks and operating personnel. The UAE is also strengthening economic ties with the United States by launching a $100 billion (about 147 trillion won) cooperation package in clean energy and artificial intelligence (AI). Separately, the UAE has begun informal talks with the Federal Reserve on a dollar currency swap. From security to technology to finance, it is showing a broad shift away from the Gulf alliance and into the system led by the United States and Israel.
Experts said signals of OPEC's waning influence, already evident in the Venezuela and Iran cases, are likely to become clearer with the UAE's withdrawal. Although Venezuela and Iran are both founding members of OPEC, the organization provided no institutional safety net in the face of sanctions and war. Both the restoration of production facilities and protection through exports were led by other countries and institutions outside OPEC's remit.
In particular, Venezuela's oil industry, which effectively came under U.S. control after the Maduro regime collapsed, is further narrowing OPEC's footprint. The oil hegemony once led by the Middle East is eroding in terms of absolute output as producers in the Americas grow. U.S. crude production more than doubled from 5.4 million barrels a day in January 2010 to 13.2 million barrels in January this year. U.S. shale firms can profit at $50 a barrel, while most OPEC members need $80 to $120 for fiscal balance. For Saudi Arabia, the price needed for fiscal balance is $86.
Diminished OPEC influence is expected to affect the energy policies of Asian countries with high dependence on Middle Eastern oil, such as Korea and Japan. Japan's dependence on Middle Eastern oil is 95%, and Korea's is about 70%. Citing experts, Reuters projected that in the short term the UAE's exit from OPEC could weigh on refining, aviation, and petrochemical margins and on trade balances. But it also offered a positive outlook that once the Iran war ends and the UAE enters a phase of increased production, buyers may gain more bargaining chips in a Middle Eastern supply chain long dominated by Saudi Arabia.