The Saudi-UAE clash: Power rivalry in the Middle East


Entrance of the OPEC Headquarter in Vienna, Wikimedia Commons: https://www.wikidata.org/wiki/Q53470445

Sameera Pillai


The Organisation of the Petroleum Exporting Countries Plus’ (OPEC+) recent decision to increase oil production has marked the climactic end of a month-long conflict between the gulf countries of Saudi Arabia and the United Arab Emirates (UAE). The recent disagreement is but one of a myriad of issues facing the countries' relationship and have had the potential to impact the stability of OPEC+.


This necessitates an analysis into what seems to be deep-seated issues in the Saudi-Emirati alliance. More pressingly, the recent spat has illuminated geopolitical tensions that continue to loom large and threaten to further fracture their partnership. Given their position as top oil producers in the Middle East, a breakdown of the Saudi-UAE relationship could leave lasting complications for OPEC+.


Incompatible interests


The two Gulf countries have been enmeshed in geopolitical disagreements, that have not been very public, but continue to strain the relationship behind the curtains.


For example, in 2020, the UAE signed the Abraham Accords, normalising ties with Israel and cooling the region's otherwise hostile attitude towards Israel. The Emirates became the first Arab nation to broker such an agreement with Israel in over 25 years. Saudi Arabia, on the other hand, refused to sign such accords unless Israel agreed to form a peace treaty with Palestine and has indicated that an overt attempt to normalise relations with Israel does not seem likely in the near future. The de facto OPEC+ leader does share mutual interests with Israel on matters pertaining to Iran and its expansionism, and the two nations have furtively liaised with each other on security issues and shared intelligence information. Nonetheless, Saudi Arabia, as the “Custodian of the Two Holy Mosques” and committed to the causes of Islam, maintains its steadfast support for a Palestinian state, and so the possibility of a formal alliance with Israel is hampered.

So, why does Saudi Arabia continue to interfere with the UAE-Israel alliance? Analysts have argued that the UAE’s move to recognise Israel through the Accords, undermines the Arab Peace Initiative devised by the Saudi government in 2002, an initiative that offered Israel normalised diplomatic relations with Arab countries in exchange for a free Palestinian state.


Misaligned interests between the UAE and Saudi Arabia were again apparent in the Gulf Cooperation Council (GCC)'s signing of the Al-Ula agreement in January this year. This agreement effectively lifted the trade and travel blockade imposed against Qatar in 2017 in response to the country’s links with terrorism and radical Islamist groups. Although Saudi Arabia, the UAE, Bahrain and Egypt collectively came to this decision to restore regional solidarity, the UAE’s Crown Prince Mohammed bin Zayed Al Nahyan (MBZ) was hesitant because of Doha’s inclination to support the Muslim Brotherhood and the promotion of political Islam.


Retaliation over restoration?


Although on each of these occasions restoration of relations was always on the horizon, recent oil-related issues have heightened the countries’ divergent views, jockeying for economic power and prioritising self-interests, and ultimately made such routine reconciliation more in doubt.


In February this year, the role of Dubai as the financial hub of the Arab region was boldly challenged by Riyadh as the Saudi government declared that it will conclude business relations with organisations that do not set up their headquarters in the Kingdom by 2024. Saudi Arabia’s ultimatum was interpreted as a direct attack on the UAE, one that aimed to drive investments away from Dubai and into the pockets of the Kingdom. As the largest oil producer in the region, Saudi Arabia has proven that it can pull rank and drive business to Riyadh. However, with the stark differences in the cultural, social and lifestyle dynamics between Riyadh and Dubai, and given the appealing economic and social atmosphere that attracts businesses and immigrants to Dubai, whether this play will be successful for the Kingdom remains a question mark.

More recently, Saudi Arabia asserted that Israeli goods, or any goods produced by Israeli companies in the UAE, would not benefit from the preferential tariffs agreement that the Kingdom otherwise holds with its neighbouring Gulf countries. The trade agreement oils the wheels of trade in the region, by allowing tariff-free access that is enjoyed by all six members of the GCC. The Kingdom has also debarred goods produced in “free zones” from the preferential tax concession. For the UAE, the free zones act as significant economy boosters, as the zones are governed by relatively relaxed regulations and form the cornerstone for Dubai’s burgeoning economy and reputation as an international trade hub. Again, such a decision by the Kingdom has strained its relationship with the UAE.


Boiling down to oil


Oil demand fell significantly during 2020 and OPEC+ agreed to reduce crude oil production as a result of the price war between Saudi Arabia and OPEC+ member, Russia. As markets gradually recuperate from the pandemic, the demand for oil has increased this year. In response, Saudi-led OPEC+, which is responsible for modulating oil supply, eased the oil production restraints that were imposed last year and raised overall outputs.


In this decision, the Kingdom also pushed for an extension on the existing cap for oil production to the end of 2022. But, the extension proposal was rejected by the UAE, which claimed the Emirates’ production of oil would be significantly limited by the agreement. The UAE demanded an increase in its individual oil production quota, calling the deal “unfair”, arguing for a higher baseline from which its quota can be determined. Ending the rift, a compromise was reached with a decision to increase the Emirates’ baseline from 3.17 to 3.65 million barrels per day.


Although the relationship has been seemingly mended, it is evident that the recent clash between the Kingdom and the UAE was by no means the first of its kind. Their alliance has so far been soldered by shared concerns regarding Iran, particularly around the country’s links with extremist groups that threaten to disturb the existing political architecture in the Middle Eastern region.


The recent turmoil forecasts an unclear path for the alliance, with the UAE growing weary of Saudi Arabia’s sovereignty and strong-arming in the region. The growing importance of the UAE as the United States’ prime Arab-military ally is an indication that the Emirates, albeit smaller, is ready to step out of Saudi Arabia’s shadows. Considering these advancements, can the UAE chart its own course, delinking itself from the Kingdom?


Both countries are essential to maintain regional unity. The recurrent strife between these Gulf allies causes the future of OPEC+ and the GCC to hang precariously in the balance.


 

Sameera Pillai is a Bachelor of Journalism and Communications graduate from the University of New South Wales. Her interests include human rights, climate change and sustainability, and gender issues.


Featured