When Saudi Arabia negotiated with Russia over the details of the new OPEC+ deal in early July, the Saudi Crown Prince Mohammed bin Salman must have felt elated. The agreement centered on gradually increasing oil output in the coming months for member states, following last year’s significant cuts.
After being alienated by the new Biden administration (which has affected investor sentiment in the kingdom) and having been forced into uncomfortable foreign policy positions over Iran and Yemen, the Crown Prince considered the new OPEC+ deal as an opportunity to be seen as a relevant international player of sufficient clout.
The sheer confidence of Riyadh in its agreement was such that it did not consider any scenario where it would be challenged publicly by the other OPEC states, let alone by its closest ally, Abu Dhabi.
The Problem with the OPEC Deal
Though Riyadh was apparently pleased with the Russia pact, UAE Minister of Energy Suhail Mohamed Al-Mazrouei opposed it, claiming that the UAE would be “sacrificing” under the output limits. The statements prompted a rare, open dispute between the Gulf states.
The disagreement itself has to do with the production quota assigned to each OPEC+ member. The UAE initially agreed to painful cuts during the last price war between Russia and Saudi Arabia on the basis that the market had become dangerously volatile, and that then-President Donald Trump was becoming increasingly erratic. That agreement resulted in the UAE operating its oil production at two-thirds of its capacity at a time when Abu Dhabi was seeking to accelerate its economic diversification process.
The UAE is much further ahead than the other Gulf states in its economic diversification strategy.
With the agreement reaching the end of its period in July, the UAE appears to have hoped that it would be able to restore its production to maximum capacity and use the profits to fund its much-needed economic reform project. The UAE is much further ahead than the other Gulf states in its diversification strategy and is therefore not as exposed to the dilemma of low oil prices as its peers. The problem with this approach, however, is that it either results in a fall in oil price that no one else in OPEC wants, or it imposes greater reductions on other OPEC members who would have to bear the production cut burden that the UAE refuses to accept.
In reality, the only OPEC member that would be able to take on the cuts would be Saudi Arabia. But that scenario hurts Saudi Arabia’s economic diversification process. The second threatens Saudi Arabia’s traditional leadership of OPEC when faith in the organization is increasingly diminishing amongst an increasing number of member states.
Saudi Arabia is keen to ensure a much slower approach to increasing production as it struggles to navigate popular discontent with the economy at home, which is becoming loud enough to draw criticism from some of Bin Salman’s ardent supporters. Riyadh also wants a stable oil price that is relatively acceptable to both the Biden administration (which is desperate for lower oil prices), and OPEC member states whose economies have been ravaged by the COVID-19 pandemic. With stability, Saudi policymakers would be able to control the economic diversification activity and avert any sudden additional downturn in the economy.
Despite the recent open spat between both countries’ energy ministers, it is hard to imagine the discreet UAE Crown Prince Mohammed Bin Zayed would intentionally seek to embarrass Riyadh publicly on any issue. Bin Zayed has often gone to great lengths to convince Riyadh of the advantages of its foreign policy and has sought to coax Saudi policymakers into cooperation rather than force a zero-sum game.
Bin Zayed is well aware of the sensitivities in Riyadh to being treated as anything less than the primary regional power and this has been a hallmark in the Saudi-UAE relationship over the past decade. This historically strong partnership has allowed the allied nations to crush the Arab Spring in Egypt, drown the democratic transition in Libya, overthrow Al-Bashir in Sudan, and roll back Qatar’s once overwhelming regional influence.
It is therefore unlikely that Abu Dhabi deliberately sought to provoke Riyadh. Instead, it is more likely that Riyadh took for granted that Bin Zayed would support the deal, regardless of the UAE’s economic interests. On July 14, reports revealed that the UAE and Saudi Arabia reached an outline of a deal which would revise the latest OPEC agreement and raise oil production limits for the UAE. The compromise has apparently been approved by OPEC member states as well.
Saudi Arabia Lashes Out
However, while the crisis that emerged from the public quarrel over oil may have simmered, the reaction of Saudi Arabia suggests more deep-rooted discontent and frustration towards its closest ally, that goes beyond OPEC. Saudi Arabia’s Energy Minister and Chairman of OPEC Prince AbdulAziz Bin Salman denounced the UAE in early July stating that “[he] had never seen such a demand in [his] 34 years in OPEC.”
In the same week, Riyadh announced a ban on travel to and from the UAE on the grounds of essential COVID-19 measures. The decision surprised Abu Dhabi which initially reacted by announcing its own ban before later retracting the announcement. UAE commentator AbdulKhaleq Abdullah remarked in a now-deleted tweet that the timing of the announcement suggested something sinister on the part of Saudi Arabia.
Riyadh then declared that GCC goods made in free zones or with any Israeli input in the production process would be excluded from the preferential tariffs system. The message was clear and fully understood in the UAE which is heavily dependent on its lightly-regulated free zones in its ability to attract foreign investment. UAE Deputy Chief of Police and General Security Dhahi Khalfan would go on to post cryptic tweets, including:
“He who [loses] his friends . . . is lost . . . and he who sells them [i.e. turns on them for profit] . . . is [eventually] eaten by hyenas.”
Yet, outside the UAE, these measures by Saudi Arabia were seen to be purely economic. Analysts framed Riyadh’s reaction within the context of economic competition between two allies. The decision on tariffs on goods made in free zones was perceived as part of Saudi Arabia’s increasing pressure on international companies to set up base in the kingdom itself rather than the UAE. The tariffs on Israeli goods were touted by some as seeking to hinder the UAE’s bid to become the leading tech hub, even as Saudi Arabia pitches its NEOM City projects as the beacon of innovative tech in the region.
However, such opinions were blown out of the water when Hamas spokesman Khaled Mishal made a sudden surprise appearance on Saudi Arabia’s Al-Arabiya TV network for an exclusive extended interview. This was a sudden U-turn for a television channel that had derided the Palestinians openly in the last Israeli aggression against occupied Jerusalem and Gaza. The channel could not have hosted Khaled Mishal without express permission from the Saudi Crown Prince Mohammed Bin Salman himself. Mishal was uninterrupted in his lauding of the Muslim Brotherhood and when he proudly declared Hamas’ enduring ties with the group’s ideology.
Mishal’s appearance revealed three important sentiments in Riyadh: The first is that Saudi Arabia is in no rush to normalize ties with Israel and does not envisage any sufficient short or even medium-term benefits for doing so. Mishal’s appearance suggested that Saudi Arabia is more than prepared to return to its support of the Palestinians as and when circumstances necessitate.
Riyadh delivered a heavy blow to the perception that Abu Dhabi has the ability to wield Saudi Arabia as it wishes.
The second revelation is that there is an acute awareness in Riyadh that part of the UAE’s meteoric rise in the region, and in Washington, is due to the perception that Abu Dhabi speaks on behalf of Saudi Arabia. There is little doubt that part of the UAE’s discussions with Israel have included a promise to bring Riyadh on board. Rumors have been rife over the past two years of secret UAE-brokered meetings between Bin Salman and Israeli officials. In inviting Khaled Mishal to its news station, Riyadh delivered a heavy blow to the perception that Abu Dhabi has the ability to wield Saudi Arabia as it wishes, which has been a central pillar of the UAE’s foreign policy.
The third disclosure is that Riyadh’s view of the Muslim Brotherhood is far more tempered than that of the UAE. Thus, by featuring Khaled Mishal and allowing him to praise the organization that UAE Crown Prince Bin Zayed is hell-bent on crushing everywhere in the region, Saudi Arabia suggested that it is nowhere near as sensitive to the group as the UAE is. In other words, if circumstances necessitated it, Riyadh would have no reservations in reconciling with the Brotherhood regardless of whatever protestations the UAE might have.
Ultimately, Bin Salman invited Khaled Mishal on Al-Arabiya solely to spite Mohammed Bin Zayed over the latter’s public defiance and chose to strike on the most delicate issues to the UAE Crown Prince.
The UAE’s “Over-inflated Sense of Importance”
Perhaps more than anything else, Saudi Arabia is livid at what it perceives to be the UAE’s over-inflated sense of importance. Indeed, Saudi Crown Prince Mohammed Bin Salman takes for granted that the kingdom is the rightful leader or “big brother” in the region. UAE Crown Prince Mohammed Bin Zayed quietly rejects this status quo and has become increasingly assertive in his vision for greater representation and primacy of UAE interests in the region.
Where Saudi Arabia views the UAE as a junior partner, the UAE is progressively seeing itself as the superior partner. Abu Dhabi believes that it was the architect of removing the former Saudi Crown Prince Mohammed Bin Nayef and thereby facilitating Bin Salman’s rise to replace him as Crown Prince. Abu Dhabi further believes that its lobbying efforts are what have protected the Saudi Crown Prince from international repercussions over the murder of journalist Jamal Khashoggi. Moreover, Abu Dhabi considers its foreign policy to be what rescued the kingdom from the Arab Spring (and not the other way around as Saudi officials assert).
The UAE is aware that it lacks the necessary power to resist an assertive Saudi Arabia in the region.
Yet the UAE is aware that it lacks the necessary power to resist an assertive Saudi Arabia in the region. Bin Salman dragged the UAE kicking and screaming into a reconciliation with Qatar that it did not want. Bin Salman has rapidly expanded his relations with Doha, which has reciprocated by significantly toning down its media coverage of his transgressions.
The Saudi Crown Prince has also begun to exert greater pressure on the Southern Separatists in Yemen to toe the line on its policy for the war-torn country. This has irked Abu Dhabi, as it has been preparing for a US-brokered de facto division in Yemen which would seemingly benefit its geopolitical interests in the war-ravaged country. Additionally, Bin Salman is engaging more with Sultan Haitham Bin Tariq of Muscat in a bid to formulate effective policy on Iran and Yemen (and thereby diluting the UAE’s influence on these two fundamental issues).
It is this understanding of Saudi Arabia’s regional leverage that has been the primary driver of the UAE’s normalization of ties with Israel. Abu Dhabi seeks to use Tel Aviv against Saudi Arabia on a larger scale than Doha once wielded Israel, to keep the kingdom in check. In going above and beyond any Gulf state, the UAE seeks to rely on Israel’s extensive lobbying networks in Washington to amplify its own influence on US foreign policy, and therefore resist being forced to concede to an increasingly confident Bin Salman.
Alliance Will Survive
Nonetheless, it appears Saudi Arabia and the UAE have come to an agreement on OPEC oil output limits. For Riyadh, the stakes are too high to allow the deal to fail. Bin Salman is keen to use this opportunity to present himself as a capable regional leader both to Washington and Moscow. Meanwhile, the UAE is aware that the Biden administration is increasingly expanding its ties with Mohammed Bin Salman on security issues. Bin Salman’s younger brother and Deputy Defense Minister, Khaled Bin Salman, arrived in Washington in early July and met with high-level officials in the State Department and Pentagon to discuss at length the region’s security issues.
Worse for the UAE is that Tel Aviv is eager to woo Saudi Arabia and averse to alienating what Israeli officials perceive as unprecedented developments in relations with Riyadh, which have even included Israeli sports teams playing on Saudi soil. In other words, Abu Dhabi cannot rely on Biden or Tel Aviv to whole-heartedly support its bid to rein in Saudi Arabia on the OPEC issue.
The UAE’s ability to assert itself is heavily dependent on Riyadh remaining idle to its expansion.
More importantly, the UAE does not want to see its alliance with Saudi Arabia fail. For all its current strength, its ability to assert itself is heavily dependent on Riyadh remaining idle to its expansion. An antagonistic Saudi foreign policy would be devastating for the UAE. This is why UAE commentators were quick to alter their rhetoric on bilateral ties after their initial outbursts, while the Saudi “twitterati” boasted that “the solution to all the region’s problems” has always been, and will always remain, in Riyadh.
The UAE is also acutely aware that both Qatar and Turkey believe they can win over Saudi Arabia. Indeed, the diplomatic efforts of Doha in particular, over the past five years, have often focused on reducing Riyadh’s dependency on Abu Dhabi, with a view to supplant the latter.
Still, the OPEC spat has provided valuable insight into the fragility of the Saudi-UAE alliance, the growing ambitions of Abu Dhabi, and the sensitivities in Riyadh to any challenge to its position as the region’s “leader.”