The UAE's OPEC withdrawal could impact its trade ties to Saudi Arabia
The United Arab Emirates withdrawing from OPEC will weaken the group's hold on the global oil market and could potentially risk a rift between Saudi Arabia, the Gulf neighbor who is the de facto leader in the organisation of crude producers.
Analysts say that the UAE-Saudi Arabia relationship has been headed for a showdown since a long time. This is due to diverging oil policies, geopolitical tensions in Yemen and Sudan and growing economic rivalry.
HOW LIKELY IS THE SAUDI-UAE ROW TO HIT TRADE?
Analysts say that Saudi Arabia and the UAE are so intertwined in terms of trade, investment, and logistics they believe a full-blown rift would not be possible and would be detrimental to neither country's interests. The region has already been affected by the impact of the Iran conflict on business and investor sentiment. Fareed Mohamedi said that the Gulf Cooperation Council countries do not need more disputes or disruptions in the conduct of business.
Yet, trade relations in the region were reshaped previously. Saudi Arabia, Bahrain, Egypt, and the UAE cut ties almost immediately with Qatar in June 2017. The allegations included fomenting unrest, which Doha denied.
The Qatar blockade was aimed at a smaller economy that had fewer interdependencies. Qatar, a smaller oil producer left OPEC in 2019. Qatar, a much smaller oil producer, left?OPEC in 2019.
How closely linked are their economies?
Saudi Arabia is the UAE's largest trading partners in the Arab World.
According to the UAE economy ministry, non-oil bilateral trade between Emiratis and Saudis will total $41.3 billion by 2024. This is up from $37.3 in 2023. Saudi data revealed that bilateral trade had increased by?roughly 42 percent since 2020. In 2024, the UAE was the fifth largest destination for exports of the kingdom and its third largest source of imports.
The trade between the two countries is extensive, covering?everything, from refined petroleum to gold, to jewellery, and re-exported consumer products like electronics. Most of the trade between Saudi Arabia and Dubai flows through Dubai's Jebel-Ali port, which is a major hub to receive goods into the Saudi market. Riyadh, on its part, has been spending big money to expand their own ports in order to increase direct shipments.
The Saudi Ports Authority announced in March the opening of new trade services that will link King Abdulaziz Port, Dammam to ports in Abu Dhabi and Sharjah in the UAE.
The consumer markets are closely intertwined. Lulu hypermarkets in the UAE, a chain that is ubiquitous throughout both countries, are a place where shoppers regularly buy Saudi staples. Almarai milk, Jomara date, Alyoum poultry.
Alice Gower, partner of the London-based consultancy Azure Strategy, stated that a boycott could undermine both countries' economic goals.
What about investments?
According to the General Authority for Statistics in Saudi Arabia, the UAE contributed by volume to Saudi Arabia’s net foreign direct investments inflows of 9 billion riyals (US$2.4 billion) in 2024. Emirati data shows that Saudi direct investments in the UAE total over $4.3 billion.
A HSBC survey conducted in October found that 9 out of 10 international companies in the UAE intend to increase their trade and investment with the Kingdom over the next 5 years.
ARE THE TWO GULF NATIONS ECONOMIC RIVALS?
Yes. The UAE has forged almost 30 bilateral trade agreements with countries, leapfrogging the slower Gulf Cooperation Council discussions that would have included Saudi?Arabia. Saudi Arabia also took steps that were seen as competitive. For example, its directive in 2021 requiring foreign companies to establish regional headquarters in?Riyadh for government contracts – a move widely viewed by many as an attempt to lure firms away from Dubai, which is the Gulf's financial and tourism hub.
Why are their trade ties important for the Middle East?
Saudi Arabia and the UAE have a strong economic relationship that is at the core of?much trade and investment in the region. Both countries are a hub for goods, services, and capital - Saudi Arabia is the largest Arab economy, while the UAE is a major financial and logistics hub.
Gower stated that regional stability was the number one priority for both Gulf States. Any boycott would undermine confidence in their long term economic plans and discourage investment in the region. A prolonged tension between the two countries would have a ripple effect across the Middle East.
(source: Reuters)
