Geopolitics

Are We Witnessing The Unraveling Of OPEC?

The pandemic has exacerbated tensions within the petroleum cartel, eroded Saudi Arabia's hegemony, and led to shifting internal alliances. An era may be over.

A worker at an oil processing facility of Saudi Aramco, a Saudi Arabian state-owned oil and gas company
A worker at an oil processing facility of Saudi Aramco, a Saudi Arabian state-owned oil and gas company
Sébastien Boussois*
English edition - WORLDCRUNCH

-Analysis-

Everyone is talking about the post-oil era, but in all likelihood, that horizon is still far away. OPEC (the Organization of the Petroleum Exporting Countries) is very much still calling the shots in the energy sector and, consequently, in the global economy. Nothing happens in isolation on the international stage.

In April 2020, Saudi Arabia, struggling with worsening economic insecurity, suddenly opted to increase its oil production within the organization. Now, the kingdom's long-time ally, the United Arab Emirates (UAE), is looking to do the same thing, and in the process, is openly opposing other members, including Saudi Arabia.

Up until now, Abu Dhabi and Riyadh held a strong bond, forming an untouchable strategic and political axis. In the midst of the blockade crisis, this partnership seemed all the tighter when Qatar, a sworn enemy of the Persian Gulf, chose to leave OPEC. The loss of Qatari opposition had the effect of reducing existing internal tensions within the organization.

Each member country has its own agenda and economic concerns that typically steer the enactment of new and different production rules for the years to come. In the case of the UAE, the pandemic has been very costly, forcing it, among other things, to postpone the Dubai 2020 World Expo by one year.

Qatar stands to gain from these Gulf state tensions

It is therefore all-the-more urgent for the UAE to increase its oil production both to compensate for losses incurred and to quickly increase its foreign exchange earnings. OPEC's goal of reducing oil production until at least through 2022 is unthinkable.

By the end of 2019, the UAE had at least 100 billion barrels of oil in reserve, placing the country in eighth place globally with nearly 6% of total world reserves. It's limited, however, by 2018 OPEC agreements stipulating that Abu Dhabi produce only 3.17 million barrels per day, even though it has the potential to produce almost 4 million.

In the past the UAE has been discreet, opting to remain in Riyadh's shadow. Those days are over, though, and it has now become a major player in the organization. And, after several months of Abu Dhabi trying to quietly distance itself from its historical ally, the crack is for the first time taking place openly.

Prince Mohammed bin Salman (right) receives Qatar's Emir Sheikh Tamim bin Hamad Al Thani in Jeddah, Saudi Arabia — Photo: Balkis Press/Abaca via ZUMA Press

Could this shift within OPEC signal the possibility of a violent rift to come between Mohammed bin Salmane — the heir to the Saudi throne — and his Emirati mentor? Perhaps. Either way, what is clear is that Qatar stands to gain from these Gulf state tensions.

The pandemic is largely responsible for the expected overturning of previously long-held alliances. The geopolitical and economic context was already tense, and a year of economic collapse has only exacerbated the situation. In 2020, every member state joined together in accusing Saudi Arabia of unilaterally increasing its production capacity, subsequently causing the price of oil to fall and destabilizing other OPEC countries, namely Russia. The self-interested, lone-wolf style of behavior has not been appreciated.

Thus, the Saudi monopoly is in many areas beginning to crack, and there's no clearer evidence of this than the UAE's public opposition. Saudi Arabia's historic hegemony has been severely undermined.

Still, it is in the interest of many that these tensions dissipate in order to avoid global destabilization. Under the leadership of former President Donald Trump, the United States, an ally of Saudi Arabia, had worked to resolve the crisis. But new President Joe Biden cannot be counted on to keep doing Saudi Arabia's bidding. Since his arrival at the White House in January, the Democrat has stated he wants to assess the relationship between the United States and this ally, and in particular with Mohammed ben Salmane.

Meanwhile, like Qatar, the UAE is also threatening to leave OPEC altogether if its demands are not met. Oil is only one of the things that bind Qatar and the UAE together. Other areas include the terrorist threat in the Middle East, their common opposition to Turkey, with its expansionist aims, and above all the common interest in normalizing relations with Israel. The UAE's threat may soon be realized. If so, the repercussions will be felt all over.


*Sébastien Boussois is a researcher and professor of international relations.

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A check operation in Indian-administered Kashmir, following a spate of targeted attacks on the region's Hindu minority

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Здраво!*

Welcome to Friday, where Joe Biden vows to protect Taiwan from China, Alec Baldwin accidentally kills a cinematographer, and can you guess what day it is TODAY? We also have a report from a researcher in San Diego, USA on the sociological dark side of food trucks.

[*Zdravo - Macedonian]

💡  SPOTLIGHT

Iran-Saudi Arabia rivalry may be set to ease, or get much worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before, writes Persian-language media Kayhan-London:

The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.

Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

Kayhan-London

🌎  7 THINGS TO KNOW RIGHT NOW

• Biden vows to defend Taiwan: U.S. President Joe Biden said the United States would come to Taiwan's defense if it were attacked and had a commitment to defend the island nation that China claims as its own. The White House clarified for the second time in three months that U.S. policy on the subject has not changed, and declined further comment when asked if Biden had misspoken.

• Call on China to respect Uyghurs: A statement from 43 countries denounced China's human rights record at the United Nations over the reported torture and repression of the mostly Muslim Uyghurs, as well as the existence of "re-education camps" in Xinjiang. The declaration calls on Beijing to allow independent observers immediate access. In response, Cuba issued a rival statement shortly afterwards on behalf of 62 other countries claiming "disinformation".

• Alec Baldwin fires prop gun, kills cinematographer: U.S. actor Alec Baldwin fatally shot cinematographer Halyna Hutchins and injured director Joel Souza after discharging a prop gun on the set of his new movie, near Santa Fe. The accident is being investigated.

• Berlusconi acquitted: Former Italian Prime Minister Silvio Berlusconi was acquitted of judicial corruption charges. The 85-year-old media mogul had been accused of seeking to bribe guests present at his infamous "Bunga Bunga" parties to lie about the evenings as part of an underage prostitution case.

• COVID health workers death toll: A new WHO working report estimates that between 80,000 and 180,000 health and care workers may have died from COVID-19 between January 2020 and May 2021. The same report also noted that fewer than 1 in 10 healthcare workers were fully vaccinated in Africa, compared with 9 in 10 in high-income countries, and less than 5% of Africa's population have been vaccinated.

• Seven killed in Russian gunpowder factory blast: An explosion at the Elastik gunpowder and chemicals plant southeast of Moscow killed at least seven people, while nine are still missing.

• Aye aye, CAP'n: HAPPY CAPS LOCK DAY, FOLKS!

🗞️  FRONT PAGE

Dutch daily De Volkskrant pays tribute to "sound master" and renowned classical conductor Bernard Haitink, who died at 92. Born in Amsterdam, Haitink made more than 450 records and led some of the world's top orchestras in the span of his 65-year career.

📰  STORY OF THE DAY

The food truck, a sign that the white and wealthy are moving in

In San Diego, California, researcher Pascale Joassart-Marcelli tracked how in the city's low-income neighborhoods that have traditionally lacked dining options, when interesting eateries arrive the gentrification of white, affluent and college-educated people has begun. In The Conversation she writes:

🥡 In 2016 in City Heights, a large multi-ethnic San Diego neighborhood, a dusty vacant lot on the busiest boulevard was converted into an outdoor international marketplace called Fair@44. There, food vendors gather in semi-permanent stalls to sell pupusas, lechon (roasted pig), single-sourced cold-brewed coffee, cupcakes and tamarind raspado (crushed ice). Just a few blocks outside the gates, informal street vendors — who have long sold goods such as fruit, tamales and ice cream to residents who can't easily access supermarkets — now face heightened harassment.

🤑 Cities and neighborhoods have long sought to attract educated and affluent residents – people whom sociologist Richard Florida dubbed "the creative class." The thinking goes that these newcomers will spend their dollars and presumably contribute to economic growth and job creation. Food, it seems, has become the perfect lure. It's uncontroversial and has broad appeal. It taps into the American Dream and appeals to the multicultural values of many educated, wealthy foodies.

🏙️ My analysis of real estate ads for properties listed in City Heights and other gentrifying San Diego neighborhoods found that access to restaurants, cafés, farmers markets and outdoor dining is a common selling point. San Diego Magazine's home buyer guide for the same year identified City Heights as an "up-and-coming neighborhood," attributing its appeal to its diverse population and eclectic "culinary landscape," including several restaurants and Fair@44. When I see that City Heights' home prices rose 58% over the past three years, I'm not surprised.

➡️ Read more on Worldcrunch.com

#️⃣  BY THE NUMBERS

€6.65 million

The remains of "Big John," the world's largest triceratops skeleton ever found, were sold at auction for a European record price of 6.65 millions euros in Paris to a private anonymous collector from the U.S. The 200 pieces of the skeleton were unearthed in 2014 in South Dakota and reassembled by specialists in Italy.

👮🎮  IN OTHER NEWS

Police bust Mexican drug gang recruiting boys via online video games

Police in Mexico have intervened to rescue three minors, aged 11 to 14, from recruitment into a drug gang that had enticed them through online gaming.

A top Mexican police agency official Ricardo Mejía Berdeja, said the gang had contacted the youths in the south-central city of Oaxaca, chatting through a free-to-download game called Free Fire, which involves shooting at rivals with virtual firearms.

Calling himself "Rafael," another player of the same age, the suspected gang member offered one of the youths work "checking radio frequencies and watching out for police presence" in Monterrey, northern Mexico, reported national daily El Heraldo de México. The pay was unusually good — 8,000 pesos (almost $400) every two weeks — and the youth called two friends who also wanted to get in.

The three boys were set to take the bait, but an anonymous Mexican intelligence agent following the exchange while also posing as youth playing Free Fire, ultimately led police to a safe house in Santa Lucía del Camino, outside Oaxaca.

➡️ Read more on Worldcrunch.com

📣 VERBATIM

"I just want to make China understand that we are not going to step back."

— U.S. President Joe Biden vowed to defend Taiwan if it came under attack from China, an assertion that seems to move away from the U.S. stated policy of "strategic ambiguity." His administration is now facing calls to clarify this stance on the island.

📸  PHOTO DU JOUR

Paramilitary soldiers are conducting a check operation in Indian-administered Kashmir, following a spate of targeted attacks on the region's Hindu minority that have left at least 33 dead since early October. The region, claimed in full by both India and Pakistan, has been the site of a bloody armed rebellion against India since the 1990s — Photo: Adil Abbas/ZUMA

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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