Tuesday’s announcement by the UAE that it will withdraw from Opec tomorrow brings the curtain down on an association that has lasted more than five decades. Although the formal end of any relationship can heighten feelings and fuel uncertainty, the reality is that the Emirates are bidding farewell to an arrangement that was built for a different era.
As a grouping constructed to control the price and supply of a vital-but-finite resource, Opec undoubtedly played an important role in the Middle East and in the world economy. This is particularly true for those Gulf members that used their oil resources to deliver prosperity to their citizens and embark on a journey of rapid social and economic development. For the Emirates however, this journey led the country to a place where Opec’s rules no longer enable growth but could potentially hinder it.
It is no secret that the UAE is rapidly headed towards a post-oil future. In 2015, President Sheikh Mohamed – then Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces – said that in 50 years’ time, the country would “celebrate the last barrel of oil”. This phrase encapsulates the understanding that hydrocarbons are a valuable but exhaustible resource. This insight has informed many of the changes the UAE economy has experienced in recent years.
In 1967, when Abu Dhabi joined Opec, the judicious use of oil was the propellant that drove the UAE’s success. That has since been complemented by a knowledge economy, the embrace of AI, the provision of high-end financial services and sovereign investments the world over. On the same day that the UAE’s decision to leave Opec was announced, Abu Dhabi Customs data revealed that the emirate’s non-oil foreign trade exceeded Dh415.4 billion ($113 billion) last year, up from about Dh306 billion in 2024. This further demonstrates the emirate’s – and the country’s – commitment to economic diversification.
Over the past few years, the UAE’s role in Opec was that of a team player. It held back nearly a third of its production capacity to adhere to the organisation’s quotas. However, it no longer makes strategic sense to maintain an arrangement that is becoming outdated in a changing world of energy diversification.
This is not to discount oil’s importance. For now, it remains a driver of the world’s economy. It is the proceeds from oil sales that help pay for data centres, overseas investments, new infrastructure, education and training, commercial and residential construction, and transport projects – all of which are crucial parts of a robust 21st-century economy. Given this, Opec quotas that hamstrung the UAE’s momentum by requiring its third-biggest producer to curtail oil exports were restrictions that the Emirates outgrew long ago.
