(1) “The United Arab Emirates,” today “made a shock request of [Pakistan] — repay $3.5bn immediately” [1].
(2) Saudi-Emirati relations were at an all-time low before the Iran War [2]. (Saudi Arabia just bailed Pakistan out of its Emirati loan. Saudi Arabia and Pakistan agreed a mutual-defence treaty last year [3].)
Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
What I don’t yet see is the ambition of the endgame. Is it Saudi Arabia backing off in Africa? Or is it seizing the Musandam Peninsula, islands of the Strait and possibly even territory on the other side?
OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.
This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)
show comments
iLemming
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, and my grandson is going to ride a camel". Sheikh Rashid bin Saeed Al Maktoum, the former Emir of Dubai.
show comments
cmiles8
The US has long sought to erode OPEC’s ability to dictate global oil prices. The US has made massive progress in being broadly energy independent to isolate it from challenges elsewhere. The US has been a net energy exporter since 2019. Global oil pricing was always an annoying thorn in that strategy.
This is an initial but big crack in shaking up global oil markets in a way that meaningfully shifts global power dynamics.
show comments
netdur
Geopolic: A US-aligned Gulf state walking away from a Saudi/Russia-led bloc in the middle of a war, after deciding the bloc didn’t really have its back
Economic: it weakens OPEC’s pricing power in a way you might not see right away if Hormuz is closed, but it could really change the supply picture once things reopen
show comments
dgrin91
My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC? Does this mean UAE thinks Hormuz will be a problem for a long time? And what does it mean for oil prices long term?
show comments
austin-cheney
UAE is responsible for 12-13% of OPEC output as its third most productive member.
In 2019 Qatar left OPEC, but nobody cared because oil is less than 10% of their national fossil fuel output, which was about 2% of OPEC's oil output.
2901Asg
The UAE was talking about getting a credit swap line from the US. It could be the condition.
Or it is also part of a long term plan of the US to control all energy routes. It will keep Hormuz closed and try a new pipeline via the UAE to the Gulf of Oman.
Fragmentation of the energy producers is another goal. New Alaskan LNG projects have been approved and are all the rage among senators:
"Alaska LNG will deliver vital #EnergySecurity for our military and allies in the Pacific. Thank you @SenDanSullivan for your continued engagement and advocacy."
The US would control the following:
- Baltic sea via pipeline threats.
- Corridor from the Caspian sea from Azerbaijan through Armenia to Turkey.
- Venezuela.
- UAE corridor to the Gulf of Oman.
Probably much more than that. Grabbing the Arctic route via Greenland has failed so far.
woodruffw
Serious question: what is OPEC’s influence in 2026? Most analyses I’ve read suggest that it’s essentially a defunct organization and has been since the 1980s, due to (1) a lack of geopolitical agreement between members, and (2) a lack of punishment/compensatory mechanisms for when individual members cheat on their commitments.
show comments
DrProtic
I see this as a temporary action to contain oil prices, orchestrated by the US.
I expect UAE to send signals that they will increase production considerably once situation allows.
Whenever oil prices surge or 10Y yield touches 4.4% we get some action to contain them.
show comments
0xbadcafebee
This is the US trying to salvage the petrodollar. They want those t-bills and oil priced in dollars to maintain reserve currency status, but the whole world is divesting anyway. UAE is hoping that by leaving OPEC they can continue to do business and get protection from US. But US isn't gonna risk a larger war just to defend UAE, US has plenty of oil to exploit in Venezuela and at home. So UAE is just kinda screwed, and petrodollar will become north-american-petrodollar. My guess is it'll happen by Q1 2027
show comments
eykanal
Is there an explainer on this? I'm not familiar with the geopolitics or oil cartels well enough to understand the implications here.
show comments
Ifkaluva
Can somebody knowledgeable help me understand why this is in the interests of the UAE? Also, seems like a moot point since the strait is closed. Why do they think it’s in their best interests, and why now?
show comments
Yizahi
Great news, I hope this will finally crash russia, just like the same events back in the 80s caused soviet empire collapse.
notepad0x90
an interesting variable in all this is China. the whole crisis, and maduro being kidnapped by his american counterpart dictator, has left them only russia left as a major source of petroleum overseas.
If I had to guess, the UAE is looking to form petro-alliances, and have a negotiating leverage. They're have to compete, and they can't beat saudi. So, either the US caters to their demands, or they'll be forming alliances with india and china, where currently OPEC's price setting was a limiting factor.
show comments
asah
Counterintuitively, I see modern OPEC as mostly net-positive for the West because business and government most cherish stability which OPEC helps provides (emphasis on helps).
1970-01-01
This is how peak oil happens. Without a healty cartel, oil is doomed. Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
The US is bailing out the UAE for liquify issues and this is likely a quid pro quo in return??
show comments
christkv
They represent 4.5% of oil production it seems. It will be interesting to see what this means longterm.
show comments
dueltmp_yufsy
Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty. Seems we are damned if we do, damned if we don't these days.
show comments
choam
Even if the UAE increases crude oil production, wouldn’t it have little impact on oil prices if the Strait of Hormuz isn’t open?
sciencesama
is there a vested interest for usa and our war partner ?
silexia
This is titanic, earth shattering news. The breakup of the OPEC cartel would be on the best things to happen to humanity this century.
cogman10
> The UAE's exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organisation of "ripping off the rest of the world" by inflating oil prices.
I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
The UAE's exit almost certainly signals they are planning on selling oil in other currencies (probably the Chinese yuan). It's also a sign of the UAE wanting out of the partnership it's enjoyed with the US and it's allies.
show comments
contingencies
What's a good investment vehicle for broader energy transition?
show comments
jmyeet
To anyone wondering, yes this is a consequence of the War in Iran but what this means isn't exactly clear. Or rather the consequences aren't clear.
For a super brief background, the US has what's been called an oil-for-security deal with Saudi Arabia since 1945. The US supports the Saudi royal family and Saudi Arabia keeps the oil flowing, which has largely been the case (other than 1973). Saudi Arabia remains the "big dog" in OPEC. OPEC+ is really about Russia even though it also includes Kazakhstan and Mexico. Russia became a major oil producer and exporter in the last 20-30 years.
OPEC generally likes stability in oil prices. How it works now is that every 3 months they meet and figure out what the demand for oil will be and adjust production based on that projection to maintain both a price floor and a price ceiling. Prior to this conflict that range was $70-80. Each member gets a share of that production. OPEC hasn't always been successful in policing member countries who have at times exceeded their production targets and also lied about production cuts.
Gulf countries now are utterly dependent on US arms to maintain their (typically unpoular) despotic regimes (usually monarchies). The UAE is particularly belligerent here. I view Dubai as a cleaner, shinier Mos Eisley. The UAE is directly responsible for the genocide in South Sudan. US arms are diverted to the RSF in exchange for illegally smuggled gold to Duabi that gets laundered via Switzerland [1]. Dubai is a terrible place.
Beyond Russia's rise as a major energy exporter, the US also became one in the last 15 years, particularly in 2015 when the export ban was lifted on crude oil (which had been there since the 1973 oil shock). OPEC countries are generally unhappy about this development because every barrel the US exports tends to be 1 barrel OPEN doesn't. But they're also largely powerless to do anything about it.
The Iran War is a massive strategic blunder by the US because it's shown the US has been unable to stop Iran from closing the Strait of Hormuz despite spending $1T+ a eyar on its military but, just as bad, it's shown that the US cannot or will not defend GCC countries or even its own bases in those countries from Iranian counterattacks.
Foreign countries generally pay for US bases as part of a broader security agreement and the idea of joint responsibility for security guarantees. But what if those guarantees are essentially worthless? This will completely reshape the US relationships with GCC countries. The UAE is really just the first domino to fall.
Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up. But I think this will long-term further destabilize the region and I wouldn't be surprised if some of these governments end up falling or at least break security ties with the US.
If anything, GCC countries will likely see China as a more reliable and stable trading and security partner as a result of all this.
UAE is toast, it's glitter was just influencers and glass in the desert, resting on the flow of oil.
_oxxa
Well, looks like that was the price for getting the USD swap line. Milkshake theory won't last long, just like the petro dollar.
madihaa
Okay this I did not see coming... If it actually happens it's going to cause a alot of ripple in the energy market. Good or bad? Hell if I know.
nashashmi
Iran lets oil traded in Yuan to navigate the Strait. OPEC sets prices in Petrodollars. What is the point of staying in OPEC then? Qatar is not part of OPEC so they were able to trade freely in Yuan.
elphinstone
Leaving OPEC right now means little short-term with so much production shut-in. Long-term, the UAE may cease to exist if this war goes on. Its population is 80%+ guest workers, it's totally dependent on desalination, food imports, and oil/gas exports and is incapable of defending itself on its own.
Context:
(1) “The United Arab Emirates,” today “made a shock request of [Pakistan] — repay $3.5bn immediately” [1].
(2) Saudi-Emirati relations were at an all-time low before the Iran War [2]. (Saudi Arabia just bailed Pakistan out of its Emirati loan. Saudi Arabia and Pakistan agreed a mutual-defence treaty last year [3].)
Put together, we’re seeing an Emirati-Israeli axis emerging to balance Saudi hegemony in the Gulf and Iranian hegemony over the Persian Gulf. I’d expect to see an Emirati deal with Egypt and India next if this hypothesis is correct.
What I don’t yet see is the ambition of the endgame. Is it Saudi Arabia backing off in Africa? Or is it seizing the Musandam Peninsula, islands of the Strait and possibly even territory on the other side?
[1] https://www.ft.com/content/99073d6e-4b57-417f-88fb-7a2c0e55e...
[2] https://www.nytimes.com/2025/12/30/world/middleeast/yemen-sa...
[3] https://en.wikipedia.org/wiki/Strategic_Mutual_Defence_Agree...
OPEC has long been Saudi Arabia reducing output, and everyone else selling everything they can. They haven't had much power since the 1970s, but that they exist means they are a threat that if everyone else actually stuck to the agreement for a change.
This is the common problem for cartels: everyone has inventive to cheat on the deals made. By selling a little more than your share you get more money, while because everyone else is following along the prices are higher. (see also prisoners dilemma)
"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, and my grandson is going to ride a camel". Sheikh Rashid bin Saeed Al Maktoum, the former Emir of Dubai.
The US has long sought to erode OPEC’s ability to dictate global oil prices. The US has made massive progress in being broadly energy independent to isolate it from challenges elsewhere. The US has been a net energy exporter since 2019. Global oil pricing was always an annoying thorn in that strategy.
This is an initial but big crack in shaking up global oil markets in a way that meaningfully shifts global power dynamics.
Geopolic: A US-aligned Gulf state walking away from a Saudi/Russia-led bloc in the middle of a war, after deciding the bloc didn’t really have its back
Economic: it weakens OPEC’s pricing power in a way you might not see right away if Hormuz is closed, but it could really change the supply picture once things reopen
My guess is that is this because UAE has ports on the other side of Hormuz and doesn't want to be restricted in their usage by OPEC? Does this mean UAE thinks Hormuz will be a problem for a long time? And what does it mean for oil prices long term?
UAE is responsible for 12-13% of OPEC output as its third most productive member.
In 2019 Qatar left OPEC, but nobody cared because oil is less than 10% of their national fossil fuel output, which was about 2% of OPEC's oil output.
The UAE was talking about getting a credit swap line from the US. It could be the condition.
Or it is also part of a long term plan of the US to control all energy routes. It will keep Hormuz closed and try a new pipeline via the UAE to the Gulf of Oman.
Fragmentation of the energy producers is another goal. New Alaskan LNG projects have been approved and are all the rage among senators:
https://xcancel.com/alaskalng
A happy coincidence:
"Alaska LNG will deliver vital #EnergySecurity for our military and allies in the Pacific. Thank you @SenDanSullivan for your continued engagement and advocacy."
The US would control the following:
- Baltic sea via pipeline threats.
- Corridor from the Caspian sea from Azerbaijan through Armenia to Turkey.
- Venezuela.
- UAE corridor to the Gulf of Oman.
Probably much more than that. Grabbing the Arctic route via Greenland has failed so far.
Serious question: what is OPEC’s influence in 2026? Most analyses I’ve read suggest that it’s essentially a defunct organization and has been since the 1980s, due to (1) a lack of geopolitical agreement between members, and (2) a lack of punishment/compensatory mechanisms for when individual members cheat on their commitments.
I see this as a temporary action to contain oil prices, orchestrated by the US.
I expect UAE to send signals that they will increase production considerably once situation allows.
Whenever oil prices surge or 10Y yield touches 4.4% we get some action to contain them.
This is the US trying to salvage the petrodollar. They want those t-bills and oil priced in dollars to maintain reserve currency status, but the whole world is divesting anyway. UAE is hoping that by leaving OPEC they can continue to do business and get protection from US. But US isn't gonna risk a larger war just to defend UAE, US has plenty of oil to exploit in Venezuela and at home. So UAE is just kinda screwed, and petrodollar will become north-american-petrodollar. My guess is it'll happen by Q1 2027
Is there an explainer on this? I'm not familiar with the geopolitics or oil cartels well enough to understand the implications here.
Can somebody knowledgeable help me understand why this is in the interests of the UAE? Also, seems like a moot point since the strait is closed. Why do they think it’s in their best interests, and why now?
Great news, I hope this will finally crash russia, just like the same events back in the 80s caused soviet empire collapse.
an interesting variable in all this is China. the whole crisis, and maduro being kidnapped by his american counterpart dictator, has left them only russia left as a major source of petroleum overseas.
If I had to guess, the UAE is looking to form petro-alliances, and have a negotiating leverage. They're have to compete, and they can't beat saudi. So, either the US caters to their demands, or they'll be forming alliances with india and china, where currently OPEC's price setting was a limiting factor.
Counterintuitively, I see modern OPEC as mostly net-positive for the West because business and government most cherish stability which OPEC helps provides (emphasis on helps).
This is how peak oil happens. Without a healty cartel, oil is doomed. Solar, wind, geothermal, hydro, nuclear. These are more than ripe to disrupt energy into the 21st century.
archive for the Reuters article
https://archive.ph/uSXJx
Is this as a function of the Iranian war?
The US is bailing out the UAE for liquify issues and this is likely a quid pro quo in return??
They represent 4.5% of oil production it seems. It will be interesting to see what this means longterm.
Ok I was initially thinking this would be good for oil prices since they are leaving a cartel, but the article is saying this will just create more uncertainty. Seems we are damned if we do, damned if we don't these days.
Even if the UAE increases crude oil production, wouldn’t it have little impact on oil prices if the Strait of Hormuz isn’t open?
is there a vested interest for usa and our war partner ?
This is titanic, earth shattering news. The breakup of the OPEC cartel would be on the best things to happen to humanity this century.
> The UAE's exit from OPEC represents a win for U.S. President Donald Trump, who in a 2018 address to the U.N. General Assembly accused the organisation of "ripping off the rest of the world" by inflating oil prices.
I can't see how it is actually a win for Trump. OPEC has mostly been a big partner with the US. They are the ones that have mandated using the dollar as the baseline currency for buying and selling OPEC oil.
The UAE's exit almost certainly signals they are planning on selling oil in other currencies (probably the Chinese yuan). It's also a sign of the UAE wanting out of the partnership it's enjoyed with the US and it's allies.
What's a good investment vehicle for broader energy transition?
To anyone wondering, yes this is a consequence of the War in Iran but what this means isn't exactly clear. Or rather the consequences aren't clear.
For a super brief background, the US has what's been called an oil-for-security deal with Saudi Arabia since 1945. The US supports the Saudi royal family and Saudi Arabia keeps the oil flowing, which has largely been the case (other than 1973). Saudi Arabia remains the "big dog" in OPEC. OPEC+ is really about Russia even though it also includes Kazakhstan and Mexico. Russia became a major oil producer and exporter in the last 20-30 years.
OPEC generally likes stability in oil prices. How it works now is that every 3 months they meet and figure out what the demand for oil will be and adjust production based on that projection to maintain both a price floor and a price ceiling. Prior to this conflict that range was $70-80. Each member gets a share of that production. OPEC hasn't always been successful in policing member countries who have at times exceeded their production targets and also lied about production cuts.
Gulf countries now are utterly dependent on US arms to maintain their (typically unpoular) despotic regimes (usually monarchies). The UAE is particularly belligerent here. I view Dubai as a cleaner, shinier Mos Eisley. The UAE is directly responsible for the genocide in South Sudan. US arms are diverted to the RSF in exchange for illegally smuggled gold to Duabi that gets laundered via Switzerland [1]. Dubai is a terrible place.
Beyond Russia's rise as a major energy exporter, the US also became one in the last 15 years, particularly in 2015 when the export ban was lifted on crude oil (which had been there since the 1973 oil shock). OPEC countries are generally unhappy about this development because every barrel the US exports tends to be 1 barrel OPEN doesn't. But they're also largely powerless to do anything about it.
The Iran War is a massive strategic blunder by the US because it's shown the US has been unable to stop Iran from closing the Strait of Hormuz despite spending $1T+ a eyar on its military but, just as bad, it's shown that the US cannot or will not defend GCC countries or even its own bases in those countries from Iranian counterattacks.
Foreign countries generally pay for US bases as part of a broader security agreement and the idea of joint responsibility for security guarantees. But what if those guarantees are essentially worthless? This will completely reshape the US relationships with GCC countries. The UAE is really just the first domino to fall.
Short-term this smells like the US is either behind this break or at least approves of it. The idea is probably for the UAE to increase production in an effort to stabilize oil prices. This administration has also shown a complete disregard for historic alliances (including NATO) and they probably view OPEC as a cartel they want to break up. But I think this will long-term further destabilize the region and I wouldn't be surprised if some of these governments end up falling or at least break security ties with the US.
If anything, GCC countries will likely see China as a more reliable and stable trading and security partner as a result of all this.
[1]: https://www.democracynow.org/2025/1/28/sudan
UAE is toast, it's glitter was just influencers and glass in the desert, resting on the flow of oil.
Well, looks like that was the price for getting the USD swap line. Milkshake theory won't last long, just like the petro dollar.
Okay this I did not see coming... If it actually happens it's going to cause a alot of ripple in the energy market. Good or bad? Hell if I know.
Iran lets oil traded in Yuan to navigate the Strait. OPEC sets prices in Petrodollars. What is the point of staying in OPEC then? Qatar is not part of OPEC so they were able to trade freely in Yuan.
Leaving OPEC right now means little short-term with so much production shut-in. Long-term, the UAE may cease to exist if this war goes on. Its population is 80%+ guest workers, it's totally dependent on desalination, food imports, and oil/gas exports and is incapable of defending itself on its own.