Analysis: OPEC disagreement exposes growing economic rivalry between UAE and Saudi Arabia


Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan receives Saudi Crown Prince Mohammed bin Salman at the Presidential Airport in Abu Dhabi, United Arab Emirates on November 27, 2019. WAM / Handout via REUTERS

DUBAI, July 5 (Reuters) – Rare public disagreements between the UAE and Saudi Arabia over OPEC policy point to growing economic rivalry between the two largest Arab economies that is only set to intensify, have said several regional analysts.

The UAE’s opposition over the weekend to a proposed eight-month extension of production restrictions, favored by Saudi Arabia, was a rare display of defiance from Abu Dhabi, including Crown Prince Mohammed bin Zayed al-Nahyan has been a staunch ally of Saudi Crown Prince Mohammed. ben Salman.

The disagreement led to the cancellation of OPEC + talks on Monday.

“The current OPEC stalemate signals a wider push by the UAE to assert its economic and national interest in Saudi Arabia,” said Amir Khan, senior economist at the Saudi National Bank.

The alliance between the ambitious young princes had propelled a hawkish foreign policy that saw them launch a military campaign in Yemen, lead an Arab boycott of Qatar, and fight Islamist political groups in the Middle East and beyond.

But as Saudi Arabia tries to wean its economy off oil, it competes with the UAE for foreign capital and talent, though economists say it will take time to really challenge the mall, shopping and tourism in the region.

“There is this creeping economic competition in the relations between the two largest Arab economies and the competition is sure to intensify,” said Emirati political scientist Abdulkhaleq Abdulla.

“The UAE is voicing their opinion (…) but the relationship is strong and the leaders know how to solve the problems,” he said.

The UAE’s foreign ministry and the Saudi government’s communications office did not immediately respond to Reuters requests for comment on their economic and political ties.

While the common threats perceived by Iran and Islamist groups in the region are likely to contain political differences, analysts say, the two states are seen as increasingly likely to clash over questions of economic sovereignty.

Riyadh has warned foreign companies that they could lose state contracts if they do not establish a regional headquarters in the kingdom by 2024 and in another challenge to the UAE’s status as a trade hub and regional affairs, this week it changed the rules for imports from the Gulf. States exclude goods made in free zones, a major driver of Dubai’s economy.

Several diplomats in the region have said the UAE-Saudi Arabia alliance has gone as far as it can go, with national economic interests taking priority, especially in the wake of the COVID-19 pandemic.

COMMON CONCERNS

The first indication of a track separation came in 2019 when the UAE withdrew its military presence in Yemen, leaving Riyadh embroiled in a costly war that directly threatens its security. Abu Dhabi still maintains its grip via Yemeni forces, some of whom have challenged the Saudi-backed government.

The UAE has also dragged its feet on a deal Saudi Arabia announced in January to restore political ties with Qatar as Riyadh tries to ease friction with US President Joe Biden over its rights record. of man and Yemen.

While the UAE forged ties with Israel last year in a move that enjoyed bipartisan support in Washington, Riyadh, on the other hand, took interim steps to improve relations with Turkey.

But the United Arab Emirates and Saudi Arabia remain bound by concern over Iran’s growing influence through regional proxies and security threats that put their economic ambitions at risk.

The UAE began engaging with Iran in 2019 to ease tensions after attacks on tankers in Gulf waters and Saudi oil factories that Riyadh blamed on Tehran, a charge it denies .

The kingdom has followed suit this year, launching direct talks with Tehran over Yemen where they are locked in a proxy conflict. The move came as Biden sought to revive a nuclear deal between world powers and Iran that Riyadh opposed so as not to attack Iran’s missile capabilities and regional activities.

“The potential US-Iran easing, the energy transition and competition in non-oil diversification create a particularly difficult period of divergence this time around,” said Hasnain Malik, head of equity strategy at Tellimer, of the relationship between Saudi Arabia and the United Arab Emirates.

Khan of the Saudi National Bank said the UAE, which has invested heavily to increase oil production capacity, wants to move quickly to monetize reserves given the global shift away from fossil fuels.

Saudi Arabia needs more price stability to complete the national megaprojects which are largely driven by its sovereign wealth fund.

“Now you can see direct confrontations and the UAE is above its weight,” a foreign diplomat said in Riyadh of the OPEC disagreement. “This is the first time that the two countries have exchanged public and strongly worded accusations.”

While economic issues may see more public disagreement, Riyadh and Abu Dhabi should continue to treat political issues more quietly in order to preserve an image of unity, said British academic and Gulf expert Christopher Davidson.

Additional reporting by Davide Barbuscia and Saeed Azhar; Writing by Ghaida Ghantous; Editing by Kirsten Donovan

Our Standards: Thomson Reuters Trust Principles.


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