07/08/2021, 12.50
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Riyadh, Abu Dhabi rivalry drives up oil prices

A bitter clash is under way between the two supposedly allied nations over production quotas. The Emirates were asking for an upward revision, after having increased extraction capacity. In the background is the struggle between the two hereditary princes for political, economic and commercial supremacy in the Middle East region. Experts say battle is inevitable.

Abu Dhabi (AsiaNews/Agencies) - Rivalry and tensions between the United Arab Emirates and Saudi Arabia are driving up oil prices, which have reached the highest level in six weeks. On paper the two countries are allies in an anti-Iranian key: in reality they have long been competing for supremacy in the Gulf. In recent days there has been a bitter clash between the two kingdoms over production quotas, which has caused the Saudis to withdraw from the negotiating table and left the energy markets in limbo.

The 23 Opec+ member nation, which includes the organisation's top producers and allies such as Russia, have had to postpone negotiations indefinitely, fuelling fears of global instability. The group has been instrumental over the past 18 months in tackling the global economic crisis triggered by the Covid-19 pandemic, which led to a collapse in prices in the early stages.

The problem came to a head last week when the Emirates rejected a proposal by Opec+ leaders Saudi Arabia and Russia to extend production limits for another eight months. Abu Dhabi was calling for a renegotiation of the current baseline - the level from which cuts or increases are calculated - to ensure greater freedom of extraction. This request met with firm opposition from Moscow and Riyadh.

The negotiations took an anomalous turn when the energy ministers of the Emirates and the Saudis made their differences public. "The rift has come as a surprise, but perhaps the tussle was inevitable," says Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington. "Abu Dhabi's production capacity is at odds with its Opec quota. It has invested a lot of money to raise its production. And now demand is picking up. That's why the UAE has been frustrated over the last year at its inability to increase production," he adds.

The personal ties between Saudi Crown Prince Mohammed bin Salman and his Abu Dhabi counterpart Mohammed bin Zayed, who in the past were instrumental in cementing the alliance between the two nations, are part of the clash. Both are seen as the de facto rulers and have ambitious visions.

For some time, there has been deep cooperation on strategic issues, but cracks have emerged in the past two years, starting with the withdrawal of Emirati troops from Yemen, leaving the Saudis alone in managing the war against the pro-Iranian Houthi. Moreover, in January the Emirates reluctantly accepted a Saudi-sponsored agreement to end the Qatari embargo. At the same time, Riyadh did not seem enthusiastic about Abu Dhabi's decision to normalise relations with Israel.

The cracks reached worrying levels in February, when Saudi Arabia issued an ultimatum to multinationals to relocate their regional headquarters in the kingdom by 2024, on pain of losing government contracts. The move was perceived as an attack on Dubai, the economic and commercial heart of the Middle East region. With the Wahhabi kingdom increasingly geared towards adopting an aggressive economic strategy, there are many areas where competition is strengthening, starting with tourism, financial services and technology.

"Saudi Arabia is the giant in the region which is now waking up. And at some level that's a concern for the Emiratis," says Neil Quilliam, an associate fellow at Chatham House in London. "In 15 to 20 years' time, if Saudi Arabia transforms into a dynamic economy, then that would be a threat for the Emirati economic model."


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