By Andrew Mills, Rachna Uppal and Federico Maccioni
Abu Dhabi, April 29 (Reuters) - The United Arab Emirates' withdrawal from OPEC weakens the group's control over global oil markets and potentially risks widening a rift with Gulf neighbour Saudi Arabia, the de facto leader of the crude producers' organisation.
From diverging oil policies to geopolitical tensions over Yemen and Sudan, and growing economic rivalry, the UAE and Saudi Arabia's relationship had been heading for a showdown for a while now,
according to analysts.
HOW LIKELY IS THE SAUDI-UAE ROW TO HIT TRADE?
Saudi Arabia and the UAE are so deeply enmeshed in trade, investment and logistics that analysts say a full-blown economic rift is unlikely and would serve neither's self-interest.
The region is already reeling from the fallout of the Iran conflict and its impact on investor and business sentiment. The last thing Gulf Cooperation Council nations need is more disputes and disruptions to the smooth conduct of business in the region, said Fareed Mohamedi, managing director at SIA-Energy International.
Still, trade links in the region have been reshaped before. In June 2017, Saudi Arabia, the UAE, Bahrain and Egypt severed ties with Qatar almost overnight over a range of allegations, including fomenting regional unrest that Doha denied.
The Qatar blockade targeted a smaller economy with fewer interdependencies. Qatar, a much smaller oil producer, left OPEC in 2019. The UAE, which has a capacity of around 5 million barrels a day, and a large excess capacity, has the ability to significantly disrupt oil markets.
HOW CONNECTED ARE THEIR ECONOMIES?
Saudi Arabia is the UAE's largest trading partner in the Arab world.
The value of Emirati-Saudi non-oil bilateral trade totalled $41.3 billion in 2024 according to the UAE's economy ministry, up from $37.3 billion in 2023. Saudi data showed that annual bilateral trade was up roughly 42% since 2020. The UAE was the kingdom’s fifth-largest destination for exports and its third-largest source of imports in 2024.
Commerce between the two runs deep, spanning everything from refined petroleum and gold, to jewellery and re-exported consumer goods like electronics. Much of this trade flows through Dubai’s Jebel Ali port, a major hub for goods entering the Saudi market, even as Riyadh spends big to expand its own ports to capture more direct shipments.
In March, the Saudi Ports Authority (Mawani) announced the opening of a new trade corridor with new shipping services linking King Abdulaziz Port in Dammam with ports in Sharjah and Abu Dhabi in the UAE.
Consumer markets are deeply intertwined. Shoppers at Lulu hypermarkets, an Emirati chain ubiquitous in both countries, routinely toss Saudi-made staples into their trolleys: Almarai milk, Jomara dates, Alyoum chicken.
A move toward a boycott would undermine both countries' wider economic goals, said Alice Gower, a partner at London-based advisory firm Azure Strategy.
WHAT ABOUT INVESTMENTS?
The UAE was the second-largest contributor by volume to Saudi Arabia's net foreign direct investment inflows in 2024, with inflows worth 9 billion riyals ($2.4 billion), according to Saudi Arabia's General Authority for Statistics. Saudi direct investments in the UAE are over $4.3 billion, according to Emirati data.
An HSBC survey in October revealed that nine out of 10 international businesses in the UAE plan to increase trade and investment with the kingdom over the next five years.
ARE THE TWO GULF STATES ECONOMIC RIVALS?
Yes. The UAE has forged nearly 30 bilateral trade deals with countries, leapfrogging slower Gulf Cooperation Council negotiations that would have included Saudi Arabia.
Saudi Arabia has also taken steps seen as competitive, such as its 2021 directive requiring foreign firms to set up regional headquarters in Riyadh to qualify for government contracts - a move widely viewed as an effort to lure companies away from Dubai, the Gulf's finance and tourism hub.
WHY DO THEIR TRADE TIES MATTER FOR THE MIDDLE EAST?
The Saudi-UAE economic relationship underpins much of the region’s trade and investment flows. Both countries act as a gateway for capital, goods, and services - Saudi Arabia as the largest Arab economy and the UAE as a major logistics and financial hub.
Regional stability is the top priority for both Gulf states, and any boycott would risk undermining confidence in their long-term economic masterplans and discourage investment and engagement in the region, Gower said.
Any prolonged strain between the two states would ripple across the Middle East.
($1 = 3.7504 riyals)
(Reporting by Rachna Uppal, Andrew Mills and Federico Maccioni; Writing by Andrew Mills, Editing by Alexandra Hudson and Sharon Singleton)
