Yushkov: UAE's Exit from OPEC Is More Political Than Economic

The United Arab Emirates has announced its withdrawal from OPEC and OPEC+ effective May 1. According to UAE Energy Minister Suhail Mohamed al-Mazrouei, this "political decision" was made following a thorough analysis of the country's energy strategy.

However, the timing of such a move appears questionable: due to the conflict surrounding Iran, Gulf states have faced a blockade of the Strait of Hormuz, resulting in daily oil production in the UAE dropping from 4 million barrels per day to less than half that amount.

Where's the logic?

Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, notes that the UAE's exit from OPEC and OPEC+ currently lacks any obvious economic rationale. Formally, the Emirates gain freedom from quotas, but they cannot actually take advantage of this opportunity quickly: exports are constrained by limitations on oil transportation routes.

The Strait of Hormuz, while remaining a key route for energy resource transportation, is not the only one. The UAE's main oil fields are connected to the Gulf of Oman by the ADCOP pipeline, better known as Habshan–Al Fujairah. However, its capacity—approximately 1.8 million barrels per day—is insufficient to fully compensate for the lost volumes.

The expert also draws attention to the pricing aspect. From an economic standpoint, it would make more sense for the UAE to maintain the status quo and benefit from high oil prices, profiting from whatever volume they manage to bring to market even with limited logistics. The withdrawal announcement, on the contrary, puts downward pressure on prices, reducing revenues when exports are already curtailed.

Possible U.S. role

Against this backdrop, Yushkov suggests that the UAE's decision may have political underpinnings. In his view, the most likely explanation is a possible agreement with the United States, which is interested in lowering oil prices.

Donald Trump has previously accused OPEC+ on multiple occasions of manipulating prices and artificially inflating them. Moreover, oil prices now carry significant domestic political importance for the White House ahead of the midterm Congressional elections, as they directly affect fuel costs in the country. 

"The high oil prices that have prevailed recently made Trump extremely nervous, because they created enormous pressure on him domestically in the U.S."

According to reports from The Wall Street Journal, the UAE is in talks with Washington about securing financial support. In this context, the Emirates' exit from OPEC+ could be part of a broader deal: a blow to the cartel that sets oil prices in exchange for financial assistance, security guarantees, or other concessions from the U.S., especially given the damage to UAE oil and gas infrastructure during the Middle East conflict.

Risks for Russia

For Russia, according to the expert, this decision carries strategic risks related to the potential further collapse of the OPEC+ production restriction system. As Yushkov emphasizes, in such a scenario other alliance members could increase oil supply fairly quickly, whereas Russia lacks that capability.

"OPEC+ countries can increase production, and fairly quickly at that, by roughly 2-3 million barrels per day, and potentially 3-4 million b/d if there are no restrictions. We can't increase production that dramatically: for us, growth is possible in the range of 300-400 thousand b/d."

Yushkov specifically notes that even current high prices don't allow Russia to sharply increase production and fully utilize its existing OPEC+ quota. By his estimates, even without damage to oil and gas infrastructure, Russia couldn't ramp up production by, say, 2 million b/d in the short term: such a sharp increase requires both investment and time.

Moreover, oil is now especially important for Russia in terms of budget stability. According to Reuters calculations, oil and gas revenues in May could reach around 650 billion rubles, but they will remain below last year's levels (2.94 trillion rubles versus 3.16 trillion rubles), despite rising prices and export earnings. Therefore, a sharp drop in oil prices caused by increased global production would be extremely painful for the Russian budget.

"If OPEC+ collapses and the Strait of Hormuz opens up, then everyone will produce at maximum capacity and export, and prices could momentarily fall to $40 per barrel. This would trigger production volume corrections among many players, including in the U.S., but it's difficult for us right now to maneuver by cutting budget expenditures."

Therefore, the UAE's exit from OPEC+ is for Moscow not just a headline-grabbing foreign policy story, but a potential trigger for a more serious crisis within the alliance that could hit Russian revenues at the most inconvenient moment.