Advantage India? How New Delhi stands to gain from UAE’s withdrawal from Opec

Amid the Iran war, which has now entered its second month, the United Arab Emirates (UAE) announced a shocker on Tuesday (April 28) — the Emirati nation was quitting the Organisation of the Petroleum Exporting Countries (OPEC).

The UAE, one of the world’s top oil producers, will pull out on Friday (May 1), a statement carried by the official WAM news agency said.

The decision is likely to weaken Opec, dominated by the UAE’s neighbour and rival Saudi Arabia, indicating further turbulence for markets. However, India may stand to gain.

As the story grabs attention across the world, here’s a deep dive into Opec, the UAE’s role in the collective, and how India may benefit from this move.

What is Opec and when did UAE join it?

Opec is a permanent, intergovernmental organisation based in Vienna, Austria, with the aim of coordinating and unifying petroleum policies among member states. It was originally created at the Baghdad Conference in September 1960 by five oil-producing founding states, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.

The founding countries of Opec wanted to assert sovereignty over their natural resources and secure fair and stable prices for petroleum producers, as well as regular supplies to consuming nations. With the creation of OPEC, the world order also changed — the power shifted from Western companies that dominated the oil market to countries with reserves, which took more control.

The UAE became a member of Opec in 1971. However, Abu Dhabi, the emirate that holds 95 per cent of Emirati oil reserves, has been a member since 1967.

Today, Opec has 12 members, including, aside from the UAE, Algeria, Republic of the Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, and Venezuela.

It also has Opec+, a collective of countries including Russia, Azerbaijan, Kazakhstan, Bahrain, Brunei, Malaysia, Mexico, Oman, South Sudan, and Sudan, bringing its output to about 41 per cent of global supply.

Why is the UAE leaving Opec?

On Tuesday, the
UAE announced that from May 1, it would be withdrawing from Opec and Opec+ to focus on “national interests”.

In a statement, the UAE noted: “This decision reflects the UAE’s long-term strategic and economic vision and evolving energy profile.

“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all.

“However, the time has come to focus our efforts on what our national interest dictates.”

UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters the decision followed a strategic review of the country’s long-term energy priorities. “This is a policy decision. It has been done after a careful look at current and future policies related to the level of production,” Mazrouei said.

But what are these “national interests” that the UAE is talking about? The
UAE and Saudi Arabia have been differing on oil policy for some time now. While the UAE wishes to increase oil production, the Saudis have been against it, in an effort to keep prices high.

This is because Riyadh is more reliant on oil revenues to fund its country and its lavish budget. Meanwhile, the UAE economy is less dependent on oil revenues. In fact, Abu Dhabi has been investing heavily in expanding capacity, which reflects its desire to monetise reserves. By leaving Opec, the UAE will be able to increase oil production.

How does UAE’s departure affect Opec?

UAE’s departure from Opec significantly hurts the organisation, as it is one of the most influential and compliant members. Moreover, the UAE had the second-highest spare production capacity. In simple terms, it was the second most important swing producer, capable of increasing production to help ease prices.

Jamie Ingram, managing editor for the Middle East Economic Survey, also noted that Opec is losing 13 per cent of its production capacity with the UAE’s exit.

Notably, the UAE’s departure from Opec isn’t the first such instance of a nation exiting the oil collective. Qatar exited in 2019, and Angola left in 2024.

The UAE’s withdrawal also hurts Opec’s ability to increase production in times of emergency, which, in turn, will affect oil prices. “A structurally weaker Opec, with less spare capacity concentrated within the group, will find it increasingly difficult to calibrate supply and stabilise prices,” said Jorge Leon, head of geopolitical analysis at Rystad Energy to the Associated Press.

“The net effect points to a more fragmented supply landscape and a potentially more volatile oil market over time as Opec’s capacity to smooth imbalances diminishes.”

Does UAE’s move impact India?

For
India, the UAE’s departure from Opec could be good news, noted experts.

For long, India has been urging Opec countries to increase oil production to achieve energy security and affordability. It’s important to note here that 40 per cent of India’s oil requirement is served by Opec nations, whereas the UAE accounts for around a tenth of India’s overall oil imports.

According to experts, as the UAE will be freed from Opec mandates on oil production, it will benefit India, as it will be able to get more oil. As Sourav Mitra, partner, oil and gas Grant Thornton Bharat told LiveMint, “It is likely to be beneficial for India’s import bill and inflation in that sense.”

Narendra Taneja, chairman, Independent Energy Policy Institute, also concurred that India stands to gain from the UAE’s exit from Opec. “The UAE and India have deep relations, and this will only improve now,” he was quoted as telling NDTV.

The shift also opens up new avenues for bilateral energy engagement. “The potential exit would signal a shift toward more flexible, bilateral energy engagement, enabling India to negotiate long-term supply agreements without being constrained by Opec production quotas,” Yogesh Jambhale, Senior Manager – Research at Rubix Data Sciences, told the Financial Express.

However, the impact of the UAE’s departure from Opec won’t be fully felt until the
blockade of the Strait of Hormuz is lifted. The choked waterway prevents much of the oil produced by Persian Gulf countries such as Saudi Arabia and the UAE from getting to customers.

David Oxley, the chief climate and commodities economist at Capital Economics, told The Guardian: “[The] surprise announcement by the UAE that it will leave Opec+ from May 1 will not have any immediate implications for the global energy market, but it does suggest that global supplies will be higher than would otherwise be the case once the Strait of Hormuz reopens. “It fits with our existing view that the ties binding Opec members together have loosened.”

With inputs from agencies