Time To Bury OPEC

OPEC is dying. The announcement by the United Arab Emirates (UAE) that it will leave the cartel effective May 1 may be the fatal blow. As OPEC’s third-largest producer, the UAE’s exit follows Qatar’s 2019 departure, Saudi Arabia’s repeated unilateral production decisions, and Venezuela’s collapse as a meaningful OPEC contributor. What remains is a shell — an organization that can no longer effectively coordinate output or sustain prices.

The Emirati decision reflects both legitimate grievance and strategic calculation. The UAE has absorbed thousands of missile and drone attacks from OPEC member Iran and has long chafed under production quotas that deprived it of billions of dollars of potential revenue each year. Thus, the Emirates should not have to share a cartel with its attacker. And inside a now-weakened OPEC, Iran loses a tool it would have counted on to finance its recovery.

A Price Maker No More

OPEC’s core function has always been coordinating production cuts to prop up the price of oil, a tactic the cartel has long employed to the detriment of American consumers. That function, however, requires internal cohesion that no longer exists. Saudi Arabia — the cartel’s “swing producer” — has repeatedly acted outside the cartel’s consensus, increasing or decreasing output to serve Riyadh’s own needs. The UAE’s exit removes the cartel’s third-largest producer from the table entirely. More damaging still, the UAE was one of the only remaining OPEC members with meaningful spare capacity — the idle production that a cartel needs to discipline markets, respond to supply shocks, and keep members in line. Without credible enforcement or unified membership, OPEC cannot fulfill its founding purpose. Markets will increasingly price oil based on supply and demand — with less regard for cartel decrees.

Squeezing Iran at the Negotiating Table 

Tehran has suffered massive economic losses during Operation Epic Fury. Iran will be reliant on elevated oil prices to relieve domestic pressure and rearm its forces once the conflict stops. A weakened OPEC, with the UAE pumping freely and adding supply to global markets, deprives Iran of a tool to raise oil prices. This effectively makes the war damage Tehran has sustained more costly than it now appears because there is more risk that oil prices might be depressed when Tehran is seeking to rearm and coopt domestic dissent. That is leverage Washington can exploit at the negotiating table today.

UAE Had Every Reason To Walk

For the UAE, OPEC membership had become structurally untenable long before Iran fired the first missile. Following a $150 billion investment program, Abu Dhabi National Oil Company — UAE’s state oil company — had built capacity approaching 5 million barrels per day. However, OPEC quota obligations kept actual production roughly 30 percent below that ceiling, leaving billions in unrealized revenue on the table each year. The longer the UAE honored those constraints, the more it subsidized a cartel whose largest producers — including Iraq — had repeatedly broken ranks anyway. Iran’s attacks made an already-failing arrangement politically unsustainable.

Washington Should Accelerate OPEC’s Collapse

The administration should welcome the Emiratis departure from a cartel that has done real harm to American consumers. Washington should make sure that OPEC doesn’t recover. The United States can start by using leverage over OPEC’s next largest producer — Iraq. The U.S. controls the periodic release of Iraqi oil revenues held in U.S. Federal Reserve accounts. Tying Baghdad’s access to these accounts to an OPEC exit — as well as security and financial reforms — would increase the strategic pressure on Iran. The United States should also ramp up diplomatic pressure on Kuwait to formally leave the cartel in the wake of Iran’s attacks on it. Kuwait — a longtime U.S. ally — will need flexibility to increase production to address wartime damages. It should not have to coordinate that output with the country that caused the damage. It is time to fully bury OPEC.

 Elaine Dezenski is the senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). Daniel Swift is a senior research analyst at FDD and a retired U.S. diplomat. For more analysis from the authors and FDD, please subscribe HERE. Follow FDD on X @FDD. Follow Elaine on X @ElaineDezenski. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.