Authors: Edberg D. Cheeran and Agnes Mary Jaison*
The United Arab Emirates (UAE) has been operating for more than six decades in the Organization of Petroleum Exporting Countries (OPEC) as a mechanism for collective discipline in global oil markets, influencing and coordinating petroleum policies. In 2016, OPEC+, a wider alliance, was forged to manage global supply, which today controls 50% of the world’s oil production and about 90% of global oil reserves. However, the UAE’s recent decision to exit from OPEC, effective from May 2026, may create a paradoxical situation. Firstly, it raises a question on the reasoning behind a key Gulf actor taking the risk of undermining coordinated power, with Saudi Arabia at its core. Secondly, at a time when the world is debating about accelerating energy transition, a solar-dominant country that is aggressively pivoting towards renewable energy fundamentally shifts its production policy.
The former reflects a strategic geopolitical realignment, not merely surface-level issues over production quotas and voluntary discipline. It may signal deeper dissatisfaction with OPEC’s inability to adapt to new global energy realities. The origin, however, was long before the cracks were visible on the surface, a fact the US-led West did not notice or chose to ignore. The Saudi-Emirati divergence began with a fracture in Yemen, where both entered as allies but with very different objectives. From there, the fractures turned into visible cracks, including Saudi Arabia’s bombing of Emirati proxies, marking a diplomatic rupture nobody expected.
Over the past few years, there has been a subtle yet significant shift from cooperation to calibrated competition. This ‘quiet rivalry’ has manifested in strategic disagreements and competing visions of regional leadership. The recent exit from OPEC is perhaps the most prominent example of this shift. What appears to be a technical disagreement within OPEC, with the UAE repeatedly pushing for higher production quotas and Saudi Arabia preferring tight supply control to stabilize prices, actually reflects a broader transition from being strategic partners to competitors seeking regional dominance.
The energy transition paradox is the practical application of the ‘last man standing strategy.’ The UAE described its decision as one in pursuit of its national interests, in line with the country’s plan for ‘strategic autonomy.’ The Arab nation has long viewed the organization’s production quotas as structural sabotage that caps its potential and hinders the monetization of sovereignty of significant investments in upstream oil technology over the past few years. This, coupled with the growing call for energy transition, increases stranded asset risk for the UAE. This can be seen as the rationale for the Emirati government’s targeted expansion of crude oil production capacity from roughly 3.4 million barrels to 5 million barrels per day by 2027. They assert that increased flexibility and agility to meet supply, taking both their investors and stakeholders into consideration, are the main drivers behind the decision.
OPEC is structured in a way that benefits petrostates that depend heavily on oil prices. This is not the case for the UAE, which has invested in diversifying its revenue sources and deliberately building an economy resilient to oil shocks, given that oil accounts for just one stream of revenue. An exit from OPEC gives the UAE greater flexibility and freedom to increase production, thus increasing global oil supply and making it more responsive. This can be seen as a positive development for countries like India. With the UAE pushing for rapid technological advancements as well as a heavy influx of foreign investments into its oil fields, it will only be a matter of time before OPEC faces pressure to abandon previous notions of constraints and voluntary restraints and match its neighboring competitor. This increased competition will undoubtedly lead to increased volatility and additional downward pressure on oil prices, bringing down prices per barrel in the short term for oil-importing countries.
India and the UAE have strong ties, especially through the ‘Comprehensive Strategic Partnership,’ and these ties are expected to deepen through oil diplomacy. This bilateral has steadily evolved into a US$100 billion strong partnership. A new target of US$200 billion in trade has been set for 2032. The UAE’s evolving vision and energy profile will drive higher investments in domestic energy production, with the Abu Dhabi National Oil Company (ADNOC) and others collaborating with major Indian refiners such as Indian Oil and Bharat Petroleum on mega-refining projects. This could give India an advantage amid the crisis in the Strait of Hormuz. It creates better opportunities for negotiation with the UAE, which are crucial for India to accelerate production, bypass the volatile Strait, and use inland pipelines, especially via the Habshan-Fujairah pipeline. The UAE now plans to build an additional pipeline to the Port of Fujairah by 2027. This would help reduce India’s import bill and inflationary pressure from rising prices. Without OPEC constraints, the UAE can pursue better bilateral trade agreements, potentially even rupee-based trade or digital currency with India, reducing dependence on the US dollar.
In May 2026, India and the UAE signed six significant agreements, including a strategic collaboration pact between Indian Strategic Petroleum Reserves Limited (ISPRL) and Abu Dhabi National Oil Company (ADNOC), which could allow the storage of up to 30 million barrels of crude oil in India’s strategic reserves. India has made its stance clear, positioning the Arab country as an important partner in India’s energy security landscape.
In the shipping sector, Cochin Shipyard Limited and DryDocks World (DDW) have agreed to establish a ship repair cluster at Vadinar in Gujarat, including offshore fabrication facilities under India’s Maritime Development Fund Scheme. The current leadership of both countries has also embraced the operationalization of the Virtual Trade Corridor using MAITRI (Master Application for International Trade and Regulatory Interface). This comes at a crucial time, as streamlining cargo movement, reducing logistics costs, and enhancing trade flows between nations have become national priorities. India is, however, negotiating Bilateral Trade Agreements (BTAs) and Free Trade Agreements (FTAs) with Gulf nations such as Bahrain and Qatar, while Africa and South America have become important partners in India’s crude import slate in recent times.
Ultimately, the UAE’s exit is not merely an institutional shift but a reflection of a transforming global energy order. Thus, the dual paradox at the heart of this departure resolves itself. What may seem contradictory is, in reality, a calculated adaptation strategy that could become a megatrend, triggering a wider, systemic ripple effect. The result in the next few years would be the blurring of lines between market stability and strategic volatility, geopolitics and geoeconomics, and dependence on fossil fuels and clean energy transitions.
*Agnes Mary Jaison is an undergraduate student in the Department of International Relations, Peace and Public Policy (IRP and PP), St Joseph’s University, Bengaluru, Karnataka-560027, India. With diverse academic interests, her curiosity spans from contemporary global issues to evolving socio-political dynamics in India.
