Qatar’s Exit from OPEC – Rational or Irrational?

Alao Abiodun
20% Complete

The Organization of Petroleum Exporting countries (OPEC), was founded in September 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. After much oil discoveries came into limelight in a host of other countries, in 1961, Qatar joined, followed by Indonesia, Libya, the UAE and Algeria. Nigeria, Ecuador and Gabon came in the 1970s, followed by Angola, 2007; Equatorial Guinea, 2017; and the Republic of Congo, 2018.

The United Arab Emirates — which includes Abū Ẓabī (the largest of the emirates), Dubayy, ʿAjmān, Al-Shāriqah, Umm al-Qaywayn, Raʾs al-Khaymah, and Al-Fujayrah — assumed Abū Ẓabī’s membership in the 1970s. Gabon, which had joined in 1975, withdrew in January 1995, but it had relatively insignificant oil reserves. Ecuador suspended its membership from OPEC from December 1992 until October 2007, while Indonesia suspended its membership beginning in January 2009.

Strategically, the influence of individual OPEC members on the organization and on the oil market usually depends on their levels of reserves and production. Statistically, Saudi Arabia controls about one-third of OPEC’s total oil reserves, playing a leading role in the organization. Other important members are Iran, Iraq, Kuwait, and the United Arab Emirates, whose combined reserves are significantly greater than those of Saudi Arabia.

Also Read: Qatar Set to Exit OPEC in 2019

Kuwait, which has a very small population, has shown a willingness to cut production relative to the size of its reserves, whereas Iran and Iraq, both with large and growing populations, have generally produced at high levels relative to reserves.

In the coming days, the oil cartel that controls roughly a third of global production, and its allies including Russia and Kazakhstan, will meet in Vienna to decide how to respond to the 30 per cent plunge in oil prices to nearly $60 a barrel over the past two months. With US output surging, and Russia and Saudi Arabia also producing at close to record levels, traders are convinced the market will be awash with oil next year. Previously such a fall would have prompted OPEC and its allies to agree to cut production but for Saudi Arabia, which remains the world’s top oil exporter and the cartel’s de facto leader, that decision has been complicated by the murder of Jamal Khashoggi.

Wald, who is president of Transversal Consulting and a senior fellow at the Atlantic Council’s Global Energy Center, says Qatar’s decision would be both a personal matter for the Qatari leadership and also a domestic political matter.

“[Qatar] probably sees no reason to be part of a group that has its positions dictated by Saudi Arabia, when Saudi Arabia is making statements outwardly that it would like to basically end Qatar, as Qatar exists today,” she said.

On Monday, December 3rd 2018, Doha, one of OPEC’s smallest oil producers but the world’s biggest liquefied natural gas (LNG) exporter, said it was quitting OPEC from January to focus on its gas ambitions. The United Arab Emirates stressed that Doha’s decision to leave OPEC was as a reflection of the decline of its influence.

The bone of contention however is the rationale behind the decision which has continued to generate heated controversies. As one of OPEC’s prominent member, Qatar has acquired enormous influence economically and a strong security base and as such played a pivotal role globally. Its influence is therefore solely tied with its activities at the level of OPEC, however, while the decision might be a strong factor on the side of economic advancement, there maybe a constraint on the geopolitical level. Being part of the ‘decision-making’ group within OPEC is most of the time the key to the White House, the Kremlin or Brussels. Having an insight and a say at the table of OPEC ministers grants nations a great deal of power.

It should be recalled that in June 2017, The Saudi government led a campaign to isolate Qatar, the tiny country on its border, which it said was supporting terrorism. The Saudi Kingdom banned Qatari airplanes and ships from using Saudi airspace and sea routes and blocked the only land crossing onto the Qatar peninsula.

Follow us on Twitter @aprecon



Leave a Comment

Copyright 2017. All Right Reserved. PRIVACY POLICY

Powered by APRECON