OPEC cut signals Middle East change

By Gao Shangtao

Summary: A shakeup of the international relations pattern in the Middle East is in the works with Qatar's withdrawal from OPEC.

Saudi Arabia's Oil Minister Khalid al-Falih talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, December 6, 2018. [Photo: VCG]

At the recent OPEC (Organization of the Petroleum Exporting Countries) Plus Summit in Vienna, OPEC reached an agreement with non-OPEC oil producers to reduce the daily production of crude oil by 1.2 million barrels a day starting in January. The initially set period is for 6 months, with two-thirds of the cuts coming from OPEC members, and the rest being cut by 10 non-OPEC oil producers, including Russia. The reduction agreement is expected to help balance supply and demand in the crude oil market.

Of course, the reduction agreement also has other motivations, including a hedge against the impact of Qatar's withdrawal from OPEC. A few days before the OPEC Plus Summit, Qatar's Minister of State for Energy Affairs, Saad al-Kaabi, announced that Qatar will withdraw from OPEC as of January 1st, and will begin to focus more on the production and sale of natural gas. The move means Qatar's oil production will no longer be subject to OPEC limits.

This is the first time since the establishment of OPEC that a Middle Eastern country has withdrawn from OPEC, which has magnified the complex internal struggle within the organization. Although Qatar's level of production compared to the rest of OPEC is not high, its vast natural gas reserves have a considerable influence on the international energy market. So despite pleas by certain OPEC members to remain within the organization, Qatari authorities say their move to withdraw is resolute.

Qatari authorities say withdrawing from OPEC is a long-term strategic move to improve its international status, and is not based on any political considerations. But taking into account an embargo imposed by Saudi Arabia and other countries since the breaking of diplomatic relations with Qatar in June last year, the move is being widely viewed as a counterattack against Saudi Arabia and others in the Gulf region.

At present, Saudi Arabia is the de facto leader of OPEC. Saudi authorities have been uneasy about the recent downturn in international oil prices, and have been pushing for a consensus within OPEC to limit production and raise prices. Would Qatar, which has been deeply affected by Saudi Arabia's economic sanctions, sacrifice its own interests to help out the Saudis? Obviously it wouldn't. As such, Qatar sees no need to remain in OPEC, as any objection it might have to OPEC policy would likely fall on deaf ears. So by withdrawing, Qatar creates its own ability to guide its oil sector as it sees fit, which - in itself - is a slap in the face to Saudi Arabia.

Qatar's withdrawal from OPEC is not a temporary impulse. Before the outbreak of the current diplomatic attack against Qatar - which has been led by Saudi Arabia and the United Arab Emirates - Qatar also clashed with Saudi Arabia over its modernization reforms and support for reformists in the Salafist movement. However, those disagreements were still bound in the framework of international relations within the Middle East dominated by Saudi Arabia, especially within the framework of the Gulf Cooperation Council.

After Saudi Crown Prince Mohammad bin Salman took over power, and especially after the outbreak of the diplomatic turmoil, Qatar gradually drifted away from Saudi Arabia, and rebooted its regional strategies and foreign policy. Rejecting Saudi Arabia and the United Arab Emirates, and instead relying on Turkey, reconciling with Iran and maintaining "brotherhood" with countries such as Oman and Kuwait, have gradually become Qatar's new strategic options. Under this strategic consideration, Qatar's withdrawal from Saudi-led OPEC is the end result.

Of course, this is only the first step in Qatar's redesign of its diplomatic strategy. It is likely to try to marginalize the GCC, and might eventually withdraw from the Saudi-led Arab royal states union, bringing about a shakeup in the international relations pattern in the Middle East.

It is foreseeable that the days of Saudi Arabia leading Arab royal states against a Shiite-dominated Iran, as well as Egypt, and in competition with Turkey, are likely gone. The new Middle East pattern is likely to shake-out in this direction: Saudi Arabia will shift closer to Egypt, the United Arab Emirates and Israel to deal with Iran and subdue Qatar. Iran will continue to ally further with the Shiite-dominated government of Iraq, as well as Syria, Hezbollah in Lebanon and the Houthi forces in Yemen to counter Saudi Arabia. Among this confusion, Israel has gradually established more friendly relations with the GCC countries, except for Qatar, to improve its strategic situation. Of course, there is an unstable factor in this new game, that is, whether the Saudi Crown Prince can effectively lead the new alliance organized by Saudi Arabia over the long-term.

Professor Gao Shangtao is the director of the Center for Middle Eastern Studies, China Foreign Affairs University, Beijing.