6 min readApr 29, 2026 04:16 PM IST First published on: Apr 29, 2026 at 04:16 PM ISTOn Tuesday, the UAE announced that it was leaving OPEC. After almost 60 years of membership, its exit is significant because this comes on the back of escalating disagreements with Saudi Arabia on regional conflicts in the last few years, most notably in Sudan and Yemen. Immediately, this move will likely have little impact on oil markets given the ongoing blockade of the Strait of Hormuz. However, in the medium to long run, it could be significant.The differing economic and oil production philosophies of Saudi Arabia and the UAE have now been laid bare. At least historically, Saudi Arabia has generally supported constraining supply and maintaining a high global price environment. This was not only an economic move, but a political one in response to the dominance of Western oil majors and military conflict in Gulf states in the 1970s. By enforcing OPEC’s quota system, where each member state (12 members before the UAE’s departure) would be held to production targets, OPEC used its spare capacity as a tool to strongly guide global oil prices. Before the UAE’s exit and the Iran war, OPEC+ (which has 11 additional countries, including Russia) production accounted for almost half of all global oil production. With the UAE’s exit, almost 4-5 per cent of that production will no longer follow the quota, which could somewhat affect OPEC’s pricing power.AdvertisementClearly, the UAE is interested in expanding its production well beyond what the OPEC quota system allows. All oil-producing countries have the same quandary right now: Is it better to hold back and produce for longer (in a high-price environment), or is it better to produce quickly (in a slightly lower price environment) and make money in the short run? The UAE is generally understood to have some of the lowest per barrel oil production costs in the region, so lower prices have less of an impact on its profit margins. Frustrated with the quotas and clearly wanting to pursue more production, this exit is not completely unexpected. There were rumblings of similar moves in 2020, although nothing came of it.Also Read | In exiting OPEC, UAE has prioritised changing realities over cartel loyaltyThis decision does raise questions about whether this withdrawal is limited to oil markets alone or if the OPEC withdrawal is a precursor to broader Emirati realignment. The elements of cooperation among Gulf states post-WWII had included common interests around nationalised development of oil and gas resources (resisting Western MNC domination as much as possible), a loose sense of Gulf regionalism, and broad-based security cooperation through the Gulf Cooperation Council (GCC) to ensure the political continuity of the region’s monarchies. If the UAE’s withdrawal affects all of these common interests as well, then one has to wonder whether the GCC’s binding ties are being threatened. The UAE’s increasing alignment with the US and Israel has been a source of tension amongst some GCC member states.For India, this has a few implications. Firstly, any rising instability amongst Gulf states will have impacts on the nine million Indian migrants in the region, most of them low-wage workers. Their safety, their working conditions, and their well-being will be a rising concern if the two largest recipients of Indian migrants in the region (the UAE and Saudi Arabia) are increasingly caught up in regional tensions. Remittance inflows (annually over $50 billion from the GCC) may be less stable, and opportunities for economic migration may be more precarious if this is a broader schism in the GCC.AdvertisementSecondly, in the wake of the Iran war and these developments, India may not be able to rely on investments from Gulf states at the scale that it has in the last decade. Many of the region’s sovereign wealth funds have suspended deals due to the ongoing conflict, and it is not hard to imagine that many of these funds will have to commit resources to domestic investments and redevelopment after the Strait of Hormuz opens up.Finally, as one of the UAE’s largest oil customers, there may be a silver lining if the UAE’s increased production does manage to drive down oil prices later this year. Between LPG shortages, impending price increases of all crude oil-derived products, and conflict premiums, the economic effects of the conflict are already being felt strongly in India.Countries have left OPEC before. Indonesia suspended its membership in 2009, rejoined, and then left again in 2016. Qatar left OPEC in 2019 to focus on gas production. OPEC+ countries have not always followed the quotas as closely as well. The International Energy Agency (IEA) was created in the 1970s as an “anti-OPEC” for largely Western member countries to coordinate the release of their Strategic Petroleum Reserves (SPR) during such crises to control global prices.you may likeIndia’s associate membership in the IEA does not give it a seat at the table when such decisions are made; it is a beneficiary of the SPR releases of IEA member states through lower global oil prices. On the other hand, its long diplomatic and commercial connection with Gulf states has been the foundation of decades of expansion of oil & gas consumption. India-OPEC dialogues have also been happening more frequently, and it is projected to be one of the biggest importers of oil globally in the next few decades.So while the UAE’s withdrawal from OPEC does not need to trigger any knee-jerk policy reactions, it should provoke India to think more deeply about which clubs it wants to be a part of, and where it should use its diplomatic and commercial capital to enhance its energy security. The UAE seems to have made its choices. But so far, India seems to be sitting on the fence.The writer is assistant professor, IIT Delhi School of Public Policy