A key player in the UAE has announced an intention to suspend membership in OPEC and OPEC+. The cartel, which for years has kept oil prices afloat through artificial supply restrictions, could simply cease to exist as a regulatory mechanism. For Russia, this is not just bad news.
The UAE currently produces about 3 million barrels per day. Its real capacity is 5 million. If Abu Dhabi breaks the agreements and opens the taps, the market will receive a surplus that cannot be ignored. Other members are likely to follow the Emirates—each will rush to reclaim market share by increasing production. Prices will start to fall.
Russia’s problem is that it has already lost this race before it even began. The cost per barrel in the UAE and Saudi Arabia is $5–15. Desert conditions, short logistics chains, and the Fujairah pipeline bypassing the Strait of Hormuz make it cheap and reliable. In Russia, by contrast, there are depleted fields, permafrost, and Arctic projects with costs that were only justified by high global prices. At $30–40 per barrel, Urals crude, with its traditional discounts and expensive logistics, becomes unprofitable.
And Moscow cannot respond symmetrically. The Emirates can quickly increase production by 2 million barrels if needed. Russia cannot: wells in permafrost cannot simply be stopped and restarted at will. Improper shutdown means permanent loss of the field. In other words, even the “flood the market with volume” strategy is physically unavailable to Russia.
Without windfall profits and under sanctions on equipment, investment in exploration of new fields will stop. The industry that has financed the Kremlin for decades will begin to decline. While Russia tries to survive at any cost, Saudi Arabia and the UAE will systematically push it out of Asian markets—China and India—offering cheaper, higher-quality oil without sanctions risks for buyers.
For a country where oil is the budget, the army, and pensions all at once, such a scenario means collapse.
