Following the UAE’s Lead: Iraq May Withdraw from OPEC
25 June 19:16
The war in the Middle East and the resulting oil shock were among the reasons why one of OPEC’s largest oil producers—the United Arab Emirates—withdrew from the cartel. Now Iraq, which has been hit harder than others by the disruption of supplies from the Persian Gulf, is considering this option. The country will have to consider all options if its OPEC quota is not significantly increased, a high-ranking official from Iraq’s Oil Ministry told Reuters, according to "Komersant Ukrainian".
Baghdad is considering leaving the cartel if it does not allow a significant increase in production, according to other people familiar with the situation. Oil is the main source of revenue for the country, which ranks second in OPEC in terms of production volume and is one of the five founding members of the organization. Iraq’s quota stands at 4.378 million barrels per day, and it was nearly meeting that quota before the war began, producing 4.2 million barrels in February. However, in May, that figure dropped to just 1.48 million barrels per day.
“Iraq is working to restore oil exports to full capacity and aims to bring production up to 7 million barrels per day in the coming years,” said government spokesman Haider al-Abudi.
He declined to discuss the possibility of withdrawing from OPEC.
Iraq’s new Prime Minister Ali al-Zeidi, who took office in May, said on Wednesday: Iraq wants the cartel to increase its quota in line with its production capacity and population size, the state news agency INA reported.
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The issue of the quota size should be approached with the utmost seriousness, the ministry representative added. According to him, Iraq has considered withdrawing from OPEC, but for now, the plan is to remain in the organization and demand an increase in its quota:
“Saudi Arabia and other OPEC allies must treat this issue with the utmost seriousness. Otherwise, Iraq will be forced to consider all options,” the official said.
One of the reasons the UAE announced its withdrawal from OPEC in late April was the ongoing disputes over quota levels that it had to engage in with the organization’s leader, Saudi Arabia. The UAE was one of the few countries with spare capacity to increase production. With a quota of 3.4 million barrels per day, it produced 3.64 million barrels in February, while it could have produced 4.3 million barrels.
Production limits imposed by the quota result in approximately 30% of capacity lying idle, the revenue from which would help the UAE offset the losses in tourism, finance, and business revenue caused by the war, as well as invest in the construction of pipelines bypassing the Strait of Hormuz, The Wall Street Journal reported.
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