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Qatar Withdraws from OPEC after 57 Years

08 Dec 2018
By Amin Bagheri
Qatar announces its withdrawal from OPEC. Source: twitter user @AJEnglish

Qatar’s recent withdrawal will have a limited material effect on OPEC’s operations, however its symbolic effect may prove far more damaging.

Qatari officials claim that the decision to withdraw from the Organisation of Petroleum Exporting Countries (OPEC) has nothing to do with the decision of some Arab countries to boycott Qatar, and was considered months ago. In recent months, there have been rumours about Qatar’s decision to withdraw from OPEC, and Qatari authorities have now painted the reality behind the announcement that their country will be among OPEC members for another month. In Doha on Monday, Qatari energy minister Saad Qaeda told reporters: “The decision to leave OPEC indicates Qatar’s desire to focus on development-related programs and increasing gas production capacity [from gas condensate] from 77 million tons per year to 110 million tons a year within the next few years.” Therefore, Qatar will be the first Persian Gulf country to leave the world’s largest oil cartel, OPEC, and it’s interesting that news of this important development was officially released only three days before the sensitive OPEC meeting held on 6 December in Vienna.

OPEC was founded in 1960. Qatar was the first Arab country to become a member of this organisation, and now, the first to leave. In 1995, Gabon became the first member to withdraw from the organisation. Indonesia, which was merely an oil importer, suspended its membership in 2016. Qatar is a small country with a population of only 2.7 million. But this small country is the world’s largest exporter of liquid natural gas. Its oil production is 600,000 barrels a day.

Will Qatar’s departure widen the gulf within OPEC?

Since Qatar’s oil reserves are limited and its production levels have flatlined, the loss of Qatar is not crippling for OPEC. However, OPEC membership is indispensable for Qatar. The gap that has been created in OPEC is gradually increasing; four Arab countries boycotted the small Gulf state in June 2017. These four countries included Saudi Arabia, Egypt, the UAE and Bahrain, which imposed trade and travel bans on Qatar. Two of these are OPEC members.The most important is Saudi Arabia. With tensions rising between Saudi Arabia and Qatar, Bahrain, Egypt, Saudi Arabia and the UAE decided to launch an economic and diplomatic boycott of Qatar last summer to compel Qatar to change its behaviour. On the other hand, tensions between Qatar and Saudi Arabia, which began in June 2017 resulted in the severing of ties between the two countries. This accounts for Qatar’s reluctance to cooperate with Saudi Arabia even in an organization like OPEC. Hence, the Qatari government has decided to withdraw from the oil organisation after 57 years.

Accordingly, although Qatar claims it made this decision in order to focus on gas production, it is more plausible that Qatar has exploited this opportunity to respond to the sanctions imposed by the four Arab states .

What are the consequences of Qatar’s withdrawal from OPEC?

Although OPEC has long been the world’s largest oil producing cartel it is increasingly experiencing a decline in its power and impact. The official departure of one of the oldest members of the organisation threatens the existence of this important economic entity.

Doha produces around 600,000 barrels of crude oil per day compared with the near 10 million barrels a day produced by Saudi Arabia. Comparison of these figures clearly shows that Qatar only made a limited contribution to OPEC’s overall oil production, and it is apparent that it is not important to OPEC. However, this decison by Qatari officials may expose fundamental weaknesses in the nearly 60-year old organisation that could eventually lead to its demise. Qatar’s action sends the message to other OPEC members that it may be better to operate outside the organisation than continue existing within it. The move follows a roughly 30 per cent decline in oil prices from four-year highs in October.

In conclusion, although Qatar’s withdrawal will have no significant material impact on the cartel’s decision-making process, it is symbolic of deepening regional division which may later diffuse to other members of the OPEC.

Amin Bagheri is a member of the Iranian International Studies Association in Tehran. His research focuses on Iran and the Middle East.

This article is published under a Creative Commons Licence and may be republished with attribution.