Saudi Arabia’s domination of OPEC may be under threat with several GCC countries, including the United Arab Emirates, planning to increase cooperation with Iran on the production and transportation of crude oil.
With sanction pressure being eased on Iran, Gulf nations have begun re-establishing diplomatic and economic relations, setting a tone of optimism in the Gulf region. Currently, Iran and the UAE are close to reaching an agreement on three previously disputed islands near the Strait of Hormuz. The strait carried approximately 35% of all seaborne traded oil in 2011, according to the Iranian.com.
While the deal could prove positive for the UAE’s economy, it may isolate Saudi Arabia, a country that ships three times more crude oil through the Strait of Hormuz than any other Gulf nation.
This budding deal is another development that may effectively cut Saudi Arabia off from other OPEC nations. Oman is planning to build a pipeline connecting it with Iran’s natural gas fields as part of a $60 billion deal to increase cooperation and trade between the two countries. Iraq recently announced its plans to collaborate with Iran to increase its oil production capacity to 9 million barrels per day (bpd), challenging Saudi Arabia’s domination of OPEC. The Kingdom produced 9.8 million bpd in December 2013.
