United Arab Emirates
In spite of its small size, the United Arab Emirates (UAE) is an important country at the intersection of energy and national security. The UAE is one of the world’s 10 largest oil producers, in addition to being a member of OPEC. It also plays an important role in global security. The UAE sits on the Strait of Hormuz, through which 90% of Persian Gulf oil exports travel. In addition to providing docking ports to U.S. Navy ships patrolling the strait, the UAE regularly sends its Union Defense Force to participate in U.S.-led missions in the Middle East.
Recent developments in the UAE’s oil and gas industry have called into question its future as a major energy producer. According to the EIA, it is unlikely that new petroleum discoveries will be made in the country.1 The UAE relies on enhanced oil recovery techniques to maintain its production in mature oil fields. These techniques raise the input costs of oil extraction, and the UAE’s continued stream of revenue depends on high oil prices. The Emirati government continues to try to diversify its economy by bolstering its tourism, financial and real estate sectors. However, at least in the near future, the UAE’s prosperity will continue to depend on the health of its oil and gas sector.
The UAE is extremely reliant on its oil and gas sector, since it accounts for around 80% of government revenue and 50% of exports. The government manages its vast oil wealth through a sovereign wealth fund: the Emirates Investment Authority. The fund mitigates the impact of significant dips in oil prices and production.
Many talk about the Strait of Hormuz as a crucial chokepoint in the world energy market. To bypass it, the UAE has tried to diversify its shipping routes by constructing a pipeline traversing the country from west to east, with direct access to the Indian Ocean. In 2014, the pipeline transported about 800,000 barrels per day. UAE officials have referred to the pipeline as “a very strategic project” and have discussed plans increase the pipeline’s capacity to 1.5 million barrels per day (about 65% of the UAE’s oil exports).2
The United States and the UAE have a security agreement that allows the United States to station troops and house equipment in the UAE. The UAE’s Jebel Ali port is the only port in the Gulf able to harbor an aircraft carrier, making it a strategic site for the U.S. Navy. The UAE is also the only Arab nation to have participated in the U.S.-led coalition operations in Afghanistan, Libya, Somalia, Bosnia-Kosovo, the Gulf War and against the Islamic State. It is unlikely that changes in oil production or trade will hurt this security relationship in any way. Much of the U.S.-UAE trade relationship exists outside of the oil and gas sectors, and there is little evidence to suggest that any increases in oil trade between the UAE and other potential rivals to the United States would result in greater political ties with those countries or a reduced security relationship with the United States.