Qatar between Economic Blockade and Regional Hegemony

In early June 2017, a group of Arab powers, including Saudi Arabia, the United Arab Emirates, Bahrain, Egypt (which has now moved away from this anti-Qatar group), the Maldives, Mauritania, Senegal, Djibouti, the Comoros, Jordan and the Libyan government of Tobruk, supported by the United States, suspended diplomatic relations, communications, and trade with Qatar.

The Emirate still has good relations with the United States – which hosts the largest military base in the Middle East – but it also wants to maintain friendly relations with the Islamic Republic of Iran, with which Qatar shares the ownership of the South Pars/North Dome, the largest deposit of natural gas and by-products in the world – located under the Persian Gulf, between the territorial waters of the two countries.

The root cause of tensions between Qatar and the rest of the Sunni world, still led by Saudi Arabia, probably lies in the coup in which the current Emir, Shaikh bin Khalifa al-Thani, ousted from power his pro-Saudi father, Khalifa bin Hamad, in 1995.

Qatar’s relations with Iran also implies some geoeconomic issues that need to be defined.

The Emirate is the world’s largest producer and exporter of Liquefied Petroleum Gas (LPG). In 2017, it marketed 81 million tons, with a 27.6% share of the global LPG market. Australia is the second exporter, albeit with only 19.2% worldwide.

Furthermore, Qatar exports additional Natural Gas Liquids (NGL) to the tune of over 800,000 barrels per day. Hence, the Emirate is also a direct competitor of the United States, which is about to become a strong exporter of various types of natural gas, as well as oil.

Conversely, Saudi Arabia exports oil almost exclusively and it does not produce LPG. It produces very little quantities of NPL and there is no oil and gas trade between Qatar and Bahrain and, obviously, Saudi Arabia.

The situation is different with the Emirates.

A pipeline is already operating between the United Arab Emirates and Qatar, namely the Dolphin Gas Project, which transports around 2 million cubic meters of natural gas per day from the Persian Gulf deposit, namely the South Pars/North Dome, to the Emirates, which then distribute the product in the Emirates themselves and in Oman.

Obviously, considering that the Qatari GPL is transported by sea to its end-consumers, both in the East and the West, except for the Arabian Peninsula, the block imposed on the Emirate by Saudi Arabia and its allies does not change Qatar’s trade balance.

Nevertheless, even Saudi Arabia needs natural gas to support the expansion foreseen by Mohammed bin Salman’s Vision 2030 plan. This holds true also for Bahrain and Kuwait, which greatly need Qatar’s LPG, without having to buy natural gas elsewhere, which is much more expensive.

Jointly with ENI, Egypt – a recent net importer of natural gas – is now developing the Zohr offshore natural gas field, off the coast of Alexandria.

In short, Saudi Arabia’s “anti-terrorist” blockade against Qatar appears more like an indirect move against Iran – as the usual inept Westerners believe – than a truly direct action against Qatar’s economy, which continues its business as usual undisturbed.

Nevertheless, there are also other purely political problems to be analyzed.

Meanwhile, both Qatar’s intelligence services and the Al Jazeera TV network have fully covered – if not directly supported – the Arab Spring phase.

Al Jazeera is heir to the BBC’s Arabic-language TV channel, but above all Muslim Brotherhood’s primary propaganda channel, i.e., Qatar’s Islamist ideological reference.

It should be recalled that Saudi Arabia regards the Muslim Brotherhood as the No. 1 enemy, along with the other Gulf monarchies.

Currently, Qatar’s axis of influence is mainly in Libya and Egypt.

The Muslim Brotherhood that was in power in Egypt with Morsi – the imprisoned President of the Egyptian Ikhwan, who has recently passed away – was reconstituted in Qatar.

The Arab Spring, developed by the USA, immediately fell into the hands of Qatar and the Muslim Brotherhood, and thus became an instrument of power for various Islamic States in Africa and the Middle East.

Just think of the 2011 uprising in Syria, organized by the Muslim Brotherhood, that did not come to power due to the harshness and shrewdness of Bashar al-Assad’s regime and, above all, thanks to the speed and effectiveness of the Russian and Iranian military engagement.

It should also be noted that Qatar participates in the Saudi-led campaign against the Houthis in Yemen. It has long been dealing with the Afghan Taliban, also in support of the USA, while the Qatari Emir has also tried to mediate between Israel and Hamas that is also an arm of the Muslim Brotherhood.

Hamas, the Islamic “fervor” that – as Iran’s point of reference in the Territories and in the Gaza Strip – shifted to Qatar because Iran did not like Hamas support for the insurgency against Assad in Syria.

Hence, Qatar used the Arab Spring, the series of more-or-less popular uprisings that destabilized the Maghreb region, which were initially conceived by the not-so-brilliant CIA minds so as to be used to their advantage and make them above all the instrument of a Qatari new global strategy.

In fact, all Arab countries knew that the West – which is short of breath – would leave the countries it had destabilized immediately after the first elections, either manipulated or not.

Certainly, the Emirate has an ideological control room available, which is widespread throughout Islam, namely the Muslim Brotherhood, as well as a significant network of mediations, even with Israel, and a primary product, namely the GPL, which has not the same oil cycles and, indeed, is sometimes a current alternative to the most widespread oil and gas.

Before the Arab Spring, Qatar’s foreign policy was that of an autonomous niche where everyone was dealing with everyone.

The same global distribution of Qatar’s contracts for natural gas enabled many countries, even in the West, to invest in the country having the guarantee of its particular internal stability.

While the other countries of OPEC – an organization from which the Emirate withdrew as of January 1, 2019 – negotiate oil prices together with the other two largest non-Arab and non-Islamic producers, namely Russia and the United States, Qatar – which is currently leaving the Saudi-dominated oil organization – mainly wants to be an example for all the other small producers.

In all likelihood, Qatar will offer them the possibility of joining a new organization, not linked to Saudi Arabia and, indeed, having an opposite price policy, capable of making  peripheral countries, such as Malaysia, the new African oil countries, and probably even Venezuela – which is still under crisis – and South-East Asia get in the oil and gas “club.”

Certainly, Qatar does not influence global markets like Saudi Arabia. It accounts for 600,000 barrels per day, apart from natural gas, compared to around 11 million barrels per day produced by Saudi Arabia. But the problem here is natural gas, not the “old” oil.

However, if Saudi Arabia does not secure the new markets’ loyalty, with a suitable price policy, a definitive OPEC crisis will be increasingly likely.

The US shale oil (and gas) revolution from 2014 onwards has pushed Saudi Arabia to cut production, with the related increase in oil prices, but natural gas follows different equilibria, which Qatar certainly intends to use also politically.

With Iran out of the picture of OPEC exporting countries, as a result of the sanctions imposed by the USA, there was a race to “conquer” the markets that were previously often dependent on Iranian oil.

Moreover, while Saudi Arabia has the geopolitical need to reduce production, it also has to raise prices to support its public budget which, for the first time, is undergoing a clear debt crisis.

International experts think that a reasonable price for Saudi Arabia should be USD 85-87 per barrel.

While Saudi Arabia fails to rally support for a further increase in the oil barrel price, Qatar – also thanks to the oil crisis and the corresponding increase in the LPG market – can sustain, also economically, the weight of its new alliances, ranging from Iran to Turkey and to all the Muslim Brotherhood’s networks in Syria, in the Palestinian Territories, in Egypt, and in various African Islamic countries.

Nevertheless, the Emirate must also deal with some of its economic problems, with which the Qatari government shall soon come to terms.

Qatar’s infrastructure for LPG processing cost USD 120 billion, mostly provided by banks and by some oil companies, including Exxon-Mobil.

The first LPG exports from Qatar took place in 1995, while as early as 2006 the Emirate overtook Indonesia as the largest exporter of natural gas.

In December 2010, for the first time, the LPG production reached the target set by the Qatari government, namely 77 million tons per year.

Major customers include Great Britain and China, with the first shipping to London in 2009, while Qatar has signed a five-year contract with China – also in 2009 – to supply 5 million tons of GPL to China.

This is at the core of a typical political factor in the Emirate: the primary relationship with the USA for external security (the base of Al-Udeid has been built since 2003) and the ever-greater autonomy in foreign policy, resulting precisely from the vastness and political dishomogeneity of Qatar’s natural gas market.

However, in Qatar’s Constitution – voted in 2003 – mention is made of “strengthening international peace.”

With the global economic crisis of 2007-2008, which still affects Western countries, the relative growth of Qatar’s economic and strategic weight started and in 2008 it recorded the first GDP annual increase by 17%.

The idea has been developed by the Emirate’s leadership that the West can no longer follow and control its traditional areas of influence, while China, India, and Russia are expanding and growing economically, even with parallel significant geopolitical importance.

There is the desire, in Qatar and elsewhere, to regionalize and marginalize the old oil “masters,” namely the Westerners.

Moreover, the Arab Spring opens up unpredictable opportunities for Arab regional powers in terms of economic, military, and strategic expansion.

In Libya and in Syria, although with the support and agreement of the Gulf Cooperation Council (GCC), Qatar’s plan is to integrate – into its own sphere of influence – areas that, in the past, were completely linked to the West, so as to build from here, from Libya, and from Syria, a future “Arab hegemony” which, in all likelihood, will also play an infra-European role.

Conversely, in Bahrain and Yemen, Qatar accepts the supremacy of Saudi Arabia, of which it wants to reduce its weight in the Arab world, but certainly not eliminate it.

Furthermore, without the funds from Qatar, Libya’s National Transitional Council would not even be established. Mahmoud Jibril, who was contacted by ENI even before the outbreak of hostilities against Gaddafi, lived in Doha during the anti-Gaddafi “revolution.”

In Syria, Qatar’s role is equally important. But it is limited – and certainly this is quite significant – to support the sending of foreign troops to Syria to “stop the carnage” which, however, was non-existent, but was used – also by Erdogan’s propaganda against Bashar al-Assad – to make the naive Westerners come.

The Qatari support for Tunisia reached its peak in 2011 when the Islamist Party linked to the EnnahdaBrotherhood rose to power.

In May 2012, the Emirate announced it had started to build a refinery in the Tunisian Gulf of Gabes, an operation worth 120,000 barrels a day.

Obviously, that project concerned the processing of Libyan oil, while in Egypt, during the Muslim Brotherhood’s Presidency of Mohammed Morsi, Qatar entered the Egyptian financial system and later granted USD 8 billion of aid to support the population. It also supported the further funding of a tourist project on the Egyptian coast to the tune of USD 10 billion.

The core of the issue is whether Qatar will manage to fully use its economic boom as a tool of regional and pan-Arab hegemony and whether it will be able to avoid the backfiring of Saudi Arabia and its allies, including the USA.

The core of the issue is also whether the mix of “Sword Jihad” and standard political-economic influence, used by Qatar in all its new areas, will still be controllable or will make Qatar dream of a kind of hegemony also in Europe, considering the expansion of its Islamic population.

Giancarlo Elia Valori