Qatar's economic reinforcement and expanded relations with Russia, China and Turkey have made the blockade imposed by its Gulf neighbors less effective.
It is a reality: Qatar has won its battle against the United Arab Emirates and Saudi Arabia after more than three years of diplomatic rupture during which the two countries, together with other Arab neighbors, isolated the Qatari peninsula commercially and territorially. Economic and geopolitical reasons explain why the blockade imposed has finally faded away without Qatar giving in to its autonomous diplomatic line.
Qatar's Emir Tamim Al Thani at the 2018 Munich Security lecture [Kuhlmann/MSC].
article / Sebastián Bruzzone
In June 2017, Egypt, Jordan, Saudi Arabia, Bahrain, the United Arab Emirates, Libya, Yemen and the Maldives accused the Al Thani family of supporting Islamic terrorism and the Muslim Brotherhood and initiated a total blockade on trade to and from Qatar until Doha complied with thirteen conditions. However, last January 5, 2021, Saudi Arabia's Crown Prince Mohammed bin Salman welcomed Qatar's Emir Tamim bin Hamad Al Thani with an unexpected embrace in the Saudi city of Al-Ula, sealing the end of yet another dark chapter in the modern history of the Persian Gulf. But how many of the thirteen demands has Qatar fulfilled to reconcile with its neighbors? None.
As if nothing had happened. Tamim Al Thani arrived in Saudi Arabia to participate in the 41st Summit of the committee Gulf Cooperation Council (GCC) in which member states pledged efforts to promote solidarity, stability and multilateralism in the face of challenges in the region, which is confronted by Iran's nuclear and ballistic missile program, as well as its sabotage and destruction plans. In addition, the GCC as a whole appreciated the mediating role of Kuwait, then U.S. President Donald J. Trump and his son-in-law, Jared Kushner.
The meeting of the Gulf Arab leaders has been the thaw in the political desert after a storm of mutual accusations and instability in what was called the "Qatar diplomatic crisis"; this rapprochement, as an immediate effect, clears the normal preparation of the soccer World Cup scheduled in Qatar for next year. The return of regional and diplomatic understanding is always positive in urgent situations such as an economic crisis, a world pandemic or a common Shiite enemy arming missiles on the other side of the sea. In any case, the Qatar of the Al Thani can be crowned as the winner of the economic pulse against the Emirati Al Nahyan and the Saudi Al Saud unable to suffocate the small peninsula.
The factors
The relevant question brings us back to the initial degree scroll prior to these lines: how has Qatar managed to withstand the pressure without buckling in the slightest in the face of the thirteen conditions demanded in 2017? Several factors contribute to explaining it.
First, the injection of capital by the QIA (Qatar Investment Authority). At the beginning of the blockade, the banking system suffered a capital flight of more than 30 billion dollars and foreign investment fell sharply. The Qatari sovereign wealth fund responded by providing $38.5 billion to provide liquidity to the banks and reactivate Economics. The sudden trade blockade by the United Arab Emirates and Saudi Arabia led to a financial panic that prompted foreign investors, and even Qatari residents, to transfer their assets out of the country and liquidate their positions in fear of a market collapse.
Second, rapprochement with Turkey. In 2018, Qatar came to Turkey's rescue by pledging to invest $15 billion in Turkish assets across subject and, in 2020, to execute a agreement currency swap in order to raise the value of the Turkish lira. In reciprocity, Turkey increased commodity exports to Qatar by 29% and increased its military presence in the Qatari peninsula against a possible invasion or attack by its neighbors, building a second Turkish military base near Doha. In addition, as an internal reinforcement measure, the Qatari government has invested more than $30 billion in military equipment, artillery, submarines and aircraft from American companies.
Third, the rapprochement with Iran. Qatar shares with the Persian country the South Pars North Dome gas field, considered the largest in the world, and positioned itself as a mediator between the Trump Administration and the Ayatollah government. Since 2017, Iran has supplied 100,000 tons of food daily to Doha in the face of a potential food crisis caused by the blockade of the only land border with Saudi Arabia through which 40% of the food was entering.
Fourth, the rapprochement with Russia and China. The Qatari sovereign wealth fund acquired a 19% stake in Rosneft, opening the door to partnership between the Russian oil company and Qatar Petroleum and to more joint ventures between the two nations. In the same vein, Qatar Airways increased its stake to 5% of the capital of China Southern Airlines.
Fifth, its reinforcement as the world's leading exporter of LNG (Liquefied Natural Gas). It is important to know that Qatar's main economic engine is gas, not oil. That is why, in 2020, the Qatari government initiated its expansion plan by approving a $50 billion investment to expand its liquefaction and LNG carrier capacity, and a $29 billion investment to build more offshore offshore offshore platforms in North Dome. The Qatari government has forecast that its LNG production will grow by 40% by 2027, from 77 to 110 million tons per year.
We should keep in mind that LNG transportation is much safer, cleaner, greener and cheaper than oil transportation. Moreover, Royal Dutch Shell predicted in its report "Annual LNG Outlook Report 2019" that global LNG demand would double by 2040. If this forecast is confirmed, Qatar would be on the threshold of impressive economic growth in the coming decades. It is therefore in its best interest in that status to maintain its solvent public coffers and a stable political climate in the Middle East region. As if that were not enough, last November 2020, Tamim Al Thani announced that future state budgets will be configured on the basis of a fictitious price of $40 per barrel, a value considerably smaller than the WTI Oil Barrel or Brent Oil Barrel which is around $60-70. In other words, the Qatari government will index its public expense considering the volatility of hydrocarbon prices. In other words, Qatar seeks to be foresighted in the face of a possible collapse in the price of crude oil by promoting an efficient public expense policy.
And sixth, the maintenance of the Qatar Investment Authority's investment portfolio , valued at $300 billion. The assets of the Qatari sovereign wealth fund constitute a life insurance policy for the country, which can order its liquidation in situations of extreme need.
Qatar has a very important role to play in the future of the Persian Gulf. The Al Thani dynasty has demonstrated its capacity for political and economic management and, above all, its great foresight for the future vis-à-vis the other countries of the committee Gulf Cooperation Council. The small "pearl" of the peninsula has struck a blow against the Crown Prince of Saudi Arabia, Mohammed bin Salman, and the Crown Prince of Abu Dhabi, Mohammed bin Zayed, who did not even show up in Al-Ula. This geopolitical move, plus the Biden Administration's decision to maintain its hard-line policy towards Iran, seems to guarantee the international isolation of the Persian country's ayatollah regime.
