By Marc Champion, Bloomberg News, June 5, 2017 [with extensive related readings further below on the Saudi Arabia-led blockade of Qatar]
Natural gas wealth fueled irritants from Iran policy to television service, while choice of LNG over pipelines set former Saudi ‘vassal’ apart in Gulf
Saudi Arabia’s isolation of Qatar has been brewing since 1995, and the dispute’s long past and likely lingering future are best explained by natural gas.
Not only was 1995 the year when the father of the current emir, Sheikh Tamim bin Hamad Al Thani, toppled his own pro-Saudi father, it was also when the tiny desert peninsula was about to make its first shipment of liquid natural gas from the world’s largest reservoir. The offshore North Field, which provides virtually all of Qatar’s gas, is shared with Iran, Saudi Arabia’s hated rival.
The wealth that followed turned Qatar into not just the world’s richest nation, with an annual per-capita income of $130,000, but also the world’s largest LNG exporter. The focus on gas set it apart from its oil producing neighbors in the Gulf Cooperation Council and allowed it to break from domination by Saudi Arabia, which in Monday’s statement of complaint described Qataris as an “extension of their brethren in the Kingdom” as it cut off diplomatic relations and closed the border.
Instead, Qatar built its own ties with other powers including Iran, the U.S. — Qatar hosts U.S. Central Command — and more recently, Russia. Qatar’s sovereign wealth fund agreed last year to invest $2.7 billion in Russia’s state-run Rosneft Oil Co. PJSC.
“Qatar used to be a kind of Saudi vassal state, but it used the autonomy that its gas wealth created to carve out an independent role for itself,” said Jim Krane, energy research fellow at Rice University’s Baker Institute, in Houston, Texas. “The rest of the region has been looking for an opportunity to clip Qatar’s wings.”
Trump’s visit
That opportunity came with U.S. President Donald Trump’s recent visit to Saudi Arabia, when he called on “all nations of conscience” to isolate Iran. When Qatar disagreed publicly, in a statement the government later said was a product of hacking, the Saudi-led retribution followed.
Critically, Qatar’s natural gas output has been free from entanglement in the Organization of Petroleum Exporting Countries, the oil cartel that Saudi Arabia dominates.
The new emir, having survived a counter-coup attempt in 1996, didn’t build pipelines that would have integrated Qatar into the markets of its Gulf neighbors. Two senior Qatari government officials alleged during the trial in 2000 of the coup plotters that Bahrain helped to organize the attempt with Saudi Arabia’s consent, according to a report by the BBC.
At the time, those much richer oil states saw natural gas as virtually worthless, useful mainly for injecting back into oil wells to improve extraction rates. They were willing to pay only a fraction of the world market price for LNG, according to a paper Krane co-authored with Qatar University’s Steven Wright.
The sole pipeline built, the Dolphin project connecting Qatar’s North Field to the United Arab Emirates and Oman, has operated at half to two thirds capacity. Contracts signed last year should fill the rest, yet the vast majority of Qatar’s exports will continue to go to markets in Asia and Europe.
Angering neighbors
More recently, demand for natural gas to produce electricity and to power industry has been growing in the Gulf states. They’re having to resort to higher-cost LNG imports and exploring difficult domestic gas formations that are expensive to get out of the ground, according to the research. Qatar’s gas has the lowest extraction costs in the world.
Qatar gas wealth enabled it to develop foreign policies that came to irritate its neighbors. It backed the Muslim Brotherhood in Egypt, Hamas in the Gaza Strip and armed factions opposed by the UAE or Saudi Arabia in Libya and Syria. Gas also paid for a global television network, Al Jazeera, which at various times has embarrassed or angered most Middle Eastern governments.
On Tuesday, Trump said on Twitter that when he talked about the need to stop funding radical ideology during his trip to the Middle East, “Leaders pointed to Qatar – look!”
Above all, gas prompted Qatar to promote a regional policy of engagement with Shiite Iran to secure the source of its wealth.
Gas isn’t the immediate cause of the current showdown, but “you can question why Qatar has been unwilling to supply its neighboring countries, making them gas poor,” said Wright, the academic, speaking by telephone from the Qatari capital Doha. “There probably was an expectation that Qatar would sell gas to them at a discount price.”
What next?
Adding to regional frustrations, Qatar declared a moratorium in 2005 on the further development of the North Field that could have provided more gas for local export. Qatar said it needed to test how the field was responding to its exploitation, denying that it was bending to sensitivities in Iran, which had been much slower to draw gas from its side of the shared field. That two-year moratorium was lifted in April, a decade late, after Iran for the first time caught up with Qatar’s extraction rates.
“People here are scratching their heads as to exactly what the Saudis expect Qatar to do,” said Gerd Nonneman, professor of international relations and Gulf studies at Georgetown University’s Doha campus. “They seem to want Qatar to cave in completely, but it won’t call the Muslim Brotherhood a terrorist organization, because it isn’t. And it isn’t going to excommunicate Iran, because that would jeopardize a relationship that is just too fundamental to Qatar’s economic development.”
Related readings:
Why tiny Qatar angers Saudi Arabia and its allies, by Grant Clark and Mohammed Sergie, Bloomberg News, June 4, 2017
… Qatar is the world’s biggest exporter of liquefied natural gas, has the world’s highest per-capita income ($129,700 a year), will hold the 2022 FIFA World Cup and hosts the Al Jazeera television channel.
When Saudi Arabia ejected the U.S. air operations center for the region in 2003, Qatar took it on. Today the emirate hosts 10,000 U.S. troops and is home to the forward headquarters of CENTCOM, the U.S. military’s central command in the Middle East.
The nation’s $335 billion sovereign wealth fund holds stakes in companies from Barclays Plc to Credit Suisse Group…
Qatar crisis: Why Saudi Arabia and its allies suddenly cut ties to their Sunni Arab neighbour, by Patrick Cockburn, The Independent, June 6, 2017
Qatar ‘not ready to change foreign policy’
Al Jazeera, Thursday, June 8, 2017
Sheikh Mohammed bin Abdulrahman Al Thani says Qatar has never experienced such hostility even from an enemy country.
Qatar is not ready to change its foreign policy to resolve a dispute with fellow Arab Gulf states and will never compromise, Qatar’s foreign minister has told Al Jazeera.
Sheikh Mohammed bin Abdulrahman Al Thani made the remarks in Doha on Thursday, just days after Bahrain, Saudi Arabia, Egypt, the UAE and several other countries cut relations with Qatar. They accuse Qatar of supporting armed groups and their regional rival, Iran. Qatar says the charges are baseless.
“We are not ready to surrender, and will never be ready to surrender, the independence of our foreign policy,” Sheikh Mohammed bin Abdulrahman said.
Al Jazeera‘s Hashem Ahelbarra, reporting from Doha, said Sheikh Mohammed bin Abdulrahman was defiant and stressed that Qatar could live under embargo forever. “He said Qatar has the backing of the international community and that they will manage to mitigate the consequences of this crisis,” our correspondent said.
Sheikh Mohammed bin Abdulrahman said that “measures had been taken by the Qatari government to ensure that the standards provided to the people will be maintained”. He said Qatar had not yet been presented with a list of demands by the countries that cut off ties with the country on Monday, but he insisted it be solved by peaceful means. “There cannot ever be a military solution to this problem,” he said.
Sheikh Mohammed bin Abdulrahman further said that the contingent of Turkish troops set to deploy to Qatar was for the sake of the entire region’s security.
LNG gas agreements
Meanwhile, Qatar will respect the LNG gas agreements it has made with the UAE despite its cutting off relations with Doha, Sheikh Mohammed bin Abdulrahman said. He said Iran has told Qatar it is ready to help with securing food supplies and will designate three of its ports to Qatar, but the offer has not yet been accepted.
Sheikh Mohammed bin Abdulrahman’s comments come a day after high-level UAE government official told AFP news agency that the unprecedented measures against Qatar aim to pressure the country into making drastic policy changes. Accusing the Qatari government of being in “denial”, Anwar Gargash, UAE state minister for foreign affairs, said: “This is not about regime change – this is about change of policy, change of approach.”
The four Arab countries have suspended all flights to and from Doha and closed off sea and air links to Qatar. Saudi Arabia has also closed off Qatar’s only land border.
Analysts say the crisis is in part an extension of a pre-existing dispute which saw Saudi Arabia, the UAE and Bahrain temporarily recall their ambassadors from Doha in 2014 over Qatari support for the Muslim Brotherhood.
Gulf blockade disrupts Qatar Airways flights
Dozens of Qatar Airways flights grounded as four nations close airspace, triggering fears for future of Gulf aviation
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have closed their airspace to Qatari aircraft on Tuesday amid a deepening diplomatic row, forcing Qatar’s flag carrier to re-route its flights over Iran, Turkey and Oman.
The decision by the four Arab nations to sever diplomatic ties and cut off sea and air links with Qatar has caused major disruptions to air travel across the Gulf and raised fears for the future of aviation in the region – home to several of the world’s major long-haul carriers. The countries that launched the measures against Qatar have accused it of supporting “terrorism”, a claim Qatar has called “unjustified”.
More than 70 flights were grounded across the region on Tuesday, according to data from scheduling firm OAG. A majority of the flights belong to Qatar Airways.
Other airlines affected include Dubai’s Emirates, Abu Dhabi’s Etihad Airways, Saudi Arabia’s Saudia, and Bahrain’s Gulf Air, which have all cancelled flights to and from Doha.
Alexandre de Juniac, the director general of the International Air Transport Association (IATA) has expressed concern over the blockade and called for more openness. “We would like borders to be reopened, the sooner the better,” he told reporters at the group’s annual meeting in the Mexican city of Cancun on Monday. “Aviation is globalisation at its very best.”
Grounded
The departure terminal at Doha’s Hamad International Airport was virtually deserted early on Tuesday. More than 30 flights were shown as cancelled on airport television screens.
Qatar Airways, in a statement on its website, said passengers holding a confirmed ticket to any of the four Arab nations between June 5 and July 6 are permitted to rebook their flights up to 30 days after their current departure date.
The airline said its offices would continue to operate as normal in affected countries. Saudi Arabia’s General Authority of Civil Aviation, however, revoked the airline’s license on Tuesday and ordered its offices to be closed within 48 hours. Qatar Airways could not be reached for comment. Meanwhile, many of the airlines’ passengers were complaining online of delays in rebooking and obtaining refunds.
Analysts said the altered routes for Qatar Airways flights will lead to longer flying time, lowering demand, thus affecting the airline’s profits.
An image posted online by flight tracking group Flightradar24 showed the restricted routes Qatar Airways flights were taking because of the blockade. The aircraft were being forced to take a single flight path in and out of Doha. “Many of Qatar Airways’ flights to southern Europe and Africa pass through Saudi Arabia. Flights to Europe will most likely be rerouted through Iran and Turkey,” Flightradar24 said. “Flights to Africa may route via Iran and Oman and then south.”
‘Few winners’
The CAPA Centre for Aviation in Melbourne, Australia, in a report on Monday, said the Gulf diplomatic crisis has dealt a blow to public confidence in aviation and may have a far-reaching impact on the region’s airlines. “There can be few winners,” the group said, adding that the crisis “has already created wider uncertainty for Gulf aviation and passengers whose bookings are months away”.
The row between Gulf states is a fresh challenge for the region’s airlines at a time when U.S. President Donald Trump is trying to restrict the travel of passengers to the U.S. from some Muslim-majority countries. U.S. authorities have also banned the use of most electronic devices on board aircraft from some Gulf countries. “Amidst growing security concerns and the existing laptop ban, passengers are unlikely to dig in to the reason for this ban. Gulf aviation becomes less attractive for all,” CAPA said.
IATA’s De Juniac, meanwhile, said profits and passengers have fallen sharply in the Middle East in recent months. “There is growing evidence that the ban on large electronic devices in the cabin and the uncertainty created around possible U.S. travel bans is taking a toll on some key routes,” he said.
Al Jazeera media platforms under cyberattack , Al Jazeera, June 8, 2017
Website and digital platforms of entire Doha-based network undergoing ‘systematic and continual hacking attempts’
