Economics of Qatar Isolation

qatar
Image Courtesy: Pixabay

Coalition of Saudi Arabia, United Arab Emirates (UAE), Egypt and Bahrain cut off diplomatic and economic ties with Qatar the last week. The reason for such surprise step was Qatar’s funding to terrorism as alleged by the Saudi Arabia led coalition. According to one report, Qatar has directly provided $1 billion to Iran and Al-Qaeda spin offs. There are various records of Qatar supporting terrorists and sectarian groups including ISIS, Al-Qaeda and Muslim Brotherhood, directly or indirectly. Although Qatar dismissed these claims stating them as “baseless allegations”, the isolation is said to be “the beginning of the end to the horror of terrorism”, as tweeted by US President Donald Trump.

Qatar’s Richness

Qataris are the richest in the world. Qatar’s per capita income is $ 1,29,000 a year. It is the world’s biggest seller of Liquified Natural Gas (LNG) aggregating to 30% of global supply. The gas reserve is also said to last for 135 years more according to one estimate. So, there is a plenty of time for Qatar to bat on LNG. Qatar will be hosting 2022 football World Cup too. Qatar Investment Authority (QIA), the sovereign wealth fund of the nation is said to be one of the most acquisitive funds in the world possessing about $ 338 billion of assets around the globe. It is the fourth largest shareholder in the Swiss Bank and third largest in Germany’s Volkswagen. It rescued UK’s Barclays Bank during the 2008 financial crisis and became one of the largest investors in it. It has also bought London’s Shard, the tallest building in Europe. It has committed $ 35 billion investment in the USA. It currently holds various assets in the US in the form of luxury apartments, hotels, etc. and plans to invest further too.

GCC, Al Jazeera and Terrorism

Gulf Cooperation Council (GCC), formed in 1981 is a regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf, except for Iraq. It was basically founded to counter Iran’s influence in the region. Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. There were disagreements among the six members since many years.

In mid-1990s, Al Jazeera, Qatar’s news channel was launched which provided a platform to criticize autocratic Arab governments except Qatar. Qatar accepted US military troops and has the largest military base in the region. Qatar played an active role in supporting anti-regime movements in Saudi and UAE during Arab Spring and backed Muslim Brotherhood groups who were challenging authorities in Libya, Syria, Tunisia and Egypt.

Qatar maintained ties with Iran, Saudi Arabia’s rival and a hub of terrorism.

Anti-Russia Stance

Qatar wanted to pass its own pipeline to connect Europe through Syria. Gazprom, a Russian LNG supplier enjoys a near monopoly market in Europe. Qatar was a staunch supporter, backer and financier of the Syrian rebels, which were tasked to topple the Assad (current President of Syria) regime. Qatar has spent $3 million over the past two years supporting the rebellion in Syria. If Qatar becomes successful in removing Assad from power and installing its pipeline, the Russian supplier would end its monopoly in the region. This is the reason Putin (current President of Russia) is firmly supporting Assad.

Pro-Russian Stance

Qatar knew that Russia would not allow to pass the pipeline through Syria. So, it changed its strategy and turned to be pro-Russia. Last year, it agreed to invest $ 2.7 billion in Russia’s state run Rosneft Oil. With this ideological shift, Qatar became a supporter of Russia-Iran-Syria nexus.

Qatar’s Complicated Relationships

Qatar is a home for the Taliban, which operated for almost four years. Taliban chose Qatar as it was seen as ‘neutral’ and US did not object to it too.

It enjoys a good relationship with Hamas, a Palestinian Sunni-Islamic fundamentalist organization. Hamas fought various wars with Israel and is regarded as a terrorist organization by many countries.

Qatar enjoys close economic relationship with Iran, sharing control over a large natural gas field in Qatar. Thus, it generally does not criticize Iranian policies despite being the GCC member.

It also enjoys close ties with Israel (remember, it has close ties with Hamas too as stated above).

Despite of everything it has the largest US military base. In short, Qatar shares a very complicated web of relationships with almost everyone in the region.

[I recommend you to read these paragraphs again to understand this complicated chain.]

Saudi -USA ties

Saudi Arabia, an oil rich country and the USA, a superpower are strategic allies. Military relationships between these nations began since 1951 under the Mutual Defense Assistance Agreement. After 9/11 attacks these relationships got bitter as Al-Qaeda was responsible for the attacks. (According to Al Jazeera, Al-Qaeda was formed by US, Saudi and Pakistan to support Afghans’ resistance to the Soviet occupation in that region. Thus, Saudi also became a hub of various terrorist groups.) Various arms deals were contracted since Obama administration, which are now continued by Trump too. Trump signed billion dollars arms deal with Saudi Arabia in May 2017. He and King Salman (Saudi King) singled out Iran as the world’s main sponsor of terrorism in this meet.

Impact of Isolation

Immediate impact of isolation was on stock market and prices of oil and LNG. Though there is no major impact on oil in short-term (Qatar being one of the smallest producer of oil) on account of the isolation, LNG prices and various contracts could get affected. Qatar stock exchange tumbled around 11%. Qatar exports about 10% of total LNG to Arab nations and they would be severely affected if LNG is not supplied to them. However, Qatar is equally dependent on Saudi for 40% of its food imports. If the isolation continues, both Qatar and the alliance would be affected which might result in grave economic problems in the region and could cause oil and LNG prices to soar.

India, on the other hand is a nonchalant spectator in this drama and maintained a neutral stand as usual. There would not be any immediate or short-term impact on prices of LNG and oil in India as the supply would remain constant as agreed.

TERRORIST
Image Courtesy: Pixabay

Final Take

Other highlights like US Shale gas impact, rise of ISIS, Syrian war, etc. could be related. But the future of this isolation depends on various factors like stance taken by Qatar, Saudi, USA and Russia. Qatar could not be isolated actually since it would be dominant in LNG space. Self and terrorist funding is possible even after isolation. Whether this isolation was for Qatar or indirectly for Iran? And should we connect ISIS attack on Iran’s parliament in the same week with this event or not? Who is the real face of terrorism in the world? Qatar, Iran, Saudi, USA or Russia? Who needs to stop whom? Who is to be blamed – one who abodes or one who sponsors terrorists? If both are to be blamed, then Qatar – Iran – Russia and USA – Saudi, both groups are wrong. But they are fighting against each other with the muscle, petroleum and money power. So, what do you feel; whose terrorist will win?

International politics and events should not be perceived to be simple, clear and correct every time. We might get introduced to some event in a biased and ambiguous manner and on those bases, we conclude and judge people, groups and nations. We say that there is no face or religion to terrorism. But there is a very complex history and a variety of causes which make terrorists. Terrorism is a mask which is veiled over different economic, political and strategic reasons. In this high-level cold war and oil war, a common and innocent human is killed every day in the name of some religion which really has no connect.

Is this really the end of terrorism? Or a new start?

 – Swapnil Karkare

Sources and Further Reading:

To know the past:

Zero Hedge

Live Mint 1, Live Mint 2,

CNN

Al Jazeera

More about QIA:

Forbes

To know the future:

Marginal Revolution

Live Mint 1, Live Mint 2, Live Mint 3, Live Mint 4

Other References:

Business Line

Wikipedia 1, Wikipedia 2

Image Courtesy:

Qatar Airways – https://pixabay.com/en/qatar-airways-cargo-boeing-777-867777/

Terrorist – https://pixabay.com/en/criminal-police-reaction-force-1577887/

 

 

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