Saudi fury could spark a coup in Qatar
Diplomatic crisis could also delay FIFA World Cup plans, writes Jesse Snyder.
The biggest Middle East oil and container ports banned all vessels sailing to and from Qatar from using their facilities amid a diplomatic crisis gripping the world’s main energy-exporting region.
Saudi Arabian and Bahraini authorities closed off all of their ports to Qatari-flagged vessels or ships travelling to or coming from the Persian Gulf state, according to a notice posted on the website of Inchcape Shipping Services Tuesday. Container and oil terminals in the United Arab Emirates also closed off traffic to any ships touching Qatar, according to separate statements from three port operators.
Also Tuesday, Moroccan airline Royal Air Maroc cancelled flights via Doha to the United Arab Emirates, Saudi Arabia, Yemen and Egypt.
Fears of food shortages — Qatar relies heavily on imports — caused long lines at checkout counters.
Meanwhile, U.S. President Donald Trump threw his weight behind the Saudi-led diplomatic isolation of Qatar, calling it just punishment for the country’s financial support for Islamic extremists. “Perhaps this will be the beginning of the end to the horror of terrorism!” he said in a tweet Tuesday.
From a backwater in the 1990s, Qatar’s fortunes changed when Emir Hamad bin Khalifa Al-Thani ousted his father in a bloodless coup in 1995, and went about monetizing the country’s natural gas reserves and transforming it into one of the world’s richest countries in the world in per capita terms. His son Tamim bin Hamad Al-Thani took over in 2013, as the elder Thani stepped aside in a transfer of power.
The isolation of Qatar could have widespread ramifications. It is the world’s largest exporter of liquefied natural gas (LNG), as well as a member of the Organization of Petroleum Exporting Countries both of which could be impacted by the dispute.
We lay out some central themes:
1. SAUDI-QATAR RELATIONS
Independent-minded Qatar has irritated Saudi Arabia for no less than a few decades with its independent foreign policy. Back in September 1992, Saudi forces reportedly attacked a Qatari outpost in a border dispute. In recent years, Saudi and other Gulf counterparts have withdrawn their ambassadors from the country for its support of the Muslim Brotherhood and its upstart Al Jazeera TV network which is often critical of the regional rulers.
The latest spat appears to be more serious, especially as Saudi Arabia is emboldened by Trump’s recent visit. Eurasia Group thinks “risk of a coup is significant.”
2. LNG KING
Qatar is the largest exporter of LNG in the world, delivering nearly 77 million tonnes of the supercooled gas, or about a third of global supply. With that, the small Gulf state is heavily dependent on resource revenues. According to the Qatar National Bank, the country generated 49 per cent of revenues in 2014 from hydrocarbons, most of which is derived from LNG exports or gas-to-liquids (GTL) facilities. It is also among the top producers of dry gas, and sits atop the third-largest natural gas reserves in the world, behind only Russia and Iran.
However, analysts don’t yet expect trade blocks by rival Gulf states to impact Qatar LNG exports, the bulk of which go to Asia and Europe.
3. OVERSEAS ENERGY AMBITIONS
The decision by several Gulf states to sever ties with Qatar could have knock-on effects on some of its major overseas LNG interests, which often require investment from supermajor companies like Royal Dutch Shell PLC, ExxonMobil Corp. and ConocoPhillips Co. This past April, the U.S. awarded an export licence for the Golden Pass LNG facility in Texas, a joint venture between Qatar’s state-run gas behemoth Qatar Petroleum International, ExxonMobil and ConocoPhillips. In April 2013, Qatar Petroleum International and the U.K.’s Centrica PLC jointly bought $1 billion in natural gas assets from Calgary’s Suncor Energy Inc. The deal gave Qatar Petroleum a 40 per cent stake in natural gas assets spread across B.C., Alberta and Saskatchewan, and marked the beginning of Qatar’s strategy of locking in gas supplies abroad.
4. OPEC PRODUCTION AGREEMENTS
Despite its LNG supremacy, Qatar is a relatively small oil producer. It is the second-smallest producer by volume within OPEC, since Libya began pumping higher volumes of crude.
5. WORLD CUP DREAMS DASHED?
If trade and diplomatic disputes continue, it seems “unrealistic” Qatar will meet the International Monetary Fund’s estimate of 3.4 per cent GDP growth in 2017, according to Eurasia Group analysts. Missing that projection could have major impacts on the state’s broader ambitions. “Qatar’s efforts to emerge as a regional financial hub and host the football World Cup in 2022 will need to be revisited,” analysts say.