Saudi Arabia says it’s waging diplomatic war against Qatar because of its support for terrorism. But if you drill below the surface, there’s actually something else that helps explain the crisis: Qatar’s hugely valuable natural gas reserves.
People often look at Gulf states in the Middle East and assume that the fantastic wealth in the region all emanates from oil. But oil is not evenly distributed in the area, nor is it the sole source of natural resource-driven cash in the region.
Enormous amounts of natural gas, not oil, have fueled Qatar’s rise to become one of the world’s wealthiest nations in per capita terms. It’s also the special ingredient that helps explain how it has become a renegade state in the Gulf region — and the target of an isolation campaign that marks the most acute diplomatic crisis in the Middle East in decades.
The fact that Qatar’s economy isn’t as beholden to oil means that it isn’t as beholden to Saudi Arabia, the world’s largest oil exporter and the leader of the Organization of the Petroleum Exporting Countries (OPEC), a group that acts in unison to influence oil prices. Qatar generates four times more export revenue from natural gas than it does from oil, and doesn’t need to follow Saudi’s dictates the way it would if its survival were predicated on it.
In addition to this, the natural gas Qatar exports is liquefied, meaning it is compressed and shipped around the world, and isn’t primarily distributed through pipelines that are vulnerable to being meddled with by angry neighbors.
Then there’s the issue of the origins of Qatar’s natural gas: It gets most of it from an offshore gas field in the Persian Gulf that it shares with Iran. Which is to say Qatar has every interest in maintaining harmonious ties with Saudi Arabia’s nemesis.
Qatar’s economic independence has translated into an independent-minded foreign policy. The tiny former British protectorate has evolved in recent decades into a global player that competes with and defies Riyadh on several fronts, whether through the popularity of its robust international media operation Al Jazeera; its backing of groups like the Muslim Brotherhood, which Saudi Arabia and its allies consider to be an existential threat to their own regimes; or its friendly relationship with Saudi’s regional rivals, Iran and Turkey.
Since Saudi Arabia can’t rein in Qatar using its dominance over oil, it’s using its immense diplomatic influence in the region to hurt Qatar’s economy in other ways. Saudi Arabia and its allies Egypt, the United Arab Emirates, and Bahrain have severed all diplomatic ties with Qatar and suspended air, land, and sea travel to and from the country. Other countries in the region have since joined. It’s a bold — and risky — attempt to make Qatar fall in line after marching to its own beat for decades.
Qatar’s natural gas has made it a wild card in the Middle East
Qatar first discovered the biggest natural gas trove in the world in its backyard in 1969. But at the time it was a disappointment: Natural gas wasn’t a useful resource if a market for it couldn’t be found within pipeline reach. Most of Qatar’s neighbors had enough natural gas of their own at the time, and Europe was too far. Qatar was a mid-level oil producer, and then would much rather have discovered an oil field.
But this changed in the 1990s. Qatar’s Emir Hamad bin Khalifa al-Thani, who came to power in a bloodless coup in 1995, promoted Qatar as an exporter of liquefied natural gas — natural gas chilled to its liquid state, which takes up far less volume and can be shipped by sea. Foreign investors poured money into Qatar’s gas liquefaction capacities, and it started shipping liquefied natural gas the world over. Today Qatar is the world’s largest exporter of liquefied natural gas, distributing about a third of the world’s supply.
As Qatar’s neighbors modernized their economies, their demand for natural gas grew too, and Qatar was able to capitalize on it. Qatar sends natural gas to the UAE and Oman by pipeline, and it’s a crucial supply of energy for them. “About 40 percent of the electricity that is generated in the UAE depends on that gas supply from Qatar,” Karen Young, a senior resident scholar at the Arab Gulf States Institute in Washington, told me.
Qatar’s natural gas reserves transformed it from a tiny former British protectorate and mid-level oil producer to a global energy giant. And Qatar has been eager to exploit its unique wealth to forge a unique geopolitical identity, much to the chagrin of Saudi Arabia.
The fact that Qatar shares oil fields with Iran is a crucial component of this. Iran, the Middle East’s preeminent Shia power, is typically at odds with the Sunni Muslim monarchies of the Gulf. But the fact that Iran and Qatar draw from the same pot of gold tempers that tension. Qatar has valued a friendly relationship of engagement with Iran, which is a much larger country than it, and could try to make outsize claims to the field they share. Young sums up their relationship as “investment partners” — they aren’t necessarily pals, but they have little to gain from antagonism with one another. (They don’t co-invest in extraction but they both invest in the same shared asset.)
Saudi Arabia, by contrast, prefers a confrontational posture toward Iran.
Qatar is adept at trolling Saudi
Qatar has been able to get out from under the thumb of Saudi Arabia due to its natural gas-based independence. It’s a member of Saudi-dominated OPEC, but it doesn’t have to adopt the kind of follow-the-leader mindset that other more oil-dependent members of OPEC have to.
And the fact that Qatar’s natural gas reaches global markets primarily through shipments and not pipelines that run through the immediate area is also a strategic advantage. The US keeps a naval fleet in the Persian Gulf and its stated mission there is to ensure the free flow of gas and oil through choke points.
Shielded from Saudi Arabia’s regional hegemony, Qatar has maneuvered with exceptional agility to make a name for itself. When Saudi Arabia in 2003 asked US forces to leave the country due to domestic anti-American pressure in the wake of 9/11, Qatar successfully proposed that the US make a new home in their own country.
“Sheikh Hamad’s key strategic security achievement was to convince the Pentagon to move into the bases he built — Al Udeid air base and the Camp As Sayliyah,” Jim Krane, energy and geopolitics fellow at Rice University’s Baker Institute, told me.
Qatar bought itself an insurance policy by allying itself closely to the US and making itself important to American military operations in a strategically crucial area — Al Udeid airbase is home to some 11,000 US troops and is the nerve center of operations against ISIS in Iraq and Syria. So on top of economic independence, Qatar quickly bought itself a security buffer as well.
As Qatar has risen in stature, it has undertaken a number of initiatives that have been a source of aggravation for its neighbors. It’s poured hundreds of millions of dollars into Al Jazeera, the explosively popular media service that has taken aim at governments throughout the Middle East with harsh coverage.
During the Arab Spring, Qatar diverged from Saudi Arabia and much of the old order it represents. It took a gamble and put its money on the wave of rising grassroots insurgencies against autocracies in the Middle East, whether by sending its tiny air fleet to join NATO operations backing rebels against Libyan dictator Muammar Qaddafi or by actively supporting the Muslim Brotherhood’s political aspirations in Egypt after the fall of Egyptian strongman Hosni Mubarak in 2011.
“Qatar decided to back the Muslim Brotherhood because it saw the group, and political Islam — perhaps mistakenly — as the way of the future,” Krane explains. “And when your neighbors are all absolute monarchs who use Islam for their own legitimacy, they see the Muslim Brotherhood as a major threat.”
In 2014, Saudi Arabia, the UAE, and Bahrain pulled a much milder version of the move that we’re seeing today, withdrawing their ambassadors from Qatar over its support for the Muslim Brotherhood, among other wrongs. That time, Qatar made some concessions, including curbing some of its ties to the group and cooperating more closely with Gulf states on security, and diplomatic ties were restored.
This time, Saudi and its allies are acting far more aggressively. Saudi has closed its land border with Qatar, through which Qatar imports most of its food; residents of the country are worried about the possibility of long-term shortages. And the list of demands Saudi wants Qatar to submit to in order to end the punishment effectively calls for it to discard everything that makes Qatar independent. Among other things, it calls for the country to nearly sever ties with Iran and Turkey and shut down Al Jazeera completely.
There are also questions about what will happen to Qatar’s recently announced agenda to expand its liquefied natural gas production by 30 percent over the next five to seven years. The countries boycotting Qatar could discourage companies like Exxon Mobil — which has important relationships throughout the region — from investing in Qatar’s expanded liquefaction operations. Without that corporate investment, Qatar would have to spend a great deal more money to pull off its initiative.
The US’s interest is in having this regional dispute sorted out as swiftly and as smoothly as possible. Secretary of State Rex Tillerson has called for “a lowering of rhetoric” and hinted that all parties should be willing to compromise in order to find a resolution. President Trump, however, has complicated Tillerson’s pleas for calm by siding openly with Saudi against Qatar, labeling Qatar “a funder of terrorism at a very high level.” That in turn is likely to make Saudi less compromise-friendly.
There’s a lot at stake, as strife in the Gulf creates a vacuum that can empower rival powers. “The more divided and weak these powers in the Gulf are, the less able they are to stamp down on extremist activities, let alone extremist financing,” Allen Fromherz, the director of the Middle East Studies Center at Georgia State University and the author of Qatar: A Modern History, told me. “And the US definitely doesn’t want a scenario where it’s having to concede the status quo to Iran even further, which is where it might end up if the Gulf states don’t find a peaceful solution soon.”
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