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War Is Making One of the Richest Countries Even Richer
Hosting the football World Cup is a coup for Qatar, but it’s Europe’s hunt to replace Russian natural gas that will give the Gulf state real influence.
ByPaul Wallace and Simone Foxman+Follow
29 avril 2022,
As planes begin their descent into Doha, passengers can look down at the brand new 80,000-seat stadium rising from the desert that will host the final of the World Cup in December. They may also notice another striking image: tankers lined up in the Persian Gulf to collect super-chilled natural gas.
Football and an increasingly indispensable fuel may have little in common, yet they are coming together to give Qatar outsized influence on the global stage. As the World Cup showcases its ability to acquire international prestige, Qatar’s status as a much-coveted gas supplier is promising to turn the tiny peninsula into the bigger player it always aspired to be.
Soaring oil prices because of the war in Ukraine have boosted Middle East oil producers like Saudi Arabia and Kuwait, but the financial and geopolitical rewards on offer for Qatar make it the standout winner after Vladimir Putin’s invasion forced Europe to start weaning itself off Russian energy imports.
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The port of Ras Laffan, north of Doha, from where Qatar’s liquefied natural gas is exported.Photographer: Copernicus Sentinel 2017/Orbital Horizon/Gallo Images/Getty Images
Several of the European Union’s most senior officials have flown to Doha in recent weeks, all with a clear message: we need your gas as fast as possible. Germany has told businesses to start negotiating supply deals. The urgency became more acute this week after Russia cut off supplies to Poland and Bulgaria.
Qatar’s energy exports were already due to reach $100 billion this year for the first time since 2014 based on trends from the first quarter, according to Bloomberg calculations. That will allow it to spend even greater riches in global stock markets and on pursuing its foreign policy goals, mainly via its $450 billion sovereign wealth fund. Meanwhile, the Qatari government expects a $20 billion economic boost from staging the World Cup.
The 2022 figure assumes average from first quarter for whole year; hydrocarbons and products derived from them account for over 90% of exports
That’s made 2022 more than just the year Qatar will make its mark on the sporting calendar, enriching what’s already one of the wealthiest countries and boosting its clout in a way that looked unlikely just a year ago.
Europe’s clamoring for liquefied natural gas, or LNG, comes after Qatar started a $30 billion project to boost its exports by 60% by 2027. The extra demand means more competition among buyers for long-term supply contracts and, most likely, better terms for Qatar.
Before the outbreak of the Ukrainian war, some analysts doubted there’d be enough business to justify the expansion plan. Now, Qatar is sounding out customers about an even bigger enlargement, Bloomberg reported on April 20.
“It’s an incredible opportunity,” said Karen Young, senior fellow at the Middle East Institute in Washington. “Qatar will be one of the most important exporters of gas, the market for which will probably be very strong for years to come.”
The Shift in Qatar’s Fortunes
It’s quite a turnaround for Qatar and its population of less than 3 million people. Saudi Arabia, the United Arab Emirates and allies spent more than three years trying to strangle it economically for being too close to regional Islamist groups and Iran. The coronavirus pandemic depressed the price of gas to record lows, accelerating what many said was an inevitable trend of consumers switching from fossil fuels to cleaner, renewable energy.
Human rights activists, meanwhile, were slamming Qatar for its treatment of foreign workers building the infrastructure for the World Cup. At least 50 of them died in 2020 alone, according to the International Labour Organization.
Spin forward and the economic boycott has ended and European gas prices sit near all-time highs. They have more than quadrupled in the past year, first as demand rebounded from the pandemic and then due to Russia’s invasion of Ukraine.
The emir, Sheikh Tamim bin Hamad Al Thani, is in demand in the U.S. as well as Europe. At a White House meeting with President Joe Biden in late January — weeks before the war started — the two discussed “ensuring the stability of global energy supplies.”
Biden designated Qatar a “a major non-NATO ally,” partly a result of Doha assisting the U.S. with evacuations from Afghanistan, though gas was at the forefront of their talks. That contrasts with the tension between the White House and Saudi Arabia and the UAE because of their refusal to hike oil production and help bring down prices.
Qatar is reaping benefits already. The $200 billion economy is set to grow 4.4% this year, the most since 2015, according to Citigroup. Gross domestic product per person will soar to almost $80,000, back up toward levels in places like the Cayman Islands and Switzerland.
The start of what could be a gas “supercycle” comes just as the World Cup construction boom that powered the economy in recent years comes to an end, according to Ziad Daoud, chief emerging markets economist at Bloomberg Economics. “The timing is fortunate for Qatar, which could see a new driver of growth for this decade,” he said.
What Will Qatar Do With the Money?
The question now is what Qatar will do with its LNG-fueled windfall. Its track record suggests not just a deeper dive into global stock markets, but also foreign-policy forays that haven’t always been in tune with its allies in the U.S. and Europe.
Much of the money will be used to bolster Qatar’s sovereign wealth fund, according to a person familiar with the matter. That would enable the Qatar Investment Authority, already a major investor in companies from Barclays Plc to Volkswagen AG, as well as New York and London real estate, to accelerate its push into technology stocks.
Qatar could also use the fund to further its regional goals. Last month, the government pledged $5 billion of investments in Egypt. That was part of a plan by Gulf states to support the North African country, which has been battered by a rise in food prices since the Ukrainian war started.
Previous investments linked to foreign policy haven’t always paid dividends. The QIA put billions of dollars into Russian assets including state oil company Rosneft PJSC in the past decade. The value of those has now sunk.
Support for Egypt included $8 billion after the Arab Spring uprising in 2011, when the Muslim Brotherhood ran the government. Its leadership proved short-lived, with the Egyptian military ousting President Mohamed Morsi in 2013. Qatar’s backing of him, under Sheikh Tamim’s father, Sheikh Hamad, drew criticism from fellow Gulf states and was among the reasons for their boycott years later.
“Qatar can play an interesting regional role, but it comes with a lot of risk,” said Young at the Middle East Institute. “Being friends and interlocutors for the region’s problem cases comes with unpredictable baggage.”
The Slow Road to Staggering Riches
Qatar’s importance to world gas supply has been a long journey. Its reserves are mostly contained in the North Field, an offshore behemoth extending into Iranian waters that Shell Plc discovered in 1971. Yet the company soon abandoned it. Gas had little value, especially if it was too far away to be piped to major markets.
By the 1990s, Qatar’s finances were under strain as its oil production and prices fell. Abdullah Bin Hamad Al Attiyah, the energy minister at the time, believed gas was the future.
QatarGas offshore drilling rig in the Persian Gulf
QatarGas offshore drilling rig in the Persian Gulf.Photographer: Tuck/Ullstein Bild/Getty Images
Consumption was rising and engineers had brought down the cost of making LNG, whereby the fuel is compressed and cooled to 258 degrees below Fahrenheit (-161°C), enabling it to be shipped across the world. By 2012, the country had become the world’s biggest exporter thanks to demand in Japan and Taiwan. Europe, though, proved a tougher market to crack because of competition from Russia.
“In 1997 or 1998 I went to Germany, I met German officials and we discussed whether Qatar could be a supplier,” Al Attiyah said in an interview. “They replied: ‘Oh, we don’t think we need your LNG because we will get a lot of gas from Russia through pipelines and it’s cheaper.’”
Al Attiyah’s argument that they needed many suppliers was eventually proved right when Russia started Europe’s deadliest conflict since World War II and by Putin’s threats to retaliate against Western sanctions by shutting down gas exports. The EU has imposed stinging trade and business penalties in a bid to isolate Russia, but it’s so far excluded oil and gas.
For now, Qatar can’t produce enough to fulfil the needs of Europe, which gets around 40% of its gas from Russia. State producer Qatar Energy is pumping at full capacity and more than 80% of its cargoes go to Asia. Most of those are sold under multi-year contracts that Doha has said it won’t cancel to divert supplies to Europe.
Source: Bloomberg