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Qatar's OPEC exit as great ambitions of small country

Author : Georgiy Kuhaleyshvili

Qatar stands at the crossroads of interests of influential states, and therefore its leadership makes decisive changes in foreign policy
23:14, 6 December 2018

Aljazeera

On Monday, December 3, Minister of Energy of Qatar Saad Sherida Al-Kaabi announced his country's withdrawal from the Organization of Petroleum Exporting Countries (OPEC) in January 2019. According to him, Qatar leaves the organization due to plans to increase natural gas production. Former Prime Minister of Qatar Hamad bin Jassim Al Thani called the withdrawal from OPEC a wise decision, since membership in this organization does not bring any benefit and harms the national interests. OPEC is a cartel organization whose members are 15 oil producing and exporting countries from Asia, Africa, and South America. OPEC member countries agree on oil production quotas and prices. They supply 44% of oil to the world market and influence world oil prices. Qatar has been participating in OPEC since 1961, and the desire to leave the organization came as a surprise. Al-Kaabi announced its withdrawal from OPEC shortly after preliminary agreements of Saudi Arabia with non-members of the organization Russia and Canada to reduce oil production in order to contribute to the growth of world oil prices. Today there is a surplus of oil in the world market, so the prices are stable. The final decision on this issue to be made on December 6 at the OPEC summit in Vienna.

Related: Oil prices climb on prospect of OPEC and Russian cuts

Extraneous reasons

The reason for the withdrawal of Doha from OPEC seems to be illogical. Restrictions and OPEC quotas apply exclusively to oil production, but do not affect the gas market. Nothing prevented Qatar from implementing its plans to produce liquefied natural gas by participating in OPEC. Qatar is the world's largest producer of liquefied natural gas (LNG). The country's share in the global LNG market is almost 30%. On average, Qatar produces over 77 million tons of liquefied gas per year and plans to increase production to 110 million tons. Qatar ranks third in the world in terms of natural gas reserves after Russia and Iran. Qatar contains about 25 trillion cubic meters of gas. According to al-Kaabi, the emirate plans to build the largest ethane gas plant in the Middle East, which is used in the production of ethylene, the main chemical for plastics, and synthetic products.

Aljazeera

It is unlikely that Qatar is frightened by the plans of Saudi Arabia to reduce oil production. Qatar already produces relatively insignificant volumes of oil among OPEC member countries: 600 thousand barrels of oil per day, no more than 2% of the production of other members of the association (27 million barrels per day). According to Peter Kern, an analyst of the Economic Intelligence Group, Qatar’s exit from OPEC will not have a significant impact on the market. Richard Mallinson, an employee of the marketing agency Energy Aspects, believes that the oil market will not feel a significant difference after Qatar’s exit. Al-Kaabi's statement affected a slight increase in oil prices by 4-5%, which meets the interests of Saudi Arabia and other OPEC members.

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Doha conflict with Riyadh

Despite the fact that Al-Kaabi denies the political implications of Qatar’s exit from OPEC, only one country dominates the organization – Saudi Arabia, which produces more than 10 million barrels of oil per day - more than other OPEC members. The withdrawal from OPEC is a kind of Doha’s vote of no confidence in Riyadh, a refusal to recognize the exceptional position of the Saudi dynasty in the Middle East. Saudi Arabia and Qatar compete for leadership in the Persian Gulf. Doha never seeks to follow in the wake of Riyadh’s foreign policy. If the Saudi dynasty relies on the unification of other secular countries of the Middle East against the threat from a theocratic Iran, the Al Tani dynasty in Qatar adheres to an alternative approach and develops close relations not only with the United States, but also with Iran and radical Islamists in various Arab countries. Large reserves of natural gas are an aid to an independent foreign policy.

Related: Ukraine-Qatar visa free regime takes effect

Last June, Arab countries imposed a trade embargo against Qatar and a travel ban after Al Qani’s QNA outlet published a statement in which he recognized Iran as a regional force, the terrorist organization Hamas, the legitimate representative of the Palestinian people, and criticized the government of Saudi Arabia, the UAE Bahrain and Egypt because they consider extremist groups "Muslim Brotherhood," "Hamas," "Hezbollah" to be terrorists. Qatari authorities claimed that this statement was fabricated, but Saudi Arabia used it as a pretext to isolate the emirate. Riyadh and its partners are demanding that Doha break off diplomatic relations with Iran, close the Turkish military base on its territory (since 2015) and stop broadcasting on Al Jazeera.

Aljazeera

Qatar has intensified contacts with Turkey, which is also drawing closer to Iran and is buying Persian oil in large volumes. In June 2016, Turkish President Recep Erdogan sent 3,000 troops to the emirate, where the Turkish military base is located in Tariq bin Ziyad. In conditions of cooling of the Turkish-American relations, Erdogan views Qatar as the foothold of Turkey in the Persian Gulf, dominated by Saudi Arabia - one of the regional allies of the United States. Al Tani sees the Turkish military as a guarantee of the security of his regime. The economic blockade of Qatar turned out to be very useful for the Turkish business, to which the Qatari authorities granted trade preferences. Since 2011, Turkey’s exports to Qatar have increased by 126%. The Turks mainly supply electronics, shipbuilding products, and food. About 30 Turkish companies are implementing contracts in Qatar worth $ 8.5 billion (mainly in the construction sector). Qatar is preparing to host the World Cup in 2022 and plans to build new infrastructure.

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At stake are relations with the US

A change in Qatar’s foreign policy priorities could lead to contradictory consequences in relations with the United States. Emir Al-Thani considers the United States as a major military and political ally. Since 2003, there is the largest US air base in the Middle East in the city of Qatar. Al-Udeid, numbering 10 thousand people, which can accommodate 100 military aircraft, including strategic bombers B-1B, capable of carrying nuclear warheads. The Trump administration has not joined the economic blockade of Qatar and smoothes over the contradictions with Saudi Arabia.

However, Qatar’s rapprochement with Iran, Turkey, China, and Russia, which are interested in reducing US influence in the Middle East, is alarming for the Americans. Qatar’s strategy to increase the production and export of liquefied natural gas runs counter to Washington’s priorities. The United States, like Qatar, has embarked on an increase in the production and supply of liquefied natural gas abroad. In this case, Qatari gas creates competition for American products. Qatar exports liquefied natural gas to the same countries as the United States — to Japan, South Korea, India, and Spain.

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Yet the US is in no hurry to include Qatar in the black list. This country is the "trump card" of the US in the deck of cards in the MidEast. The US might use relations with Qatar as a lever of pressure on Saudi Arabia, whose actions do not always meet American interests. The killing of opposition journalist Jamal Ahmad Khashoggi at the consulate of Saudi Arabia in Istanbul has caused a negative reaction in the West. The United States has imposed personal sanctions against Saudi officials suspected of involvement in the crime. Plans of Saudi Arabia, Russia, and Canada to reduce oil production for the sake of rising prices do not meet the US interetst. Trump has personally urged OPEC not to overestimate the price of oil. Qatar can act as a bridge for building relations between the United States and Iran, as a mediator, if it comes to negotiations between Trump and Iranian leader Ali Khamenei, President Hassan Rouhani on the termination of the Iranian missile program in exchange for the lifting of sanctions.

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