The official narrative catalogues the reason for the recent Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, is because the country is funding terrorists. Following Trump’s visit to Saudi Arabia in which he counseled a clampdown on financial support of terrorism, coupled with a report that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda offshoots, it seemed Saudi Arabia had had enough of its miscreant neighbor and finally put its foot down. In a sharp escalation, the countries closed their borders to Qatari aircraft and ships, and also ordered Qatari citizens in their countries to leave within two weeks.

However, oftentimes, the official take is an opportune smokescreen from the real underlying tensions.

The cardinal reason behind the latest diplomatic fallout may very well have to do with a long-running and controversial topic, namely Qatar’s regional natural gas sway.

Qatar with a population of just 2.7m people has vast gas resources that have turned it into one of the world richest nations. Additionally it is also a crucial supplier of liquefied natural gas to Asia and Europe. The country also has large investments in the UK, including London’s Shard building and Harrods department store, and Europe through its sovereign wealth fund, the Qatar Investment Authority.

The reasons for natural gas as the source of discord started some twenty-two years ago when the tiny country was about to make its first shipment of liquid natural gas from the world’s largest reservoir. The offshore North Field, which provides virtually all of Qatar’s gas, is shared with Iran…Saudi Arabia’s reviled rival.

Added to this are Qatar’s desires to expand out of the region. There have been many speculations that one of the reasons for the long-running Syria proxy war was in actuality a case of competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits which initially made it a staunch supporter of Assad. Russia had been resolutely against this stratagem from the beginning. As the years passed, Qatar grew to comprehend that Russia would not allow its pipeline to traverse Syria, and as a result it strategically pivoted in a pro-Russia direction- Qatar’s sovereign wealth fund agreed last year to invest $2.7 billion in Russia’s state-run Rosneft Oil, notwithstanding the fact that it hosts one of the largest US military base in the region. This particular pivot may have also added to fears that Qatar was becoming a far more active supporter of a Russia-Iran-Syria axis in the region.

Furthermore, Qatar’s natural gas output has been free from imbroglio and political pressure - in the Organization of the Petroleum Exporting Countries (OPEC), the oil cartel that Saudi Arabia dictates.

Recently, in April 2017, Qatar lifted a self-imposed ban on developing the world’s biggest natural gas field, which it is shares ownership with Iran, in an attempt to ward off any expected rise in competition.

As a result, the desert peninsula’s increasing financial and political independence due to its gas wealth has made it transform from being a kind of Saudi vassal to becoming autonomous. Something which has left its neighbours increasingly frustrated.

An opportunity to circumvent Qatar came with U.S. President Donald Trump’s recent visit to Saudi Arabia, when he called on “all nations of conscience” to isolate Iran. Qatar public disapproval, in a statement the government later labelled hacking resulted in the recent Saudi-led retribution.

In recent years the demand for natural gas to produce electricity and power industry has been growing in the Gulf states thereby forcing them to turn to higher-cost natural gas imports and exploring difficult and expensive domestic gas alternatives. Moreover research shows that Qatar’s gas has the lowest extraction costs in the world making it more attractive for importers.

The situation is a complex one for Qatar. The country might have natural gas and oil but it does not really produce its own food- Saudi Arabia supplies over 90 percent of Qatar’s food requirements. Now that the border has been shut food prices in Qatar could sky rocket. Another element of alarm is Qatar airways which is one if the biggest airlines in the world but now that it is no longer allowed to use Saudi, Egyptian, Bahraini or Emirati air space which means flights to Africa or even North America would have to take a huge detour. This could mean longer time and higher costs all around again. The third element of concern is the shooting up of oil prices- any kind of instability in the Middle East tends to shoot oil prices up which affects the world costs all around.

It should not be forgotten that Qatar has major fiscal reserves, maintains the political support of the Turkish government and is a crucial energy partner for countries like Russia and China. Doha can also turn to Iran. The Saudis and Emiratis should realise that isolating Qatar may backfire. Moreover, Qatar’s supply of natural gas to neighbouring UAE pipeline could be halted, cutting a third of the UAE’s supply as demand for power spikes in the hot summer months.

The best way and probably the only forward is through immediate dialogue in order to iron out differences. Kuwait and Oman seem to be doing their level best but all countries need to be on board. Coercion is never the solution and since neighbours are geography bound and cannot be changed, dialogue is imperative.

 

The writer is a currently a research fellow at the Institute of Strategic Studies Islamabad. Her prime area of interest is Middle East Politics.