The Trump Effect? Or Just A Fight Over Money? Qatar Isolated By Moderate Arab States

Well, here’s a possible dagger to the heart of Barack Hussein Obama’s precious “legacy”:  Saudi Arabia, Bahrain, the UAE, and Egypt have cut off all financial and diplomatic dealings with the state of Qatar.  Why?  There are two explanations.  First, the political one:  These states are reacting to Qatar’s long-term support and financing for The Muslim Brotherhood.  You will recall that Barack Hussein Obama and his Secretary of State Hillary Clinton channeled hundreds of millions of dollars as well as weapons to the Brotherhood via the government of Qatar, during their efforts to destabilize the mideast and call it the “Arab spring”.  President Trump’s recent public meetings with the Kings of Saudi Arabia and Bahrain, as well as with Egypt’s President al-Sisi, are the proximate cause of this dramatic and very public change in Arab state policy.  For the rulers Saudi Arabia, the home of the “orthodox” Wahhabist sect, to speak in public against The Muslim Brotherhood is an event on par with a Richter 8.0 earthquake.  Here’s the political argument:

https://theconservativetreehouse.com/2017/06/05/uae-saudi-arabia-egypt-and-bahrain-cut-diplomatic-ties-with-qatar/

UAE, Saudi Arabia, Egypt and Bahrain Cut Diplomatic Ties With Qatar…

There’s a history needed for context here.  But first, here’s the latest developments in order of their occurrence.

♦ 6:00am Bahrain’s Foreign Affairs Ministry issued a statement early Monday saying it would withdraw its diplomatic mission from the Qatari capital of Doha within 48 hours and that all Qatari diplomats should leave Bahrain within the same period.

The ministry’s statement said Qatari citizens needed to leave Bahrain within two weeks and that air and sea traffic between the two countries would be halted. It wasn’t immediately clear how that would affect Qatar Airways, one of the region’s major long-haul carriers.

Bahrain blamed Qatar’s “media incitement, support for armed terrorist activities and funding linked to Iranian groups to carry out sabotage and spreading chaos in Bahrain” for its decision.

♦ 7:00am Saudi Arabia says it is cutting diplomatic ties to Qatar and it has pulled all Qatari troops from the ongoing war in Yemen.

Saudi Arabia made the announcement via its state-run Saudi Press Agency early Monday. It appeared to be timed in concert with an earlier announcement by Bahrain similarly cutting ties.

♦ 8:00am The United Arab Emirates and Egypt have cut diplomatic ties to Qatar.  The two countries have joined Saudi Arabia and Bahrain in cutting ties to Qatar amid a growing Arab diplomatic dispute with the small, gas-rich nation.

Both the UAE and Egypt made the announcement on their state-run news agencies within minutes of each other.

Qatar has been a source of historic extremist and terrorist related problems for the Gulf Security Council and aforementioned Gulf States.

Here’s some historic background for possible context on the latest developments:

  • Qatar was the intermediary used by President Obama for covert arms and monetary transfers by the Obama CIA and Obama/Clinton State Department respectively.
  • Qatar was also the chosen home for detainees when President Obama released the GITMO terrorists.
  • Most importantly however, is the relationship between Qatar and the Muslim Brotherhood.  When Egyptian President Abdel Fattah al-Sisi named the Muslim Brotherhood a terror organization, their leadership fled to safe harbor in Qatar.

el-sisi in Saudi

Egyptian President Fattah al-Sisi then began a months and years long assembly of Gulf Arab states (Gulf Security Council) to boycott Qatar, cut all diplomatic ties and isolate them until they renounced terrorism and stopped providing safe harbor for extremists.

Eventually Qatar acquiesced and sent the Muslim Brotherhood to Turkey.

President al-Sisi then asked Interpol to watch carefully and notify him if the Muslim Brotherhood were ever allowed to leave Turkey.  [Yeah, al-Sisi is a badass like that]  Recep Erdogan gave the Brotherhood safe harbor in Turkey.

◾2013 President al-Sisi charged and prosecuted the leadership of the Muslim Brotherhood. They fled to Qatar.  (link)
◾2014 President al-Sisi followed the MB to Qatar and initiated sanctions against Qatar until they stopped financing and harboring terror.  (link)
◾2015 Unrelenting President al-Sisi then formed a coalition against Qatar including the UAE and Saudi Arabia who withdrew their ambassadors and isolated Qatar in the region.  (link)  (link)

The extremist attack in Egypt last week was notably carried out by sympathizers of the Muslim Brotherhood.  The attack was launched from Libya.  Libyan Dawn, ISIS, al-Qaeda in Arabian Peninsular (AQAP) and al-Qaeda North Africa (AQIM) are all affiliates of the Muslim Brotherhood political extremist construct.  All of these entities have found financial resources structured, and/or organized, from inside Qatar.

Against the backdrop of President Trump calling for a joint coalition against extremist and violent Islamic terrorism it doesn’t come as a surprise to see the Gulf Arab States once again confronting Qatar in 2017.

The difference is this time (2017) they have a U.S. President willing to support the global effort to hunt down and eliminate the extremists…..  “DRIVE THEM OUT!”

But….  There is a second line of thought that says “follow the money”.  This theory suggests that the anti-terrorism rhetoric is merely a smokescreen for a battle over the profits to be made from the sale of natural gas.  The Qataris, along with Saudi Arabia’s arch-enemy Iran, control a huge field whose output is piped to Europe thru Syria.  Putn’s Gazprom is threatened by this line, and this explains much of Putin’s animosity towards the Assad regime.  The usually-accurate Tyler Durden at ZeroHedge puts it this way:

“Forget Terrorism”: The Real Reason Behind The Qatar Crisis Is Natural Gas by Tyler Durden Jun 6, 2017

According to the official narrative, the reason for the latest Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, is because – to everyone’s “stunned amazement” – Qatar was funding terrorists, and after Trump’s recent visit to Saudi Arabia in which he urged a crackdown on financial support of terrorism, and also following the FT’s report that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda spinoffs, Saudi Arabia finally had had enough of its “rogue” neighbor, which in recent years had made ideologically unacceptable overtures toward both Shia Iran and Russia.

However, as often happens, the official narrative is traditionally a convenient smokescreen from the real underlying tensions.

The real reason behind the diplomatic fallout may be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar’s regional natural gas dominance.

Recall that many have speculated (with evidence going back as far back as 2012) that one of the reasons for the long-running Syria proxy war was nothing more complex than competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits, however as that would put Gazprom’s monopoly of European LNG supply in jeopardy, Russia had been firmly, and violently, against this strategy from the beginning and explains Putin’s firm support of the Assad regime and the Kremlin’s desire to prevent the replacement of the Syrian government with a puppet regime.

Now, in a separate analysis, Bloomberg also debunks the “official narrative” behind the Gulf crisis and suggests that Saudi Arabia’s isolation of Qatar, “and the dispute’s long past and likely lingering future are best explained by natural gas.

The reasons for nat gas as the source of discord are numerous and start in 1995 “when the tiny desert peninsula 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 hated rival.”

The result to Qatar’s finances was similar to the windfall that Saudi Arabia reaped from its vast crude oil wealth.

The wealth that followed turned Qatar into not just the world’s richest nation, with an annual per-capita income of $130,000, but also the world’s largest LNG exporter. The focus on gas set it apart from its oil producing neighbors in the Gulf Cooperation Council and allowed it to break from domination by Saudi Arabia, which in Monday’s statement of complaint described Qataris as an “extension of their brethren in the Kingdom” as it cut off diplomatic relations and closed the border.

In short, over the past two decades, Qatar become the single biggest natural gas powerhouse in the region, with only Russia’s Gazprom able to challenge Qatar’s influence in LNG exports.

To be sure, Qatar has shown a remarkable ability to shift its ideological allegiance, with the FT reporting as recently as 2013, that initially Qatar was a staunch supporter, backer and financier of the Syrian rebels, tasked to topple the Assad regime, a process which could culminate with the creation of the much maligned trans-Syrian pipeline.

The tiny gas-rich state of Qatar has spent as much as $3bn over the past two years supporting the rebellion in Syria, far exceeding any other government, but is now being nudged aside by Saudi Arabia as the prime source of arms to rebels.

 The cost of Qatar’s intervention, its latest push to back an Arab revolt, amounts to a fraction of its international investment portfolio. But its financial support for the revolution that has turned into a vicious civil war dramatically overshadows western backing for the opposition.

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, and as we showed yesterday, Qatar’s sovereign wealth fund agreed last year to invest $2.7 billion in Russia’s state-run Rosneft Oil, even as Qatar is host of the largest US military base in the region, US Central Command. 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, its recent financial and ideological support of Iran notwithstanding.

As a result of the tiny nation’s growing financial and political “independence”, its neighbors grew increasingly frustrated and concerned: “Qatar used to be a kind of Saudi vassal state, but it used the autonomy that its gas wealth created to carve out an independent role for itself,” said Jim Krane, energy research fellow at Rice University’s Baker Institute, quoted by Bloomberg.

Furthermore, Qatar’s natural gas output has been “free from entanglement” – and political pressure – in the OPEC, the oil cartel that Saudi Arabia dominates.  “The rest of the region has been looking for an opportunity to clip Qatar’s wings.”  And, as Bloomberg adds, “that opportunity came with U.S. President Donald Trump’s recent visit to Saudi Arabia, when he called on “all nations of conscience” to isolate Iran. When Qatar disagreed publicly, in a statement the government later said was a product of hacking, the Saudi-led retribution followed.”

To be sure, in a series of tweets, Trump himself doubled down on the “official narrative”, taking credit for Qatar’s isolation (perhaps forgetting that a US base is housed in the small nation).

The cynics may be forgiven to assume that if Trump is tweeting that the reason for Qatar’s isolation is “to end the horror of terrorism”, even as the US just signed a $100+ billion arms deal with the single biggest supporter of terrorism in the world, Saudi Arabia, then indeed the Trump-endorsed “narrative” is to be dismissed outright.

Which again brings us back to nat gas, where Qatar rapidly emerged as the dominant, and lowest cost producer at a time when its neighbors started demanding the commodity on their own, giving the tiny state all the leverage. As Bloomberg adds “demand for natural gas to produce electricity and power industry has been growing in the Gulf states. They’re having to resort to higher-cost LNG imports and exploring difficult domestic gas formations that are expensive to get out of the ground, according to the research. Qatar’s gas has the lowest extraction costs in the world.”

Of course, with financial wealth came the need to spread political influence:

Qatar gas wealth enabled it to develop foreign policies that came to irritate its neighbors. It backed the Muslim Brotherhood in Egypt, Hamas in the Gaza Strip and armed factions opposed by the UAE or Saudi Arabia in Libya and Syria. Gas also paid for a global television network, Al Jazeera, which at various times has embarrassed or angered most Middle Eastern governments.

And, above all, “gas prompted Qatar to promote a regional policy of engagement with Shiite Iran to secure the source of its wealth.

And here the source of tension emerged: because as Steven Wright, Ph.D. Associate Professor at Qatar University told Bloomberg, “you can question why Qatar has been unwilling to supply its neighboring countries, making them gas poor,” said Wright, the academic, speaking by telephone from the Qatari capital Doha. “There probably was an expectation that Qatar would sell gas to them at a discount price.”

It did not, and instead it took a step backward in 2005, when Qatar declared a moratorium on the further development of the North Field that could have provided more gas for local export, adding to the frustrations of its neighbors.

Qatar said it needed to test how the field was responding to its exploitation, denying that it was bending to sensitivities in Iran, which had been much slower to draw gas from its side of the shared field. That two-year moratorium was lifted in April, a decade late, after Iran for the first time caught up with Qatar’s extraction rates.

As Qatar refused to yield, the resentment grew.

“People here are scratching their heads as to exactly what the Saudis expect Qatar to do,” said Gerd Nonneman, professor of international relations and Gulf studies at Georgetown University’s Doha campus. “They seem to want Qatar to cave in completely, but it won’t call the Muslim Brotherhood a terrorist organization, because it isn’t. And it isn’t going to excommunicate Iran, because that would jeopardize a relationship that is just too fundamental to Qatar’s economic development.

Whether nat gas is the source of the Qatari isolation will depend on the next steps by both Saudi Arabia and Iran. Saudi Arabia, along with the United Arab Emirates and Egypt – are all highly reliant on Qatari gas via pipeline and LNG.

According to Reuters, traders startled by the development, have begun to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE. The UAE consumes 1.8 billion cubic feet/day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbor, leaving it doubly exposed to tit-for-tat measures, industry sources and traders said.

So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks.

With LNG markets in bearish mood and demand weak, the UAE could cope with Qatar suspending its two to three monthly LNG deliveries by calling on international markets, but Dolphin piped flows are too large to fully replace.  “A drop off in Dolphin deliveries would have a huge impact on LNG markets,” one trader monitoring developments said.

And since it all boils down to who has the most leverage as this latest regional “balance of power” crisis unfolds, Qatar could simply take the Mutual Assured Destruction route, and halt all pipeline shipments to its neighbors crippling both theirs, and its own, economy in the process, to find just where the point of “max pain” is located.

So what are the takeaways?  First, mideast politics are always several layers more complex than they appear at first glance.  Throw Islamic sectarianism into the mix, and the waters become very murky.  Second, natural gas prices in Europe are likely to rise, and soon.  This will likely impact Germany the hardest:  Another problem for the charming frau Merkel.  And finally, the USA, now a massive exporter of LNG, is poised to benefit, as the flow of our output is not bound by political and religious skirmishes.

Trump is well-advised to capitalize on this situation, and to take credit for it; the average American cannot grasp the underlying political economics and will cheer Trump’s apparent slapdown of a terror-supporting state.

— SafeSpace —

 

 

 

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4 Responses to The Trump Effect? Or Just A Fight Over Money? Qatar Isolated By Moderate Arab States

  1. Popular Front says:

    We in Australia are watching this developing situation closely, as we are sitting on huge reserves of LNG which our idiot politicians are selling cheaply – practically giving it away – to certain Asian countries while at the same time gouging the domestic consumer with some of the highest energy prices in the world.

    Needless to say this is causing seething resentment out there in Aussie Voter Land.

  2. vonMesser says:

    I note in the blue tinged photo, everyone is looking up towards the top center of the picture.
    Everyone except the king – who is looking at Trump.
    Interesting composition, no?

  3. Hardnox says:

    This is an interesting development. Good post and commentary. There’s more to this story and I hope you keep us posted as it unfolds.

    Qatar has been playing both sides of the fence. Looks like their fellow Arabs called them out.

    BTW, isn’t Qatar the place Batears sent a bunch of GITMO detainees?

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