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Vanand Meliksetian

Vanand Meliksetian

Vanand Meliksetian has extended experience working in the energy sector. His involvement with the fossil fuel industry as well as renewables makes him an allrounder…

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Is The Qatar Blockade Coming To An End?

The Middle East’s massive energy reserves have made it the center of many key geopolitical events throughout history. The presidency of Donald Trump has transformed the power dynamics in the region with the ‘outsourcing of Washington’s foreign policy’ as an important part of the current President’s plan. The U.S. has largely withdrawn from the Middle East in the last few years while encouraging its allies such as Saudi Arabia and Israel to pick up its role regarding the containment of Iran.

Riyadh, however, interpreted Washington’s acquiescence as a carte blanche to deal with unrelated issues which it deemed as problematic such as Qatar’s independent foreign policy. Saudi Arabia’s ambitious crown prince Muhammad bin Salman has been the cause of several miscalculations costing the country financially and damaging its reputation. The timing of these missteps couldn't have been worse for Saudi Arabia as Riyadh attempts to modernize the country's economy with hard-earned cash from the partial IPO of its oil giant Saudi Aramco. Low investor confidence is partly attributed to the region’s unstable political situation.

In 2017, the Saudis imposed a land, air, and sea blockade on Qatar together with Bahrain, the UAE, and Egypt. Doha’s unexpected de facto exile from the GCC was intended to isolate the tiny country diplomatically and increase financial costs in order to force the country to accept the bloc's demands. The Sunni states objected to Qatar’s independent foreign policy and support for the Muslim Brotherhood while insisting on the closure of Al Jazeera Media Network. Instead of yielding, however, Doha strengthened its military alliance with Turkey, improved political relations with Iran, and established alternative sources to import essential products.

Although the blockade was intended to revise Qatar’s foreign policy, the opposite seems to be happening. The political and financial costs seem to be becoming unsustainable for the bloc itself. Especially Saudi Arabia and the UAE are in a financial and political predicament due to the war in Yemen. What was supposed to be a quick campaign to oust the Houthis from southern Yemen, escalated into a quagmire and the planet’s worst humanitarian disaster.

Furthermore, the low price of oil decreases the resource-dependent countries’ income during a time when the budget deficit is growing. Riyadh, in particular, is highly dependent on the export of oil. Also, the price of the commodity strongly influences the success of Saudi Aramco’s IPO. While the UAE’s economy is more diversified, the worsening investment climate has taken its toll on the country’s finances.

Although Qatar produces some oil, it has less reason to fear the low price of the commodity, because it is the second-largest producer of LNG in the world. The country's planned investments will increase its production capacity even further in the coming years. Qatar produces 77 million mt/year of LNG which will increase to approximately 126 million mt/year by 2027 making it the largest LNG producer in the world.

Natural gas has the advantage that it is seen as an important ‘bridging fuel’ during the energy transition while oil increasingly faces scrutiny and competition from electrical vehicles. Therefore, Qatar’s resource-dependent economy is in a better state than its rivals’. Related: Are Energy Stocks Hot Again?

On Tuesday, December 10 the annual GCC meeting was held in Riyadh. During the past two gatherings, lower-ranking officials represented Qatar during the summit. However, a breakthrough could be around the corner. Saudi Arabia’s King Salman sent a written invitation to sheik Tamim of Qatar to attend the gathering. The nation’s Prime Minister and Interior Minister attended the conference, although there was no mention of an end to the boycott.

Qatar could be the big winner of the rapprochement as Doha clearly won’t steer away from its independent foreign policy. The country’s finances are healthier and its international standing is strong as it will host the World Cup in 2022. Also, Washington’s wavering support for Saudi Arabia and Turkey’s unwavering support for Qatar rule out military action.

The failing strategy of the blockading countries is clear. Doha could offer the Saudi-led bloc some face-saving measures such as acquiescing to implement the unpopular 5 percent VAT increase which had been agreed earlier by the GCC. However, that seems a small price for Qatar to pay which will see a lifting of the blockade while none of the demands are met. Yet again, Saudi Arabia seems to lack the necessary strategic, economic, and military capacity to become the leader of the Arab world. 

By Vanand Meliksetian for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on December 15 2019 said:
    An end to the Saudi-led siege against Qatar will signal a great victory for this rising star in the Arab Gulf region.

    Not only has Qatar managed to withstand the intense Saudi-led siege against it since 2017 but its economy has emerged far stronger than before the siege with the International Monetary Fund (IMF) saying that Qatar’s economy grew in 2018 at 2.2% and 2.6% in 2019. Moreover, Qatar has been expanding its LNG production and export capacities from the current 77 million mt/year to 110 mt/y 2023 to consolidate its position as the world’s top producer and exporter of LNG.

    Qatar has also been geopolitically and economically savvy in diversifying its foreign investments and even buying the opposition whenever opportunities presented themselves.

    Despite pressure by the Saudi-led alliance, Qatar has managed to maintain its independent foreign policy and instead of yielding, it strengthened its military alliance with Turkey thus preventing any possible Saudi military action against it, improved political relations with Iran and established alternative sources to import essential products.

    Rather than being the one suffering from the blockade, the political and financial costs seem to be becoming unsustainable for the bloc that it imposed it particularly Saudi Arabia which continues to be sucked deeper into the costly Yemeni quagmire.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • ema chris on December 16 2019 said:
    Saudi Arabia was clear from the beginning of the crises that it seeks to continue its relationship with Qatar under certain conditions. However, Qatar didn’t accept it.
  • ema chris on December 16 2019 said:
    I don’t know why some media outlets persist calling the gulf crises a blockade as if Qataris cannot leave their country or travel somewhere else.
  • ema chris on December 16 2019 said:
    Qatar is hosting the 2020 football game and people there practice their life normally, how is it under a blockade?
  • Josep Kiguli on January 01 2020 said:
    I think it would be wise if we emphasize unity other than blaming one side or the other as some media's mostly do in which I failed to understand how they gain from it. Some of us are neither Qatari nor Saudi but we keep on spreading un necessary propaganda. At the end of the day these people we are trying to separate are sisters and brothers, we found them and we will leave them so we must only contribute to their unity rather as we are all beneficiaries from these countries

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