Qatar’s Dollar Diplomacy

The emirate’s deep pockets are helping it secure new and deeper trade and investment ties in an end run around the Saudi economic embargo.

Bolstered by huge gas wealth, the tiny Persian Gulf state of Qatar has been going its own way diplomatically and commercially since its regional neighbors—including Saudi Arabia, the United Arab Emirates, Bahrain and Egypt—imposed an economic embargo in mid-2017. The strategy thus far has elicited a strong response, as Qatar is gaining influence and exposure in key markets and regions across the globe.

Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, has made numerous foreign trips over the past year to promote international relations and trade and investment deals in the face of the regional embargo, which shows no signs of being resolved. Central to Qatar’s effort to make an end run around the boycott is its decision to leave OPEC in late 2018 and forge an independent energy policy by diversifying international investments by Qatar Petroleum (QP).

QP recently acquired a stake in Russian oil giant Rosneft and has joined Exxon Mobil in a $10 billion investment in natural gas exports, strengthening its presence in the US but also giving it a toehold in Central America. The Exxon Mobil deal will expand a liquefied natural gas (LNG) facility in Texas and convert it into an export facility for gas extracted from fields in the US. This is expected to be followed by more investment projects in the American oil and gas sector. QP is also looking at new investments in Morocco, Argentina, Mexico, Brazil and South Africa, among other countries.

Wooing Washington

But Qatar is focusing especially on boosting its trade and investment ties with the US, which is its top import partner, supplying 18% of total imports in 2018. QP recently announced a new $20 billion investment in both conventional and nonconventional energy in the US over the next five years. A number of US energy firms, including ConocoPhillips and Exxon, have joint ventures with Qatargas and Nakilat, the world’s largest LNG shipping fleet; and these firms are looking at establishing offices on the ground. The Qatar Investment Authority (QIA), the nation’s sovereign wealth fund, already has about $30 billion invested in the US and has committed to boosting the total to $45 billion in US companies and real estate, says Mansoor Al-Mahmoud, CEO of the QIA.

In January, Qatar and the US met in Doha for their second Strategic Dialogue, attended by Secretary of State Mike Pompeo. The aim of the dialogue was to deepen the bilateral relationship between the two countries across a broad range of areas including defense, security, education, trade, commercial investment and energy.

The meeting concluded with the signing of three memoranda of understanding (MOUs) and statements of intent to increase cooperation in all of these areas. Qatar confirmed an offer to expand facilities at bases used by US forces and align operating procedures there with NATO standards. The two countries also signed an MOU promising deeper coordination on the expansion of Al Udeid Air Base, including a Qatari offer to fund capital expenditures. The maritime relationship between the two countries is also deepening. Last year, the US Navy and Marine Corps hosted a Qatar Naval delegation, and both nations conducted amphibious exercise Eastern Maverick for the first time since 2012. The US has a $26 billion foreign military sales program with Qatar.

At the same time, Qatar has made a multiyear pledge of $500 million to support UN efforts, including UNICEF, the World Food Program, human rights and refugee support, and others. Qatar has also offered $75 million over five years to the work of the UN Office of Counter-Terrorism.

Stronger European Ties

Europe remains a key target for Qatar’s diplomatic push as well. Qatar has long been one of the biggest investors in the UK and a major buyer of British military equipment. It holds significant real estate in London and major investments in UK blue-chip companies.

On the continent, Qatar and France recently reached an agreement to strengthen economic cooperation and develop a closer relationship in the areas of energy and security. Deutsche Bank recently won a commitment from Qatar for additional investment through the QIA. Qatar already has a large investment in Volkswagen, and the QIA is looking at further bets in sectors such as industrials and infrastructure. Overall, Qatar is looking at investing a further $11 billion in Germany, the eurozone’s leading economy, over the medium term.

Country($ Bil.)
Hong Kong9
Data: News reports.

Turkey has been a strong and vocal supporter of Qatar since the embargo commenced, and the countries are growing closer politically and economically. Last year, as the Turkish economy came under pressure and the Turkish lira declined in value, the emir pledged a direct investment of $15 billion in Turkey during a meeting with President Recep Tayyip Erdoan. Cooperation and ties between Qatar and Turkey continue to strengthen.

“Turkey and Qatar have long held a good relationship; but the ties, at the government level and economic, have deepened a lot over the past two years,” says a senior analyst at an Istanbul-based investment bank. “Stronger bilateral relations and strategic partnerships make sense for both countries.”

Qatar is strengthening its investment ties elsewhere in the region too. Last year it announced a $500 million economic aid facility for Jordan, including investment in domestic infrastructure. Qatar also recently purchased $500 million of Lebanese government bonds in a show of support for the country, whose economy is under pressure. In Iraq, Qatar will provide a suite of loans and investments totaling $1 billion for infrastructure and reconstruction projects.

In Africa, Qatar is building relationships and trading ties with countries from Morocco to Sudan. Last year, Qatar and Morocco signed a number of bilateral cooperation agreements in sectors including media, industry, education and agriculture. Qatar’s flagship real estate company, Qatari Diar, also has multiple projects in Morocco.

Qatar’s strengthening ties to the US have not stopped it from pursuing a deeper relationship with Washington’s biggest rival. China is already Qatar’s third-biggest trading partner overall and in the energy sector, with some $14 billion worth of trade between the two nations in 2018. At the end of January, the emir traveled to China; the trip resulted in a series of MOUs aimed at developing and increasing the strategic partnership between the two countries in investment, technology and security, among other fields.

Thus far, Qatar’s dollar diplomacy has produced a flurry of bilateral trading agreements and new and stronger strategic partnerships, including the largest and most powerful countries in the world. The Saudi-led regional embargo, however, remains in place. Whether its vast natural gas wealth can enable tiny Qatar to continue to prosper in a hostile neighborhood, however, is a question still in search of an answer.

IraqStandard Bank$1 billion – infrastructure and construction projects
Jordan$500 million – economic aid and infrastructure investment
Lebanon$500 million – purchase of government bonds
Morocco$1 billion and up – increasing investment across many sectors
Data: News reports.