Sizable energy-crisis returns lead Qatar to diversify its investments globally.
In October, Qatar Sports Investment bought a 22% stake in Portugal’s top-tier football team, SC Barga. The $18.5 million acquisition immediately raised controversy with Portuguese Barga supporters, who waved a “Qatari slavers are not welcome” banner during a game in reference to Qatar’s track record of alleged human-rights abuses.
For Qatar, SC Barga is just a tiny step in a long road of European investments. Over the years, Doha has imposed itself as a strategic partner for most Western governments, supporting multiple sectors of the economy— from sports clubs and fashion brands to landmark real estate, banks, factories and major infrastructure.
“Qatar is probably the most Western-leaning country in the Gulf at the moment,” says Andreas Krieg, an associate professor at London’s King’s College.
Already one of the world’s wealthiest countries, Qatar is enjoying a fossil fueled windfall from Russia’s invasion of Ukraine. While the rest of the world is struggling with a looming recession in the aftermath of the Covid-19 pandemic and the ongoing war, Qatar forecasts almost 5% GDP growth in 2022. The International Monetary Fund expects the country’s budget surplus to grow 57.6%, from $12.2 billion this year to $19.3 billion in 2023.
Hardly known to the world 20 years ago, Qatar no longer wants to be just a rich country: It wants to be powerful. Since the early 2000s, the Persian Gulf state has used its massive wealth to acquire international influence. Most of the investments are channeled through the Qatar Investment Authority (QIA), a $450 billion sovereign wealth fund Qatar created in 2005. The fund has several subsidiaries, including Qatar Holding; Qatar Sports Investment; Katara hospitality; Kasada Capital and Qatari Diar. Other investment arms include the Qatar Foundation, Mayhoola and QInvest. All these bodies are closely tied to the ruling Al-Thani family.
“The country’s strong general government net asset position remains a credit strength, and we expect it to increase over the period to 2025, supported by investment returns on Qatar’s sovereign wealth fund,” S&P Global Ratings said in a November statement in which it upgraded the country from AA- to AA. However, “full public disclosure of data is lacking in several areas, such as the composition of government assets or the broader international investment position, which complicates our assessment of risks,” the agency pointed out.
Buying Crown Jewels
The UK was the first destination for Qatari FDI of more than $40 billion. The emirate bought some of Britain’s most prized real estate, including the Ritz Hotel, Harrod’s department store, the Canary Warf financial center, countless private homes in London’s most desirable districts, and the tallest building in the country, the Shard. The number of homes owned by Qatari individuals in the UK doubled between 2018 and 2021, shows a recent study by Doha-based real estate firm Alford Hughes. Qatar has bought so much that it is now the tenth-largest landowner in Great Britain, MSCI Real Assets reports.
Nonetheless, Qatar’s purchases are not only lavish spending; the Gulf state invests in assets that will yield positive returns. “There is obviously this element of ‘We want to buy influence,’ but it doesn’t necessarily have to come at the expense of generating a profit,” says Krieg.
Over the past two decades, the QIA has acquired equity in some of the UK’s biggest companies, such as Barclays Bank, Sainsbury’s supermarkets, Royal Dutch Shell, Heathrow airport, British Airways and even the London Stock Exchange. According to data compiled by the Guardian, Qatar generated $545 million in dividends from UK-listed firms in the first 10 months of 2022 alone.
With time, Qatar evolved from being a provider of capital to a business partner looking to support growth and enhance local companies. In December 2021, the QIA announced a $110 million deal with Rolls Royce to develop a tech hub specialized in green engineering innovation. The project could create up to 10,000 jobs between Northern England and Doha. In May, Sheikh Tameem al-Thani, Qatar’s head of state, visited London, where he promised to invest another $12.4 billion in a strategic investment partnership to support key industries such as the financial sector, science and new technologies.
France and Germany
France and Germany are the second- and third-largest recipients of Qatari investments in Europe, with an estimated $27 billion and $24 billion, respectively.
Similar to what it did in the UK, Qatar bought luxury real estate in Paris and took equity in a variety of leading French firms: media group Lagardere, oil major TotalEnergies, aerospace giant EADS, utility firm Veolia, nuclear power producer Areva, fashion brand Balmain, Parisian department store Printemps, football club Paris Saint Germain and French hospitality group Accor.
Since 2008, France has been encouraging these investments through tax exemptions. Analysts argue that they represent a $150 million to $200 million financial loss for the French state.
In Germany, Qatar is the biggest shareholder of the car manufacturer Volkswagen Group and holds stakes in technology company Siemens, Deutsche Bank, shipping firm Hapag-Lloyd and construction giant Hochtief.
Qatar’s investments have attracted severe criticism in Europe, ranging from claims of unfair privileged treatment regarding tax exemptions to accusations of human rights abuses, money laundering and terrorism financing.
“Qatar needs to invest more into projects that generate a trickle-down effect for the working class that could allow them to say, ‘Look, we are now a critical component of growth and development,’” adds Krieg.
Gradually, Qatar is investing more in supporting local communities, creating jobs and developing sectors with positive environmental and social impact. During his visit to Berlin in 2018, Sheik Tamim promised to inject an additional $10 billion into Germany, focusing on local small and midsize enterprises. When he returned to meet the chancellor in May 2022, he signed an enhanced energy cooperation deal to help Germany diversify its energy supplies and push forward with its green ambitions.
In October, Qatar announced a $2.38 billion investment to support German oil giant RWE’s acquisition of US Con Edison Clean Energy, essentially giving money to RWE to invest in America. With this deal, Qatar kills two birds with one stone: It supports a major European partner and secures a spot in a critical new energy market in the US.
Betting on the USA
Qatar is also placing chips in the USA. The most well-known deal is the Golden Pass—a $10 billion joint venture between Qatar Energy and Exxon Mobil to build North America’s biggest liquified natural gas (LNG) exporter in Texas. Already the biggest LNG exporter in the world, Qatar owns 70% of the Golden Pass facilities, which should be operational in 2024.
Along with prime real estate in New York and Washington, DC, Qatar is casting its investment net broader. “Our investments are mainly located in the USA’s sun belt or cities with a positive influx of demographics,” says Alexandre Bernassau, head of Investments at Lesha Bank, a Qatari Islamic bank formerly known as Qatar First Bank. “The US is an efficient and liquid market, with very well-defined purchasing and selling protocols and lots of buyers and sellers. We also find that currency risks are low, as the Qatari riyal is pegged to the US dollar.”
More recently, Qatar has been investing massively in cutting-edge tech technologies worldwide in sectors ranging from energy transition to medical innovation and fintech, backing up Elon Musk, or blockchain companies in the US. In September, the QIA led a $250 million round in France’s Innovafeed, a biotech company that produces insect-based protein. A few months prior, it led a $400 million round in a US-German process mining company Celonis.
In less-thriving economies, the Qataris invest in securing access to critical infrastructure and energy resources. In October, Qatari officials said the country would be willing to invest in Lebanon’s offshore gas exploration after the maritime border issue was settled with Israel. Qatar also invested in oil extraction infrastructures in Namibia, Cyprus and Brazil.
Qatar’s investments are also preeminent in Asia. But lately, the Qataris’ curiosity seems piqued by Africa, starting with Egypt, where local media reports indicate that Qatar could invest up to $20 billion, including a $2.5 billion deal for a 20% share in telecom provider Vodafone Egypt.
French connections are also helping Qatar step into sub-Saharan Africa’s tourism sector. In October, Kasada Capital acquired a beach resort in Senegal as part of a $500 million venture with French hospitality group Accor to invest in 40 hotels in sub-Saharan Africa.
