The Russia-Ukraine conflict is escalating with no end in sight. The solution of the West has been to impose sanctions on the Russian Federation but now the European Union rely on new Energy trading partners from the Middle East.
But will Qatar be really a safe alternative to the Russian Federation?
In the past two weeks, a number of European politicians have admitted that their assessment of Russian President Vladimir Putin was wrong and by surprise the German Chancellor Olaf Scholz admitted that the German Energy strategy has finally backfired.
According to the former German Defense Minister, Ursula von der Leyen, which now runs the European Commission, she believes that Qatar could be an alternative to Russia in terms of gas supply.
Lets be clear, the same old mistake is done again by talking about business and overlooking the politics in the background. Obviously, the European have learned nothing from the Russian and Ukrainian conflict, so lets do more research about the Forum of Gas Producing Countries.
Last month, the Sixth Summit of the Forum of Gas Producing Countries was held in Doha, the capital of Qatar. The summit was overshadowed by the Russian / Ukrainian conflict and its motto was “Natural Gas – Shaping the Energy Future” with a Marketing Slogan to the energy crisis in Europe. The European Union get’s 40 percent of their gas needs from Russia, and gas prices have more than doubled during the last month.
An alternative energy Source for the European Union is not in sight and the German Nord Stream 2 pipeline is unlikely to go online after Russian troops invaded Ukraine.
Interestingly during the Sixth Summit of the Forum of Gas Exporting Countries, Viktor Zubkov, the Chairman of the Board of Directors of Gazprom and the Special Representative to Russian President Vladimir Putin was awarded for his life-time contribution to the Forum of Gas Producing Countries. The award was received on behalf of Viktor Zubkov by Russian Energy Minister, Nikolay Shulginov and the European diplomats must have been stunned on how deeply the GECF is linked to the Russian Federation.
The Gas Exporting Countries Forum (GECF) is leaning towards the Russian Federation (47,805 billion cubic Meters), Iran (33,721 billion cubic Meters), Qatar (24,072 billion cubic Meters), Saudi Arabia (9,200 billion cubic Meters), Turkmenistan (7,504 billion cubic Meters), United Arab Emirates (6,091 billion cubic Meters), Venezuela (5,740 billion cubic Meters), Nigeria (5,475 billion cubic Meters) and the People’s Republic of China (5,440 billion cubic Meters).
The forum of gas exporting countries has existed since 2001 and goes back to an Iranian initiative. After Russia’s accession in 2008, it gained in importance and unity as Russian President Vladmir Putin closely initiated an alliance with Mahmoud Ahmadinejad, the President of Iran. Today, 19 member countries control 71% of the world’s known gas reserves. GECF member countries produced 43% of the world’s gas and 58% of its liquefied gas in 2020. Only two major gas producers are not members of the forum which should not be a surprise as they come from the United States and Australia. Technically speaking the GECF is operated by governments that do not follow the Western style of democracies and the West is just seen as a Trading Partner.
The current crisis has shown the geopolitical dimension of gas and Russia uses it to put political pressure on Europe. The gas from Russia is considered climate-friendly and therefore an alternative to oil and coal and the demand for Russian gas is enormous, so it helps to take a look at the production numbers to meet potential new business partners for Ursula von der Leyen.
In 2020, the USA led the list of the ten largest gas producers with 960 billion cubic Meters, followed by Russia (705 billion cubic Meters), Iran (234 billion cubic Meters), China (195 billion cubic Meters), Canada (172 billion cubic Meters), Qatar (167 billion cubic Meters), Australia (154 billion cubic Meters), Norway (116 billion cubic Meters), Saudi Arabia (97 billion cubic Meters), Algeria (84 billion cubic Meters).
Together they hold more than half of all known Gas reserves today (205,000 billion cubic Meters) and the Russian Federation, Iran and Qatar will play an enormous geo-pollical role during the next century. Cancelling Russian gas or trying to bypass Russia will have huge consequences to the European Community.
Could Qatar be an alternative gas supplier to Russia?
It is not surprising that the European Union want to take advantage to focus on getting Qatar in its pockets but it will not happened. Russia and Iran have constantly tried to turn the GECF into a new OPEC, which will set the production and prices of gas in favor of the producers.
Qatar was a world market leader for years in the export of gas, but in 2021 it slipped to second place with 77.4 bcm and was even overtaken by Australia (87.6) in third place, like the USA (71.6). However, Qatar mainly supplies Asia, in which it has long-term supply contracts for the next 15 years and the Gas prices have been pre-negotiated at a fixed contract rates and for that reason in Western countries, Energy prices are adjusted on a daily basis, compared to the Asian markets which have a buffer zone of 6 to 10 weeks before the energy prices get adjusted.
One wonders why the Western companies didn’t do the same by negotiating longterm contract rates but energy experts explained that European companies were opposed to long term contracts, preferring short contracts to ensure price certainty by passing prices on to the Western consumers overnight but lets be certain, when prices skyrocket in Western countries, so do company profits.
The production of LPG Gas requires huge investments, so only long contracts to Asia can ensure price and supply stability and protect the interests of the producers, governments and consumers. Qatar also asked the Europeans to do the same and invited them to participate in its projects as Qatar wants to increase its liquefied gas production from 77 bcm now to 126 bcm in 2027 at a cost of $51 billion. During the next 12 to 18 months European companies might not be able to benefit but in 2024, Europe should be able to replace Russian gas with gas from Qatar and other Middle Eastern countries.
Iran, Qatar & Russia: Close Allies in the Middle East
In order to attract Qatar, the US has persuaded the Arab states of Bahrain, the United Arab Emirates, Egypt and Saudi Arabia to lift their blockade against Qatar, which has been in place since 2017. Then, last month, US President Joe Biden received the Emir of Qatar and promised to make his country the only strategic ally outside of NATO and these concessions appear to have worked, but have not changed Qatar’s stance.
Iran and Qatar share the world’s largest gas field in the Gulf with reserves of 51,000 bcm of which Iran owns 38 percent and Qatar 62 percent. Gas production began in 1989, and three years later Qatar signed 30-year contracts with western oil companies. They regulated the exploitation of the field and, above all, the liquefaction of the Natural gas, which requires highly developed technology. Iran was left out after Western Sanctions for supporting terrorism and had no access to the global Gas market. After a decade, Qatar has become the world market leader in the production of liquid gas.
In 2019 Qatar Petroleum didn’t renewed it’s 25 years contract with ExxonMobil and Total, giving QP full control of the Qatargas 1 fields.
As a result, Qatar also became the richest country in the world due to its large gas reserves and the ruling family began to pursue their own goals. So far, as a member of the Cooperation Council of the Gulf Arab States, Qatar had supported a pro-Western stance but in 2006, Qatar broke from that consensus and voted in the UN Security Council against imposing new sanctions on Iran over its recently discovered nuclear program and there are concrete indications of how the sanctions against Iran are being circumvented by exporting more gas than Qatar actually can produce.
Qatar maintains close contacts to both the Afghan and Pakistani Taliban’s
With the onset of the Arab Spring in 2011, like Iran, Qatar supported the Shiites in Bahrain against the ruling Sunnis. Despite an agreement with Saudi Arabia to support the Syrian opposition as a whole, the Qataris in Syria only aided the Islamists and jihadists, particularly al Qaeda’s offshoot Al Nasra Front. They have been providing political and financial supports to Islamists in Libya, Hezbollah in Lebanon, Hamas in Gaza and the Muslim Brotherhood in Egypt. The Qatari rulers had always maintained good relations with the Taliban, letting them set up a liaison office in Doha and overseeing their secret negotiations with the Americans. Qatar also helped the Americans flee Afghanistan and, after they left, took over management of the Kabul airport to allow remaining civilians to leave the country, and now, in the nuclear negotiations with Iran, Qatar is mediating in the background.
Because of its commitment to backing the Iranians, Qatar came into conflict with the Gulf States and Egypt after 2013, which put the Muslim Brotherhood on their terrorist lists. In 2017, the conflict escalated and these states imposed a blockade on Qatar as well as a sea and air space ban. With the help of Iran and Turkey, the blockade was undermined and the Iranians supplied Qatar with food and other goods and made their airspace and national waters available.
Both Qatar and Iran moved closer together and by the end of the blockade, Qatar no longer had any economic links with its Arab neighbors.
Since Obama, Americans have wanted to leave the Middle East
Qatar has been maneuvering between the United States and the camp of Russia, Iran and China and economically, it is definitely keeps closer economical relations between GECF member countries. Politically, it wants to appear neutral but in practice, it officially announced that it will not renew the gas and oil contracts with Western companies that are due to expire this year.
After thirty years, Qatar has sufficient know-how and has become more independent. The new contracts will be negotiated accordingly and Qatar also wants to increase its stake in the companies. At the same time, Qatar has ordered four LNG tankers from China.
Since Obama the Americans have wanted to leave the Middle East in order to stop China’s policy of expansion in the Asia Pacific region and a void has emerged in the Gulf that has been filled not only by Iran and Russia, but also by China.
Last year, China and Iran signed a 25-year cooperation agreement in which China would get cheap Iranian oil. In return, China will invest $400 billion in Iran.
It is unrealistic that the US embrace of Qatar will induce the emirate to divert a significant portion of it’s Energy exports for Europe that is currently allocated for the Chinese market and Qatar would never inflict such a blow on the Russians and Chinese.
Biden is continuing Obama’s policy in the hope of signing a nuclear deal with Iran after all. He has made no effort to win back his old friends; that is why no Arab country has condemned the Russian invasion of Ukraine and everyone was neutral and appealed for peace. Whether Qatar can solve Europe’s problems is doubtful and a solution can only be a new European energy solution. You can’t rely on the political instincts of the Europeans, but you can rely on their science, they will have to invent something new. Until then, the Germans are well advised not to shut down the three remaining nuclear reactors and as well activate their coal powered plants this year and they need to keep their Fingers crossed that Russia is not shutting down it’s Energy supplies to Europe. If Russia does cut the energy supply to Europe it would be an economical disaster for all countries in the E.U. with a long lasting recession.
Irwan Shah is the Founder of eHalal Group