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Qatar's bubble to burst any moment

21.01.2016
 
Qatar's bubble to burst any moment. Qatar bubble bursting
Source: Splash/All Over

The relations between Russia and Qatar have never been perfect. Traditionally, there have been plenty of problems in bilateral relations between Russia and Qatar, even though the two countries are destined to cooperate with each other. Both Russia and Qatar represent two wings of the now emerging global gas market. Emir of Qatar Tamim Bin Hamad Al Thani has recently paid a visit to Moscow, where he met with Russian President Vladimir Putin and other high-ranking officials.

Russia-Qatar talks: No breakthrough

Unfortunately, the meetings of the Qatari Emir in Moscow have not led to any breakthrough results. The Emir was going to visit Moscow in the autumn of last year, but the visit was pushed back on account of Russia's military operation in Syria. It is an open secret that Qatar is one of the main sponsors of Syrian terrorists.

It should be noted in fairness that Qatar was attempting to play the role of a mediator since the beginning of the conflict in Syria. Qatar suggested keeping Syrian President Assad in office while restricting his powers to the benefit of the government. Qatar offered to keep Assad the chief of the armed and security forces of Syria to subordinate the police to the prime minister. In essence, Qatar offered Syria to refuse from secular principles and divide the Syrian people on the basis of confessional principle. The Syrian people rejected those proposals.

In Moscow, Russian and Qatari officials discussed most important issues of the regulation of the crisis in the Middle East, particularly in Syria. In addition, Putin and At-Thani touched upon the situation in Yemen, Libya and other countries in the Middle East.

The only thing that the sides agreed upon was their cooperation to increase anti-terrorist activities. As for the crisis in the Arab world, one should not forget about the Palestinian problem and the need to resume direct negotiations between Palestine and Tel Aviv with the aim to create a Palestinian state.

Qatar's financial position leaves much to be desired

Emir al-Thani spoke about investment cooperation, about common interests of our countries in the energy sector, especially in the field of natural gas, where Russia and Qatar are members of the Forum of Gas Exporting Countries. It is very important to understand the process of forming a single global gas market instead of three regional ones. In this market, Qatar plays a very important role. The appearance of a global gas market will open new possibilities and create a fundamentally new structure of the global gas market.

Prices on Russian natural gas are tied to oil prices. This is a historically caused phenomenon, as heat and power plants used to operate on fuel oil. Nowadays, natural gas has completely replaced fuel oil for the purpose of power generation. Prices on the Qatari natural gas in Europe are not pegged to oil prices, even though customers psychologically mind long-term contracts with Gazprom, Statoil and Algerians.

At the same time, the positions of Russia as the leading exporter in the field of pipeline gas and Qatar as a major exporter of liquefied gas, are directly opposite. In fact, it is the appearance of LNG from Qatar and shale gas from the USA on the European markets that created a new situation on the European gas market. European politicians took advantage of the situation to introduce the so-called Third Energy Package that openly discriminates against Russia's Gazprom. The package jeopardizes investment in the pipeline infrastructure and blocks many projects.

Qatar is not going to change, trying to squeeze Russia out from traditional natural gas markets. In return, Russia is trying to squeeze Qatar out from the markets that are traditional for Qatari gas, but we did not start the game.

Obviously, the Emir of Qatar brought economic proposals to Moscow. This is a peculiar feature of Qatar's foreign policy: they usually try to obtain political objectives by offering economic concessions. Most likely, it goes about Syria.

Qatar is considered to be one of the richest countries in the world, but its wealth is built on debt, and today's financial position of Qatar is very difficult. Qatar is forced to borrow more and more to be able to pay its old debts.

No one knows when Qatar's bubble may burst

Export of natural gas from Qatar is unprofitable. The operating cost of the Qatari gas in Europe is lower than the spot price, on which Qatar sells its gas. This does not apply to the total cost, taking into account the debt service, depreciation for Qatari gas projects, infrastructure, gas tankers and so on.

Moreover, Qatar can not stop the loss-making activities of their companies, because one still needs to service the loans that had been raised for their construction. Qatar is thus forced to continue its expansion, raise new loans to expand the natural gas infrastructure and service the old ones. It is a vicious circle that drives Qatar deeper into debt.

In a nutshell, Qatar suffers losses, albeit insignificant ones, with every gas tanker and every cubic meter of gas. Qatar is interested in cartel cooperation more than Russia is.

The problem is that we do not know how serious the financial situation in Qatar is. Qatar's debt structure is completely non-transparent. The country is an absolute monarchy that has no parliament to discuss the budget and debt sustainability of the country and its economic agents. We only know that the financial situation in Qatar is quite complicated, and certain legal entities are close to the moment when they can not service their debts.

No one knows how and when the bubble may burst. It may burst either tomorrow or in 50 years. One needs to understand that beautiful gestures that Qatar has recently made, such as the World Cup or economic assistance to other countries, are in fact, gestures to demonstrate creditworthiness to Western banks.

The Qataris already use austerity measures where it seems possible. Suffice it to recall significant cutbacks to funding Al-Jazeera - the main instrument of Qatari foreign policy. As soon as the network was left without money, Al-Jazeera has completely discredited itself in the world of Arab television.

In this situation, Russia should talk to Qatar from a position of strength. Russia is winning, and Qatar's situation leaves much to be desired. Qatar should make concessions to Russia on both the gas issue and the political settlement in Syria.

Said Gafurov

Pravda.Ru

Read article on the Russian version of Pravda.Ru


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