Qatar: Gateway to the Gulf?
Qatar: Gateway to the Gulf?
At first glance, Qatar is not the obvious choice as a gateway into Iran. Dubai is often cited as the entry point on the Arabian side of the Gulf and indeed has long acted as a trading hub for Iran. However, Qatar is emerging as a regional business centre in its own right.
The return of Iran to the international business arena poses both an opportunity and a competitive challenge to Qatar. On the plus side, Qatar is in a strong position to act as a channel for foreign investors into Iran. Despite being a Sunni country and adhering to the same Wahabbi theology as Saudi Arabia, Qatar has better relations with Iran than many of its fellow Gulf Co-operation Council (GCC) partners (perhaps excepting Oman). The emirate has taken a more pragmatic position on the recent nuclear agreement between Iran and the international powers. Qatari companies are also in a strong position to act as partners to Australian and other foreign companies seeking to enter Iran. Many of the leading merchant families in Qatar have long historical links with Iran due to family ties and decades of trading with Iran. These business links were retained despite the imposition of international sanctions on Iran. Qatari companies used their links and knowledge of the market to find legal means to continue to trade with Iran.
The relationship with Iran is important for Qatar. Indeed it is of strategic national importance. The two countries share the giant gas resources that lie under the Gulf. Qatar calls its portion the North Field while to Iran it is South Pars. Qatar has emerged as one of the wealthiest countries on the globe through exploiting these gas reserves. The emirate will continue to rely on the income from exploitation of these reserves for years to come. So it cannot afford to have poor relations with its northern neighbour. For Iran, development of the South Pars resources represents a path to future economic growth including emerging as a major gas exporting country. Iran has ambitious plans to develop liquefied natural gas (LNG) projects using South Pars reserves as well gas playing a more significant role in meeting its domestic energy needs. All of this provides many opportunities for Australian companies.
Exploitation of the gas reserves is also where the potential for competition between Qatar and Iran emerges, at least in the long term. Iran is unlikely to become a significant gas exporting country for at least a decade. In the meantime, Qatar will want to ensure that new development activity on South Pars does not threaten its interests in the North Field. To date, both countries have undertaken development work without infringing on the other’s rights. The maritime border between the two has also been demarcated. The overall result is that Qatar does not have the same legacy disputes with Iran that some of its GCC partners have such as Kuwait and the UAE. This lack of legacy issues and disputes also contributes to the positive nature of Doha-Tehran relations.
As well as providing a gateway to Iran, Qatar is also an attractive investment destination. While the country faces the same economic headwinds that are buffeting the rest of the region, Qatar is in a strong position to ride out the period of low oil and gas prices. Its sovereign wealth fund is substantial and so provides a safety net. This allows the country to continue to develop its infrastructure and diversify its economy. This is in part driven by the need to build facilities to host the 2022 football World Cup but also the need to invest for future growth. The emirate provides a politically stable environment. The smooth transfer of power to a new emir two years ago has also served to clarify the decision-making process with ministers having a stronger mandate to take the strategic decision required. With the new leadership has come a more hard-nosed approach to assessing the economic return to the country from projects. There is more emphasis on the economic benefit and a move away from some of the white elephant projects favoured in the past. Challenges do still persist. Low oil and gas prices have led to a credit crunch in the country. There are numerous tales of unpaid bills, especially in the construction sector and lay-offs throughout the economy. However, economically robust projects are still going ahead and this year, the country’s capital expenditure budget will be its largest ever.
Overall, Qatar offers an attractive business environment for companies seeking to gain a foothold in the Gulf region on both the Arabian and Persian sides.
Author: Michael Barron
Michael Barron has more than 25 years experience analysing, living and working in the Middle East and North Africa including engagement at the highest levels of government. He has more than 12 years experience working as a government and public affairs manger for the major gas company BG Group with assignments in Egypt, Oman and on the Gaza Marine project. He also has an in depth knowledge of transparency issues, particularly the Extractive Industry Transparency Initiative (EITI) and EU legislation in this area. Michael studied Arabic at the University of Edinburgh, including spending time in Cairo. He has also worked for Middle East Broadcasting, Control Risks Group and Eurasia Group. Michael has particular expertise in country entry (and exit) and navigating through complex political situations.