By Sourajit Aiyer
They say money makes the world go round and nowhere is this more ingrained than in the battles for oil, power and arms. The world woke up on Monday to the news of Saudi Arabia and its key allies severing connectivity with Qatar following the ongoing rift between the GCC members. Since then, three theories have emerged concerning the cause of this divide.
Is it all about oil?
Regaining control over the output of oil and gas may be reasons to instigate a rift in foreign relations. After all, oil and gas are multi-billion dollar industries globally and critical ones for Gulf nations. Following the drop in global oil prices, the Organisation of Petroleum Exporting Countries (OPEC) members decided to cut their production output by roughly 1.2-1.8 million barrels per day (bpd) to raise the price. While this revived the price from $40 to $50 per barrel, it was not sufficient. At the same time, the US ramped up its shale oil production, with output expected at 10 million bpd soon. Libya and Nigeria—not part of the OPEC cutback—also ramped up production. Since the global inventory was still being fed, the uptick in oil price was not sufficient to compensate the OPEC for the loss in its output.
The focus could also be on natural gas. Qatar is the on of the largest gas exporters in the world. Iran, central in the Saudi-Qatar spat, has roughly 16% of global gas reserves. Russia, with roughly 25% of global gas reserves, is quickly exploring its East. The recent Rosneft-Aramco meeting suggests a possible Saudi-Russian deal, which could include gas. A blockade on Qatar expected to overburden its sea-freight due to the closure of its land border. Because of this, any disruption in gas supplies may spike up prices. While fears of conflicts have not impacted oil policy in the past, it may have a short-term ripple and once they rise, the prices may remain sticky. This theory may not seem tenable but it will be interesting to note the prices and fiscal revenues of oil countries this year, more so of the Gulf states.
Challenging the boss
For decades, Saudi Arabia has been the undisputed leader in the Gulf. The world’s largest oil exporter, the House of Saud has enjoyed US patronage since early 20th century when the seeds of Aramco (Arab-American Company) were sown. Larger neighbours like Turkey and Egypt aligned with this camp given their close ties to the US and NATO.
But times have changed; Qatar’s real GDP grew at a compound annual growth rate (CAGR) of 5.4% between 2010 and 2016—the highest in the Gulf Cooperation Council (GCC). Saudi Arabia and the UAE followed with 4.6% and 4.4%. Saudi Arabia and the UAE may be the larger economies, but Qatar has one of the smallest populations. Hence, its average citizen is far richer.
Global financial markets gave Qatar and the UAE emerging market status in 2013. In a region where Western liberals often question the freedom of media, Qatar has established an English-news network that is attracting media professionals from both the US and Europe. Qatar’s growing clout gives it the confidence to challenge Saudi Arabia as the leader of the Gulf. Economic challenges that may hit Qatar following this connectivity blockade including a spike in food prices, delayed shipments, the exodus of critical expats and a general hit to prosperity.
A possible military channel
The Sunni-Shia conflict was already raging between Saudi Arabia and its Sunni allies, and Iran and its Shia allies. This rift extended to Qatar when its Emir allegedly questioned Saudi Arabia’s anti-Iran rhetoric. This was later denied by Qatar, which said its news agency was hacked. Saudi Arabia ranks amongst the top five military spenders globally. It spent an estimated 10% of its 2016 GDP on defence, amounting to a sheer $64 billion. Conversely, it is estimated Iran spent only 3%, i.e. roughly $12 billion. Qatar has money, but lacks the military might to stand up to Saudi Arabia; Iran has the weapons but needs money for more. Is this the link in the current Qatar-Iran bonhomie, resulting in extending the Shia-Sunni rift?
Qatar engaging in interactions with Iran post-elections and its alleged support to the Muslim Brotherhood did not go down well with the Saudis. When Saudi Arabia formed a Muslim military alliance to fight ISIS and al Qaeda, many globally guessed its real motive may have been to intimidate Iran. This opinion extended to the ten year $350 billion arms deal struck between the US and Saudi Arabia during Trump’s visit, where risks from Iran were discussed. Since the 2011 Arab spring, the Sunni-Shia divide has been burning. While Qatar’s royal family hails from Saudi’s Najd, the home of Wahhabism, there has been recent friction between the Wahhabis and Qatar. Has this turned Qatar towards Iran as an extension of the Shia-Sunni rift or is Iran playing its cards to get military funds from Qatar?
These battles for money may sound far-fetched and are fuel for conspiracy theories, though the crisis may just be a regular diplomatic spat. As of now, Qatar seems to have bitten off more than it can chew, as the implications of the blockade could be profound. Qatar has proved its point by standing up to the incumbent leader. Now, both would do well to settle down.
Sourajit Aiyer is the author of 2 books in UK and Germany and has written for 38 publications of 13 countries. He has worked in Mumbai, London, Delhi & Dhaka, and has been invited to speak at conferences in India and abroad. He blogs at www.sourajitaiyer.wordpress.com.
This article was originally published in Foreign Policy News, USA.
Featured Image Source: Pixabay
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