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Qatar Coming to Grips with New Realities of Global Energy Markets 23, November 2015

Posted by thegulfblog.com in LNG, Qatar.
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Qatari Liquefied Natural Gas (LNG) carri

The following article was written for and published by the Arab Gulf States Institute Washington (AGSIW). The precis can be found below and the full article can be downloaded from AGSIW (for free) following this link.

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Qatar has long dominated the market for liquefied natural gas (LNG), an increasingly popular energy source that can be transported great distances, is widely regarded as being cleaner than coal, and fills increasingly important parts of states’ energy mixes. In recent decades, surging demand and relatively limited supply has created a climate for Qatar to exploit its huge gas resources and consequent economies of scale to bestride the market.

In fact, Qatar dominates the LNG market far more than Saudi Arabia dominates the oil market. But this period of dominance is coming to an end. Demand in China that underpinned the industry’s growth is dipping and not being replaced. Across the world from Australia to the United States, to Israel, to Mozambique, large discoveries have been made and high prices encouraged hundreds of millions of dollars of investment in LNG infrastructure. Even with the fall of the oil and LNG prices, which challenges many new suppliers and their costly outlay to establish the necessary LNG infrastructure, Qatar’s dominant position supplying a third of the world’s LNG will be over by the end of the decade.

Though Qatar’s budget revenue fell 40 percent from July 2014 to July 2015, the state began cutting back in 2013 when a new administration led by Emir Tamim bin Hamad al-Thani took power. These cuts were partly driven by a savvy medium-term view of the bearishness of the energy markets. But the new leadership was also making political statements, cutting back on some of the more expensive pet projects of its predecessors such as the Qatar Foundation, which oversees foreign universities in Doha’s “Education City.” The new administration needs to ensure that it does not hamstring the Qatar Foundation – a central engine of the state’s push to diversify away from its hydrocarbon-dominated economy – as Qatar’s dependency on the oil and gas industry remains profound. Yet even with the reliance on oil and gas and the impending end of its dominance in the LNG field, Qatar’s population remains small and its energy supply role prodigious. Qatar will easily be able to manage fiscally if its ambitions remain more limited than before, as the current administration suggests through its more limited policy ambitions.

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UK in the Gulf: to Engage or not to Engage? 20, November 2015

Posted by thegulfblog.com in The Gulf, UK.
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The article below was published recently by King’s College London’s Defence in Depth blog.

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On 1 November 2015, the UK Foreign Secretary Phillip Hammond inaugurated the beginning of works constructing the UK’s first permanent military base in Bahrain in the Persian Gulf since 1971 when the UK withdrew from the region. Using language that almost seemed to deliberately hark back to Britain’s colonial days in the Persian Gulf, Hammond announced that “The presence of the Royal Navy in Bahrain is guaranteed into the future, ensuring Britain’s sustained presence east of Suez.”

In reality, the Royal Navy has scarcely left the Persian Gulf region in the last century, and this ‘new’ base is better seen as the renovation and expansion of existing structures. Nevertheless, the fanfare surrounding the announcement of the new permanence of the UK presence is interesting and indicative of the current UK Government’s perspective. Indeed, the timing of the turning of the soil on this ‘new’ base comes between the hosting of the Chinese President for a lavish, extended state visit in October and the hosting in early November of Egyptian President Sisi. David Cameron’s government plainly believes in the importance of international engagement with states that many accuse of a range of human rights abuses.

The government marshals a variety of arguments to defend its engagement with such states, many of which have roots in the UK’s National Security Strategy (NSS), the key document that seeks to outline the UK’s national interest and how it can be defended.

The government argues that the UK’s security is protected by maintaining and developing these kinds of links. In terms of the military, the UK provides a range of key training roles for counterparts in the Gulf region, while regional bases provide an important change of arena for UK troops. Moreover, given the salience of the region to the wider world economy and the number of conflicts that have plagued the region in recent decades, developing military to-military links in the Gulf area are deemed to be important. As the former Chief of the UK Defence Staff put it, ‘if we are to influence, we must know what drives our friends and how to motivate. This is not something that can be done on the eve of an operation.’ There are also direct intelligence links with, for example, Saudi Arabia that have proved to be crucial in thwarting at least one serious terrorist attack on UK soil.

The UK is highly dependent upon the Persian Gulf region for trade. Bilateral trade with the region is increasing quickly to around £30bn per annum, which is more than to India, Russia, and Mexico combined. Most governments would likely deem it inadvisable to shun such countries where trade is so important.

Some charge that there is a flat contradiction between the UK’s desire to trade with these states and other important goals of the state’s NSS, namely the promotion of British values and influence. It is not difficult to imagine ministers avoiding criticising murkier issues related to human rights in the wider effort to win a particular contract.

Similarly, the UK government is open to the charge that however many links are established between governments or in industry, and no matter the theoretical opportunities created to allow the promotion of British values and culture, the reality remains that little seems to ultimately change.

Both charges are difficult to answer. Individual examples of international pressure forcing, for example, Saudi Arabia to reverse a particularly egregious travesty of justice can be found, but the system remains the same. Which makes it all the more puzzling as to why the British government eventually chose to make a stand with Saudi Arabia over a contract to consult on Saudi Arabia’s prison system. This £5.9m contract was cancelled in mid-October because of wider human rights concerns. Principled though this may be, it would seem to be logical that anyone in the UK government or otherwise interested in spreading British values would seek to exert influence in Saudi Arabia’s prison system as a matter of priority. The narrative of building contacts and influence is effectively aimed at opening the door for just such opportunities to share expertise and best practice. This confusion is an inevitable by-product of the nature of modern British politics and the subjective, inconclusive arguments put forth by those supporting and opposing engagement.

The argument is inevitably more difficult for those against engagement. For they must move beyond rowdy, faux-principled rejectionism and actually make a case for how, for example, the Saudi prison system will reform better now that the UK role therein is finished. Perhaps another western liberal democracy will take up the contact, perhaps not. And those seeking greater engagement need to move beyond platitudes and seek concrete, direct, and ideally verifiable examples of UK influence leading to a change in policy.

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For more on the evolving role of the UK in the Persian Gulf region and how this chimes with understandings of British national interest, see David Roberts ‘British national interest in the Gulf: rediscovering a role?International Affairs (v.90, i3, May 2014).