Doha’s Iran imports jump and it hopes US doesn’t notice

Qatar’s two-pronged policies will continue. They include developing links with Iran while remaining close to Washington.
Sunday 03/02/2019
Growing links. A ship used for carrying goods is seen at the Hamad Port in Mesaieed, Qatar. (Reuters)
Growing links. A ship used for carrying goods is seen at the Hamad Port in Mesaieed, Qatar. (Reuters)

Nineteen months after Saudi Arabia and three other Arab countries imposed a boycott of Qatar over its relations with Iran and the Muslim Brotherhood, Doha’s imports from Tehran have jumped substantially.

Importing more Iranian goods fits a wider Qatari strategy, a European security analyst said: “The start [of the boycott] was tough but the crisis has pushed [the Qataris] to diversify their economy. They’re proving quite efficient in pulling themselves around.”

Qatar’s trade with Iran remains relatively low. Tehran’s exports will reach $300 million for the Iranian year that ends March 20. That’s up from $60 million-$70 million in 2016-17.

Adnan Mousapur, chairman of the Iran Chamber of Commerce, identified the main exports to Qatar as food and construction materials. He also expressed disappointment that growth was not faster. Iran’s annual exports to the United Arab Emirates, by comparison, are approximately $6 billion. Turkey has tapped the Qatari market since the Saudi-led blockade, with exports reaching $2 billion in 2018, 50% higher than in 2017.

Iranian exports to Qatar are hampered by payment problems caused by United States’ financial sanctions against dollar transactions with Iran but the low level of Qatar’s exports to Iran — around $25 million annually — precludes currency swaps. Also, there is consumer scepticism in Qatar over the quality of some Iranian products.

Nonetheless, with Tehran’s relations with the United Arab Emirates cooling as the United States tightens sanctions, there may be scope for Iran to use Qatar, as well as Oman, as a trading hub, perhaps even to export oil.

Transport links are growing. Qatar Airways, which was offered access to Iranian airspace after the blockade, has announced extra flights to Tehran and Shiraz. In December, a luxury cruise ship link from Doha to Oman and Kuwait was announced. Faisal al-Sulaiti, the owner of the 145-metre Grand Ferry, said that its 670-vehicle, 870-passenger capacity could replace road access severed by the blockage and that the service might be extended to Iran.

Qatar’s search for accommodation with Tehran goes much further back than 2017. It is, in part, the result of sharing the world’s largest gas field, known as South Pars in Iran and North Dome in Qatar. Doha has been far more successful than Iran in tapping its vast gas reserves, the world’s third largest at 24.9 trillion cubic metres. Iran’s reserves are 33.2 trillion cubic metres but it is Qatar that is the world’s largest gas exporter with 27% of the global liquid natural gas market.

Gas is the main source of Doha’s wealth and influence. Qatar’s withdrawal from OPEC will have little effect because its 600,000 barrels of daily oil exports are just 2% of OPEC’s total. However, in terms of gas exports, Qatar matters. It supplies one-quarter of the UAE’s gas and around 13% of Britain’s. Its largest export market is Japan.

Qatar’s wealth is diversified. With $320 billion in its reserves, Doha has vast interests that balance any relationship with Iran. The Qatar Investment Authority (QIA), Doha’s primary sovereign wealth fund, has holdings in Volkswagen, Russian energy giant Rosneft, UK gas company National Grid and Turkey’s biggest poultry producer.

Qatar’s strategy is both financial and political. QIA Chairman Sheikh Mohammed bin Abdulrahman al-Thani, who is also Qatar’s foreign minister, announced the purchase of $500 million in sovereign bonds in Lebanon. This was an investment in a country with a 150% debt-to-GDP ratio and where the government is paralysed by divisions between factions allied to either Saudi Arabia or Iran. Qatar also plans to invest in Jordan, Iraq and Sudan.

Bloomberg News recently reported talks between QIA and Deutsche Bank, a troubled financial institution but still Germany’s biggest lender, to boost its 6.1% holding. Last year, Doha pledged to invest 10 billion euros ($11.4 billion) over five years in Germany.

Good relations with Berlin are also evident in the recent German government approval for the export to Qatar of four RAM naval guided missile defence systems. The small, surface-to-air Rolling Airframe Missiles are developed by German, European and US arms manufacturers.

In 2017, US President Donald Trump expressed support for the move against Qatar as a “hard line on funding extremism” but since then Qatar has been buoyed by a more neutral US stance. In mid-January, Qatar agreed with visiting US Secretary of State Mike Pompeo to expand the Al Udeid Airbase, which has 10,000 US troops. The QIA also announced a 2-year increase in its US investments from $30 billion to $45 billion.

“There was an impression that Rex Tillerson [secretary of state until March 2018] was on the Saudis’ side and that once he was gone, US policy would be tougher on Qatar,” said the European security analyst. “With Pompeo this turned out to be wrong.”

So Qatar’s two-pronged policies will continue. They include developing links with Iran while remaining close to Washington. “Doha has several advantages,” said the security analyst. “It has significant energy resources, very active public relations and isn’t embroiled in Yemen.”