"Forget Terrorism": The Real Reason Behind The Qatar Crisis Is Natural Gas

Tyler Durden's picture

According to the official narrative, the reason for the latest Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, is because - to everyone's "stunned amazement" - Qatar was funding terrorists, and after Trump's recent visit to Saudi Arabia in which he urged a crackdown on financial support of terrorism, and also following the FT's report that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda spinoffs, Saudi Arabia finally had had enough of its "rogue" neighbor, which in recent years had made ideologically unacceptable overtures toward both Shia Iran and Russia.

However, as often happens, the official narrative is traditionally a convenient smokescreen from the real underlying tensions.

The real reason behind the diplomatic fallout may be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar's regional natural gas dominance.

Recall that many have speculated (with evidence going back as far back as 2012) that one of the reasons for the long-running Syria proxy war was nothing more complex than competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits, however as that would put Gazprom's monopoly of European LNG supply in jeopardy, Russia had been firmly, and violently, against this strategy from the beginning and explains Putin's firm support of the Assad regime and the Kremlin's desire to prevent the replacement of the Syrian government with a puppet regime.

Note the purple line which traces the proposed Qatar-Turkey natural gas pipeline and note that all of the countries highlighted in red are part of a new coalition hastily put together after Turkey finally (in exchange for NATO’s acquiescence on Erdogan’s politically-motivated war with the PKK) agreed to allow the US to fly combat missions against ISIS targets from Incirlik. Now note which country along the purple line is not highlighted in red. That’s because Bashar al-Assad didn’t support the pipeline and now we’re seeing what happens when you’re a Mid-East strongman and you decide not to support something the US and Saudi Arabia want to get done.

Now, in a separate analysis, Bloomberg also debunks the "official narrative" behind the Gulf crisis and suggests that Saudi Arabia’s isolation of Qatar, "and the dispute’s long past and likely lingering future are best explained by natural gas."

The reasons for nat gas as the source of discord are numerous and start in 1995 "when the tiny desert peninsula was about to make its first shipment of liquid natural gas from the world’s largest reservoir. The offshore North Field, which provides virtually all of Qatar’s gas, is shared with Iran, Saudi Arabia’s hated rival."

The result to Qatar's finances was similar to the windfall that Saudi Arabia reaped from its vast crude oil wealth.

The wealth that followed turned Qatar into not just the world’s richest nation, with an annual per-capita income of $130,000, but also the world’s largest LNG exporter. The focus on gas set it apart from its oil producing neighbors in the Gulf Cooperation Council and allowed it to break from domination by Saudi Arabia, which in Monday’s statement of complaint described Qataris as an “extension of their brethren in the Kingdom” as it cut off diplomatic relations and closed the border.

In short, over the past two decades, Qatar become the single biggest natural gas powerhouse in the region, with only Russia's Gazprom able to challenge Qatar's influence in LNG exports.

To be sure, Qatar has shown a remarkable ability to shift its ideological allegiance, with the FT reporting as recently as 2013, that initially Qatar was a staunch supporter, backer and financier of the Syrian rebels, tasked to topple the Assad regime, a process which could culminate with the creation of the much maligned trans-Syrian pipeline.

The tiny gas-rich state of Qatar has spent as much as $3bn over the past two years supporting the rebellion in Syria, far exceeding any other government, but is now being nudged aside by Saudi Arabia as the prime source of arms to rebels.

 

The cost of Qatar’s intervention, its latest push to back an Arab revolt, amounts to a fraction of its international investment portfolio. But its financial support for the revolution that has turned into a vicious civil war dramatically overshadows western backing for the opposition.

As the years passed, Qatar grew to comprehend that Russia would not allow its pipeline to traverse Syria, and as a result it strategically pivoted in a pro-Russia direction, and as we showed yesterday, Qatar’s sovereign wealth fund agreed last year to invest $2.7 billion in Russia’s state-run Rosneft Oil, even as Qatar is host of the largest US military base in the region, US Central Command. This particular pivot may have also added to fears that Qatar was becoming a far more active supporter of a Russia-Iran-Syria axis in the region, its recent financial and ideological support of Iran notwithstanding.

As a result of the tiny nation's growing financial and political "independence", its neighbors grew increasingly frustrated and concerned: “Qatar used to be a kind of Saudi vassal state, but it used the autonomy that its gas wealth created to carve out an independent role for itself,” said Jim Krane, energy research fellow at Rice University’s Baker Institute, quoted by Bloomberg.

Furthermore, Qatar’s natural gas output has been "free from entanglement" - and political pressure - in the OPEC, the oil cartel that Saudi Arabia dominates.

“The rest of the region has been looking for an opportunity to clip Qatar’s wings.”

And, as Bloomberg adds, "that opportunity came with U.S. President Donald Trump’s recent visit to Saudi Arabia, when he called on “all nations of conscience” to isolate Iran. When Qatar disagreed publicly, in a statement the government later said was a product of hacking, the Saudi-led retribution followed."

To be sure, in a series of tweets, Trump himself doubled down on the "official narraitve", taking credit for Qatar's isolation (perhaps forgetting that a US base is housed in the small nation).

The cynics may be forgiven to assume that if Trump is tweeting that the reason for Qatar's isolation is "to end the horror of terrorism", even as the US just signed a $100+ billion arms deal with the single biggest supporter of terrorism in the world, Saudi Arabia, then indeed the Trump-endorsed "narrative" is to be dismissed outright.

Which again brings us back to nat gas, where Qatar rapidly emerged as the dominant, and lowest cost producer at a time when its neighbors started demanding the commodity on their own, giving the tiny state all the leverage. As Bloomberg adds "demand for natural gas to produce electricity and power industry has been growing in the Gulf states. They’re having to resort to higher-cost LNG imports and exploring difficult domestic gas formations that are expensive to get out of the ground, according to the research. Qatar’s gas has the lowest extraction costs in the world."

Of course, with financial wealth came the need to spread political infludence: "

Qatar gas wealth enabled it to develop foreign policies that came to irritate its neighbors. It backed the Muslim Brotherhood in Egypt, Hamas in the Gaza Strip and armed factions opposed by the UAE or Saudi Arabia in Libya and Syria. Gas also paid for a global television network, Al Jazeera, which at various times has embarrassed or angered most Middle Eastern governments.

And, above all, "gas prompted Qatar to promote a regional policy of engagement with Shiite Iran to secure the source of its wealth."

And here the source of tension emerged: because as Steven Wright, Ph.D. Associate Professor at Qatar University told Bloomberg, “you can question why Qatar has been unwilling to supply its neighboring countries, making them gas poor,” said Wright, the academic, speaking by telephone from the Qatari capital Doha. “There probably was an expectation that Qatar would sell gas to them at a discount price.”

It did not, and instead it took a step backward in 2005, when Qatar declared a moratorium on the further development of the North Field that could have provided more gas for local export, adding to the frustrations of its neighbors.

Qatar said it needed to test how the field was responding to its exploitation, denying that it was bending to sensitivities in Iran, which had been much slower to draw gas from its side of the shared field. That two-year moratorium was lifted in April, a decade late, after Iran for the first time caught up with Qatar’s extraction rates.

As Qatar refused to yield, the resentment grew.

“People here are scratching their heads as to exactly what the Saudis expect Qatar to do,” said Gerd Nonneman, professor of international relations and Gulf studies at Georgetown University’s Doha campus. “They seem to want Qatar to cave in completely, but it won’t call the Muslim Brotherhood a terrorist organization, because it isn’t. And it isn’t going to excommunicate Iran, because that would jeopardize a relationship that is just too fundamental to Qatar’s economic development.

* * *

Whether nat gas is the source of the Qatari isolation will depend on the next steps by both Saudi Arabia and Iran. Saudi Arabia, along with the United Arab Emirates and Egypt - are all highly reliant on Qatari gas via pipeline and LNG.

According to Reuters, traders startled by the development, have begun to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE. The UAE consumes 1.8 billion cubic feet/day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbor, leaving it doubly exposed to tit-for-tat measures, industry sources and traders said.

So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks.

With LNG markets in bearish mood and demand weak, the UAE could cope with Qatar suspending its two to three monthly LNG deliveries by calling on international markets, but Dolphin piped flows are too large to fully replace.

 

"A drop off in Dolphin deliveries would have a huge impact on LNG markets," one trader monitoring developments said.

And since it all boils down to who has the most leverage as this latest regional "balance of power" crisis unfolds, Qatar could simply take the Mutual Assured Destruction route, and halt all pipeline shipments to its neighbors crippling both theirs, and its own, economy in the process, to find just where the point of "max pain" is located.

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nope-1004's picture

Yes reading between the lines is key.  When a poster gets deleted for being "discriminatory", for example a guy like Tony Wilson, they make new accounts.

I see no inference to CNN, so we're seeing different content in between those lines.

Got The Wrong No's picture

The link he posted is a CNN news feed. 

nope-1004's picture

Ok, I see now.  I don't usually click offsite links.

Joe Davola's picture

His name was Francis Soyer

... although, Francis' anti-semitism was way over the top.

swmnguy's picture

No, actually; that wasn't his name.  Though indeed anti-Semitism was way out of line.  I don't think that would matter in today's ZH, though.

Arnold's picture

Listen, Tony, you let your former trollisness get in the way.
Buh Bye.

Dr.Vannostrand's picture

Lol, says the 41 week trump cockgobbler. 

jjtech's picture

Yes... 100% correct. This naive belief that we can save ourselves through the political process is amuses me. 

It's like playing football with corrupt judges.... time stop playing their game and start dismantling the whole system. Mass civil disobedience, cutting off the banks   -- some really revolutinary stuff or we'll be toast

general ambivalent's picture

'I just can't take all of this Reality Winning!'

The Red Pill is the new Blue Pill. That's what this limited hangout means. Stupid Drumpftards haven't figured it out, and are the butt of one of the greatest political jokes in history.

Not Too Important's picture

“You know, I’ve communicated with one U.S. President, and a second, and a third — Presidents come and go but the politics remain the same,” the Russian President said.

“Do you know why that is?” He asked, before dropping the bombshell info.

“So a person is elected — he comes with ideas,” Putin explained. “Then people with briefcases come visit him, well-dressed, in dark suits — kind of like mine. Except instead of a red tie it’s black or navy.”

 - Vladimir Putin

TuPhat's picture

Trump has taken up residence in the swamp.  He has to get along with the other denizens of the swamp.  I had hoped he would fight them, but I think he enjoys their company.

SAE6065's picture

Anyone up for a REVOLUTION?  This is the only way to take this Country back from the EVIL MOFO'S that stole it from WE THE PEOPLE. If we do have a REVOLUTION its gonna be a bloody sun of a bitch to say the least.

shovelhead's picture

I'm right behind you...

 

a mile or so.

fuzh007's picture

war is a racket by smedley butler, the most decorated marine of all time, semper fi mf'er!!!!

Friedrich not Salma's picture

Nope-1004: If war-on-terror is 180. Is global-warming action actually meant to warm the globe?

 

TuPhat's picture

Glabal warming is actually meant to enrich the elite and make everyone else poorer and under more control.

new game's picture

right before our lying eyes. peal off the lying lense and see the truth. so, basic survival of the carbon dependent life styles are on the line here. someone explain to me how the free market wouldn't take care of this supply demand problem of resource loaction/allocation without the need on conquest and killing people? that must so civilzed as to be not a consideration. isn't that what honorable countries do? respect of fellow folks? gets to the core of this by calling out these psychopaths for what they are. and yes i know this is the way it is, conquest, take for the taking with violence. thieves is all they are...

HoyeruNew's picture

no shitsky, have known this oh since 2001. There's never been such thing as a "war on terror"

ScotlandTheBrave's picture

nope-1004: What you say absolutely makes sense, but how do you explains why the the "British Alliance" would import these murderous religion of "piece" to their and our lands...unless they want all of us dead and they figure they can outlast the religion of "piece" or kill them all in the end?

nope-1004's picture

They don't want you dead, you're the meal ticket, the good compliant borrower (mortgage, credit card) and good citizen taxpayer.

But, the easiest way to control a nation is to destabilize it, hence the influx of (predominantly male) foreigners.  Once a gov destabilizes a nation, it needs to act to control that nation but needs you in agreement to do so.  Goes like this > To act, it first needs a problem; second it needs to sell a theory and solution; third, it needs population acceptance or consensus.  Consensus goes a long way with images of bombing, dead babies, and bloody faces.

9/11 was the kicker for me.  Bldg 7 fell on its own, apparently a sympathy self-implosion, widely reported as happened before it actually happened.

Don't be fooled by MSM "reporting".  It's really MSM/.gov propaganda.

Galahad Threepwood's picture

Don't forget the other benefits of terror and war

> massive profits for the MIC

> displaced people 

> organ harvesting

> child trafficking

> refugees heading to Europe

 

Now (((who))) benefits from the above?

earleflorida's picture

Zbig is dead...

and the 'Fat Man`Kissinger' whispering in the 'OrangeDome' ears having bad breath, has liver cancer...soon enough to be no moar the right hand of a pair? long, long, long past their tyme... 

so what's a stupid fuck like,'the left hand doesn't know what the right hand is doing' gonna do, other than be compulsive delusional trumpostilskin asshole!

ParkAveFlasher's picture

they need freedom, which the terrists hate us for, and REMEMBER THE ALAMO, and REMEMBER THE MAINE, and PEARL HARBOR, and FREE WILLY

WTFUD's picture

. . . and let's not forget Puke Ridge.

PrometeyBezkrilov's picture

Looks like it. He just sold SA arms for almost 110B. What do you think it is for? To carry on the war in Yemen, possibly to get Qatar and also supply the left overs to their frends (ISIS) in Syria.

you_are_cleared_hot's picture

CENTCOM is in Qaatar...so, we're already there!

Kevin Trader's picture

have we lined up our aircraft and vehicles in a straight line yet?

Kevin Trader's picture

You damn right he is, and I promise we will take the gas!

WTFUD's picture

Will have to be a pipeline through their asses though!

AGuy's picture

FWIW: Qatar appears as the classic scapegoat. All of the Crimes are getting Pinned on Qatar, thus KSA & other ME gov'ts that promoted terriorism can escape blame.

WTFUD's picture

So kick out the invaders (Vichy DC) and bring in Vlad & The s400's ( nice name for a band, too ).

HalinCA's picture

No need ... just find a pliant prince and overthrow the ones in charge now ... once all theirassets are frozen because "they support terrorism", the coup will happen in a matter of a few weeks.

Not Too Important's picture

Didn't Turkey promise security if Qatar is attacked?

'Qatar and Turkey sign security agreement'

From 29 Apr 2016

https://www.thepeninsulaqatar.com/article/29/04/2016/Qatar-and-Turkey-si...

 

Or Iran?

'Iran, Qatar review implementation of security agreement'

From 4 April 2014

https://www.zawya.com/mena/en/story/ZAWYA20140415052704/

With 10,000 US CENTCOM troops right in the middle...

Yog Soggoth's picture

Already did. We have a huge base there.

Doña K's picture

Should we be shorting Natgas? Or go long. Help guys

 

Jim in MN's picture

The natgas you can trade in the US isn't really affected by the Middle East or the LNG market.

Geopolitical risk has a bigger direct impact on oil and gold.  But oil isn't biting here, while gold seems to be. 

Most of it's still rangebound.....markets may be stuck waiting for a 'T-bill event' to move interest rates and currencies.  Wonder what that could (coughimpeachmentcough) be?

New_Meat's picture

Qatar supplies like ~30% of Japan's energy, since Fukushima Daichi follow-on decisions shut down all of their nuclear power plants.

Not Too Important's picture

The incubation period for expsure to radiologic contaminate is 15 years. North America and Japan are already 6 years in with massive contamination and growing. The melted cores are getting hotter, not cooler, with 400-800+ metric tons of increasingly radioactive water entering the Pacific Ocean daily. The fuel rods in the Spent Fuel Pools all burned off 6 years ago - thousands of tons of enriched uranium and plutonium in the jetstream blowing West. In 9 years - 2026 - North America is going to see the greatest die-off of all life since the dinosaurs went extinct. Only this time, there won't be anything left. Nothing, other than some radiation-eating bacteria.

After that, Europe.

It's already started, with soaring Infant Mortality, heart disease and cancer rates. Look at the explosion in pediatric cancer rates. The Japanese nuclear radiation kills the kids first due to their weaker immune systems.

Once Japan is depopulated, who is going to maintain the many dozens of Spent Fuel Pool cooling systems still functioning? No one.

The Earth is now being transformed into a lethal radioactive Hell, and all our 'leaders' can think about is how to extract the last bit of personal assets we might have before we and they all die.

If any 'leader' is not talking about providing some kind of 'national hospice', they are part of the group that's going to pick your and your kids' pockets while you're dying. 

This is simply nuclear math, and there's no stopping it. 

 

Starvation 2017's picture

It used to be my job to understand and detect radiation while applying appropriate safety practices. I can say with 100% confidence that you have no idea what you're talking about. The leaking radiation is being diluted throughout the ENTIRE Pacific ocean, that's a lot of fuckin water. By the time it reaches the West coast it's so diluted it's practically undetectable, let alone a health hazard.

Wouldn't recommend eating fish caught around the immediate vicinity of the reactor, but anymore than that is fear mongering.

Not Too Important's picture
'Everyone on Earth has been irradiated by Fukushima — “Shocking new study reveals true extent of global impact” — “Scientists are only just now confirming far-reaching effects” of nuclear disaster'

http://enenews.com/everyone-on-earth-has-been-irradiated-by-fukushima-sh...

'TV: Fukushima Radiation Alert — Concern ‘nuclear chain reaction’ could occur at plant — Reactors are still melting down and spewing radioactivity — Fuel has burned through containment — Expert: It’s unprecedented… could’ve been 12 Chernobyls'

http://enenews.com/tv-fukushima-radiation-alert-concern-nuclear-chain-re...

'Nuclear Engineer: My biggest concern is Fukushima plant will collapse… Concrete under reactors is being “eaten away”… “There’s ongoing chemical attacks” — Containment structures are tilting, in jeopardy of falling over'

http://enenews.com/nuclear-engineer-my-biggest-concern-is-fukushima-plan...

'Alarming mass die-off on California beaches — “Extremely high” number of sick and dead animals — Seabirds, sea lions, dolphins affected — Experts: Never seen this many sick birds — “How many have to die before somebody cares?” 

http://enenews.com/alarm-massive-die-off-on-california-beaches-extremely...

'TV: Millions of dead sea creatures wash ashore in Hawaii — Carcasses found along miles of beach — “That should trigger some alarm” — “I don’t know what’s going on over there… I’ve never seen anything like this”

http://enenews.com/tv-millions-of-dead-sea-creatures-wash-ashore-in-hawa...

 

I'm sure it's all nothing...

shovelhead's picture

Send in the liberals.

Nobody is better at futile and useless gestures of caring.

New_Meat's picture

Not 2: how can this be?

"Millions of dead sea creatures wash ashore in Hawaii..."

But AlGore said that the shores of Hawaii were washed away due to the rising sea level.

- Ned

{how tiny are these sea creatures, anyway.  Are they like one-cell sea creatures?}

Yog Soggoth's picture

And yet the Japanese Space Program are talking about planned missions to Mars and colonies on the Moon, when they should be sending that Godzilla juice straight into the Sun. Those fools!  Gamera where are you? Can you hear me?

Yog Soggoth's picture

Invest in the holders of Perla Eni and Repsol. Why waste time in the M.E. right now except for Iraq.