"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.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fake_Gas_Chambers's picture

basically Qatar getting elbowed out of making money by saud, and also arabia->syria->europe pipeline plans biting the dust (sand), so they turn to do business northeastwards.  is that about right?

falak pema's picture

What you forget is that Obama approved of the Qatar to Turkey via Syria deal when he saw the danger of Putin's hold on Germany which got the ball moving from Ukraine to Syrac; requiring Assad's ouster...via Arab Spring hitting both Libya and then Syria...

All this was Planned at G20 Cannes in November 2011... When they celebrated Q-Daffy's death and planned the next move; along with evicting Berlu and Papadopoulos from Italy and Greece to make Club Med Germany's owned puppets--- and making Draghi King of ECB-- on that issue Mutti shed some tears at Cannes.

That was a pivotal moment of Obama's "leading from behind" plan which went sour when he balked at crossing the red line in Syrac in 2013; post Sarin unload.

SO that Qatar deal was back on front burner and Obama was NOT LOVED in Riyadh for that nor for Iran handshake...

It also explains why Hillary at State was warm to Morsi and the Muslim Brotherhood clique who were close to her team.

Jim in MN's picture

Dont forget the NOTLOVE between Israel and Obama. 

Now it seems like no one has a coherent plan or strategy--except Putin.  Because his is simple: keep on entrenching in the Russian hinterland.

Turkey, Iran and Egypt are the long-term regional powers in the Mideast.  It's a damn shame that some kind of mutual accomodation among those three keeps getting thwarted by forces of death and greed.  Doncha think?

falak pema's picture

ANybody who knows regional history knows that Turkey (from Byzantium to Ottomans) was a regional king pin.

And Saladin made the Egyptian Syrian alliance the other bloc whereas Safavid and Shiite Iran resumed its antique role of greatest cultural beacon since Darius; aka 550 BC.

Its the Rule Britannia colonialism which destroyed that old historical tradition by first launching the Great game against Russia in Balaclava and Sebastopol and then later on Balkanising the Ottoman kingdom into Satrapies which became bonanza land when they hit Oil at Baku in 1859; exactly when Drake found it at Spindletop! 

SO its now a reset after 150 years of Pax Britannica and Pax Americana rule. Those three traditional nations of Iran, Turkey and Egypt will re-emerge... and the Bedouin satrapies will disappear when OIL loses its hold on the West! 

It will take the time it will take. The losers will be the West and the Winners will be the East rising along the Silk road; JUST LIKE IN MARCO POLO'S DAYS; AKA 1271...

BACK WE GO TO A NEW PARADIGM WHERE HOPEFULLY OIL AND ABRAHAM'S THREE FACED TOXIC LEGACY WILL NO LONGER BE KING KONG LAND it is today. 

Its time to make the planet a better place for the Amon RA revival ! 

besnook's picture

excellent, falek! since turkey has apparently flipped the endgame is here.

cougar_w's picture

Ha that was pretty good. Amon Ra revival indeed.

SA is toast. They had a good run but they are done. The royals will buy some part of S. America and start a new empire there, just in time for the world to not care anymore.

TheGardener's picture

as a long time falak reader and upvoter I`m stunned by what you state in capital letters and the upvotes you receive from the general ZH public

here.  " ABRAHAM'S THREE FACED TOXIC LEGACY" is some strong smoke from what you must have been inhaling...

Yog Soggoth's picture

Just wait until Egypt finds out that they could be a (LPG) rich country like the others and Israel wants to steal it from them.

Ghordius's picture

+1 falak pema, but don't get carried away with that "evicting Berlu... and making Draghi"

the true and verifiable story on how Draghi was selected is a phone call between Berlusconi and Sarkozy

and yes, there was a difference between those who exulted and those who were not happy about Lybia getting in troubles, and both those two were not in the first camp

quadraspleen's picture

But France was only too happy to drop heavy ordnance on "the bad guys" who in the event actually turned out to be the "not so bad" guys, and the "good guys" sponsored by Arabiste elements of DGSE and MI6 were sent in to kill the "bad guys" but instead they met up with more "good guys", used Operation Zero Footprint et al to ratline weapons into Syria to fight the Syrian "bad guys", but then it turned out that the "good guys" who Scameron and Sarko sent in came back to France and the UK and started killing people! Who'd have thought?

Sarko has his hands deep in his one..probably via a brownstone op, but still...This was a very Franco-British affair, at least publicly (while Obomber was off toking it up and thinking "tee hee, they're gonna cop some shit for this")

New_Meat's picture

perfectly clear now, thanks.

Not Too Important's picture

'In Syria, militias armed by the Pentagon fight those armed by the CIA'

"Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war.

The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at [and killed] each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed."

http://www.latimes.com/world/middleeast/la-fg-cia-pentagon-isis-20160327...

Just another day in the multi-trillion dollar 'War on Terror'...

khnum's picture

The term war on terror should be just called the war for stealing resources any real student of asymetrical warfare knows to hit communications and transport infrastructure,refineries,lpg storage,power stations,the water supply,chemical plants etc since 9-11 has any of this happened- nope- its been mostly home grown idiots affected by multimedia or involved in FBI stings,any real outfit with sleeper cells like the Iranian republican guard knows what to hit,one day they'll bomb the wrong place and the house of cards will fold.

falak pema's picture

I thought the GS and TImothy Geithner clan also had their say in ousting Trichet for having started the Euro sovereign run by upping the Euro interest rate in 2009/2010 instead of EASING like Bernanke did for FED...But Berlu wanted Draghi for sure as did Sarko to make life more difficult for Scheauble who was all behind Trichet and AGAINST easing...

Draghi was a compromise but the GS blue print to help the banks all over EU was in place...And finally, Mutti made out good with a weak Euro !

poeg's picture

The plans have been online since 2006 and it's always been a Saudi-Qatari project. Where the hell do these reporters get their info from?

 

If the nutters of the world blowing up shit and beheading people were from Ireland, they'd look to Belfast first. Why is nobody in the media able to look at the House of Saud for more than a faction of a second and never with both eyes wide open???

Yog Soggoth's picture

Because our media is owned by the Khazars and most people don't know anything about the middle east. Have a hard question?

caconhma's picture

The yesterday US/Saudi story about Qatari paying a ransom for "an abdicated Qatari hunting party in Iraq" is just bizarre.

I never liked Obama but, in comparison with the Agent OrangeObama is a giant both in US and international politics.

earleflorida's picture

Blue Gold is the futures fuel...

Period

*forget about fuel cells or hybrid/ev's[batteries-lithium]

TheGardener's picture

ZH articles are always somehow strange with the repetition of the same quotes over and over again.

But this piece is a real clusterfuck and fails to differentiate between natural gas and liquified natural gas.

Am I wrong or is the natural gas pumped through pipelines and the liquified (LNG) version moved with tankers ?

Am I missing something ?

Very poor journalism at the sources quoted, it makes the article above look idiotic .

earleflorida's picture

can lead ya to the water. but can't make you drink it!

water = source

can't = use your own intuition

ZH = critical thought and 100+ IQ --- reader (doings one own homework) makes own decision

LA_Goldbug's picture

You are over reacting a bit. Your understanding is correct. Now the reasoning. Its engineering.

LNG is freezing that gas so that it will take up the smallest volume and hence be transportable in large quantities on ships.

Using the pipeline there is no use of freezing technology. Just compressors to move the gas over long distances.

"Qatar’s gas has the lowest extraction costs in the world."
Thus LNG for them is profitable business apparently. Even better would be through a pipeline which would hit the rest of the Arab-Pedos hard in the balls. They No Like That.

TheGardener's picture

Thanks for the condolences. Should I feel cool about reading through complete gibberish of an article (from various msm bs sources)

and praise myself to be in understanding none the less ? Yes I do and I should have mounted this into a rethorical question for good measure and effect. But I failed. Whingeing how stupid the lacking (journalistically and logically required) differentiation was performed was a mean and smallish intellectual weak act because I was not fully drunk yet before posting any  comments as usually . My bad . Showed off the simple minded sober work horse I have to be in an IT job.

LA_Goldbug's picture

I say pop a beer :-) It has good gas with HC.

Gorgeous's picture

"2006: Saudi Arabia withdrew its approval for Qatari plans to build a gas pipeline to Kuwait, which would have passed through Saudi territorial waters"

Nice find, Looney.  So let's piece this together (in sand jive): 

KSA:  Q, your're kinda pissin' off a lot of the homies by not selling your gas for cheap

Q:  SHFU or I'll give Al-J some of your dirty laundry

KSA:  Well, bro, Kuwait?  No-can-go, or we'll US drone your brown ass.  And seein' how y'all is a nothin' but a sand wart on our coastline, y'all got no place to go.

Q: No problemo homes.  I'll just let the Ayatollah ship it.

KSA:  The who???  That crazy nukin' Izlama-nigga? FU!!! From now on, you be talkin' to the Hand!!!!

Urban Redneck's picture

The author grossly misunderstands what happened in 2005...
Qatar hit Iranian gas.  And none of energy E&P analcysts on Wall Street caught it.
That was the reason for the moratorium.

It's also a key factor in both the tensions and cooperation between Qatar & Iran, and some serious duality of motivations for both parties (and probably a fuck ton of money laundering).

Fuckwits and their fantasies of a Qatar pipeline through Syria need to grow up, it was never about that, it was about cock blocking implementation of the 4 Seas Strategy.  The Qatari pipeline fantasy is about as silly as a scared little child naming the monster in his closet "Rothschild"

HRClinton's picture

The Bloomberg article is a day late, I believe. 

Yesterday several ZH bloggers highlighted the Qatari pivot to China and India, and a truce with Iran.

keep the bastards honest's picture

Thanks ! you noticed HRC.   And here it is! Russia has quietly befriended  qatar, iran, india, syria, china and shown to reliable.

' 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.'

Buck Johnson's picture

I have a feeling that Qatar is going to be invaded on the pretense of funding terrorism.  Most likely Saudi Arabi will get the go ahead from the US to do it.

 

keep the bastards honest's picture

saudis risk russia iran etc ? dont think so. 

TheGardener's picture

The US and Russia would both have an interest to edge on a conflict right where the loot is. The Israel dog tail waives the US against Iran for

sure but instead of proxy wars in potential pipeline carrying countries why not let the conflict move to the source of all those desires.

Russia knows the US is willing to throw allies under the bus at a whimp like a police informer the small peddlers before pay day . Saudi Arabia did threathen Russia openly with terrorist acts before the Sochi olympics and Russia probably since has plans of how to deal with that funky danger called Saud out of Medina.

I would hate to be the ruler of any of those cursed oil/gas kingdoms : best part is some respect from your foes but your friends and allies would not waste a second to grab your assets and your subdued subjects hate you all the more for the compromises you make with your best enemy friends.

 

 

 

Gorgeous's picture

This aggression will not stand, man.  The US be wantin' that North Field, oh so close to screwing with the Pars side of the tracks.

Urban Redneck's picture

"Terrorism" is always Diplospeak for Iran (since 1979), not the stuff the US (and its allies) do.

Unfortunately, they installed that retard Dubya in the White Hut, and he can't open his pie hole without butchering the English language... so the presstitutes got confused and forgot about the long game... 

panhead20's picture

Sigh, the old Syria war excuse. Before the Qatar pipeline can enter Syria it has to cross Saudi Arabia and it is not in the Saudi's interests to have Qatar exporting more gas.

MaxThrust's picture

DJT tweet: Perhaps this will be the beginning of the end to the horror of terrorism

Donald, if you want an end to terrorism I suggest you have a long chat with your friend Bibi.

falak pema's picture

Like I said : Clash of civilization is a fake paradigm for OIL monopoly games... since 70 years led by the same Seven Sisters and their political surrogates...

Sykes Picot served their interests and now so does the Duck and Owners of Ghawar. One continuous timeline.

Doña K's picture

I think that now they are eight with Lukeoil

falak pema's picture

Glencore and Vitol as traders.

Ben Tornilloed's picture

Tres de las siete hermanas ya no.

Standard Oil Company of New York - Mobil - mind melded with Exxon

Gulf Oil - mind melded with Chevron

Texaco - also now Chevron

Paul Kersey's picture

The Syria conflict, too, is all about natural gas:

"Syria Conflict a Proxy War for Natural Gas"

http://www.newsmax.com/HansBaumann/syria-assad-russia-putin/2016/10/25/i...

Paul Kersey's picture

And why did Sadam invade Kuwait?

 

"The Iraqi government had also accused the Kuwaitis of stealing 2.5 billion barrels of oil from its Rumaila oil fields by sliding drills into Iraqi oil pipelines. They had also accused Kuwait of exceeding OPEC oil production which had dropped the price of oil from $20 a barrel to $13 a barrel in the first six months of 1990. This meant 1 billion dollars less for Iraq everytime that price of an oil barrel went down by a dollar. Saddam said he would stop them from continuing aggressive action:"The oil quota violators have stabbed Iraq with poison dagger. Iraqis will not forget the saying that cutting necks is better than cutting means of living. O'God almighty, be witness that we have warned them".1 His foreign minister Tariq Aziz later said in a letter to the Arab league that Kuwait is "systematically, deliberately and continuously" harming Iraq by encroaching on its territory, stealing oil, and destroying its economy.1 "Such behaviour amounts to military aggression".

HRClinton's picture

It is in the DNA of every Empire and its ruling Oligarchs, to find some pretext and justification for taking other people's land or resources. 

The US is no different that way. Especially when it comes to the Currency/Energy duality, backed by a Military & Surveillance force.

cossack55's picture

So April said, "Go ahead and invade Kuwait, Washington won't care"

Ben Tornilloed's picture

Bullshit.  The freakin Kuwaiti's couldn't drill their way out of a paper bag with a Milwaukee Hole Hawg.  The most worthless bunch of ingrates alive - save Hillary supporters.  EVERYTHING done in the Kuwaiti oil industry was done by others.

poeg's picture

Yes, many Canadian drilling outfits who specialize in horizontal drilling have been hard at it for decades there. Horizontal drilling, instramentation packaging and recovering damaged wells... Alberta really cranks out the best.

earleflorida's picture

fun fact: in 1917 when the british and french demarcated the levant it was syria and iraq only, with attaturk abolishing the caliphate.

all the british wanted was mosul in which turkey objected but was tired of war so it capitulated to the british and baghdad Rail-Road lines to the gulf.

the best part is that 'Kuwait was a part/province of Iraq!!!

so, in summary kuwait was a iraqi territory until the british said it wasn't.

and yes kuwait was slant drilling but tell that to British Petroleum the queens war chest

Beowulf55's picture

Is Trump that stupid on geopolitics or is he feeding the masses pablum that they can understand?

TePikoElPozo's picture

puppet on a string... just like your boy from Kenya