Qatar invests for political influence

Qatar invests for political influence

With this outstanding economic performance, Qatar has decided to use its petroleum-generated resources and wealth to diversify its economy by investing abroad, both financially and politically.

In a world filled with financial woes and struggling economies, Qatar, the small Gulf country located on the eastern side of the Arabian Peninsula, has been utilizing its economic wealth to acquire expensive real estate, football clubs, global banks, and even department stores. Qatar is the world’s richest country, with its 250,000 native citizens living comfortably on $400,000 per capita income. Its proved natural gas reserves exceed 25 trillion cubic meters, which is more than 13 percent of the world total and the third largest worldwide. In 2010, Qatar’s economy was growing at 20 percent, and in 2011, it grew at 14 percent.

In 2005, the State of Qatar founded the Qatar Investment Authority (QIA), a sovereign wealth fund, to help diversify its oil and gas dependent economy. According to the QIA, their aim is to make long-term strategic investments that would “complement the state’s huge wealth in natural resources.” It is Qatar’s goal to become a world-class investor and a center for finance and investment management, demonstrating that the small Gulf country is adamant to become more than an oil and gas exporter. It is estimated that the QIA’s assets have reached $100 billion since its formation in 2005, which illustrates Qatar’s drive to become a financial powerhouse, and thus, use this power for its own political gain.

Sovereign wealth fund strategy transparency

Qatar’s sovereign wealth fund is the most strategic investor among its peers, but with medium levels of transparency

Qatar has particularly shown interest in the UK. In the last ten months alone, Qatar has made a £3.3bn profit on stakes held in UK public companies, including Sainsbury’s, the London Stock Exchange and Barclays. Qatar has also been investing in London’s real estate market, with its latest acquisition of the Intercontinental Park Lane. Currently, both governments are in talks regarding Qatar’s investment in the UK’s infrastructure projects, estimated to be worth £10 billion. These consistent investments have undoubtedly strengthened ties between both countries, while allowing Qatar to gain influence in the European market.

Qatar’s economic, and thus, political investments, have not been limited to Europe. In the Middle East, the Qataris have been eager to express their support to the countries affected by the Arab Spring, with the exception of Bahrain. Qatar has offered financial support to the Islamist-led governments in Tunisia and Egypt, sent almost its entire air force with NATO into Libya in 2011, and called for the arming of Syrian rebels. For Egypt alone, Qatar has pledged more than $5 billion in aid for President Morsi’s government to help control the country’s economic crisis and stall the need for an IMF loan.

In addition, Qatar has agreed to invest $8 billion for gas, iron, and steel plants in the Suez Canal area. In April 2013, Qatar pledged to provide Egypt with an additional $3 billion loan, and supply natural gas for the summer months to help solve the country’s upcoming electricity crisis. These investments demonstrate Qatar’s ambitions to construct a name for itself in the Arab world.  Clearly, Qatar is not only using its wealth to become a financial center or world-class investor, but to also to gain political influence in the region and the international system. For Qatar, oil wealth, investment, and foreign policy have become intertwined.

Over the past decade, secured by one of the most massive U.S. air bases in the world, Qatar has entered conflicts in Afghanistan, Iraq, Israel, Lebanon, Sudan, Syria, and Yemen. By doing so, the Qataris have positioned themselves to become a potential mediator, but so far, there has been limited success. The truth of the matter is that Qatar has not been able to buy enough trust by parties in conflict. This is exemplified by Sheikh Hamad bin Khalifa al-Thani’s visit to Gaza in October 2012, where he pledged $400 million to Gaza, and therefore, broke Hamas’ regional isolation by officially recognizing their rule. The Qatari Emir was the first Arab ruler to visit Gaza since Hamas took control of the area in 2007. By doing so, Qatar has made the Israelis and the Palestinian Authority skeptical of its position regarding the Israeli-Palestinian conflict. Moreover, the country’s continuous support for the Islamists in Egypt, Tunisia, Gaza, and Syria, is causing many to question Qatar’s intentions.

Indeed, Qatar’s investment strategy has been moving in the right direction. Its economic policy primarily focused on developing Qatar’s non-associated natural gas reserves and increasing foreign investment in non-energy sectors, while utilizing its revenue to invest abroad, yielding economic and political ramifications. However, it is important to note that Qatar’s main source of income is not sustainable, with oil and gas still accounting for more than 50 percent of GDP and 85 percent of export earnings. In order to make true progress, Qatar needs to diversify its economy at a faster pace, and work to enhance its ties with other countries in the region by building trust, rather than stir up controversy.

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