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Qatar’s decision to withdraw from OPEC in January 2019 part of increasing effort to break from Saudi influence – Qatar Analysis

Executive Summary

The Qatari announcement of a planned withdrawal from the Organization of the Petroleum Exporting Countries (OPEC) largely stems from Qatar’s inability to influence decisions made by the organization due to Doha’s relatively low oil output.
This development highlights the continued efforts by Qatar to implement Qatari-centric policies, which effectively are causing the state to distance itself from the the Gulf Cooperation Council (GCC), mainly due to Doha’s interest in breaking away from Saudi influence, as the latter retains wide influence over OPEC and the GCC.
Although Qatar’s withdrawal will likely not have significant effect on OPEC, the limited backlash the country is facing after announcing its plan to withdraw may prompt Oman, who shares similar interests, to follow suit in the future.
Travel to Qatar may continue as normal while adhering to cultural norms and avoiding making any statements critical of the Qatari Emir and government officials.

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Current Situation

The Minister of State for Energy Affairs Saad bin Sherida al-Kaabi, who is also the president and chief executive of Qatar Petroleum (QP), stated on December 3 that Qatar will withdraw its membership of The Organisation of the Petroleum Exporting Countries (OPEC) starting on January 2019.
Al-Kaabi stated that the decision comes after Qatar reviewed ways to enhance its international role and plan long-term strategy. As the world’s largest exporter of liquefied natural gas (LNG), Qatar intends to focus its efforts on developing its natural gas industry and increasing its LNG production to 110 million tonnes by 2024. The minister emphasized that for him to “put efforts, resources and time in an organization that we are a very small player in […] practically it does not work, so for us it’s better to focus on our big growth potential.”
He added that the Gulf state would nevertheless continue to produce oil, as the state-run oil firm QP planned to increase its production capability to 6.5 million barrels of oil equivalent a day from 4.8 million over the next decade. In addition, Qatar remains interested in expanding its international oil investments from abroad and would “make a big splash in the oil and gas business.”
Meanwhile, on December 9, the emir of Qatar Sheikh Tamim bin Hamad al-Thani did not attend the GCC summit in Riyadh, and sent a lower-ranking delegation instead.

Assessments & Forecast

This decision highlights the independent policies the Qatari leadership is striving to implement. Thus, as production targets within OPEC are usually set by leading oil exporters, such as Saudi Arabia, Qatar likely withdrew its membership given its much smaller outputs in crude oil, which prevented it from circumventing the directions laid out by the organization. This is partly due to Qatar’s current efforts to raise its oil production, which contradicts the expectations of cuts from OPEC members, due to low oil prices. That said, this potential increase in oil production will remain limited, due to Qatar’s efforts to further focus on the LNG sector, of which Qatar is the leading exporter. FORECAST: However, Qatar’s withdrawal from OPEC is unlikely to significantly impact the organization, given that Qatar’s contribution to it remained marginal, as the state has a share of approximately 2% of OPEC’s output.

In addition to the availability of natural resources and the economic aspect, the intended withdrawal of Qatar from OPEC stems largely from a desire of the state to further disassociate from some other GCC members, namely the UAE and Saudi Arabia. In this context, recent developments point to Doha’s increasing efforts to seek independence from neighboring states, including Sheikh Tamim’s sending a delegation composed of lower-ranking officials to the December 9 GCC summit, as opposed to attending himself. It is likely that the withdrawal from OPEC was in preparation for several months or years by the Qatari government. Qatar may have refrained from implementing it so far due to the ongoing blockade from Saudi-aligned states, following their severance of ties with Doha in June 2017, in order to avoid escalating the crisis.

However, since this status quo has largely prevailed in recent months, the Qatari government likely chose to announce the planned withdrawal now, with the expectations that at this point in time it will not yield a significant response from the blockading states. This may have been bolstered by the current weakened position of Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS), due to the allegations of his involvement in ordering the killing of journalist Jamal Khashoggi at the Saudi Consulate in Istanbul on October 2. Given that MbS remains fragile amidst this international backlash, the Qatari leadership may have announced their withdrawal from OPEC knowing that the Crown Prince would not take measures to oppose the move, as he is currently trying to rehabilitate his international image by projecting moderation.

In addition, Qatar’s withdrawal from OPEC is more specifically meant to move away from Saudi Arabia’s influence, with which regional rivalries have increased in recent years. Thus, following the announcement of withdrawal from OPEC, a Qatari official reportedly stated that Qatar does not want to depend on Saudi Arabia, as the latter controls OPEC due to their vast oil reserves.
FORECAST: Going forward, Qatar will continue striving to break away from Saudi influence and that of the rest of the GCC over the coming months, by pursuing more Qatari-centric policies, both in terms of economic and of foreign policy. For the former, as announced, this will manifest in slightly increasing Qatar’s oil output and focusing on the highly-beneficial production of LNG, while the latter may include measures aimed at strengthening relations with Iran. This will likely be further prompted by the overall hawkish policies enacted by Saudi Arabia under the direction of MbS, which is fostering disunity among the GCC states.

Recommendations

Travel to Qatar may continue as normal while adhering to cultural norms and avoiding making any statements critical of the Qatari Emir and government officials.
In light of the ongoing dispute between Qatar and regional states, it is advised to anticipate potential disruptions to services and to remain cognizant of developments and their potential effects on travel and business continuity.

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How countries such as Saudi Arabia, Bahrain, UAE, Egypt cutting ties with Qatar is likely to influence the region – Middle East & N. Africa Analysis

Current Situation

During the morning hours of June 5, Saudi Arabia, Bahrain, Egypt, and the UAE announced the cutting of all diplomatic ties with Qatar.  The Hadi-led government in Yemen, as well as Libya’s anti-Islamist House of Representatives (HoR) similarly announced the severing of diplomatic ties with Qatar on the same day. The first four countries issued a 48-hour ultimatum to Qatari diplomats to evacuate their respective nations, while similarly issuing an ultimatum to all other Qatari citizens to leave within two weeks. Additionally, Saudi Arabia, Bahrain, Egypt, and the UAE announced that they had closed their airspace for Qatari aircrafts, and that all flights by airliners from these countries to Qatar were suspended. Qatari naval vessels will also not be allowed to use the countries’ seaports to anchor, while land travel between Qatar and Saudi Arabia will be limited to non-Qatari nationals only.

Additional measures implemented against Qatar include the expelling of the country from the Saudi-led coalition in Yemen and its anti-Islamic State (IS) coalition in Syria. These measures were implemented based on accusations that Qatar is “supporting and financing extremist groups” across the region, as well as encouraging sectarianism and subversive elements operating in the abovementioned countries. Meanwhile, Qatar’s Ministry of Foreign Affairs issued a statement that the accusations are “absolute fabrications” and “proves that there are premeditated intentions to cause damage to Qatar”.

How countries such as Saudi Arabia, Bahrain, UAE, Egypt cutting ties with Qatar is likely to influence the region - Middle East & N. Africa Analysis | MAX Security
Map of countries affected by travel restrictions on Qataris

Assessments & Forecast

Severing ties may hurt Qatar economically, push its policy towards more pro-Iranian approach; limited impact on regional conflicts

While the new development is unlikely to have any effect on Qatar’s and any of the other impacted countries’ security conditions in the short term, we assess that this measure may lead to multiple local and regional ramifications over the coming months. For instance, approximately 90 percent of Qatar’s imports of food products are transferred through land from Saudi Arabia. Thus, in light of the border closure between the two countries, Doha will likely be forced to divert a large amount of resources in developing its maritime trade, including in the form of improving its seaport infrastructure, as now its imports via sea are liable to be enhanced significantly. Moreover, given the high-profile nature of the event, there remains a possibility that the turn of events will impact global markets, and particularly the oil sector, as it may be perceived as a source of instability across this oil-rich region.

These new developments may also impact expatriates, including Westerners operating in Qatar and the GCC, particularly given the suspension of flights between the GCC countries and Qatar and the closure of the land border with Saudi Arabia. In light of the likely increase in logistical difficulties in traveling between Qatar and the above-mentioned countries, exacted upon expatriates by the measures, it is likely to damage Qatar’s national economy. Though the impact on GCC residents seeking to enter Qatar is yet to be determined, it cannot be ruled out that Qatar will implement punitive measures and ban GCC citizens and residents from entering the country.

The partial isolation of Qatar may affect several conflicts and political rivalries across the region. With regards to Iran, Doha is liable to improve its bilateral relations and economic ties with Tehran, as now Qatar would be compelled to compensate for its political and economic setback. Moreover, in Yemen, in the short-term, Qatar’s absence from the Saudi-led coalition may slightly reduce the latter’s on-the-ground capabilities in fighting against the Iranian-backed Shiite Houthis. However, given Qatar’s already limited role in the coalition, as well as the aforementioned arms deal with the US, in the medium to long-term the Saudi-led coalitions is unlikely to be significantly impacted by Qatar’s absence from the coalition.

In Syria, in light of the already heightened internal divisions between rebel factions, it remains possible that this new development will further exacerbate tensions between rebel groups supported by Qatar on one side, and factions backed by Saudi Arabia and the UAE on the other. Should the event indeed lead to an economic recession in Qatar, their supported factions on-the ground would suffer from a shortage of resources, thus forcing them to disband or merge into other factions. With this in mind, should scenarios eventually materialize, it would potentially tip the scale towards the pro-government forces in the Syrian conflict.

In Libya, the development may constitute a boost to the HoR and its allied Libyan National Army (LNA), given their conflict with the pro-Islamist General National Congress (GNC) and its affiliated militias, which are partially supported by Qatar. That said, Qatar’s direct involvement in this conflict has significantly waned in recent years, particularly since the March 2016 arrival of the UN-backed Government of National Accord (GNA) to the designated capital of Tripoli, and therefore any implications on the conflict will remain limited.

Cutting ties with Qatar likely linked to global, regional developments involving Iran, new US administration

Today’s development comes amidst years of tensions between Saudi Arabia, Bahrain, UAE, and Egypt on one side, and Qatar on the other, surrounding multiple issues, chiefly the latter’s alleged direct involvement in the internal affairs of countries throughout the region. This is particularly relevant to Qatar’s long-standing support for Muslim Brotherhood-linked political elements across the Middle East and North Africa, as the countries in this Saudi-led alliance view the Islamist organization is a subversive element and a threat to their respective governments. Additional contentious issue include Qatar’s overall positive relations with Iran, as opposed to that of the other Gulf Cooperation Countries (GCC), with the exception of Oman, which remain strong adversaries of Tehran. This is highlighted by numerous past economic agreements between Tehran and Doha in recent years, such as the agreement from February 2014 to create a joint free trade and economic zones between the two countries. A further issue that contributed to the strained relations with Qatar throughout the years is the cooperation of the Qatari-based news outlet al-Jazeera, which had been accused by the aforementioned countries of attempting to undermine their, as well as their regional allies’, governments.

That said, despite these strained relations, Qatar and the other GCC countries’ relations can be characterized over the past several years by intermittent escalation and rapprochement between the sides. For instance, on December 9, 2014, Qatar agreed as part of a GCC summit, to establish a regional police force in order to improve coordination regarding drug trafficking, money laundering, and cybercrime, as well as announced its “full support to al-Sisi-led government in Egypt”. This followed Saudi officials’ March 9, 2014 threats to impose sanctions against Qatar, including in the form of sea blockade, in light of Doha’s persistent support for Muslim Brotherhood-linked elements across the region. However, the complete cutting of diplomatic relations between the aforementioned Saudi-aligned countries is highly notable given its wide scale and scope, as it includes significant restrictions on Qatar and its citizens.

We assess that this escalation is linked to global and regional geo-political developments, largely with regards to Iran and the new Donald Trump administration in the US. With this in mind, in recent years, under the Obama administration, relations between Saudi Arabia and its allies on one side, and Washington on the other, were oftentimes strained due to the US’ perceived efforts to approach Tehran, which was likely viewed by Riyadh as coming at its expense. In light of the aforementioned normal relations between Qatar and Iran, Saudi Arabia and the other GCC countries were likely felt compelled to prevent Qatar from approaching the Islamic Republic too much, as this would have significantly undermined their sense of security and regional interest.

Since President Trump’s inauguration, Washington increased its anti-Iranian rhetoric, while at the same time strengthened its ties with Saudi Arabia. This is highlighted by the May 15 UAE-US defense agreement, as well as the 350 Billion USD agreement between Riyadh and Washington involving an arms deal, and Saudi investments in the US. Thus, there remains a potential that the recent visit of President Trump to Saudi Arabia in late May, as well as the US’ growing support for Saudi Arabia and its allies, motivated the Kingdom to implement these measures, as part of the shared interest with the US in tackling Iran and its allies’ influence throughout the region. With this in mind, given Saudi Arabia’s decreasing need for Qatar’s cooperation on security and political support amidst the ongoing rivalry with Shiite Iran, it is likely that Saudi Arabia assessed that it is no longer obligated to maintain positive bilateral relations with Qatar, prompting this development.

The development comes amidst a diminishing political influence of the Islamist Muslim Brotherhood organization across the Middle East and North Africa over the past two years. In this context, it remains possible that Saudi Arabia no longer felt compelled to maintain good relations with Qatar, following the reduction of the threat stemming from the Muslim Brotherhood, as opposed to previous Saudi attempts to pressure Qatar to abandon their support for the Islamist organization in return for the improvement of relations with the other GCC countries.

Recommendations

Travel to Qatar may continue as normal while adhering to cultural norms and avoiding making any statements critical of the Qatari Emir and government officials, despite the aforementioned new restrictions. That being said, those operating in Qatar over the coming days and weeks are advised to stock up on food and basic products, due to the possibility that these will be in shortage due to the declared measures. Those operating throughout the Middle East and North Africa, and particularly in Saudi Arabia, Bahrain, UAE, and Qatar are advised to remain cognizant of developments and potential effects on travel and business continuity given the current lack of full information regarding the various restrictions that will be in effect. This is particularly relevant for the possibility of unexpected border closures between the relevant countries over the coming days and weeks.

 

This report was written by:
Asaf Day – MAX Security’s Senior Intelligence Manager, Middle East & North Africa

Intelligence Analysis: Bahrain’s Most Volatile Villages

As Bahrain celebrated its “National Day” holiday on December 16, the frustrated efforts of the Shiite-led opposition to isolate the Khalifa monarchy for its allegedly repressive policies continued to be ever more apparent. Formula One races, international conventions, a record-setting year for cruise-ship dockings and Kim Kardashian’s newest milkshake franchise expansion all signal that despite nearly two years of civil unrest, Bahrain’s image as an international trade and business hub remains largely intact. The credit goes to the Khalifas, who have successfully exploited regional tensions to keep ties with the West warm and the Saudi military waiting across the King Fahd Causeway, ensuring this strategic piece of island real estate never becomes the southern doorstep of an Iranian-led Shiite Crescent.

Shiite activists from the February 14 movement stage a march.
Shiite activists from the February 14 movement stage a march.

Predictably, the rise in violence amongst Bahrain’s opposition has been widely attributed as a natural result of feelings of abandonment by the international community. When (or if) Bahrain’s opposition movement will take the form of a low-level insurgency remains anyone’s guess. But amidst brewing tensions nationwide, some Shiite villages stand out as particularly angry. If things do get uglier, here is a short list of Bahraini opposition hubs which may just earn themselves an Arab Spring household name along with Syria’s Homs or Libya’s Misrata.

Continue reading Intelligence Analysis: Bahrain’s Most Volatile Villages

Strategic Analysis: Why Netanyahu can’t sell a unilateral strike

Over the past four years, Benjamin Netanyahu has succeeded in propelling the Iranian threat into the forefront in both Israel and around the world. The crisis over Tehran’s nuclear program now overshadows potentially crippling political and diplomatic issues in Israel,  such as growing economic disparity and the stalled peace process with the Palestinians. Yet, Netanyahu has failed to convince the Israeli public that Iran’s nuclear program must be stopped- or delayed- at all costs.

Benjamin Netanyahu has failed in convincing Israelis of the need to delay Iran’s nuclear program, even without help from the United States.

A recent poll conducted by Tel Aviv University showed that only 27% of Jewish Israelis support a unilateral strike by their government on Iranian nuclear facilities. Those results come amidst an ongoing chorus of criticism against such preventative action from Israel’s most distinguished ex-military chiefs and politicians, including President Shimon Peres. To garner this much needed public support for such a crucial decision, Netanyahu must stop speaking to Israelis’ hearts and minds on the Iranian threat, and start speaking to their wallets.
Continue reading Strategic Analysis: Why Netanyahu can’t sell a unilateral strike

Intelligence Analysis: Who will fight for Iran’s nuclear program?

Last week Iran sent a high-level envoy, Saeed Jalili, on a particularly controversial public-relations tour to Lebanon and Syria, the most explosive corner of the region. After ruffling feathers during a Beirut stopover, Mr. Jalili traveled to Damascus to meet with President Bashar al- Assad, where he declared the ties between Iran, Syria, and Hezbollah to be an “axis of resistance.”

Israeli pilots prepare for flight. Iran has since warned of massive retaliation in response to an Israeli attack on it’s nuclear facilities

Jalili is an iconic figure, whose position as the head of Iran’s Supreme National Security Council also affords him the role of chief negotiator for Iran’s contentious nuclear program. Amidst a deadlock in negotiations and a rehashing of threatening rhetoric, Jalili’s visit was meant to remind the Israelis that Iran’s proxies on Israel’s northern doorstep remain ready and willing to plunge the region into chaos if Israel strikes Iran’s nuclear facilities.

It appears however, that Iran’s allies in the eastern Mediterranean may not be as keen about going to war for the ayatollahs as Tehran would like – and the Israelis know it.

Continue reading Intelligence Analysis: Who will fight for Iran’s nuclear program?

Pentagon Budget Cuts: A Cause For Concern?

By Jay R.

What does a ‘leaner’ American military mean for the Middle East? In a word: Proxies. 

President Obama addresses reporters from the Pentagon.

On January 5, President Barak Obama announced from the Pentagon that the American defense budget was going to see significant cuts – approximately 500 billion dollars over the next ten years. The announcement sounded alarms both at home and abroad, with many concerned that the United States would surely lose its military superiority and squander its influence in the Middle East. However, such concerns are baseless and unfounded as the United States will continue to maintain a military budget that is greater than the next top ten military spenders combined.

Over the last decade, the United States has been involved in two counterinsurgency wars – Iraq and Afghanistan – totaling a cost of nearly 1.3 trillion dollars. Participation in the Iraq conflict has ended and the US is slowly drawing down its forces in Afghanistan in anticipation of a 2014 exit. The ending of these two wars will significantly absorb the budgetary cuts that the Obama administration is planning. Furthermore, the United States government and citizenry alike have lost all appetite for any military commitment that would result in the deployment of its troops to the Middle East again, therefore diminishing the likelihood for their reappearance anytime soon.    Continue reading Pentagon Budget Cuts: A Cause For Concern?

Yemen’s Greatest Challenge

By Gabi A.

Getting the oil flowing again is a basic requirement for the success of any future government.

An oil pipeline in Northern Yemen.

Even as fears of continued factional conflict continue to attract media attention, the question of economic stability and sustainability in Yemen has barely received the consideration needed to avoid a spiral into the status of a failed state. The interim government in the country faces difficult political challenges in the weeks ahead as it prepares for what many observers are hoping will be the country’s first free election. The head of the interim government, Vice President Abed Rabbo Mansour Hadi, is already facing calls to resign as protests continue to rage in the streets of the capital city of Sanaa with demonstrators facing off against forces loyal to now supposedly deposed President Ali Abdullah Saleh.

The destruction brought on by the nearly-ten-month uprising against the regime of Saleh has wreaked havoc not only on the delicate political system but also on the nation’s oil production infrastructure that provides the lifeblood for the economy. Oil exports are responsible for somewhere between 60-70% of government revenues and 90% of overall national exports.      Continue reading Yemen’s Greatest Challenge

Yemen: Progressing Into Chaos?

By Jay R. and Gabi A.

Continued violations of the recently signed GCC power transfer agreement indicate that Yemen may be entering into a new status quo of instability.  

In January of this year, Yemen’s citizenry amassed in the streets initially demanding reform and change in areas of unemployment and corruption, but then shifted their cries to the ouster of their president, Ali Abdullah Saleh. On January 27, approximately 16,000 demonstrators gathered in the capital, Sana’a, which was followed by a subsequent assembly of more than 20,000 people just one week later. But it was not until the “Friday of No Return” that the government claimed the first three lives of the revolution on March 11 setting off a wave of unrest that would escalate to opposition armed resistance in the form of an alliance between tribal chief Sheikh Sadiq al-Ahmar and General Ali Mohsen al Ahmar of the First Armored Brigade; no relation.

Activists stage demonstrations in Sana’a against immunity for President Saleh. (Xinhua)

Some argue that the hostilities which erupted between Saleh loyalists and opposition tribesmen and defectors reached the level of civil war. The Gulf Cooperation Council (GCC) peace initiative was originally expected to quel this unrest, has appeared to  have ultimately failed to do just that in the immediate term. As part of the aforementioned initiative, Yemen’s President Saleh received immunity against prosecution for his perceived crimes against the protest opposition movement. Such a concession has enraged the people, who continue their movement to express their disapproval.  As such, thousands of Yemenis continued to march in the cities of Sanaa and Taiz.
Continue reading Yemen: Progressing Into Chaos?

The Saudi Confederacy Proposal: Have the lines been drawn?

By  Jay R.

The agreement of nearly every Arab gulf state to the Saudi’s confederacy proposal highlights their concerns over the Islamic Republic’s pursuit of nuclear weapons.

Gulf nation leaders meet at a GCC conference in Riyadh. (SPA)

When the Arab peoples aligned with the British against their Ottoman rulers during the First World War, they did so under British assurances given to King Faisal that in return, the Arabs would receive their independence in the form of their own sovereign kingdom. The kingdom was to span from Turkey’s southern border in the north to the Arabian Sea in the south, and bound by Persia in the east to the Mediterranean Sea in the west. These Arab aspirations were dashed, however, when they discovered the Sykes-Pikot treaty, in which Britain and France had secretly agreed to divide the Arabian territorial spoils amongst themselves.

It is largely because of this British-French agreement that the borders of the greater Middle East are abundant with unnaturally straight lines. There have been previous attempts by these nations to break these perceived artificial boundaries, most notably by Egypt and Syria with their formation of the United Arab Republic, and the two’s confederation with North Yemen to form the United Arab States. Throughout these attempts, which took place from 1958 to 1961, there were even hopes of Iraq joining their ranks. However, the experiment was short lived as Gammal Abdul Nasser, the Egyptian leader over the confederation, failed to institute a fitting political system for the new administration, resulting in Syria’s secession through military coup, and the Republic’s ultimate demise. Continue reading The Saudi Confederacy Proposal: Have the lines been drawn?