Qatar, an energy-rich Arab nation’s decision to formally withdraw from the Organization of the Petroleum Exporting Countries (OPEC) from January 1, 2019, gave some hints about the sour relationship with Saudi Arabia. Qatar minister of energy affairs, Saad Sherida Al-Kaabi said Doha would focus on its gas potential because it was not practical for QATAR “to put efforts and resources and time in an organization that we are a very small player in and I don’t have a say in what happens.”
Although it’s not the first time that any country has unilaterally left OPEC in the past, Gabon (terminated its membership in January 1995 but rejoined in July 2016) and Indonesia (suspended its membership in January 2009, reactivated it in January 2016, but decided to suspend it again in November 2016) too have left, but this time the situation is altogether different. The reason for Qatar’s withdrawal is the Saudi-led coalition blockade on Qatar in June last year, which severed diplomatic, trade and transport links as they accused Doha of funding extremist groups and being too close to Iran.
OPEC
In 1960, at a time of transition in the international economic and political landscape, with extensive decolonization and the birth of many newly independent states in the developing world, five countries i.e. Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela came together in Baghdad to create the Organization of Petroleum Exporting Countries. In 1961, Qatar became its first non-founding member of OPEC later on other members too joined this elite club. At present, the Organization has a total of 14 Member Countries (excluding Qatar). This group is an energy-rich group that produces around 39,436 thousand barrels of oil per day (in 2017).
The Battle Between Riyadh and Doha
Last year in the month of June, Qatar faced blockade from Saudi led coalition (include UAE and Bahrain) backed up by Egypt, Yemen, Maldive, and Libya. The coalition along with its allies accused Doha of supporting Islamic extremists throughout the Middle East, including within the four countries — Bahrain, Egypt, the United Arab Emirates, and Saudi Arabia. Another key issue is Qatar’s relationship with Iran, which is seen as a supporter of Houthi rebels in Syria. Above all, a Shia majority country, Iran is the nemesis of Sunni dominated Saudi Arabia. The blockade led to the closure of airspace by Saudi Arabia, the UAE, Bahrain, and Egypt to Qatari aircraft, and even foreign airlines had to seek permission for overflights to and from Qatar. Its only land border was also closed by Saudi Arabia and ships flying the Qatari flag or those serving Qatar were banned from docking at many ports.
The blockade impacted Qatar’s economic and financial growth, the stock market lost about 10%, or about $15bn (£12bn), in market value over the first four weeks of the crisis but somehow Qatar managed the crisis. During the blockade, shipping costs went up tenfold and since 40% of food supply usually comes as imports via Saudi Arabia, Qatar suffered a lot.
Later on, Iran and Turkey came to its rescue as they supplied food materials by air and sea route. Eventually, things went in Qatar‘s favour with the rise of Mohammed bin Salman as the crown prince of Saudi Arabia. His decision to attack Yemen created a humanitarian crisis in Yemen which drove condemnation from the west and even from the United Nations.
Qatar, on the other hand, which had been “expelled” from the Saudi-led coalition which attacked Yemen, began to position itself as a supporter of grassroots Arab and Muslim causes, rather than cynical geopolitical machinations. The killing of Jamal Khashoggi, a columnist with The Washington Post and critic of Saudi prince MBS created an uproar, both, in the Arab and the western world. An investigation by a Turkish agency revealed that Jamal Khashoggi was murdered by a Saudi hit squad when he was visiting the Saudi consulate in Istanbul, in order to obtain documents related to his planned marriage.
Effect On Oil Cartel
Even though Qatar was OPEC’s 11th biggest oil producer, it accounts for less than two% of total output. Hence Qatar’s withdrawal did not affect the OPEC’s ability to influence as Qatar was a very small player.
After Qatar’s withdrawal from OPEC, oil prices did shoot up but it was because of the trade war between the United States and China. Qatar is now moving towards ramping up its Liquefied Natural Gas production from 77 million tonnes per years to 110 million tonnes in the coming years because it is the largest producer of natural gas in the world. It can also dominate its arch-rival, Saudi Arabia in the LNG sector.
Qatar is a small player when it comes to oil but a giant in natural gas and its decision to become the first Arab state to leave OPEC was more of a symbolic and geopolitical decision rather than a hasty one amid the political instability in West-Asia.
Qatar’s decision to stand against Saudi Arabia was a very calculated move especially now when Saudi Arabia is facing hostility from all sides because of the involvement of the Kingdom in Jamal Khashoggi’s murder case. The future relationship of Qatar with other West Asian countries is unpredictable and no one knows what is going to happen.