Shifting sands

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Shifting sands

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Qatar, the world’s richest country, is playing a dangerous game

“And the winner is… Qatar!”

On 2nd December a tiny country just 100 miles long and 50 wide, with summer temperatures well above 40C and the population of a medium-sized English town, was named host of the 2022 World Cup. To worldwide astonishment, Fifa, the international governing body of association football, awarded Qatar the prize even though the country has no professional football league and no record in World Cup competition.

Some put Fifa’s decision down to a triumph of lobbying by Qatar’s ruling royal family in their constant and lavishly expensive pursuit of the world’s glittering prizes. Over more than a decade, Qatar, a former British protectorate, has amassed a huge collection of assets in Britain and elsewhere, some of them trophies, but many of them are shrewd investments. It has paid for them with the wealth from the oil and gas fields that have made the kingdom, per head, the richest country in the world.

But diplomats say the award legitimately reflects Qatar’s efforts to turn itself into an international player, which go far beyond trophy hunting or financial clout. Qatar has pitched itself as the stable point in a region in turmoil, on the side of modernity—and of the US. It deals with all of its neighbours, even if they hate each other: Israel and Iran included. This spring, it took its riskiest step yet—joining the Nato-led assault on Muammar Gaddafi’s regime in Libya. It sent its six French-built Mirage fighter jets to help the coalition; it was the first Arab country to recognise the governing council of the “rebels”; it has said it will sell oil from rebel-held ports in east Libya.

“Qatar aspires to a leadership role, to be driving the agenda,” said Toby Jones, a Middle East expert at Rutgers University, New Jersey. “The royal family believes it has a role to play in shaping the terms of what it means to be Arab in the 21st century.”

The risk is that the strategy—and even the kingdom itself—could collapse under contradictions. Qatar’s critics warn that its role in the Libyan military action could provoke attacks from Gaddafi or its neighbours. In supporting Saudi Arabia by sending forces to quell Shia dissidents in Bahrain, Qatar risks enraging the Shia regime in Iran—which shares the huge gas field that underpins Qatar’s wealth. Above all, even though Qatar’s leaders sided with pro-democracy rebels in Libya, and host the al-Jazeera TV network that is a voice for dissenters across the region, they do not want to contemplate more democracy at home. That disparity is lost on no one, least of all Qatari citizens.

The royal family, the al-Thanis, had been recognised as the rulers of Qatar since the Ottomans left in 1913, although the country only gained independence from the British in 1971. Qatar’s recent ascent is the work of the current emir, Sheikh Hamad bin Khalifa al-Thani, who seized the throne in 1995 while his father was convalescing in Switzerland. The new emir set out to counter decades of wasteful drift. His predecessors had failed to use the vast wealth that followed the leap in oil prices in the 1970s to develop the industry or diversify. By the late 1990s, the price of oil had plummeted and projects were frozen. Sheikh Hamad set in train investment that raised GDP per head, according to the IMF, to the highest in the world in 2010— $88,000, expressed at purchasing power parity (a measure that makes economic statistics more easily comparable between countries). Qatar, which has the world’s third-largest reserves of natural gas, invested in techniques to liquefy gas so it can be transported by ship. It also poured money into education, financial services and alternative energy infrastructure. Propelled by this spending, the economy boomed: its GDP rose from $17.5bn in 1995 to $150bn in 2010. Growth this year is projected to be around 20 per cent.

At the same time, the emir set about boosting Qatar’s geopolitical influence, now way out of proportion to its population of only 300,000 citizens—about the same as Iceland—as well as about 1m foreign workers. Partly, that was achieved by pouring money into investments worldwide. In Britain, the sheer scale of the ventures—including the purchase of Harrods, the Chelsea Barracks site, the US embassy site, and most of the Shard, Europe’s tallest skyscraper—has led to the nickname Lon-Doha (see box below), a pun on the name of Qatar’s capital.

The country’s investment arm, the Qatar Investment Authority, founded in 2005, is called “opportunistic” by other investors. The negotiating team, headed by Prime Minister Sheikh Hamad bin Jassim bin Jabr al-Thani (a distant cousin of the emir), is said to have an eye for distress sales of assets and governments needing help. It describes itself as a vehicle “through which the state of Qatar can help secure the future prosperity of its people by building up a diversified asset base to complement its wealth of natural resources.” Over the next five or six years, it plans to invest $130bn—half in energy-related projects.

As the emir said last year, “The QIA invests everywhere.” One Middle East analyst expanded: “Look to Syria, to Lebanon. Around the world the Qataris have been investing in infrastructure projects—smart investment, not hotels and casinos. Just recently they put $2.7bn in Santander Brazil, after the emir went travelling to South America. He is a driven man with a vision. He cares only about finding smart investments, wherever they may be, and making Qatar permanently, irreversibly affluent.” The emir has fostered alliances with Greece and Indonesia, said Graham Boyce, former British ambassador to Qatar, who pointed also to the country’s investment in Porsche as evidence of its global reach. “The British press may think it’s UK-centred, but it’s not. Their surpluses are just enormous.”

***

It’s clear, however, that Qatar is spending money to win prestige as well. Ahmed Samerai, chairman of Sahara Communications, a Dubai-based PR firm promoting “an endless stream of cultural projects” for Qatar, said: “The Qataris realise the difference between being rich and being wealthy, and they want the world to come and marvel.” The Doha Tribeca film festival is an offshoot of Robert De Niro’s New York festival. Doha is hosting TEDx conferences (the global network of lectures on science, innovation and the arts). Georgetown University has a Doha campus, and University College London has announced plans to open shop in “Education City,” a vast academic campus which is the pet project of one of the emir’s three wives, Sheikha Mozah bint Nasser al-Missned.

But the emir’s ambitions for influence extend well beyond the spending of money, and this is where Qatar risks controversy in the region and trouble at home. One of his first steps, and most radical, was providing the initial funding for the al-Jazeera satellite TV network in 1996, establishing in the region the first Arabic-language news service that was, at least purportedly, free from state propaganda. “Before al-Jazeera, most people thought of Qatar as a desert backwater where nothing happens,” said one Middle East analyst in the City of London. “Then the al-Thanis poured money into the channel, and suddenly things changed.”

A second controversial alliance was the establishment during the late 1990s of al-Udeid, the US command and control airbase, close to Doha. Washington appreciated the explicit support after the 2003 Iraq invasion, which strained relations with Saudi Arabia. As Patrick Clawson, director of research at the Washington Institute for Near East Policy, put it: “The US can go there when its military gets kicked out of Saudi.”

The third plank has been the emir’s development of a network of relationships in the region. “This is a country, a leadership, exceptionally proficient at maintaining relationships,” said the City analyst who offered, as prize exhibit, Qatar’s “semi-alliance with Iran, and a relatively cordial relationship with Israel—until the Gaza offensive in 2008, at least.” Even though Qatar is an ally of the US and Saudi Arabia, it appears to be trusted as a broker by Hamas and Hezbollah, the Iran-influenced militant groups opposed to Israel’s existence. Graham Boyce also described how Qatar rebuilt villages in Lebanon and funded infrastructure projects in the West Bank.

Patrick Clawson argues that Qatar’s contradictory alliances reflect its belief that “their neighbours have always hated them,” and its determination not to be dominated. Bahrain still prickles over an 19th-century feud when the British terminated the Bahrain royal family’s rule in Qatar at the request of the al-Thanis. The United Arab Emirates resents Qatar for not joining that union of Gulf city-states, founded in 1971. The other five countries on the Gulf Co-operation Council bridle at Qatar because it is the persistent exception on votes.

Boyce added that Qatar’s unpopularity in the region has grown as the emir has asserted his “longstanding belief that the Arab world cannot blame outside forces for all misfortunes…and if a problem needs to be resolved, Arabs should do things themselves. In the first Gulf war and the protection of Kuwait, it was Qatari forces who were the first to join the coalition, not just with air strikes but ground forces too.”

“Qatar has been interested in punching above its weight for years, and has long demanded it wants to be taken seriously,” said Clawson. “Its participation in this intervention [in Libya] is partly a national security issue—telling the Saudis ‘don’t mess with us’—and partly showing the west it is a trusted partner.”

Al-Jazeera has given Qatar a central role in the Arab uprisings this spring. “The Tunisian merchant self-immolated in December, and virtually no international media picked up the story,” said the City analyst. “It was al-Jazeera which kept pushing it internationally and regionally on social networks, until it caught. ” In Boyce’s view, “the emir and his close advisers probably have no direct editorial control over Jazeera, although they could if they wanted to.” When contacted, al-Jazeera vehemently asserted its independence. However, other governments in the region are prone to accuse the emir of meddling when they dislike the channel’s coverage.

Although Qatar is protected militarily by the US, analysts point out that it might still provoke a wild strike from Libya, or terrorists, if it were blamed for civilian casualties. Its support of Saudi Arabia brings the greatest threat—from Iran, whose nuclear programme and ambitions of regional power are feared by its Arab neighbours. As Toby Jones puts it: “Even though this Saudi-Iran tension has the potential to blow up in the immediate neighbourhood, Qatar has hitched itself to the Saudi wagon. Although I don’t see the Iranians actively pursuing destabilisation, some of the Saudis are very hardline.”

The contradictions of its alliances also create potential threats at home, not least from those who want democracy. There are municipal elections—in which women can vote and stand for office—and there is a parliament building, but there is no institution or elected body separate from the royal family that can challenge the regime. The City analyst suggested that the regime believes itself insulated from the unrest because the state is so wealthy. Clawson agreed that there is little immediate risk of an uprising and attributes it as much to size as wealth. “The country has the same number of citizens as one or two British [parliamentary] constituencies. This lends itself to easy consultation with the people, and there is a fair amount of engagement which takes place between the emir and his people.” Boyce added that the 2005 constitution is relatively progressive, and that the emir “has an—albeit slightly St Augustine—belief in democracy” (recalling St Augustine’s prayer in his Confessions: “Lord, make me chaste, but not yet”).

But many have noticed that, despite supporting the pro-democracy movement in Libya, Qatar took Saudi Arabia’s side as it sent troops to Bahrain to crush pro-democracy rallies there. As Toby Jones puts it: “It is not impossible to imagine that [Qatari] people are going to remember all this, and use it as justification for militancy at home.” He added: “If things go wrong in Libya and, five years from now, Qatar is seen to be complicit in this, it undermines that self-appointed role as advocate for the modern Arab peoples and the Arab world.”

In a region that has often failed to make good use of the natural resources below the sand, Qatar stands out. The future income from shrewd investments now underpins its ambitions for even more influence. But the Arab uprisings have forced it to take sides more clearly than it has done over the past 15 years. As friction rises between its neighbours, Qatar may not be able to continue picking its way along the tightrope without challenge.


BUYING UP BRITAIN

Qatari investment in British assets has totalled more than $23bn in the past two years. That broadly corresponds to the period since the pound fell by a quarter against the dollar, making Britain much more attractive for foreign investors.

In the depths of the financial crisis in October 2008, when Barclays needed to raise £7.3bn to avoid having to accept a Treasury bailout, the bank turned to the Qatar Investment Authority (QIA) and Abu Dhabi’s sovereign wealth fund to help. That deal, and the purchase of Manchester City football club by Sheikh Mansour bin Zayed al-Nayhan of Abu Dhabi, made the name of Amanda Staveley, a former girlfriend of Prince Andrew who is now a financial adviser based in Dubai.

Financial advisor Amanda Staveley was a key player in the purchase of Man City

British assets bought by the QIA or managed by Qatari Diar, its property developer, include the 2010 purchase of Harrods for £1.5bn; the 2007 purchase of the former Chelsea Barracks site for £1bn; the Park House office development in the west end; the purchase of the US embassy building in Grosvenor Square; the 2006 purchase of Four Seasons Health Care (Britain’s biggest nursing home chain); a 26 per cent stake in Sainsbury’s; around a quarter of the London Stock Exchange; 80 per cent of the 80-stor?ey “Shard,” Europe’s tallest skyscraper, and the largest stake in Canary Wharf.

Of course, wealthy Arabs have had a love affair with London that predates sovereign wealth funds and World Cup bids. Many of the Arab elite were educated in Britain, including Qatar’s current emir, whose son was sent to board at Sherborne, the Dorset public school that now has a branch in Qatar. The attraction has its origins in the 1970s, according to a life peer and hedge fund director who has had extensive dealings in the Middle East. “Britain is considered jurisdictionally safe,” he said. “The Arabs trust the British judicial system and the tax and property laws, and the London property market is one of the strongest and safest long-term investments they can make. Obviously they’re keen to diversify their oil and gas income; wealthy Gulf Arabs are used to spending their summers here to avoid the blistering heat; they speak the language, and there’s a diaspora community in London, which they can trust, and communicate and integrate with.”

The difference between the 1970s and recent years is the professionalism of the approach of the QIA and its regional counterparts. Seraj Al Baker, chief executive of Mazaya Qatar, a property developer, said that these national investment houses now putting money into Britain “have everything in place to do it correctly: advanced [qualified] advisory and regulatory governors, who [verify] that an investment decision is based on the return of investment, risk factors, potential growth and many other suitable variables.” The strategy is not about buying up landmarks, he said. The investments make sense because “the UK today sounds much more attractive than any other European country, where the Continent is struggling with the euro and economic and sovereign debt crises.”

The Qatari elite has also invested heavily in London homes. The prime minister bought a £100m penthouse apartment in One Hyde Park—the giant glass and concrete block of Knightsbridge flats—which until recently was breathlessly dubbed the most expensive residential property in the world. The buyer of the £140m penthouse in the same building that took the record is widely thought to also be a member of the royal family. “Real estate in London may get sick but it doesn’t die,” said the emir in an interview with the Financial Times last October, a week before his state visit to Britain. “This is well known for us.”

  1. May 16, 2011

    Lohrasb Amjadi

    With all due respect to the author, Fifa is an acronym, and therefore by definition, should be spelled all in capitals, i.e., FIFA!

    Second, it is the sanctions applied to Iran, ruled by Mullahs which has allowed the Qatari regime to enjoy almost a monopoly on the gas field in the Persian Gulf; they won’t last forever.

  2. May 17, 2011

    Patric

    Brilliant article. Very interesting especially as our company is very involved in Qatar.

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Author

Sam Mendelson is former programme director at the Centre for the Study of Financial Innovation, and is a senior consultant at ESL & Network 


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