The small Country that will become even richer, due to the war in Ukraine

With less than 3 million inhabitants, Qatar has become a crucial country for Europe in its frantic quest to replace Russian energy imports.

Along with Australia, this small country in the Middle East is the largest exporter of liquefied natural gas (LNG) in the world and a potential commercial ally for the countries of the European Union, which so far cover nearly 40% of their gas needs from the Russian market.

This energy dependence between Europe and Russia had not been a big problem until the Kremlin decided to invade Ukraine in February, making the commercial relationship increasingly unsustainable.

Europe has already started to sign long-term agreements to increase gas imports from other countries, but that is not a sufficient solution to offset the potential loss of Russian gas imports.

Take the case of Germany, where 55% of the gas it consumes comes from Russia.

Economy Minister Robert Habeck recently called for unprecedented measures to reduce dependence and counteract what he sees as “energy blackmail by the Kremlin.”

It is not enough that Germany receives ships with liquefied natural gas (LNG) from other latitudes, since it needs to build the facilities to process it, a plan that may take three to five years, according to government calculations.

Despite the logistical difficulties and given the urgency of the circumstances, Habeck has said: “We have to try the impracticable.”

And the country put the accelerator to the bottom with the approval of resources to obtain floating LNG terminals, which have the capacity to receive the product from places as far away as the US or Qatar.

This is how Qatar enters the negotiating table in a good position after the start of the war, just at a time when it had already made significant investments to increase gas production and infrastructure.

German Economy Minister Robert Habeck is seeking new gas contracts.

“There is certainly an opportunity for Qatar,” Karen Young, director of the Economics and Energy Program at the Middle East Institute think tank, in Washington DC tells GLM.

Expansion plans

The country had plans to expand export capacity by about 60% by 2027 before the war started, so the medium-term opportunity to supply LNG to Europe “will be a boon, both economically, if the deals go through set at current prices, and politically,” he says.

Veing a semi-constitutional monarchy, with the emir as the head of state, and the prime minister as the head of government, Qatar does not have to go through complex decision-making processes or gain political backing from different parties.

The country’s political system has been considered by Western organizations as an “authoritarian regime”, a description that the Qatari government rejects.

Amnesty International has denounced practices it considers to be “exploitation and abuse” of migrant workers.

Qatar’s ambitions

LNG is a form of refrigerated gas that is priced higher than natural gas, but has one big advantage: it is easier to transport. It can be loaded on ships and does not require the construction of huge gas pipelines with long-term investments of millions.

With the ambition to grow its business, in 2019 Qatar announced plans to increase its LNG exports by 64% by 2027.

Gas production in Qatar.

Under that plan, the state-owned firm Qatar gas has struck a deal to expand the North Field reserve, an offshore behemoth that extends into Iranian waters and one of the world’s largest natural gas deposits.

The expansion would allow the country to increase its LNG production capacity from 77 million to 110 million tons by 2025, just as demand for the product continues to rise.

Not only Germany has been in talks with Qatar to secure additional LNG imports. So have several of your neighbors.

The urgency to obtain new energy sources has become more acute in recent weeks after Russia cut off the supply to Poland and Bulgaria in the midst of the war offensive.

A rich country getting richer

With more wealth per capita than Switzerland and the United States, Qatar appears to be on the perfect path to becoming even richer.

Is that the increase in demand is also growing in other parts of the planet.

Prime Minister Khalid bin Khalifa bin Abdul Aziz Al Thani took office in January 2020.

Currently, almost 80% of Qatar’s LNG exports go to Asia, with South Korea, India, China and Japan being the main buyers.

And by market volume, China became the largest importer of LNG in the world after signing an agreement with Qatar for a period of 15 years.

With the growing demand from Asian and European markets, experts say that Qatar has all the conditions to win profitable contracts.

Although not everything will be immediate. State giant Qatar Energy is pumping at full capacity and most shipments are being sold under multi-year contracts that Doha says it will not cancel to divert supplies to Europe.

Still, some firms like Morgan Stanley expect Europe’s decision to import gas from other nations to drive a 60% rise in global LNG consumption by 2030.

As long as that scenario continues to take shape, Qatar’s economy would grow more than 4% this year, according to Citigroup.

This is the biggest jump since 2015.