“Forget Terrorism”: The Real Reason Behind The Qatar Crisis Is Natural Gas

According to the official narrative, the reason for the latest Gulf crisis in which a coalition of Saudi-led states cut off diplomatic and economic ties with Qatar, is because – to everyone’s “stunned amazement” – Qatar was funding terrorists, and after Trump’s recent visit to Saudi Arabia in which he urged a crackdown on financial support of terrorism, and also following the FT’s report that Qatar has directly provided $1 billion in funding to Iran and al-Qaeda spinoffs, Saudi Arabia finally had had enough of its “rogue” neighbor, which in recent years had made ideologically unacceptable overtures toward both Shia Iran and Russia.

However, as often happens, the official narrative is traditionally a convenient smokescreen from the real underlying tensions.

The real reason behind the diplomatic fallout may be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar’s regional natural gas dominance.

Recall that many have speculated (with evidence going back as far back as 2012) that one of the reasons for the long-running Syria proxy war was nothing more complex than competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits, however as that would put Gazprom’s monopoly of European LNG supply in jeopardy, Russia had been firmly, and violently, against this strategy from the beginning and explains Putin’s firm support of the Assad regime and the Kremlin’s desire to prevent the replacement of the Syrian government with a puppet regime.

Note the purple line which traces the proposed Qatar-Turkey natural gas pipeline and note that all of the countries highlighted in red are part of a new coalition hastily put together after Turkey finally (in exchange for NATO’s acquiescence on Erdogan’s politically-motivated war with the PKK) agreed to allow the US to fly combat missions against ISIS targets from Incirlik. Now note which country along the purple line is not highlighted in red. That’s because Bashar al-Assad didn’t support the pipeline and now we’re seeing what happens when you’re a Mid-East strongman and you decide not to support something the US and Saudi Arabia want to get done.

Now, in a separate analysis, Bloomberg also debunks the “official narrative” behind the Gulf crisis and suggests that Saudi Arabia’s isolation of Qatar, “and the dispute’s long past and likely lingering future are best explained by natural gas.

The reasons for nat gas as the source of discord are numerous and start in 1995 “when the tiny desert peninsula was about to make its first shipment of liquid natural gas from the world’s largest reservoir. The offshore North Field, which provides virtually all of Qatar’s gas, is shared with Iran, Saudi Arabia’s hated rival.”

The result to Qatar’s finances was similar to the windfall that Saudi Arabia reaped from its vast crude oil wealth.

The wealth that followed turned Qatar into not just the world’s richest nation, with an annual per-capita income of $130,000, but also the world’s largest LNG exporter. The focus on gas set it apart from its oil producing neighbors in the Gulf Cooperation Council and allowed it to break from domination by Saudi Arabia, which in Monday’s statement of complaint described Qataris as an “extension of their brethren in the Kingdom” as it cut off diplomatic relations and closed the border.

In short, over the past two decades, Qatar become the single biggest natural gas powerhouse in the region, with only Russia’s Gazprom able to challenge Qatar’s influence in LNG exports.

To be sure, Qatar has shown a remarkable ability to shift its ideological allegiance, with the FT reporting as recently as 2013, that initially Qatar was a staunch supporter, backer and financier of the Syrian rebels, tasked to topple the Assad regime, a process which could culminate with the creation of the much maligned trans-Syrian pipeline.

The tiny gas-rich state of Qatar has spent as much as $3bn over the past two years supporting the rebellion in Syria, far exceeding any other government, but is now being nudged aside by Saudi Arabia as the prime source of arms to rebels.

The cost of Qatar’s intervention, its latest push to back an Arab revolt, amounts to a fraction of its international investment portfolio. But its financial support for the revolution that has turned into a vicious civil war dramatically overshadows western backing for the opposition.

As the years passed, Qatar grew to comprehend that Russia would not allow its pipeline to traverse Syria, and as a result it strategically pivoted in a pro-Russia direction, and as we showed yesterday, Qatar’s sovereign wealth fund agreed last year to invest $2.7 billion in Russia’s state-run Rosneft Oil, even as Qatar is host of the largest US military base in the region, US Central Command. This particular pivot may have also added to fears that Qatar was becoming a far more active supporter of a Russia-Iran-Syria axis in the region, its recent financial and ideological support of Iran notwithstanding.

As a result of the tiny nation’s growing financial and political “independence”, its neighbors grew increasingly frustrated and concerned: “Qatar used to be a kind of Saudi vassal state, but it used the autonomy that its gas wealth created to carve out an independent role for itself,” said Jim Krane, energy research fellow at Rice University’s Baker Institute, quoted by Bloomberg.

Furthermore, Qatar’s natural gas output has been “free from entanglement” – and political pressure – in the OPEC, the oil cartel that Saudi Arabia dominates.

“The rest of the region has been looking for an opportunity to clip Qatar’s wings.”

And, as Bloomberg adds, “that opportunity came with U.S. President Donald Trump’s recent visit to Saudi Arabia, when he called on “all nations of conscience” to isolate Iran. When Qatar disagreed publicly, in a statement the government later said was a product of hacking, the Saudi-led retribution followed.”

To be sure, in a series of tweets, Trump himself doubled down on the “official narraitve”, taking credit for Qatar’s isolation (perhaps forgetting that a US base is housed in the small nation).

So good to see the Saudi Arabia visit with the King and 50 countries already paying off. They said they would take a hard line on funding…

…extremism, and all reference was pointing to Qatar. Perhaps this will be the beginning of the end to the horror of terrorism!

The cynics may be forgiven to assume that if Trump is tweeting that the reason for Qatar’s isolation is “to end the horror of terrorism”, even as the US just signed a $100+ billion arms deal with the single biggest supporter of terrorism in the world, Saudi Arabia, then indeed the Trump-endorsed “narrative” is to be dismissed outright.

Which again brings us back to nat gas, where Qatar rapidly emerged as the dominant, and lowest cost producer at a time when its neighbors started demanding the commodity on their own, giving the tiny state all the leverage. As Bloomberg adds “demand for natural gas to produce electricity and power industry has been growing in the Gulf states. They’re having to resort to higher-cost LNG imports and exploring difficult domestic gas formations that are expensive to get out of the ground, according to the research. Qatar’s gas has the lowest extraction costs in the world.”

Of course, with financial wealth came the need to spread political infludence: ”

Qatar gas wealth enabled it to develop foreign policies that came to irritate its neighbors. It backed the Muslim Brotherhood in Egypt, Hamas in the Gaza Strip and armed factions opposed by the UAE or Saudi Arabia in Libya and Syria. Gas also paid for a global television network, Al Jazeera, which at various times has embarrassed or angered most Middle Eastern governments.

And, above all, “gas prompted Qatar to promote a regional policy of engagement with Shiite Iran to secure the source of its wealth.

And here the source of tension emerged: because as Steven Wright, Ph.D. Associate Professor at Qatar University told Bloomberg, “you can question why Qatar has been unwilling to supply its neighboring countries, making them gas poor,” said Wright, the academic, speaking by telephone from the Qatari capital Doha. “There probably was an expectation that Qatar would sell gas to them at a discount price.”

It did not, and instead it took a step backward in 2005, when Qatar declared a moratorium on the further development of the North Field that could have provided more gas for local export, adding to the frustrations of its neighbors.

Qatar said it needed to test how the field was responding to its exploitation, denying that it was bending to sensitivities in Iran, which had been much slower to draw gas from its side of the shared field. That two-year moratorium was lifted in April, a decade late, after Iran for the first time caught up with Qatar’s extraction rates.

As Qatar refused to yield, the resentment grew.

“People here are scratching their heads as to exactly what the Saudis expect Qatar to do,” said Gerd Nonneman, professor of international relations and Gulf studies at Georgetown University’s Doha campus. “They seem to want Qatar to cave in completely, but it won’t call the Muslim Brotherhood a terrorist organization, because it isn’t. And it isn’t going to excommunicate Iran, because that would jeopardize a relationship that is just too fundamental to Qatar’s economic development.

* * *

Whether nat gas is the source of the Qatari isolation will depend on the next steps by both Saudi Arabia and Iran. Saudi Arabia, along with the United Arab Emirates and Egypt – are all highly reliant on Qatari gas via pipeline and LNG.

According to Reuters, traders startled by the development, have begun to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the UAE. The UAE consumes 1.8 billion cubic feet/day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbor, leaving it doubly exposed to tit-for-tat measures, industry sources and traders said.

So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks.

With LNG markets in bearish mood and demand weak, the UAE could cope with Qatar suspending its two to three monthly LNG deliveries by calling on international markets, but Dolphin piped flows are too large to fully replace.

“A drop off in Dolphin deliveries would have a huge impact on LNG markets,” one trader monitoring developments said.

And since it all boils down to who has the most leverage as this latest regional “balance of power” crisis unfolds, Qatar could simply take the Mutual Assured Destruction route, and halt all pipeline shipments to its neighbors crippling both theirs, and its own, economy in the process, to find just where the point of “max pain” is located.

In Tweestorm, Trump Takes Credit For Qatar Crisis, Slams “FAKE MSM” For Trying To Stop His Tweeting

While starting a little later than usual, Trump unloaded his now traditional morning tweetstorm, where in a three tweet salvo the president first lashed out at the “FAKE MSM” accusing it of trying to stop him from tweeting and saying reporters “hate” his use of Twitter while criticizing election analysts that predicted he would lose. In a separate tweet he took credit for Monday night’s diplomatic crisis in which a Saudi-led alliance cut ties with Qatar, accusing it of being the region’s only source of terrorist funding.

In the first two related tweets, Trump said “The FAKE MSM is working so hard trying to get me not to use Social Media. They hate that I can get the honest and unfiltered message out,” followed by “Sorry folks, but if I would have relied on the Fake News of CNN, NBC, ABC, CBS, washpost or nytimes, I would have had ZERO chance winning WH,” he added shortly after.

The FAKE MSM is working so hard trying to get me not to use Social Media. They hate that I can get the honest and unfiltered message out.

Sorry folks, but if I would have relied on the Fake News of CNN, NBC, ABC, CBS, washpost or nytimes, I would have had ZERO chance winning WH

Addressing the topic of Trump’s use of social media, on Monday, White House deputy press secretary Sarah Huckabee Sanders said that no one in the White House vets Trump’s tweets, following recent reports from the WSJ that as part of Trump’s “war room” White House lawyers would seek to curb Trump’s twitter usage.

“I think social media for the President is extremely important. It gives him the ability to speak directly to the people without the bias of the media filtering those types of communications,” Sanders said.

In the aftermath of the latest London terrorist attack, Trump sent out a series of incendiary tweets Sunday and Monday criticizing the mayor of London after a terror attack in the city, and touting his “travel ban” on individuals from six majority-Muslim countries, in the process provoking a furious political response by UK politicians, some of whom demanded that Trump’s invitation to the UK later this year be rescinded.

Commenting on Trump’s tweeting, Axios reported this morning that after Trump’s tweets yesterday undermining his own Supreme Court case on the travel ban, his Republican allies on Capitol Hill and downtown sounded weary and irritated at day after day of self-inflicted wounds:

  • A top GOP operative said: “People are running out of patience. He’s in a very tenuous position, where it wouldn’t take a lot more bad news for things to come crumbling apart. Their complete inability to get ahead of the Russia story is so strange to people.”
  • The N.Y. Times’ Michael Schmidt, who broke the story that Comey had kept memos of his conversations with Trump, made the remarkable disclosure on “Morning Joe” last week that it was Trump’s twitter threat to Comey (“James Comey better hope that there are no ‘tapes’ of our conversations before he starts leaking to the press!”) “that motivated some of the folks that I was talking to … and led to them talking about how Trump told Comey to end the Flynn investigation. … [T]he tweets … loosen them up to talk about things

In a separate tweet, Trump appeared to take credit for the latest Gulf scandal in which many of Qatar’s neighbors cut ties with the wealthy nation, saying that there cannot be funding for “Radical Ideology.”

“During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!”

During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!

As some sarcastically pointed out in response to Trump’s tweet, “Saudi-led GCC effectively blockaded Qatar and isolated a country hosting US bases, as per the US President?”

Others echoed this sentiment, pointing out that “the President, w/o any diplomatic preparation, just supported a sort of a blockade on a country that hosts 1 of US largest military bases.”

The President, w/o any diplomatic preparation, just supported a sort of a blockade on a country that hosts 1 of US largest military bases

Don’t get me wrong, Qatar deserves much of this criticism, but the President tweet w/o any coordination w State & DOD is reckless

Trump on Twitter endorsing diplo/econ attack on Qatar. But our biggest mil base in region is in Qatar. Thought this through?

 

As a reminder, on Monday Bahrain, Egypt, Saudi Arabia and the United Arab Emirates on Monday announced they were cutting diplomatic ties with Qatar, citing what they say is Qatar’s support for extremist groups and its relations with Iran, which as the FT later reported may have been catalyzed by a $1 billion payment made by Qatar to Iran and various al-Qaeda spinoffs operating in the region. Some have alleged that the Saudi-led action was merely an attempt to scapegoat Qatar for ongoing support of terrorism in the region which as even Hillary Clinton noted previously includes not only Qatar but also America’s biggest arms customer, Saudi Arabia.

In response, Qatar has denied any support for militant groups and says the crisis is being fueled by “absolute fabrications” and is a “violation of its sovereignty.” In the aftermath of the scandal, U.S. officials downplayed the growing dissension between Qatar and the four other Arab nations, saying the dispute would not affect the fight against ISIS. As Bloomberg reported earlier, Kuwait is trying to mediate the crisis between Qatar and its Arab neighbors Qatar’s foreign minister said Tuesday.

In an interview with Doha-based satellite news network Al-Jazeera, Foreign Minister Sheikh Mohammed Bin Abdulrahman Al Thani said Kuwait’s ruler had asked Qatar’s emir to hold off on giving a speech about the crisis late Monday night.

Sheikh Tamim bin Hamad Al Thani “received a call from the emir of Kuwait asking him to postpone it in order to give time to solve the crisis,” Sheikh Mohammed said. Still, the minister struck a defiant tone, rejecting those “trying to impose their will on Qatar or intervene in its internal affairs.”

The state-run Kuwait News Agency reported Kuwaiti ruler Sheikh Sabah Al-Ahmad Al-Sabah spoke with Qatar’s emir Monday evening and urged him to give a chance to efforts that could ease tensions. The call came after a senior Saudi royal arrived in Kuwait with a message from the Saudi king. An Omani diplomat traveled to Qatar on Monday.

The Qatar Turmoil Fallout: Flights, Food, Football And More

Today’s stunning expulsion of Qatar from the Saudi “circle of friends” prompted some analysts to ask if in Qatar’s immediate futures is a departure from OPEC. In a note by Mitsubishi UFJ, the bank notes that “a full-fledged confrontation will, without any doubt, put pressure on the current compliance rate of OPEC members to the adherence of the 9-month agreement to cut production” and adds that “whilst Qatar’s pledge was only to cut 30,000 barrels to 628,000 barrels (as part of the OPEC agreement), there are potential risks of Qatar leaving OPEC which could significantly impact oil prices.”

That said, the political fallout for Qatar, and its remaining allies, could have broader implications than merely the collapse of the already dying oil cartel; as MUFJ notes “a rapprochement between Iran and Qatar would be a vast security risk to the U.S. military” while closure of land/sea/air contacts could have adverse “implications for the airlines, shipping and road freight industries.”

According to analysts and pundits cited by the BBC, the biggest threats facing the tiny but rich nation, with a population of 2.7 million, include food, flights, construction, people, trade and… football.

Flights

As reported overnight, Abu Dhabi’s Etihad Airways and Dubai’s Emirates are suspending all flights to and from Doha, starting from Tuesday morning. Both carriers operate four daily return flights to Doha. Budget carriers FlyDubai and Air Arabia are also cancelling routes to Doha, with other airlines, including Bahrain’s Gulf Air and Egyptair expected to follow suit. It comes after Saudi Arabia, the UAE, Bahrain and Egypt all said they would stop flights in and out of Qatar, and close their airspace to the country’s airline, Qatar Airways.

And it is Qatar’s flag carrier that risks being the biggest loser. Its flights to places like Dubai, Abu Dhabi, Riyadh and Cairo will stop. That is dozens of flights a day.

Qatar Airways has already said it is cancelling its services to Saudi. It said: “All customers booked on affected flights to and from the Kingdom of Saudi Arabia will be provided with alternative options, including the option of a full refund on any unused tickets and free rebooking to the nearest alternative Qatar Airways network destination.”

But a bigger, if not existential threat, to Qatar Airways is being banned from large chunks of airspace: according to a report by CAPA — Center for Aviation, “losing Saudi, Bahrain and UAE airspace would effectively ground Qatar Airways,” CAPA. That’s because Qatar actually has very little airspace relative to the size of the country.

“It is largely surrounded by Bahrain airspace (the Bahrain FIR), a slither on the south is managed by Saudi Arabia while the UAE is on the eastern border,” CAPA stated. While losing access to Saudi airspace will force Qatar Airways into the costly maneuver of rerouting its Africa-bound flights, losing access to Bahrainian airspace could be catastrophic because it almost completely encircles Qatar.

That said, while the various gulf nations are free to refuse landing rights, it remains unclear if Bahrain and the UAE can legally ban Qatar Airways from their airspace. As signatories to the International Air Services Transit Agreement, Bahrain the UAE can’t legally shut off its airspace to fellow signatory Qatar. Saudi Arabia, however, is not an IASTA member country and can legally shut Qatar Airways out.

On Monday, Flightradar24 reported that neighboring Bahrain notified pilots that it will limit flights to and from Qatar by Qatari aircraft through its airspace to a single air route. This means, even if Qatar Airways isn’t grounded, it will be subject to heavy air traffic congestion.

Qatar Airways’ growth has come through positioning itself as a hub airline, connecting Asia and Europe via Doha. “If a journey to Europe that used to take six hours now takes eight or nine because it has had to change routes, then that makes it far less appealing and passengers might look elsewhere,” says Ghanem Nuseibeh, director at advisory firm Cornerstone Global.

Food

While desert states in general struggle to grow food, food security is a particular issue for Qatar given the only way into the country is a single border with Saudi Arabia. Every day hundreds of trucks cross the border, and food is one of the main supplies. About 40% of Qatar’s food is believed to come via this route. That may no longer be an option after Saudi Arabia said it will close that border and when the trucks shipments end, Qatar will become reliant on air and sea freight.

“It will immediately cause inflation and that will directly affect normal Qatari people,” says Nuseibeh. “If things start costing significantly more, then you’re going to see the Qatari people putting increasing political pressure on the ruling family for either a change of leadership or a change of direction.” The Cornerstone analyst also pointed out that many poorer Qataris make daily or weekly trips to Saudi to do their grocery shopping as it is cheaper. Clearly a closed border means this will no longer be possible.

Football

The prospect of Qatar hosting the 2022 World Cup has plunged into the most serious doubt after the diplomatic scandal. According to the Guardian, the multibillion-dollar preparations to host the 2022 tournament, which involve building nine stadiums and huge infrastructure, is put into perspective by local reports that Qataris are so worried about the blockade that they are stocking up on food. The border with Saudi Arabia is the only road route into the country; Qatar relies on sea ports for its materials and the blockade of airspace is a huge logistical handicap to the country and its flagship airline, Qatar Airways.

The “supreme committee” responsible for building the 2022 World Cup facilities did not issue a public statement but a source acknowledged that the seriousness of the crisis is greater than any of the formidable challenges Qatar has faced since winning the vote in 2010 from Fifa’s now discredited executive committee. The tournament has been switched to the winter to avoid searing summer temperatures, a series of investigations has been held into strongly denied corruption allegations and there has been worldwide criticism of the country’s treatment of its migrant construction workers.

The English Football Association did not comment on the crisisbut the German FA (DFB) president, Reinhard Grindel, said he would discuss it with the German government and Uefa. Grindel promised to look for a “political solution” but said: “The football community worldwide should agree that … major tournaments should not be played in countries that actively support terror.”

Construction

A new port, a medical zone, a metro project and eight stadiums for the 2022 World Cup are just some of the major construction projects going on in Qatar right now. Key materials, including concrete and steel come in by ship but also by land from neighbouring Saudi. The closure of that border could, as with food – push up prices and lead to delays.

A materials shortage is already a threat that looms over Qatar’s construction industry. This risks making things worse. A lengthy closure of the airspace and land borders would “wreak havoc on the timeline and delivery” of the World Cup, says Kristian Ulrichsen, a Gulf expert at the US-based Baker Institute.

People

The move to end ties bans citizens from Saudi, Egypt, Bahrain, the United Arab Emirates, Libya and Yemen from travelling to Qatar, living there or passing through it, according to the Saudi government. People affected have 14 days to leave. Meanwhile Qataris will have the same amount of time to get out of Saudi Arabia, the UAE and Bahrain.

More significant though would be if Egypt issued a similar ban. According to one recent report about 180,000 Egyptians live in Qatar – with many involved in engineering, medicine and law as well as construction. A loss of that workforce would pose a problem for both local and international firms operating in the Gulf state.

Trade and business

Nervousness over the unprecedented situation left Qatar’s main share index more than 7% lower on Monday – its biggest drop in nearly a decade – amid worries about the investment climate. Many Gulf firms have a presence in Qatar, including in retail. Those stores are likely to to close, at least temporarily, believes Nuseibeh. Indeed, we’re already seeing business deals begin to crumble – major Saudi football team Al-Ahli has cancelled a sponsorship deal with Qatar Airways.

It’s A “Geopolitical Earthquake”: A Stunned World Responds After Saudi Alliance Cuts All Ties With Qatar

Virtually nobody saw it coming.

Late on Sunday night, the Saudi-led alliance of Gulf Arab states, Saudi Arabia, the UAE and Bahrain including Egypt, shocked the world when they announced they had severed ties and closed borders with one of the Gulf’s wealthiest, if smallest, neighbors Qatar, a (now former) member of the Gulf Cooperation Council in what we called a “geopolitical earthquake” and what Bloomberg dubbed an unprecedented move designed to punish one of the region’s financial superpowers for its ties with Iran and Islamist groups in the region.”

As we noted first last night, just days after president Trump left the region, a “geopolitical earthquake” took place in the Middle East as the rift between Qatar and other members of the Gulf Cooperation Council exploded with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “spreading chaos,” by funding terrorism and supporting Iran. Saudi Arabia, Bahrain, the United Arab Emirates and Egypt all said they will suspend air and sea travel to and from the Gulf emirate. Saudi Arabia will also shut land crossings with its neighbor, potentially depriving the emirate of imports through its only land border.

It was not immediately clear when the proposed measures would be implemented. Saudi Arabia said it would “begin immediate legal measures with friendly, sisterly countries and international companies to implement that measure as quickly as possible for all types of transit from and to the state of Qatar.”

Saudi Arabia cited Qatar’s support of “terrorist groups aiming to destabilize the region,” including the Muslim Brotherhood, Islamic State and al-Qaeda. It accused Qatar of supporting “Iranian-backed terrorist groups” operating in the kingdom’s eastern province as well as Bahrain.  Saudi Arabia, along with Bahrain and the U.A.E., gave Qatari diplomats 48 hours to leave.


Donald Trump meets Qatar’s ruler Sheikh Tamim bin Hamad al-Thani in Riyadh in May

Qatar responded by saying it regrets the “unjustified” decision of the gulf nations to sever ties and called the accusations “baseless”, saying they were part of a plan to “impose guardianship on the state, which in itself is a violation of sovereignty.”

The first hints that not all is well emerged just three days after Trump left Riyadh as part of his first international trip in May – during which the US president and Saudi King Salman singled out Iran as the world’s main sponsor of terrorism – when the state-run Qatar News Agency carried comments by Qatari ruler Sheikh Tamim bin Hamad Al Thani criticizing mounting anti-Iran sentiment. Officials quickly deleted the comments, blamed them on hackers and appealed for calm, however it was too late and Saudi and U.A.E. media outlets then launched verbal assaults against Qatar, which intensified after Sheikh Tamim’s phone call with Iranian President Hassan Rouhani over the weekend in apparent defiance of Saudi criticism.

“Qatar is right in the middle of the GCC countries and it has tried to pursue an independent foreign policy,” said Peter Sluglett, director of the Middle East Institute of the National University of Singapore quoted by Bloomberg. “The idea is to bring Qatar to heel.”

Qatar’s geopolitical importance can not be underscored, not only for its vast wealth, but because Qatar is one of the biggest producer of liquefied natural gas (and arguably the source of the 6 year long Syrian proxy war, due to Qatar’s documented desires to pass a natgas pipeline into Europe through Syria), and also hosts the forward headquarters of CENTCOM, the U.S. military’s central command in the Middle East.

And speaking of Qatar’s wealth, while the country has a population smaller than Houston, it has one of the world’s largest sovereign wealth funds with over $335 billion investments in companies from Volkswagen, to Rosneft, Barclays, Credit Suisse and Tiffany’s.

The economic fallout loomed immediately, as Abu Dhabi’s state-owned Ethihad Airways, Dubai’s Emirates Airline and budget carrier Flydubai said they would suspend all flights to and from Doha from Tuesday morning until further notice. Qatar Airways said on its official website it had suspended all flights to Saudi Arabia.

* * *

What prompted the surprising move by the Gulf-states?

According to some, emboldened by “warmer” ties with the US under President Trump, the Saudi-led alliance is seeking to stamp out any opposition to forming a united front against Shiite-ruled Iran. And while Monday’s escalation is unlikely to hurt energy exports from the Gulf, it threatens to have far-reaching effects on Qatar according to Bloomberg.

“There are going to be implications for people, for travelers, for business people. More than that, it brings the geopolitical risks into perspective,” Tarek Fadlallah, the chief executive officer of Nomura Asset Management Middle East, said in an interview to Bloomberg Television. “Since this is an unprecedented move, it is very difficult to see how it plays out.”

The stunned confusion explains the sudden, adverse reaction in Qatar assets, which saw the Qatar QE Index of stocks plunge tumble 8%, the most since 2009 to the lowest since January 2016…

… while Dubai’s index fell 1.2%. Separately, Qatar bond yields surged in the worst day in 7 months as Qatar CDS spiked to 2 month highs.

There were also fireworks in the FX arena, where forward contracts for the Qatari riyal soared by over 200bps  to 4.05%, suggesting a currency devaluation may be imminent as a result of the economic blockade.

While Brent initially rose as much as 1.6% to $50.74 a barrel, it has since pared all gains as concerns that the tenuous OPEC alliance may be about to collapse, resulting in a fresh flood of crude in the market. That said, keep an eye on the Straits of Hormuz: heightened tensions between Saudi Arabia, the world’s biggest crude exporter, and Iran typically draw market attention to the tight waterway through which about 30% of the seaborne oil trade passes.

Politicians, largely behind the curve, chimed in and U.S. Secretary of State Rex Tillerson said it’s important that the Gulf states remain unified and encouraged the various parties to address their differences. Speaking at a news conference in Sydney, he said the crisis won’t undermine the fight on terrorism. “What we’re seeing is a growing list of some irritants in the region that have been there for some time,” Tillerson said. “Obviously they’ve now bubbled up to a level that countries decided they needed to take action in an effort to have those differences addressed.”

Making the matter a particular headache for the US State Department is that all five countries involved in the dispute are U.S. allies, and Qatar has committed $35 billion to invest in American assets. The Qatar Investment Authority, the country’s sovereign wealth fund, plans to open an office in the Silicon Valley.

Then there is the issue of the 2022 World Cup: As Reuters notes, “the diplomatic broadside threatens the international prestige of Qatar, which hosts a large U.S. military base and is set to host the 2022 World Cup. It has for years presented itself as a mediator and power broker for the region’s many disputes. Kristian Ulrichsen, a Gulf expert at the U.S-based Baker Institute, said if Qatar’s land borders and air space were closed for any length of time “it would wreak havoc on the timeline and delivery” of the World Cup.”

* * *

Not the First Time

As Bloomberg reminds us, this is not the first time Qatar has been singled out and disagreements among the six GCC members have flared in the past; tensions with Qatar could be traced to the mid-1990s when Al Jazeera television was launched from Doha, providing a platform for Arab dissidents to criticize autocratic governments in the region except Qatar’s.

The Gulf nation also played a key role in supporting anti-regime movements during the Arab Spring, acting against Saudi and U.A.E. interests by bankrolling the Muslim Brotherhood’s government in Egypt. Qatar also hosts members of Hamas’s exiled leadership and maintains ties with Iran.

In 2014, Saudi Arabia, the U.A.E. and Bahrain temporarily withdrew their ambassadors from Qatar. That dispute centered on Egypt following the army-led ouster of Islamist President Mohamed Mursi, a Muslim  Brotherhood leader. This time the measures are more severe than during the 2014 incident, when Saudi Arabia, Bahrain and the UAE withdrew their ambassadors from Doha, again alleging Qatari support for militant groups. At that time, travel links were maintained and Qataris were not expelled.

In 2011, Qatar used its media and political clout to support long-repressed Islamists in the “Arab Spring” uprisings in several Arab countries. Muslim Brotherhood groups allied to Doha are now mostly on the backfoot in the region, especially after a 2013 military takeover in Egypt ousted the elected Islamist president.

The former army chief and now president, Abdel Fattah al-Sisi, along with the new government’s allies in Saudi Arabia and the UAE, blacklist the Brotherhood as a terrorist organization. Egypt, the Arab world’s most populous nation, said on its state news agency that Qatar’s policy “threatens Arab national security and sows the seeds of strife and division within Arab societies according to a deliberate plan aimed at the unity and interests of the Arab nation.”

The crisis comes just weeks after Moody’s cut Qatar’s credit rating by one level to Aa3, the fourth-highest investment grade, citing uncertainty over its economic growth model.

“Qatar is economically and socially most vulnerable from food and other non-energy imports,” said Paul Sullivan, a Middle East expert at Georgetown University. “If there is a true blockade, this could be a big problem for them. Rules stopping citizens of the U.A.E., Saudi Arabia and Bahrain from even transiting via Qatar could cause significant disruptions.”

Iran also chimed in, with an official saying the Gulf crisis is a fallout from Trump Saudi visit: “Rift and crumbling of unity” among Gulf nations “first result of the sword dance in Riyadh,” Hamid Aboutalebi, a deputy chief of staff for political affairs, said on Twitter.  The comments were a reference to Donald Trump’s Saudi visit last month, when he took part in a ceremonial sword dance with Saudi officials

“Time for sanctions has ended, cutting diplomatic ties, closing borders, blockading nations” is not the way to end crisis, the Iranian added and said that Saudi, UAE, Egypt, Bahrain need to choose “democracy at home and talks in the region.”

A Russian envoy in Vienna, Vladimir Voronkov, was cited by RIA saying that that tensions between Qatar, Middle Eastern nations are a sign of political destabilization in region.

Finally, with confusion still rampant over last night’s events, here courtesy of Bloomberg is a recap of key reactions by various analysts and investors who believe the damaged diplomatic ties will lead to increased volatility and pessimism toward Middle Eastern assets. Here are some views on the move by market participants:

Tarek Fadlallah, chief executive officer of Nomura Asset Management Middle East:

  • “Clearly this is going to rattle investors, mostly foreign investors, that have to play a key role in regulation reform and investment program.”
  • “Political uncertainty, particularly given recent headlines on Trump’s visit, make investors wary of investing not just in Qatar specifically, but in region more broadly”
  • Expect spike in volatility, followed by downward move in markets in general

Marwan Shurrab, head of high net worth and retail equities brokerage at Al Ramz in Dubai

  • Sees volatility increasing in the very short-term
  • Investors will watch for any kind of announcement, or further clarification coming from governments or companies
  • Investors will assess which companies have the biggest exposure to the region and therefore, have potential revenues at risk
  • Some long-term investors could find opportunities if any signal of potential recovery

Majd Dola, senior research analyst at Al Ramz Capital in Dubai

  • Many U.A.E. companies have operational exposure to Qatar ranging from mid- to-large size projects, sees some “negative economic impact on already struggling companies”
  • Notes Drake & Scull has 500m dirhams worth of projects in Qatar; Arabtec has two joint ventures, pending legal cases, and receivables; DAMAC announced a 500m-dirham tower in Doha recently
  • While hard to quantify the direct impact on those companies, it won’t be positive in short- term
  • “If we take this one step further, Qatar is set to host World Cup 2020, which created a massive potential pipeline for U.A.E. developers and contractors”
  • Qatar investment funds might also be under pressure to liquidate U.A.E. holdings
  • Companies like DXBE (11% owned by Qatar investment) might face further pressure if things moved further in negative direction

Abdul Kadir Hussain, head of fixed income asset management at Arqaam Capital Ltd.

  • Expects some initial impact on Qatari bonds.
  • “A lot of them are held in hold-to-maturity books so I don’t expect a major pullback.”
  • Still, expects a small narrowing of bond spreads
  • Doesn’t expect move to affect bonds across the GCC at this point since they are “relatively cheap” for their ratings
  • Given the lull in market due to summer and Ramadan, technicals are probably supportive in terms of new issuance

Peter Sluglett, director of the Middle East Institute of the National University of Singapore

  • “Desire of the Trump administration is that nobody in that region should have any sort of relations with Iran. Qatar is right in the middle of the GCC countries and it has tried to pursue an independent foreign policy. So the idea is to bring Qatar to heel”

As for the biggest question of all: is Qatar’s ambition for a trans-Syrian nat gas pipeline now officially over, the jury is still out…

Saudi Arabia Shuts Local Al Jazeera Office For “Promoting Plots Of Terrorist Groups”

Shortly after Saudi Arabia announced it had cut ties with Qatar over Doha’s alleged support for Islamists and Iran, on Monday the kingdom said it had also shut the local office of Al Jazeera, Qatar’s influential satellite channel, and had revokved its license. Riyadh views Al Jazeera as critical of its government, but the outlet says it is an independent news service giving a voice to everyone in the region. The move was announced by state television.

From Saudi press agency SPA, google translated:

The Ministry of Culture and Information closed Al-Jazeera’s office in Saudi Arabia and withdrew its license.

The move comes after Al-Jazeera has promoted the plots of terrorist groups, supported and supported the Houthi militias in Yemen, and tried to break the Saudi internal ranks by inciting them to leave the country and harm the sovereignty of Saudi Arabia.

* * *

For readers confused about the ongoing spat between Saudi alliance and Qatar, Bloomberg has released a convenient Q&A which summarizes the key issues in the latest diplomatic spat:

Saudi Arabia and three of its Arab allies cut diplomatic ties with Qatar on Monday, furious with what they see as the tiny emirate’s tolerant attitude toward Iran and Islamist groups such as the Muslim Brotherhood. The moves by the Saudis, Bahrain, the U.A.E. and Egypt came soon after U.S. President Donald Trump visited the region and joined Saudi Arabia in lambasting Iran for sponsoring terrorism from Syria to Yemen.

1. What’s caused the diplomatic rift?

It’s mostly, but not all, about Iran. The spark for this flare-up was a report by the state-run Qatar News Agency that carried comments by Qatar ruler Sheikh Tamim bin Hamad Al Thani criticizing mounting anti-Iran sentiment. Qatari officials quickly deleted the comments, blamed them on hackers and appealed for calm. Criticism by Saudi and U.A.E. media outlets escalated after Sheikh Tamim phoned Iranian President Hassan Rouhani over the weekend in apparent defiance of Saudi criticism.

2. So this is a Sunni vs Shiite tension?

Partly. The Shiite-led Islamic Republic of Iran is Sunni-led Saudi Arabia’s main regional rival. The two major oil exporters are on opposite sides of conflicts from Syria to Iraq. In taking diplomatic action, the Saudis accused Qatar of supporting “Iranian-backed terrorist groups” operating in the kingdom’s eastern province as well as Bahrain. But they also
cited Qatar’s support of “terrorist groups aiming to destabilize the region,” including the Muslim Brotherhood, Islamic State and al-Qaeda.

3. Why is the spat taking place now?

The temperature noticeably rose following Trump’s visit. Days after Trump and Saudi King Salman bin Abdulaziz singled out Iran as the world’s main sponsor of terrorism, Saudi Arabia and the U.A.E. accused Qatar of trying to undermine efforts to isolate the Islamic Republic. Newspapers, clerics and even celebrities attacked Qatar’s Sheikh Tamim; the Riyadh-based Al-Jazirah daily declared that he stabbed his neighbors with Iran’s dagger.

4. What do analysts say?

Emboldened by closer U.S. ties under Trump, the Saudis and the U.A.E. are seeking to crush any opposition that could weaken a united front against Iranian influence in the Middle East. The two countries are also putting pressure on Qatar to end its support for Islamist movements such as the Muslim Brotherhood and the Palestinian Hamas group that rules the Gaza Strip.

5. What does Iran say?

Before the latest confrontation, Rouhani, a moderate cleric who was re-elected to a second, four-year term last month, said his country is ready for talks to end the feuding. At the same time, though, Iran’s Supreme Leader Ayatollah Ali Khamenei, who wields more power than Rouhani, has said the Saudi regime faces certain demise for its policies in Yemen. In 2015, Saudi Arabia assembled a coalition of Sunni-led countries to fight Yemeni Shiite rebels loyal to Iran after they toppled a Gulf-backed government. The war there continues.

6. Where else are Saudi and Iran facing off?

They are locked in proxy wars on opposite sides of conflicts across the region from Syria to Yemen. Suspicions that cyberattacks on government agencies in Saudi Arabia emanated from Iran threatened to elevate tensions between the two powers in late 2016. Earlier that year, after Saudi Arabia executed a prominent Shiite cleric, Iranian protesters set the Saudi embassy in Tehran on fire, and Saudi Arabia severed diplomatic relations with Iran.

7. Are disagreements with Qatar anything new?

In 2014, Saudi Arabia, the U.A.E. and Bahrain temporarily withdrew their ambassadors from Qatar. That dispute centered on Egypt, where Qatar had supported a Muslim Brotherhood government while the Saudis and U.A.E. bankrolled its army-led overthrow. Qatar also hosts Hamas’s exiled leadership as well as Taliban officials. Analysts say Saudi and its allies want to show Qatar, a country of 2.6 million residents, that it is punching above its strategic weight.

8. Isn’t that what Qatar tries to do?

Less so now than in the past. During the Arab Spring uprisings Qatar, uniquely among Middle Eastern governments, broadly supported groups agitating for change — as long as it was outside the Persian Gulf. Muslim Brotherhood groups have mostly foundered since, and Qatar reeled back its support for them in 2014 when faced with diplomatic threats from its Gulf neighbors. Qatar also aspires to be the region’s indispensable mediator. Its leaders have connections with a wide range of parties, such as warring tribes in Libya as well as both the U.S. and the Taliban. On the other hand, by choosing sides during the Arab Spring revolts, it weakened its standing as a neutral party.

9. What else is Qatar known for?

It’s the world’s biggest exporter of liquefied natural gas, has the world’s highest per-capita income ($129,700 a year), will hold the 2022 FIFA World Cup and hosts the Al Jazeera television channel. When Saudi Arabia ejected the U.S. air operations center for the region in 2003, Qatar took it on. Today the emirate hosts 10,000 U.S. troops and is home to the forward headquarters of CENTCOM, the U.S. military’s central command in the Middle East. The nation’s $335 billion sovereign wealth fund holds stakes in companies from Barclays Plc and Credit Suisse Group.

10. What are the repercussions for markets?

Any dispute in the region will make oil markets nervous. Internal disputes among the Gulf countries could limit their appeal to foreign investors. Even before Trump’s visit, Citigroup said rising tensions between the U.S. and Iran could also have “significant”’ implications for oil and financial markets. Qatar stocks plunged 7.3 percent by the market close on Monday and dollar bonds tumbled, with yields on bonds due in 2026 increasing 23 basis points.  Oil erased earlier gains, however, because the diplomatic clash was seen as having limited impact on OPEC policy.

11. Why might this dispute be different?

“Internal differences and disagreements are nothing new, but what is interesting is the timing and the somewhat unprecedented level of pressure,” says Mehran Kamrava, director of the Center for International and Regional Studies at Georgetown University in Qatar, referring to the recent Trump visit. That suggests that “Saudi Arabia and the U.A.E. want nothing but complete submission from Qatar.’’ If Qatar resists, that will further destabilize an already volatile region. For one, the faceoff also encumbers U.S. efforts to fight Islamic State: Qatar is home to bases central to the U.S.-led air offensive.

Saudi Arabia, Egypt, UAE, & Bahrain Cut Diplomatic Ties, Shut All Borders With Qatar

Just days after president Trump left the region, a geopolitical earthquake is taking place in the Middle East tonight as the rift between Qatar and other members of the (likely extinct) Gulf Cooperation Council explodes with Bahrain, UAE, Saudi Arabia, and Egypt cutting all diplomatic ties with Qatar accusing it of “speading chaos,” by funding terrorism and supporting Iran.

The dispute between Qatar and the Gulf’s Arab countries started over a purported hack of Qatar’s state-run news agency. It has spiraled since, and appears to be climaxing now… just days after President Trump left the region.

As Al Arabiya reports, Bahrain has announced it is cutting diplomatic ties with Qatar, according to a statement carried on Bahrain News Agency.

The statement on Monday morning said Bahrain decided to sever ties with its neighbor “on the insistence of the State of Qatar to continue destabilizing the security and stability of the Kingdom of Bahrain and to intervene in its affairs”.

The statement also said Qatar’s incitement of the media and supporting of terrorist activities and financing groups linked to Iran were reasons behind the decision.

“(Qatar has) spread chaos in Bahrain in flagrant violation of all agreements and covenants and principles of international law Without regard to values, law or morals or consideration of the principles of good neighborliness or commitment to the constants of Gulf relations and the denial of all previous commitments,” the statement read.

Qatari citizens have 14 days to leave Bahraini territories while Qatari diplomats were given 48 hours to leave the country after being expelled. Meanwhile, Bahrain has also banned all of its citizens from visiting or residing in Qatar after the severance of ties.

Additionally, Bahrain has has closed both air and sea borders with Qatar.

Saudi Arabia then confirmed the same – cutting ties and shutting down all sea, airspace, and land crossings with Qatar as well as dissolving Qatar’s role in the Saudi-led coalition fighting against Yemen. Emirates, Etihad, Saudia, Gulf Air, and Egypt Air are no longer allowed to fly to Qatar and Saudi Arabia is providinhg facilities, services to Qatari pilgrims

Egypt then followed, confirming it was cutting diplomatic ties with

Then UAE confirmed it would cut ties, shut down all sky, water, and land crossings, and expel all Qataris within 48 hours.

The Maldives also just cut diplomatic ties with Qatar.

All of this happens within 24 hours of Iran calling out ‘The West’ for ignoring the real sponsors of terrorism around the world and UK’s Labor party leader outright name-shaming Sauid Arabia’s funding of terrorism.

Qatari officials did not immediately respond to a request for comment.

As a reminder, documents obtained by Middle East Eye show strategic alliance includes pledge by Ankara to protect Gulf state from external threats…

In December 2015, Turkey announced, to the surprise of many, that it planned to establish a military base in Qatar. Behind the scenes, the agreement was about forming a major strategic alliance.

After a 100-year hiatus, Turkey is militarily back in the Gulf and ramping up its presence overseas. In January, Ankara announced that it would also establish a military base in Somalia.

Specific details about the Qatar agreement, which Turkey described as an alliance in the face of “common enemies”, remain scant, but Middle East Eye has acquired copies of the agreements, as well as further details, which include a secret pledge by Ankara to protect Qatar from external threats.

Did Qatar just get scapegoated in the ‘war on terror’? One thing seems clear, support for a Syrian gas pipeline will be dwindling and with it the need for a Syrian war.

Notably, this raises further doubts about OPEC’s stability. As Bloomberg notes, while Middle East ructions have historically added risk premia to oil prices, discord here could theoretically put downward pressure on prices as OPEC members struggle to maintain unity and compliance on production cuts.

The Shocking Trigger Behind Today’s Gulf Scandal: Qatar Paid Al-Qaeda, Iran $1BN In Hostage Deal

The FT has unveiled what its believes is the key trigger behind the shocking overnight collapse in diplomatic relations between Qatar and its Gulf neighbors. According to the FT, the catalyst that forced the Saudis and their allies to unveil the cut in diplomatic and economic ties, is that Qatar allegedly paid up to $1 billion to Iran and al-Qaeda affiliates “to release members of the Gulf state’s royal family who were kidnapped in Iraq while on a hunting trip, according to people involved in the hostage deal“; the secret deal was allegedly one of the triggers behind Gulf states’ dramatic decision to cut ties with Doha.

The details of the payoff: “around $700m was paid both to Iranian figures and the regional Shia militias they support, according to regional government officials. They added that $200m to $300m went to Islamist groups in Syria, most of that to Tahrir al-Sham, a group with links to al-Qaeda.

A regional Arab official said the total paid to jihadi groups was closer to $300m. “So, if you add that up to the other $700m they paid to Iran and its proxies, that means Qatar actually spent about a billion dollars on this crazy deal,” he said.

* * *

The Iraqi Shia militia commanders in Iraq, all from hardline Iranian-backed groups, said that, to their knowledge, Iran had obtained around $400m after giving them a payment they would not disclose. They agreed to share some details because they were unhappy about their share of the payment.

“They [the Iranians] took the lion’s share,” said a member of one of the Iranian-backed Shia militias in Iraq. “That’s caused some of us to be frustrated, because that was not the deal.”

The “ransom payments are the straw that broke the camel’s back,” said one Gulf observer.

Not to be confused with the Obama administration secretly airlifting crates full of $1.7 billion in cash to Tehran to release five US hostages held by Iran, the FT writes that commanders of militant groups and government officials in the region told the Financial Times that “Doha spent the money in a transaction that secured the release of 26 members of a Qatari hunting party in southern Iraq and about 50 militants captured by jihadis in Syria.”

By their telling, Qatar paid off two of the most frequently blacklisted forces of the Middle East in one fell swoop: an al-Qaeda affiliate fighting in Syria and Iranian security officials.

If nothing else, at least Qatar got a better bang for the physical buck, at $38 million per hostage, compared to the $340 million the Obama administration paid for the five US hostages released by Tehran.

While there is no official evidence, the FT adds that the deal, which was concluded in April, heightened concerns among Qatar’s neighbours about the small gas-rich state’s role in a region plagued by conflict and bitter rivalries, which however is at least somewhat confusing: after all it was well-known since the Podesta emails that even the US state department had confirmed that both Saudi Arabia and Qatar were the two primary funders of the Islamic State and various Jihidaist groups in the region. Recall from our October 2016 post:

In a leaked email sent on August 17, 2014 by Hillary Clinton to her current campaign manager, John Podesta, who back then was counselor to Barack Obama, she admitted that Qatar and Saudi Arabia “are providing clandestine financial and logistic support to ISIL and other radical Sunni groups in the region.”

The email, which was sent just days after the US launched it “temporary” air campaign in Syria, which has now extended over two years, represents an eight-point plan laying out ideas how to defeat ISIS in Iraq and Syria. Clinton’s email said that the United States should engage in “military operations against these very irregular but determined forces” by “making proper use of clandestine/special operations resources, in coordination with airpower, and established local allies” such as Kurdish forces.

Having confirmed the role of Qatar and Saudi Arabia, Hillary then states that “we need to use our diplomatic and more traditional intelligence assets to bring pressure on the governments of Qatar and Saudi Arabia” and recommends to step up US commitment to the Kurdish Regional Government or KRG. “The Qataris and Saudis will be put in a position of balancing policy between their ongoing competition to dominate the Sunni world and the consequences of serious U.S. pressure.  By the same token, the threat of similar, realistic U.S. operations will serve to assist moderate forces in Libya, Lebanon, and even Jordan, where insurgents are increasingly fascinated by the ISIL success in Iraq.”

In any case, last year’s revalation appears to have been “news” to Saudi Arabia – the other named source of funding to ISIS, and on Monday, Saudi Arabia, Egypt, the United Arab Emirates and Bahrain took the extraordinary step of cutting off diplomatic ties and transport links to Qatar, alleging the country fuels extremism and terrorism.“

The FT further notes that “Doha denies it backs terrorist groups and dismissed the blockade by its neighbours as “founded on allegations that have no basis in fact”. It said it could not immediately respond to a request for comment on the hostage deal. But a person close to the Qatari government acknowledged that “payments” were made. The person was unaware of the amounts or where the money went.”

Doha has a history of reaching out to all kinds of controversial groups, from rebels in Sudan’s Darfur region to the Taliban in Afghanistan and Hamas in Gaza. Qatar touts itself as a neutral player that can act as an intermediary in regional conflicts. But its critics, notably Saudi Arabia and the UAE, allege it also uses such interventions to play both sides and fund radical Islamist groups, most recently in Libya and Syria. And to Doha’s critics, the hostage deal was further evidence of that role.

In an amusing twist, one FT source – a Syrian opposition figure who has worked with an al-Qaeda mediator on hostage swaps in Syria. – adds that “if you want to know how Qatar funds jihadis, look no further than the hostage deal…. And this isn’t the first — it is one of a series since the beginning of the war.”

Those who spoke to the FT said the deal highlighted how Qatar has allegedly used hostage payments to bankroll jihadis in Syria. But to its Gulf neighbours, the biggest issue is likely to be the fact that Doha could have paid off their main regional rival, Iran, which they accuse of fuelling conflicts in the Arab world.

This particular saga began when an Iranian-backed Iraqi Shia militia, known as Kata’eb Hizbollah, kidnapped the Qataris in December 2015. Three Iraqi militia leaders say the hostages were held in Iran.

Kata’eb Hizbollah is an Iraqi group but it is seen as having links with Iran’s main regional proxy, Hizbollah, the Lebanese militant group. The latter is helping Iran back Bashar al-Assad, the Syrian president, in his country’s six-year conflict.

It gets better: the hostage transaction was also linked to a separate agreement, signed in March 2017, to facilitate the evacuation of four mutually besieged towns in Syria — two surrounded by jihadi forces and two besieged by Shia militias — according to the FT’s sources: “Syrian rebels and diplomats.” One western diplomat said the arrangement provided Qatar the “cover” to finance the hostage deal.

“Iran and Qatar had long been looking for a cover to do this [hostage] deal, and they finally found it,” he said.

According to two opposition figures with close contact with the groups paid, Qatar used the evacuation arrangement to pay $120-$140m to Tahrir al-Sham. Another $80m, they said, went to the Islamist group Ahrar al-Sham. “The Qataris pay anyone and everyone, to what end? They have only brought about our ruin,” said a Syrian rebel commander, who gave details about the payments but asked not to be identified.

* * *

Going back to our analogy of Obama dumping crates of cash – anywhere between $400 million and $1.7 billion – in Iran, it appears this time was not that different:

Another confusing chapter of the deal is that Haidar al-Abadi, Iraqi prime minister, said in April his government had seized hundreds of millions of dollars, which Iraqi officials said arrived on Qatari planes “illegally”. It is not clear if this is money is part of the sums mentioned above, or an additional amount.

The punchline: “The money all came in suitcases, can you imagine this?” said one senior official.

And while Qatar has now been scapegoated for funding Al-Qaeda and ISIS, something most have known for years, a question emerges: does this mean that Saudi Arabia – another chronic supporter of terrorism in the region and around the globe – is now off the hook. That would be problematic in light of Saudi Arabia’s own on the record admission that it itself created Daesh, or ISIS, which however it allegedly did only in response to Obama’s disastrous policy in the region. From the Financial Times:

After the Iraqi city of Mosul fell to a lightning Isis offensive in 2014, even the late Prince Saud al-Faisal, the respected Saudi foreign minister, remonstrated with John Kerry, US secretary of state, thatDaesh [Isis] is our [Sunni] response to your support for the Da’wa” — the Tehran-aligned Shia Islamist ruling party of Iraq.