December 05, 2018
6 months

Why in news?

Qatar recently announced that it was walking away from the Organisation of the Petroleum Exporting Countries (OPEC).

What is OPEC?

  • OPEC was initially founded in 1960 by Saudi Arabia, Iraq, Iran, Kuwait, and Venezuela. Qatar joined in 1961.
  • OPEC is now a group of 15 countries that produce about 45% of the world’s oil and contain over 80% of its “proven” reserves.
  • OPEC has a very big influence on global oil prices.
  • It plays a crucial role in determining the economic health of many countries, including India.

What is the rationale behind Qatar's decision?

  • Qatar is among the world’s smallest countries by area.
  • However, it is the richest in terms of per capita gross national income ($128,000 according to World Bank figures).
  • Qatar’s riches are due to its natural gas reserves, and it is the world’s largest exporter of liquefied natural gas (LNG).
  • So it wanted to focus on its gas industry rather than on oil, in which it was in any case a small player.
  • It denies any political reasons for leaving OPEC.
  • However, Qatar's broken diplomatic relationship with Saudi Arabia is to be noted.
  • Notably, Saudi Arabia plays a dominant role in the OPEC, having pumped 11 million barrels per day in October, 2018.
  • So Qatar feels it was pointless to put efforts, resources and time in an organisation that it was a very small player in.

Why is Qatar's regional relations strained?

  • Qatar has long showed an independent mind in foreign policy.
  • This includes having a close economic and diplomatic relationship with Shia Iran, Sunni Saudi’s great regional rival.
  • This stance does not always align with the priorities of its regional Arab neighbours.
  • In June, 2017, Saudi Arabia, UAE, and Bahrain cut ties with Qatar.
  • They directed Qatari citizens to leave within 14 days, and forbade their citizens from going to or staying in Qatar.
  • Egypt too severed diplomatic contact with Qatar.
  • All of these countries shut their airspace to Qatari aircraft, and told foreign airlines to seek permission if flying to and from Qatar.
  • Saudi also sealed Qatar’s only land border, and closed its ports to Qatari-flagged ships.
  • It claimed Qatar had refused to end ties with “terrorists”, after Doha declined to fulfil 13 demands that were presented to it.
  • It included
  1. cutting diplomatic relations with Tehran and military ties with Turkey
  2. shutting down the TV station Al Jazeera
  3. aligning with other Arab countries “militarily, politically, socially and economically”
  • But Qatar said the demands amounted to surrendering their sovereignty, which it would never do.
  • It has backed the Muslim Brotherhood and Hamas, but it is also part of the US-led war on the Islamic State.
  • It has assisted the rebels fighting Bashar al-Assad’s regime in Syria.
  • Over the last year and a half, hopes of reconciliation of Qatar with its neighbourhood have dimmed.
  • Doha has only deepened its cooperation with Iran and Turkey, and with political Islamist organisations.

How will Qatar's decision impact global oil prices?

  • Qatar is a tiny player that pumped only 2% of OPEC’s total output of 32.9 million barrels per day.
  • It has limited influence on OPEC’s pricing decisions and so the exit would not make a much impact in terms of global oil prices.
  • However, over the last many decades, it has played a role mediating internal rivalries in OPEC.
  • It helped strike production-cut deals with producers like Russia.
  • So in these areas, Qatar's absence may hurt OPEC slightly.
  • India - Qatar's position as the world’s top LNG exporter and an influential player in the global LNG market is important for India.
  • Qatar is one of India’s oldest LNG suppliers, with Petronet LNG among the companies that have contracted to buy LNG from Qatar.
  • But LNG pricing is not in OPEC’s domain, so Qatar’s decision is unlikely to impact these trends.


Source: Indian Express

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