Peace Talks, Oil Shock and Qatar's Economic Contraction

**Tim Elliott** (0:00)
It's the Morning Drive. Can diplomacy calm the markets, or is the Gulf economy entering a new era of uncertainty as peace talks struggle to deliver a breakthrough and energy markets remain on edge? Questions are growing over Qatar's economic outlook and the wider impacts on global oil and gas. So what should investors and businesses be watching next? One of many questions for Frank Kane, who is the editor at large at AGBI, which is the Arabian Gulf Business Insight. Joins you back in the studio. Good to see you.

**Frank Kane** (0:35)
Great to be back, Tim. Thanks for having me.

**Tim Elliott** (0:37)
Nice to have you here. So let's look at your latest piece and your argument that Qatar is an economic loser. Regardless of the peace talks, what makes you say that?

**Frank Kane** (0:52)
Well, look, I must say I'm not trying to kick Qatar when it's down. I've got lots of good friends in Qatar, and they have been over the decades, an incredible energy and economic success story. But my latest piece was part of a series that I'm doing on the economic consequences of the peace for the Gulf countries. I've already done the UAE and Saudi Arabia. And when I came to Qatar looking at the evidence, it seemed to me that they had suffered more seriously than most others.
A double whammy, if you like. There was the very serious attack on Ras Laffan, the LNG processing plant on March 18th, I believe it was, which knocked out 17% of Qatari LNG product. And the impact of that will be felt for years. It will take years to replace those plants. They call them trains. They're not actually trains. It's a gigantic conveyor belt that liquefies natural gas into a form where it can be shipped and exported. And they are incredibly complex bits of machinery.
That will severely impact the whole Qatari economy for several years going forward. You know, so that was whammy number one. Whammy number two, of course, was the fact that Qatar is entirely dependent on Hormuz transit for its exports. And as we've seen just in the past 24 hours, Hormuz transit is by no means guaranteed, despite ceasefires, memorandums of understanding and ongoing peace talks in Switzerland. We saw attacks over, in the past couple of days, actually an attack on a Qatari LNG tanker, and as well as another couple of ships. And overnight, US forces responded with attacks on Iran, on what they say were missile sites and port facilities. They say they've taken another 60 small boats. You know, you have to wonder how many small boats Iran got, because they keep taking them out at the rate of 60 or 70 per attack.
But that was the basis of my prognosis for Qatar. It's going to have quite a tough time recovering.

**Tim Elliott** (3:26)
It is the case, isn't it? I mean, I think framing it as an economic loser is slightly dramatic, but it is the case that...

**Frank Kane** (3:33)
You're right. It is slightly dramatic, yeah.

**Tim Elliott** (3:36)
On my part. Qatar's economy is more vulnerable, arguably, than its regional peers, isn't it?

**Frank Kane** (3:44)
Yes, I think so. And you're right. Look, I did get a bit of headlinitis here, economic loser, because, of course, Qatar has got incredibly deep pockets, 500-odd billion in the QIA, for example.
And the Qatar Investment Authority, its sovereign wealth fund. And of course, this bolsters the economic impact when you have that kind of cash lying around.

**Tim Elliott** (4:13)
That's a half-trillion-dollar fund.

**Frank Kane** (4:15)
That's a half-trillion-dollar fund, yeah. You know, one of the biggest in the Middle East, one of the biggest sovereign wealth funds in the world. So, you know, that gives you a lot of upholstery, if you like.
But even so, it is looking at a years-forgone economic growth. In fact, the worst-case estimate for GDP this year is for a 14% contraction. And by any measure, that is recession. That's quite a severe recession. So, they will lose a year's economic growth. They will lose 17% or so of the LNG exports going forward for at least a couple of years.
So, you know, this is not good. As I say, a double-whammy that other countries in the region did not suffer.

**Tim Elliott** (5:03)
It's interesting because for years Qatar has been kind of a broker or a middleman, kind of talking to all sides, you know, global superpowers, regional factions, sort of a diplomatic omni-channel in a lot of ways. Is that approach something of an economic liability now, do you think?

**Frank Kane** (5:26)
Well, you know, they've done very well at this, haven't they?