Qatar isn’t backing down against OPEC and even takes shot at U.S. shale

Secretary of State Rex Tillerson spent four days last week trying to get Qatar and the four-nation Saudi-led bloc to come to terms on the rift between them. At this point, the involved parties refuse to talk to each other despite U.S. and Kuwaiti mediation, and the diplomatic crisis remains in effect.

Tillerson acknowledged that, “Potential ways forward in the dispute were weighed by both sides,” but more rounds of negotiations are needed to close the rift between the Persian Gulf countries.

Qatar, the leading producer of liquefied natural gas, has to comply with a list of 13 demands from the Saudi-led bloc before diplomatic relations can resume. The Saudi-led bloc accuses Qatar of supporting Iran and having terrorist ties. One of the demands on the list stipulates the removal of all Turkish military forces from Qatar.

Qatar and Turkey are instead doing the exact opposite. Turkey has sent more forces in defiance of Saudi demands, deploying dozens of elite commandos and an artillery unit to Qatar. The two countries plan to hold joint military drills in the near future.

In a statement, Ilnur Cevik – an advisor to Turkish President Recep Tayyip Erdogan – said, “Turkey’s steady buildup continues there, protecting the border and the security of the Qatari government.”

Qatar remains steadfast in its determination to hold out against Saudi Arabia, the United Arab Emirates (UAE), Bahrain, and Egypt. However, investors around the globe have doubts on whether the country can hold out indefinitely. Earlier this month, Moody’s Investors Service downgraded Qatar’s credit outlook to negative, and since the boycott began in early June, the country’s stock market has lost nearly $8.3 billion.

Despite the financial issues, Qatar remains undeterred. The small Arabian country has turned to Iran and Turkey for food sources that were formerly purchased from Saudi Arabia and the UAE. Qatar also plans to build its own food-processing and storage facility to help meet the country’s demand for sugar, rice, and cooking oil.

Last week Qatar also announced that it plans to double their liquefied natural gas output by the year 2020.

Former Qatar oil minister, Abdullah al-Attiyah, warned the country’s former OPEC allies during an interview in Istanbul, “OPEC would hurt itself and help U.S. shale producers if it adopted deeper cuts. It’s not beneficial for OPEC to deepen their cuts because prices will go up and shale oil producers and others will take OPEC’s market share.”

The minister added, “The problem is that there is someone waiting in the dark corner for OPEC – it’s shale oil producers and whenever prices rise, they raise production.”

The former oil minister might be trying to deflect attention off of Qatar and onto U.S. shale producers and their involvement in the current global energy downturn. Regardless of his intention, one point is clear: OPEC is beginning to lose its ability to influence the global market, and Qatar is an example of OPEC countries losing their ability to control each other.

Article written by HEI contributor Raymond Arrasmith.

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