On May 20, 2022, Qatar finally managed to sign a long-term contract to export liquefied natural gas (LNG) with Germany, Europe’s largest economy. Numerous previous talks between Qatar and Germany had not led to a definitive agreement due to a disagreement over long-term LNG exports to Germany and the lack of the necessary infrastructure. With Russia invading Ukraine and Western governments trying to cut gas exports from Russia and sanctioning and weakening Moscow, Doha reached a long-term and valuable agreement with Germany. Thus, what are the implications of the Qatar-Germany deal on the export of Qatari liquefied natural gas and the construction of two LNG terminals in Germany?
During the Cold War and since Reagan’s presidency in the United States, the United States has warned Europe regarding its dependence on oil, especially related to the Russian gas. After the collapse of the Soviet Union and the cessation of gas exports following the 2005 and 2007 crises in Ukraine, particularly the Russian occupation of Crimea in 2013, repeated attempts to reduce dependence on Russian gas were on the agenda of European governments. But given Russia’s dominance of gas pipelines and gas-exporting countries in Central Asia and widespread sanctions, the European governments have not succeeded in building pipelines independent of Russia to meet Europe’s growing needs.
With the Russian invasion of Ukraine, the debate over European governments’ dependence on Russian gas and Moscow’s leverage over the West intensified. As Germany, Europe’s most significant power, supplies about 55 percent of its gas imports from Russia through various pipelines, it has been pressured more than any other country to find an alternative to Russian gas. Qatar, as the third-largest holder of gas resources after Russia and Iran and one of the most important exporters of liquefied natural gas in the world, seeks to control the East Asian market (about 80% of gas imported from East Asian countries such as South Korea, China, Japan, India, etc.). Meanwhile, Qatar, as the world’s second-largest producer of liquefied natural gas (LNG), has been the main focus of efforts to find alternative energy supplies. Since late January, Washington has been pushing Doha to reroute gas exports to Europe. However, Qatari production is close to maximum capacity, with much of its supply tied up in contracts with key customers in Asia. If the US fails to convince its Asian partners to release some of their purchases for delivery to Europe, new gas supplies will be limited and delivered at spot market prices, which are already at an all-time high. Also take control of the European market. It should be noted that before the agreement between Qatar and Germany, Qatari liquefied natural gas was exported to European countries, such as Britain and Italy.
Qatar will likely want Europe to make concessions – the European Commission to stop a four-year investigation into Qatar’s alleged use of long-term contracts to inhibit gas flow to the European single market.
Qatar’s agreement with Germany and Qatar’s insistence on a long-term contract can be analyzed in this way:
First, gas circulation through pipelines has many advantages over LNG. In other words, gas transmission through pipelines ensures reliability and long-term stability in energy transmission and thus energy security. Also, gas imports through pipelines are cheaper than liquefied natural gas, and the volume of gas exported through pipelines is much higher. Finally, there is less pollution from gas transmission through pipelines.
Secondly, given the benefits of building pipelines and the enormous costs of exporting LNG, the Qatari government is willing to send liquefied natural gas to Germany only under a long-term contract’s guarantees. In addition, the Ukraine war is finally coming to an end, and there is a possibility that Russia will return to the international community and subsequently resume gas pipelines. Thus, a long-term guarantee agreement for Doha to provide relative market control is Europe’s most considerable power.
Finally, regional and international conditions offer Doha a unique economic and political opportunity. In other words, given the geopolitical position of other countries in the region and Russia’s gas pipelines to Europe, Russia’s simultaneous war with Ukraine has allowed Qatar to seize the critical East Asian market and gradually take control of the European market.
In conclusion, on the one hand, this agreement is in line with the new era of competition between energy suppliers over finding energy consumers with an extensive range for Qatar economically. On the other hand, politically, in addition to enhancing Qatar’s position and prestige, it has increased its bargaining power in international affairs and, of course, against the powers of the Persian Gulf region, and it makes Qatar’s global position among the Persian Gulf countries even more prominent.
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About the author:
Amin Bagheri is a Research Fellow at the International Studies Association in Tehran. His primary research interest lies in international relations, transnational governance, international peace, and conflicts in the Middle East.