Qatar: a Global Investor

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In the last years we have been constantly reading news about Qatar’s investments, acquisitions, and capital flows on the international financial scene. In Italy, for example, the Qatar Investment Authority (QIA) – the sovereign fund of the small emirate – bought the fashion brand Valentino few months ago, while we have been reading news about the possible purchase of  an important share of Eni for almost one year. In the meantime QIA has acquired shares of several other giants of the energy sector, such as Shell and Total. It has also invested in other “glamour” companies such as the London-based Harrods and the important French brand Chanel. What is the strategy behind this new kind of “financial investments mercantilism”?   

An empire around the world

Banking sector: through its subsidiaries, QIA owns 5,8% of the English institute Barclays. Furthermore it has recently contributed with US$250 million to the Barclays’ fund for natural resources.

QIA is also owner of 6,17% of Credit Suisse, one of the biggest Swiss financial institutes, whose London’s representative building was recently purchased by Qatar for more than US$500 million. The emirate also owns  a share of a Chinese bank, the Agricultural Bank of China.

Fashion and luxury hotels: In 2010 QIA purchased the English brand Harrods for US$2,35 billion. The plans for developing the company are very ambitious. They involve the construction of several Harrods-branded hotels in many important touristic and financial centers in the world, such as Kuala Lumpur and Paris.
Furthermore, Qatar owns another chain of hotels – Katara Hospitality – which is planning the construction of several luxury hotels in France, Swiss and Italy.     
In the fashion sector, in 2012 QIA announced the purchase of a share of the French brand Chanel, the complete ownership of the Italian Valentino, while it is already in possess of 1% of Louis Vuitton. The interest of the small emirate for luxury companies has expanded also towards the cars market, with the acquisition of 10% of Porsche in 2009.

Finally, QIA is also owner of a European soccer team, Paris Saint-Germain, in which it invested tens of millions for the purchase of famous players.

Hydrocarbons and energy:  Energy is the sector in which QIA has been showing a major interest, also in terms of quantities of invested capital. For instance Qatar’s sovereign fund acquired 5% of Holland’s Shell in 2012, becoming its biggest shareholder. Qatar’s interest in this big energy company has increased when they started to work together in the Pearl GTL project - the world’s biggest implant for liquid gas transformation – which has made Qatar the biggest global producer of liquid gas. The participation in Shell gives the emirate access to the know-how of one of the key players in the energy sector. Furthermore Qatar has acquired the power to influence major energy projects in many countries, such as the United States and China.

In 2012 Qatar purchased 3% of the French energy company Total, and tried several times to acquire a share of the Italian Eni. Should this operation be achieved, Doha would virtually be able to influence the business strategies of some of the most active and dynamic protagonists of the world’s energy sector.

The financial investments mercantilism between revenues, power and glamour    
What are the main reasons behind this apparently insatiable hunger of foreign assets?
There are several possible answers, and they involve the emirate’s need of economic diversification, together with a strategy to acquire more prestige and power on the international scene.     

Qatar’s need for the diversification of its GDP – which is now based mainly on the sale of hydrocarbons (Qatar is the third global producer of natural gas, and an important oil producer) – is a feature which Doha shares with many other countries in the area. In recent years Other Gulf monarchies, such as Saudi Arabia and the UAE, have been developing strategies to ensure the same level of GDP in case of future exhaustion of their energy resources.

Qatar has made a step forward in dealing with its necessity for diversification. It made of it a key to raise its position within the international political scene. Its scarce population – less than 300.000 citizens and one million of foreign workers – and its enormous energy resources allowed the al-Thani – the ruling family – to preserve internal stability. Every Qatari citizen has the right to a big “citizenship-revenue” which made Qatar the country having the highest perceptual  of billionaires in the world (almost 10% of the population). The strong internal stability gave the current emir Hamad bin Khalifa al-Thani the possibility to exploit vast resources in order to increment his influence on the international scene.

Being too small both geographically and demographically to become a traditional regional power, Qatar has not renounced this objective. At the beginning of Ahmad bin Khalifa al-Thani’s rule, the emirate started an alternative strategy based on soft power – whose main element has been the developing of Al Jazeera, the first all-news channel in the Arab world – and a vast campaign of investments, which can be defined as a sort of neo-mercantilism based on the acquisition of foreign assets.

With the term “mercantilism” scholars have normally intended to define the adoption of a commercial and economical set of policies aimed at increasing one nation’s political power. It could be developed by conquering foreign monopoles through the use of military means, as in the colonial era. In more recent times weapons have been replaced with more sophisticated  commercial and monetary policies – which have been denominated more correctly “neo-mercantilism” – aimed at generating major trade surplus in order to obtain the control of the national economic policies of the other countries witnessing balance-of-payments’ deficits.

The Qatari strategy can be considered a variant of this model. It is not centered on trade but on investments and financial revenues. In common with the neo-mercantilist model it has the characteristic of not watching only at simple economic gains but primarily at gains In the country’s strategic position on the international political scene.
Such a strategy is based on three main pillars: capital, energy and charm.

On the one hand it has focused on energy and banking sectors, the two most strategic economic activities in international politics. On the other hand it is also aimed at increasing the country’s soft power, through the construction of a “glamour” appeal linked to fashion, information, sports (Qatar will host the 2022 Soccer World Championship) and luxury.

Conclusion: Between Success and Power Bubbles

This strategy led to brilliant results. Qatar has entered the small club of the regional scene’s protagonists since almost a decade. Its important position in many strategic economic sectors has allowed the al-Thanis to entertain privileged relations with all the key actors in the area, often going beyond the logics of traditional alliances.

Besides hosting on its territory an American military base, Doha is an active member of the Gulf Cooperation Council – the organization of the Gulf monarchies, founded to counter-balance Iran’s influence – managing at the same time to keep profiting business relations with Iran. Furthermore Qatar hosts the representative delegation of the Palestinian movement Hamas – considered a terrorist organization by the United States and Israel – and the only diplomatic delegation of the Taleban movement.      

Qatar has been very active as a broker on several conflict scenarios, from the Afghan to the Israeli-Palestinian one. Therefore, it seems that emir al-Thani’s ambitious objective – bringing a small emirate of less than half a million inhabitants to be a protagonist of international politics – has been reached. Nevertheless, some doubts remain on the effectiveness of the Qatari influence, which have been well expressed in Blake Hounshell’s article “The Qatar Bubble” published on Foreign Policy in May 2012.

The article focuses on the fact that most of the Qatari diplomatic initiatives – even if greatly sponsored by the country’s formidable communication power – have rarely brought to concrete results. Apparently Qatar has conquered a major role on the international scene by means of a clever strategy of investments and soft power, but its small demographic and military size still counts when it comes to the obtainment of real results from its powerful partners.  

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