When Iranian missiles pounded into Qatar’s Ras Laffan gas plant, it wasn’t just the energy infrastructure that went up in flames.The
attack also blew up the global gas market and incinerated Qatar’s own
economic prospects. If Donald Trump and the Tehran regime don’t strike a
peace deal soon, the tiny Gulf monarchy may tumble into an economic
crater.
On a map, Qatar appears as little more than a 4,500-sq-mile thumb of desert sand jutting into the Gulf.
But if economic malaise takes hold there, it could send shock waves through Britain.
Qatar’s
deep entanglements in the UK – ranging from luxury hotels and trophy
towers to energy supplies, household-name retailers and extensive arms
dealing – could all feel the impact.
The
emirate has at least £40bn invested in Britain, with some estimates
putting the figure closer to £100bn if property owned by wealthy Qataris
is included.
With
war raging in the Middle East, questions are mounting about Qatar’s
plans for its mountain of cash locked up in Britain – and the potential
fallout for the UK’s businesses and economy.
Dire straits
The emirate of 3.1 million people, of whom only about 360,000 are native Qataris, has experienced tough times before.
Between
2017 and 2020, its neighbours Saudi Arabia and the United Arab Emirates
blockaded the country as diplomatic relations soured, and a tough Covid
lockdown came straight after.
But
throughout all that, Qatar kept pumping out the liquefied natural gas
(LNG) that fuels its economy and fills the public coffers.
This time it’s different.
“This
is conspicuously worse than anything that any of the Gulf monarchies
have experienced since 1990. The blockade was not good, but it wasn’t
this bad,” says David Roberts, a Middle East expert at King’s College
London.
Qatar has been left reeling from Iran’s blockade of the Strait of Hormuz.
The
narrow waterway is the only means for the country, the world’s third
largest gas exporter, to get its product to the outside world. One fifth
of the planet’s gas is shipped out that way.
Hydrocarbons
account for about two thirds of the Qatari economy and up to 80pc of
government revenue. All this is in limbo until Tehran loosens its grip
on the Strait of Hormuz, or Trump prises it open.
On top of this came the Iranian attack on Ras Laffan.
Iran and Qatar have a relatively cordial relationship, and Qatar has
been spared the kind of missile and drone barrage inflicted on the
United Arab Emirates and Saudi Arabia.
But
Tehran needed a like-for-like retaliation for Israel’s bombing of
Iran’s huge South Pars gas field. So it hit the global gas industry
where it hurts.
The
attacks took out 17pc of Qatar’s LNG export capacity, and also dented
production of condensate, liquefied petroleum gas, helium, naphtha and
​sulphur.
In
an unusual but probably tactical display of transparency and candour,
QatarEnergy boss Saad al-Kaabi put the damage at $20bn (£15bn) in lost
annual revenue.
Repairing
the damage could take three to five years, he said, and Qatar’s plan to
double its gas output in the next five years has been delayed by at
least a year.
Kaabi said the scale of the damage had set the region back by a decade or more.
“I
never in my wildest dreams would have thought that Qatar would be ...
⁠in such an attack, especially from a brotherly Muslim
country in the month of Ramadan,” he told Reuters.
In the past week, QatarEnergy ​declared force majeure on long-term contracts for up to five years for LNG shipments bound for Italy, Belgium, South Korea and China.
Farouk
Soussa, a Goldman Sachs economist, has forecast that if Hormuz reopens
soon, the hit to Qatar’s economy this year may be no more than 5pc.
But if the conflict drags on, Qatar faces a much worse fate. Its gross domestic product could shrivel by 14pc this year.
“For many Gulf economies, the war could have a bigger near-term impact than Covid,” Soussa wrote.
“When
the dust settles they will rebuild and they will recover, but the scars
this conflict leaves on confidence remain to be seen.”
Kaabi
could only agree. His country had a reputation as “a safe
⁠haven for a lot of people”, he said. “That image, I think,
has been shaken.”
Taking a battering
Schoolchildren
will be back in the class in Qatar on Sunday as schools reopen, a move
ministers hope will signal a return to normality.
The
country is desperate to maintain its business-as-usual image – of an
economy and society sitting safely under state-of-the-art missile
defences.
“The threat has been eliminated and the situation has returned to normal,” the interior ministry said in a statement on Friday.
But
take a look at the Facebook groups for British expats in Doha, the
Qatari capital, and Kaabi’s concerns of Qatar’s fading reputation as a
safe haven are becoming a reality.
Qatar
has only received a fraction of the Iranian attacks endured by its
neighbours. Whereas the UAE has suffered 2,213 missiles and drones, the
Saudis 816, and Kuwait and Bahrain 500-plus, Qatar has seen just 276.
Most of these attacks were repelled.
Yet with schools and airspace largely closed until this week, expats have been debating whether to stay or go.
“I’m
choosing not to bury my head in the sand, and using the means I have to
leave,” said one forum participant, who, like most, posted anonymously.
Another responded: “Everyone from Europe is leaving ... When missiles explode, it is frightening, to be honest.”
Others
were adamant that nothing had really changed. “It is worrying at times,
but the Qatar government are doing a brilliant job at keeping us safe,”
said one.
Dania
Thafer, of the Gulf International Forum and who is based in Doha, says
most expats leaving the country see their relocation as temporary.
“Most
people are planning to return, most are holding on to their jobs. I
don’t think the disruption has been to the extent that people are going
to flee the Gulf states at this point,” she says.
For those who have stayed, “everyone is just living a normal life, though it does have a little bit of a Covid feeling”.
The economy may also get that Covid feeling. In 2020, the first year of the pandemic, GDP shrank by more than 4pc.
But
this crisis may outpace that one. Even in the depths of the pandemic,
for example, Qatar Airways kept flying. Now, it has parked 20 of its
largest aircraft in Spain.
For
Kristian Coates Ulrichsen, a US-based Middle East expert at Rice
University’s Baker Institute, this is symptomatic of how wide-ranging
the economic hit to Qatar could be.
He
says the billions of lost gas revenue and the cost of repairing the
infrastructure at Ras Laffan are only part of the story. The crisis
could metastasise across Qatar’s economy.
The
pain could extend into sectors that the ruling family has built up
expressly to mitigate the country’s dangerous hydrocarbon dependence.
One
of these is aviation. Qatar Airways is a state flagship carrier and its
extensive network has turned Doha into the world’s 10th busiest
international airport, chiefly serving as a transit hub.
The
government leveraged this status to become a destination for events and
conferences, especially since hosting the men’s football World Cup in
2022. Now that is in danger too, along with the burgeoning Gulf cruise
industry.
“Flights
are beginning to operate again, but the transit traffic is very badly
damaged. That had been the business model that Qatar Airways had
followed. That model is being very badly hit at the moment, with no end
in sight,” Coates Ulrichsen says.
“There
are a lot of different points of cost all mounting up. If this does
escalate and turns into a grinding conflict, it could last for months,
and the damage will just continue to increase.”
As
the economic clouds close over Qatar, one shaft of sunlight remains.
Unlike the debt-strapped West, the country’s gas riches have ensured it
is in reasonable financial shape to handle the crisis.
According
to the most recently available data, in 2024 the government ran a
budget surplus and its debt-to-GDP ratio was under 50pc.
Moving money
One
ace up Qatar’s sleeve is the country’s $580bn sovereign wealth fund,
the Qatar Investment Authority (QIA), which could be used to bail out
the country.
QIA is
the Gulf’s fourth-largest sovereign wealth fund, although it’s half the
size of peers from Abu Dhabi, Saudi Arabia and Kuwait.
“Qatar
has deep pockets. The QIA is a huge fund, and it’s a small country, so
there’s a certain amount of resilience just through the scale of the
fund,” says Daniel Brett, of the data analysis firm Global SWF.
The
fund’s mandate is to invest petrodollars in building up Qatari
businesses and infrastructure, and to earn a return from billions parked
offshore.
But
Qatar’s ruling emir, Sheikh Tamim bin Hamad Al Thani, has the option to
draw on QIA cash to repair Ras Laffan, prop up the domestic financial
system, replenish the military or bankroll government spending.
Sheikh
Tamim bin Hamad Al Thani could use a $580bn sovereign wealth fund to
bail out the country - Qatar News Agency/EPA-EFE/Shutterstock
He
may be preparing to do just that. On Wednesday he restructured QIA’s
board, drafting in senior government ministers and business figures.
The
government offered no explanation for the reshuffle. But the Doha News
said the reshuffle came as Gulf sovereign wealth funds sought to
“strengthen investment resilience and reposition portfolios”.
If
the QIA is drafted in to bolster the economy, it will have to sell
offshore assets. And if it needs to do so quickly, it will reach for the
portfolio’s lowest-hanging fruit: liquid assets such as bonds and
publicly traded shares.
This
is where Qatar’s scramble to cushion the blow from its lost gas
revenues could start to hit Britain, on London’s capital markets.
Brett
says the most likely sell-down would come from the QIA’s stock of
bonds, which Global SWF estimates at about one fifth of the portfolio,
or $116bn.
The fund
won’t sell down its domestic equity holdings, which include Qatar’s
bank, the airline, and the electricity and water utilities.
That
means any further heavy lifting would have to come from QIA’s
international investments – which could bring the crisis to Britain’s
door.
Qatar is one
of central London’s biggest property owners. Its trophy cabinet includes
The Shard, Canary Wharf Group, 8 Canada Square, 99 Bishopsgate and
Harrods; and hotels including Grosvenor House, Claridges, the Berkeley,
the Savoy and the Connaught. Most of these are under the auspices of the
QIA.
The fund has a
stake in publicly listed Sainsbury’s and private-equity investments in
Heathrow Airport, the water utility Severn Trent and the Rolls-Royce
unit that will make modular nuclear reactors.
QatarEnergy,
which is largely QIA-owned, is the majority shareholder in the South
Hook LNG terminal in Wales. Qatar Airways holds more than a quarter of
the shares in IAG, which owns British Airways.
Official data are opaque on Qatar, but the British Government has estimated that Qatari investment in the UK at more than £40bn.
The
Times put the figure at £100bn last year, rolling QIA together with
Qatar’s banks, various members of its ruling family and a clutch of
wealthy entrepreneurs. This tally extended the list of assets into
Marylebone, Belgravia, Park Lane and the Ritz.
Brett reckons it’s unlikely that the Qataris will pull back from their British property portfolio.
“They
can’t easily liquidate real estate, certainly not at a significant
profit. Who’s going to buy the Shard tomorrow? They just can’t sell
these assets fast enough in order to help stabilise the economy,” he
says.
Stakes in
publicly listed companies could be liquidated. QIA has been slowly
selling Sainsbury’s shares since the end of the Saudi-UAE blockade. From
a high of 25pc, its holding is now down to 6.8pc.
But even if QIA holds on to its current assets, it might need to delay new deals.
With no fresh gas revenue coming in and spare cash needed at home, the pipeline could thin out.
Bloomberg
has reported in recent weeks that QIA will help bankroll private credit
firm 5C Investment Partners, run by two former Goldman Sachs
high-flyers. In another deal, Italian newspaper Corriere della Sera said
the fund would spend up to €250m (£216m) on a 10pc stake in shoe-maker
Golden Goose.
“There
will be a pipeline of deals that have advanced quite far, and they’re
not going to reverse now. But I would imagine there’s going to be a
slowdown in these kinds of deals, if only to see what the situation is
in the coming weeks,” Brett says.
“I
would expect more emphasis on liquidity, resilience and optionality.
They’re likely to have a more cautious pace of any fresh illiquid
deployment in private markets until the regional picture becomes
clearer.”
The
biggest question mark may be over QIA’s pledge to Trump last year that
it would plough $500bn into the US in the next decade.
If
that risk plays out, then an unintended consequence of Trump’s attack
on Iran in 2026 could be the torpedoing of the trillions in Gulf
investment pledges that he solicited in 2025.
Military spending spree
If
QIA pulls away from new offshore deals and investments, one fresh focus
will probably be on Qatar’s ability to defend itself. On this front,
Britain may stand to benefit.
After
the Saudi-UAE blockade of 2017-2020, Qatar’s military went shopping.
According to Swedish think tank Sipri, Qatar became the top arms
importer in the Middle East over the next four years.
The
Americans supplied missiles and air defence systems, as well as
aircraft. But after Trump seemed to back the Saudis against Qatar during
the blockade in his first term, diversification became a Qatari
watchword.
They tapped up Britain and France for fighter jets, Germany for tanks and howitzers, and Italy for frigates.
In
2021 the Qataris ordered £6bn worth of Typhoon fighter jets and Hawk T2
Mk167 jet trainers, which were built at BAE Systems’ sites in
Lancashire. At the end of 2024, Qatar signalled it was in the market for
another dozen Typhoons.
Qatar ordered £6bn worth of Typhoon fighter jets in 2021 - Sgt Nicholas Egan RAF/UK MOD Crown
Sipri
valued Britain’s contribution at about 15pc of Qatar’s total weapons
imports. These have also included missile systems, guided munitions and
naval patrol boats.
The
Qatari defence ministry has set up its own defence-tech firm, Barzan
Holdings. This, says Brett, will help Qatar “capture more of its own
defence spending and recycle it domestically, by building up domestic
defence industries”.
Barzan
signed a memorandum of understanding with BAE in January to collaborate
on cutting-edge military tech such as anti-drone systems.
What Britain misses out on in forgone property or private-equity investments from Qatar, it may recoup in new defence deals.
Out of gas
Building
up an indigenous defence industry will not only help Qatar ward off its
enemies, but also bolster the emir’s attempt to reduce the war-hit
economy’s overweening reliance on oil and gas.
“Energy
dependence is Qatar’s Achilles’ heel. The extent to which it relies on
its gas industry would certainly give cause for worry for long-term
planning,” says Christopher Davidson, author of eight books on the
Middle East.
But
there are limits to the emir’s diversification strategy, he suggests.
“Qatar’s geography is not really favourable to any other industries.
Plus most of the other diversification activities have already been
established in Dubai and Abu Dhabi, and now Saudi Arabia is copying that
playbook.”
Yet even
as it tries to diversify, Qatar has increased its reliance on gas. It
plans to double its LNG output capacity by 2031. The first tranche of
this expansion was supposed to come on-stream this year, yet now faces
delays of up to a year.
But
the gas picture is uncertain. Even restarting the existing operation
will take time. Qatar’s bespoke LNG ships have to be marshalled from
afar; upstream gas has to be switched on; liquefaction plants must be
carefully cooled; trains have to be restarted one by one.
Tom
Marzec-Manser, of energy analysis firm Wood Mackenzie, reckons that
once the Strait of Hormuz reopens, Ras Laffan’s undamaged northern site
could be fully operational again in about 40 days.
Gas production at Ras Laffan could come back relatively quickly, but the damaged area will not be operational for years - REUTERS
The
undamaged part of the southern site would take three to four months to
restore, while the damaged section is out for at least three years.
The US will ramp up its LNG supply by 2028, but in the meantime there just won’t be enough gas to go around.
“Finding imports is going to be very difficult,” says Laura Page, of analysis firm Kpler.
Poorer countries will be priced out, and will have to cut usage or switch to coal. Richer countries in Europe will be competing with China, Japan, Taiwan and South Korea to buy American supplies.
Britain
is in that boat. The UK’s net zero ambitions mean that, unlike China or
South Korea, it hasn’t committed to a 20 or 25-year gas supply deal
with Qatar.
This
leaves Britain reliant on the spot market for gas. That used to come
from Qatar, but this is increasingly gobbled up by the countries with
long-term contracts.
The alternative is the US, where China or Japan might outbid the Brits. “Cargoes that were going to Europe are now diverting and going to Asia,” Page says.
Qatar
might not be selling Britain much gas any more, but it does own most of
the South Hook terminal in Milford Haven, Pembrokeshire. This is likely
to take in American LNG from a part-Qatari-owned plant in Texas, if and
when Britain can get hold of it.
Once Qatar doubles production in the 2030s, South Hook may yet become a major hub for Qatari gas.
“Qatar
was, and will remain, the lowest cost producer of LNG worldwide ... and
will remain a competitive supplier for years to come,” says
Marzec-Manser.
But other analysts wonder whether Qatar’s reputation as a reliable partner has taken a telling blow.
“If you’re a buyer, are you going to prioritise going to Qatar for your supply? That’s a big question mark,” says Page.
Most Qatar-watchers expect the country to bounce back from this economic shock, as it did from the blockade.
“Qatar
is going to be hit hard economically, but it’s not going to fall apart
if this war goes on for a couple of months. It can withstand disruption
for quite a while from a financial perspective,” says Thafer.
Coates
Ulrichsen, though, says its durability isn’t infinite. “There’s
resilience for months, obviously; but I think if this conflict goes on
for a long period of time, then that begins to lessen, perhaps.”
Even
if the economy and society hold together, something may have broken:
Qatar’s model for achieving security in a dangerous, unstable region.
Qatar’s
security was based on its relationship with the US, its booming gas
industry, its military build-up, and its ability to play both sides of
the street. On all counts, says KCL’s Roberts, the country has been let
down.
“They are just
sitting there getting smacked in the face time and time again. They
have good military capability, but they can’t retaliate or they might lose a desalination plant,” he says.
The
biggest question is whether Qatar, which hosts a major US base, can
still rely on Washington to provide security, rather than jeopardise it.
Most
analysts say there is no alternative to reliance on the US. “I think
Qatar is going to double down on its relations with the United States,
but diversify in terms of its defence procurement,” says Thafer.
If there is a major strategic shift, it could come from the Gulf monarchies’ discovery that they have a common enemy in Iran.
“In
the past, they’ve all often turned on each other, rather than actually
had a unified bloc. To what extent does the shock of what has happened
create that space for a more genuinely integrated Gulf Cooperation
Council?” says Coates Ulrichsen.
Qatar
may also question whether it can hang on to its fundamental
geopolitical identity as a mediator and broker, hosting not just US
military bases but also Taliban and Hamas political leaders.
It
was a balancing act that was supposed to keep Qatar safe from everyone.
Yet, as with the big bets on gas exports and US military power, it
doesn’t seem to have paid off.
Roberts
reckons that for a tiny, exposed state like Qatar, ultimately the
economic and strategic choices it has made in recent decades might still
be the only ones available.
“Will
there be a grand reset? There’ll be a grand conversation, for sure. But
I’m not sure they will come up with a vastly different set of answers
to the core question.”
