Page 1 of
2 China,
Qatar forge tricky
partnership By Chris Zambelis
The impetus underlying China's manifold
interests in the Middle East remains a topic of
close scrutiny. The dramatic social and political
changes that are taking root in the region portend
a vastly different geopolitical cartography in
contrast with previous arrangements. These
circumstances yield important implications for the
people of the Middle East and foreign powers, such
as the United States with longstanding strategic
interests in the region.
Owing to its
notable inroads into the Middle East in recent
years, China also is watching regional events
unfold with great interest. Due to its increasing
demand for Middle Eastern oil and natural gas and
growing diplomatic and economic profile on the
world stage, Beijing is consumed justifiably with
the potential
repercussions of
prolonged regional instability on its position.
A series of quiet yet important
developments emanating from China's relationship
with Qatar - one of the region's smallest
countries in both population and area - is
emblematic of the growing complexity of China's
role in the Middle East.
In early October,
the China Securities Regulatory Commission and
State Administration of Foreign Exchanges
announced they had approved Qatar's request to
attain Qualified Foreign Institutional Investor
(QFII) status to operate in China. Under the
auspices of Qatar Holding (QH), the overseas
investment arm of its sovereign wealth fund (SWF)
the Qatar Investment Authority (QIA), Qatar
formally submitted a request to Beijing in June to
invest up to US$5 billion in Chinese stocks, bonds
and other securities.
Being afforded QFII
status will make Qatar the largest foreign
investor in Chinese capital markets [1]. The QFII
program was launched in 2002 to govern foreign
investor access to yuan-denominated stocks and
other assets. China has decided to implement a
plan it devised earlier this year to increase the
current investment quota allocated to foreign
investors to invest in its capital markets from
$30 billion to $80 billion; the current quota for
individual investors is $1 billion.
China's decision to relax its restrictions
over investment quotas on its capital markets and
the flow of foreign exchange into and out of the
country is designed to encourage more investment
in China. China has granted 188 foreign entities
QFII licenses. These licensed-entities then are
able to apply for an individual investment quota
set by Chinese regulators. Taken into the context
of the peculiarities of Qatar, a financial
powerhouse that is exerting disproportionate
influence well beyond its size in world affairs,
this latest chapter of Sino-Qatari relations
warrants further examination.
Natural
gas When judged against its ties with major
players in the Middle East such as Saudi Arabia or
Iran, China's relationship with Qatar tends to be
overshadowed. China's pursuit of energy resources,
particularly natural gas, underpins Sino-Qatari
relations. Qatar is the world's largest producer
and exporter of liquefied natural gas (LNG) and
third-largest holder of natural gas reserves.
Qatar is also a major producer and exporter of
crude oil.
Qatar is an important source of
China's LNG needs, satisfying around 20% of
Chinese demand for LNG. Chinese imports of Qatari
crude, in comparison, are negligible.
Qatargas and the China Natural Offshore
Oil Corporation signed a sales and purchase
agreement in 2008 for Qatar to supply China with 2
million tonnes (m/t) of LNG annually over a
25-year period. The first shipment of Qatari LNG
was delivered to China in October 2009. In
September, a Q-Max LNG vessel, the world's largest
class of LNG carriers, delivered a shipment of
Qatari LNG to China's LNG Terminal in the port of
Ningbo in the eastern Zhejiang province. China and
Qatar marked this milestone as an important
breakthrough in Sino-Qatari energy and trade
relations.
Chinese energy majors also have
forged a number of collaborative ventures with
their Qatari counterparts. In July, PetroChina,
the largest energy company in Asia and, according
to some estimates, the world's largest oil
producer, signed an agreement with Qatar Petroleum
(QP) authorizing it to obtain a 40% stake in
exploration and production rights for natural gas
from GDF Suez, a French concern. The agreement is
governed under Qatar's exploration and production
sharing agreement (EPSA) for Block 4, an offshore
bloc north of the emirate.
The deal was
concluded after PetroChina joined QP and Royal
Dutch Shell in another EPSA in May for natural gas
in Block D, China's first investment in Qatar's
energy sector. Qatargas also engaged Sinopec in
talks to supply it with deliveries of LNG.
The extent of Sino-Qatari cooperation in
the energy sector extends beyond Chinese imports
of Qatari LNG and joint upstream development
projects in Qatar. In October 2011, QP, Royal
Dutch Shell and PetroChina agreed to build a
petrochemicals and refining complex in Zhejiang
province with an initial investment of $12.5
billion.
As Qatar places a heavy premium
on satisfying the rapidly growing demand for LNG
across Asia, Doha and Beijing continue to look for
ways to further develop energy ties. This is the
case even as questions surround future LNG demand
in China due to a growing reliance on natural gas
supplies delivered by pipeline and heightened
interest in developing domestic shale gas
reserves. Qatar serves as a major source of LNG
and crude oil for Japan, South Korea, Taiwan,
India and other consumers in Asia.
The
centrality of energy to Sino-Qatari relations was
not lost during Chinese Premier Wen Jiabao's
official two-day state visit to Doha on January
18-19. During a press conference, Wen stressed the
strategic significance of Qatar to China's energy
security paradigm, saying: "Establishing a
long-term, stable and comprehensive cooperative
partnership with Qatar on natural gas is an
important topic between us."
Wen's
meetings with Qatari Emir Sheikh Hamad bin Khalifa
al-Thani and other political, diplomatic and
business leaders also touched on other economic
matters, including a proposal by China to
manufacture downstream oil products in Qatar.
Significantly, the two sides also appeared
to lay the foundation for China's decision to
grant QFII status to the QIA during their
exchanges. According to Wen, "I do want to add one
more important point. In order to address
investment issues, we need financial support.
Therefore, we reached another agreement, a
cooperation agreement linking finance with
investment. Qatar also proposed the use of local
currency in trade settlement and even a specific
ratio. I think this proposal can be studied."
Wen's visit to Doha also resulted in a
series of agreements governing formal cooperation
between the People's Bank of China and the Qatar
Central Bank as well as between the China Banking
Regulatory Commission and the Qatar Financial
Center. Both sides also signed agreements
outlining future cooperation in science and
technology, environmental matters, and fostering
closer cultural exchanges.
Geopolitics
of Qatar Qatar's geopolitical
influence far exceeds its diminutive stature, a
reality that poses an interesting set of dynamics
for Chinese foreign policy. Qatar's ascent to the
world stage in recent years represents one of the
most important trends in Middle East affairs. On the surface, the tiny emirate's rise to
international prominence occurred as a result of
its energy prowess and strategic alliance with the
United States and other critical US allies in the
Middle East. This assessment is incomplete.
Indeed, Qatar is a member of the Organization of
the Petroleum Exporting Countries. Qatar is also a
member of the Gulf Cooperation Council (GCC), the
association of pro-US Arab monarchies that
includes Saudi Arabia, and the Arab League.
Like its GCC partners, Qatar plays a
critical role toward advancing US strategic
military objectives in the Middle East. Qatar is
host to the forward headquarters for US Central
Command (USCENTCOM), including key military
installations such as Camp al-Sayliyah and
al-Udeid Air Base. Qatari soil serves as the
largest prepositioning base for US forces outside
of the United States.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
