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This year, Qatar has tripled its exports of liquefied natural gas to China. Associated Press
This year, Qatar has tripled its exports of liquefied natural gas to China. Associated Press

Qatar weighs principle and capital

Ties between Qatar and China seem to have grown in fits and starts, held back by what analysts say is a lack of expertise in Doha about the best ways to enter the Chinese market and a reticence to do so amid growing disagreement over the conflict in Syria.

As Qatar dramatically increased its economic stake in China over the past year, it seemed to many a match meant to be.

Qatar, the world's largest gas supplier, was set to forge ties with a country whose voracious appetite for energy has defined the commodity market for the past half decade.

This year, Qatar has tripled its exports of liquefied natural gas (LNG) to the country and trade volume rose from US$3 billion (Dh11.01bn) to $5bn between 2010 and last year.

Yet what's more surprising than the new ties is why they seem to have grown in fits and starts, held back by what analysts say is a lack of expertise in Doha about the best ways to enter the Chinese market and a reticence to do so amid growing disagreement over the conflict in Syria.

In the immediate term, it is the lack of experience that has hampered ties. But political disputes hang the larger question mark over the future of Qatar's China ties.

For the past decade, Qatar's sovereign investments and its foreign policy have often gone hand in hand. But, now actively involved in some of the region's most difficult crises, Qatar could find the balance between its interests more difficult to manage.

Relations between Doha and Beijing have "cooled" over differences on Syria, where the two are backing opposite sides in the conflict, said David Roberts, who studies ties between Qatar and Asia at the Royal United Services Institute in Doha.

The chill means Doha's links to Beijing are likely to continue to be dwarfed by its ties with other Asian partners, such as Japan and South Korea. Although Qatar is now China's second-largest LNG supplier, Beijing's purchases still make up a tiny portion of total sales.

There are no publicly available figures but financial insiders suspect up to 70 per cent of Qatar's sovereign wealth fund is invested in the European market.

Qatar's move into China dates to the global financial crisis, says Rajiv Biswas, the chief Asia economist at IHS Global Insight. "There was the recognition after 2009 that the future growth is going to come from Asia, so we saw a broad pattern of investment from the Gulf into China."

In 2010, Qatar Holding, a subsidiary of the Qatar Investment Authroity, became the largest foreign investor in the Agricultural Bank of China with a $2.8bn stake. Qatar Holding expanded its exposure to the Chinese economy last month with a 22 per cent stake in Citic Capital Holdings, a private fund managing $4.4bn in assets.

Both deals made headlines for seeming to illustrate a long-predicted shift eastward in economic policy.

"The Gulf has been looking to Asia for a long time," says one analyst based in Doha who follows the Chinese market.

They were also relatively straightforward purchases, analysts say. The Agricultural Bank of China, for example, was the last of the country's banks to offer foreign buyers a share - and hence the last chance to get into the country's well-endowed national financial institutions.

"Investing in China is still a learning process for the Gulf countries because it's a relatively new focus," says Mr Biswas. "It's very hard to understand China if you're sitting outside China. You need something on the ground."

Meanwhile, in Doha, there have also been small signs of growth. China Harbour Engineering Company is building Qatar's new port, for $879 million. Several Chinese construction firms have won bids to work on Qatar's metro, planned for the 2022 Fifa World Cup.

"Our economic relations are doing very well," says China's ambassador to Doha, Zhang Zhiliang. Beijing is now looking to import even more Qatari LNG, he adds.

Yet the political gap remains. China has been reticent to back the Syrian uprising, while Qatar has actively worked for the removal of Bashar Al Assad's government.

The tensions were exacerbated in May when China failed to renew the credentials of Al Jazeera's correspondent there.

Then, as the fighting in Syria escalated this summer, Beijing joined Moscow in vetoing a UN security council resolution on Syria that Doha had pushed for.

Mr Zhang insists his government and Qatar's have consulted repeatedly on the crisis.

"We have shown mutual understanding," he says. "Many countries may think we have a difference on Syria but actually we do not. The Chinese stance is clear: we are fully against foreign intervention."

But Mr Roberts argues the two sides do not understand one another. And it was not altogether clear how Qatar - a relative newcomer to foreign policy - would manage inevitable differences between its economic and political goals.

Few examples have tested this balance so far. But Doha has not been shy about putting its politics first, analysts say.

"Qatar has its values that stem from its traditions and culture and, if needed, it is willing to stick with its values and let go of its economic interests,"says Hassan Al Ibrahim, a Qatari commentator and the co-founder of Fikra, a Qatari think tank.

He points to Syria itself - where Qatar had significant economic investments - as a case where taking a political position meant economic sacrifice.

For now, the pace of growth in ties with China is likely to continue slowly. The sense that Asia holds the key to the global economic future is hard to shake and in July, Qatar requested a licence to invest $5bn in Chinese stocks and bonds.

"The Chinese investment atmosphere is very good," says Mr Zhang. "Qatar has done its research and they agree in that."

edickinson@thenational.ae

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