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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.
The 26rd Beijing International Offshore Oil & Gas Exhibition is an annual gathering of petroleum and petrochemical industry. With a magnificent exhibition space of around 120,000 sqm, 18 national pavilions.Read More >
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