Previous Quarterly Editions
Expropriation Risk: 39 39 40 40 ► Political Violence Risk: 36 36 36 35 ▼ Terrorism Risk: 5 5 5 5 ► Exchange Transfer and Trade Sanction Risk: 35 35 35 45 ▲ Sovereign Default Risk: 15 15 15 15 ►
TREND ▲
Government's commitment on climate policy Weakest 1 2 3 4 5 Strongest
Qatar’s per capita emissions of carbon dioxide are the highest in the world, owing mainly to its small population and large energy production base. Qatar’s Ras Laffan Industrial City, one of the world’s largest industrial cities for the production of natural gas and its derivatives, is a major source of greenhouse gas emissions. On the consumption side, a subsidy on electricity at a current level of 66% means that consumers pay one third of the cost for their electricity, a factor encouraging unstainable consumption habits.
Among Gulf Cooperation Council countries, Qatar’s financial incentive for embracing clean energy is the weakest in the bloc, given its access to low-cost natural gas as a fuel for power generation and other energy demands. Qatar’s sustainability efforts have so far centred on its commitments to hosting an environmentally friendly football World Cup in 2022.
Qatar has pledged it will be the first carbon-neutral edition of the tournament, thanks to the use of solar-powered stadiums and the use of cooling and lighting that uses water and energy-saving technology. Last year, the country also made progress in tapping its abundant solar resources, announcing the closing of financing for the 800-megawatt Al Kharsaah solar power project, which is set to meet 10% of Qatar’s current peak electricity demand once it is fully commissioned in the first quarter of 2022.
However, Qatar is keen to be viewed internationally as proactive on climate action. Just weeks before the COP26 international climate summit in Glasgow in late 2021,
Qatar created a new climate change ministry and announced a national climate change action plan. QatarEnergy, the country’s state energy firm, has also overhauled its sustainability framework. Through the updated strategy, the company is going to decrease the carbon intensity of Qatar’s liquified natural gas facilities by 35%, instead of the initial target of 25%. It has also placed a new reduction target for the carbon intensity of its upstream facilities at 25% instead of 15%. The strategy calls for the installation of 4 gigawatts of renewables capacity by the end of this decade to power QatarEnergy’s expanding, energy-intensive operations.
In March 2022, Qatar belatedly endorsed the Global Methane Pledge. The methane pledge, spearheaded by the U.S., has been hailed as a rare concrete outcome of the COP26 climate talks. The pledge is an agreement by 105 countries, including Saudi Arabia, the United Arab Emirates (U.A.E.), Bahrain, Iraq and Kuwait, to cut global methane emissions by 30% over 2020 levels by the year 2030. Last year, following announcements by the U.A.E. and Saudi Arabia on committing to net-zero emissions by 2050, Qatar’s energy minister dismissed the pledges as publicity stunts. Instead, the minister has emphasised gas-rich Qatar will have a crucial role in the global energy transition as natural gas is a cleaner fuel than oil and coal.
TREND ►
Given the bedrock hydrocarbon industry’s prevailing model of joint ventures with oil majors, expropriation risks are minimal. Qatar is also touting its new industrial free zones, co-located with its new sea and airports, as destinations for foreign investment.
The country has increased the number of areas where foreigners can own property. A new foreign investment law promulgated in 2019 should widen the range of sectors in which full ownership is permitted, although details are pending. Additionally, a proposed amendment of that law, if approved, will allow 100% ownership of the capital of Qatari shareholding companies listed on the Qatar Stock Exchange, a move that could spur inflows into listed companies.
TREND ▼
Qatar’s leader Emir Tamim bin Hamad Al Thani used the Qatar boycott by other Gulf states to promote nationalist sentiment, with popular support coalescing around his rule. He has also increased senior royals’ visibility in key government briefs, including the foreign ministry. These moves have helped to consolidate the emir’s domestic power base.
In October 2021, Qatar held long-promised elections for the legislature. With power almost entirely centralised, the Advisory Council is effectively a rubber-stamping body, and regardless of the elections, the Council will remain loyal. Given neighbouring Kuwait’s persistent policy deadlocks due to its powerful parliament, the appetite for greater political openness in Qatar is weak.
Qatar’s large expatriate population means its security sector has traditionally focused on internal security, but the sharp downturn in relations with its large and well-armed neighbours, though improving now, has forced the country to re-evaluate its military, with Qatar’s armed forces now growing exponentially.
The U.S. will continue to be Qatar’s ultimate security guarantor, especially as Qatar contains Al Udeid airbase, U.S. Central Command’s forward headquarters.
Qatar has no terrorism and negligible organised crime. Well-paid security personnel and stringent border controls make successful terrorist attacks an unlikely prospect. Qatar has expanded its counterterrorism cooperation with the U.S. in recent years. Qatar has also made terrorist financing an increased focus of its domestic counterterrorism activities, in response to criticism over gaps in the country’s financial system. In 2019, Qatar ratified new anti-money laundering and counterterrorism financing legislation.
Aside from formal central bank foreign reserves, which stood at around USD37.3 billion in January 2022, sufficient for well over three months of import cover, Qatar has other liquidity and nearly USD500 billion in foreign assets held by the Qatar Investment Authority.
The country also has the capacity to raise foreign exchange through borrowing. As such, Qatar is very likely to remain committed to, and capable of maintaining, its currency peg to the U.S. dollar. There are currently no known international sanctions against Qatar.
Qatar is rated AA- with a stable outlook by the three main credit rating agencies, reflecting its robust financial buffers, vast hydrocarbon reserves and high per capita income. Qatar was last downgraded in 2017, following the onset of the neighbouring states’ boycott, and liquidity risks related to the banking system’s dependence on non-resident deposits, which account for more than a quarter of total deposits, with non-resident deposits recovering.
Banks have also been able to diversify the geographical composition of non-resident deposits and lengthened their maturity structure. Post boycott, the combination of higher oil prices, better liquidity management, the easing of Qatar’s supply chain risks and the country’s return to the Arab fold make a strong case for a rating upgrade in coming months. Therefore, sovereign default risks are low.
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