Talking to Uncle Sam

Qatar

Economic News

22 Jul 2010
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Qatar's role as a catalyst for dialogue between the US and the Islamic world took another step forward recently, with the second US-Islamic World Forum kicking off in Doha on April 10.



"The dialogue between the two parties on democracy needs to be an issue of agreement and not contention," said the Emir, Sheikh Hamad bin Khalifa Al Thani, in his opening address. He then added that this dialogue should be "an issue that binds, not disunites".



Qatar's Ministry of Foreign Affairs was a prime mover in setting up the US-Islamic World Forum last year, an act accomplished in partnership with the Saban Center of the Brookings Institute. However, the role played by Qatar alongside the US has also been subject to scrutiny from the Islamic world in recent years, especially since it hosts vital strategic deployments of US forces - forces which have been actively engaged in pursuing Washington's security goals in the region.



In return, the US has not been shy in offering its key regional allies economic incentives and benefits to help them achieve policy goals. Qatar is no exception, having signed a Trade and Investment Framework Agreement (TIFA) with the US in March, 2004.



The significance of a TIFA is that it allows the US and the partner country to form a joint council for setting out what the US State Department calls "basic principles underlying the two nations' trade and investment relationship".



These principles are generally expected to form the basis of a future Free Trade Agreement (FTA), as they have for other US allies in the region, such as Jordan and Morocco, but more particularly, Bahrain. Qatar's neighbour hosts the US Fifth Fleet headquarters and concluded its FTA with the US in record time, although the agreement still awaits ratification by the US Congress.



These moves to enhance trade with and within the Middle East also hope to encourage economic development alongside certain other goals - such as counteracting the anti-Western sentiment in the region.



Yet the push to sign more FTAs has not always sat well with some of Qatar's Gulf Cooperation Council (GCC) partners. Local heavyweight Saudi Arabia in particular has not been pleased with the other GCC members' expressed intention to enter into bilateral agreements with the US.



The Saudi view is that such deals undermine the GCC's goal of abolishing external tariffs, and give states with a US FTA a trade advantage over fellow member states. At present, the GCC members have signed a customs union fixing tariffs at 5% with a view to forming a full economic union in the future.



The discontents argue further that the deal violates the economic agreement signed by member states in 2001 stipulating that "no member state may grant to a non-member state any preferential treatment exceeding that granted herein to member states, nor conclude any agreement that violates provisions of this agreement."



For Qatar, the economic benefits stemming from such a deal with the US will not be huge. The 2003 trade figures, for example, show exports to the US as having diminished since 2001, down from QR1.38bn ($380m) to QR764.7m ($210m), while imports have grown from QR1.88bn ($517m) to QR2.17bn ($596.6m). Although total growth in imports has exceeded 100% since 1999, the benefits are still not large.



Qatar's relationship with the US is more than just trade though. Defence and security also play a key role.



Diplomatic relations began in 1973, but US-Qatari relations were not close until the 1990 invasion of Kuwait by Iraq. Indeed prior to that relations had at times been sticky, particularly in 1988, when US-made Stinger missiles were observed at a military parade in Doha. The problem stemmed from the fact that the weapons had been obtained through unsanctioned channels. With the Qatari government at the time refusing to give up the offending articles or allow inspection, the US withheld military and economic co-operation



The issue was settled in 1990, when Qatar destroyed the missiles. The subsequent co-operation during Operation Desert Shield and Desert Storm improved Qatar's status, making it a more desirable security partner for the US. In 1992, the two countries signed a bilateral defence co-operation agreement. The agreement provided for US access to Qatari bases, pre-positioning of US materiel and combined military exercises.



After the current Emir, Sheikh Hamad, replaced his father in 1995, the US was the first to recognise his rule. With the 1996 opening of al-Udeid airbase for use by US forces, the assurance of constant military protection was of some comfort, as Qatar's potential wealth - stemming from huge natural gas reserves - became the basis for its subsequent economic development.



Qatar's role developed further when the US began its "war on terror". The US Air Force conducted between 14 and 16 supply flights per day to Afghanistan out of al-Udeid. Ongoing investment in the facility has expanded its capacity and it currently houses between 5000 and 6500 personnel, with a total capacity of up to 10,000 troops and 140 aircraft. Significantly, the base also features the region's main combat air-operations centre, originally built as a backup to US operations in Saudi Arabia.



The subsequent invasion of Iraq was also an issue in which Qatar played a vital supporting role. Although the move was unpopular with the Qatari population, after some mixed messages the Qatari government agreed with the need for confrontation of the regime and this became the focus for renewed bolstering of the US military presence in Qatar.



The rapid construction of Camp al-Saliyah moved the forward headquarters of the US Central Command to Qatar from Saudi Arabia. In the run-up to the invasion, the air-conditioned warehouses at the facility hosted tens of thousands of troops, and hundreds of tanks and armoured fighting vehicles.



Qatari government officials have since expressed concerns and displeasure with US tactics and operations since the invasion, but are committed to participating constructively in rebuilding Iraq. Privately however, some Qataris and Arab-residents will express discontent with US foreign policy in the region - particularly over Washington's support for Israel. Yet Qatar has played an active role in resolving Arab-Israeli differences, endorsing the "road map" plan set out by the US and even hosting an Israeli trade mission, although this closed during Operation Iraqi Freedom.



Assistance in the "war on terror" has not been limited to military co-operation either. A money laundering law closed all bank accounts for foreign charities in a bid to prevent terrorist funding passing through Qatar's financial system. The Qatar National Bank has also provided its entire staff with a four-day course on preventing money-laundering and terrorist financing.



Some tension has endured despite the development of these close relations though, particularly over Qatar's hosting of the controversial Arabic TV news station, al-Jazeera. The channel has frequently drawn criticism for showing graphic images - and has been slammed repeatedly by the US for its coverage of Iraq.



In early 2004, reports were published claiming that the US administration had put pressure on the Qatari government to fast track the privatisation of the channel as a result of Washington's discontent. A story in the New York Times went on to quote US government insiders who claimed the channel had been the cause of some heated arguments in the cabinet. Al-Jazeera and the Qatari government subsequently denied that any pressure had been placed on them to bring privatisation forward, and the plans still have no firm schedule.



Meanwhile, assured of its security, Qatar has begun to thrive. In taking on an international role to address the dialogue gap between the US and the Islamic world, Qatar hopes not to be seen as an apologist for US foreign policy. However, whilst nestling up to the world superpower may have some drawbacks in terms of popular perception, even the supposed benefits cause problems for Qatar's other foreign economic relations. The true impact of an FTA with the US may well turn out to be on GCC economic unity, not on Qatar alone.

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