According to recent media reports, regional energy giant QatarEnergy is looking to make a significant move into the Iraqi oil and gas sector by acquiring a stake of around 30 percent in French firm TotalEnergies’ $27 billion portfolio of energy projects in Iraq.
The deal has not been confirmed by either party, but reports suggest that the joint cooperation may involve the exploration and development of gas and renewable energies in southern Iraq, as well as the construction of a 1,000-megawatt solar energy plant.
While TotalEnergies has signed a spectrum of energy deals with the Iraqi government, it is widely believed that Qatar plans to focus on the development and exploration of gas and renewable energy. Oil Price expert Simon Watkins says that the French and Qataris may collaborate on a project to collect the gaseous byproduct derived from oil drilling in five Iraqi oilfields located in the Basra Governorate – West Qurna 2, Majnoon, Tuba, Luhais, and Artawi.
The collaboration between the Qatari and French energy giants should not come as a surprise, as the two companies have a long history of partnership in Qatar’s giant liquefied natural gas (LNG) production, as well as in many projects around the world, including in South America (Guyana) and Africa (Namibia and South Africa).
If the energy deal materializes, it will provide much-needed relief for Prime Minister Mohammed al-Sudani and his new government, who, like their predecessors, have been plagued by severe electricity shortages and internal political turmoil. Some have suggested that the Qatari project may even minimize Iranian influence in Iraq as it would potentially boost domestic production and reduce Baghdad’s heavy dependency on Iranian oil.
Why is Qatar interested in Iraq’s energy sector?
In recent years, a number of international companies have pulled out from Iraq due to poor returns from revenue-sharing agreements. So why is QatarEnergy interested in entering the country’s energy sector, given this negative trend?
According to Global Head of Strategy & Risk Dr. Cyril Widdershoven at Berry Commodities Fund, the same margins or even higher ones could be generated in other regions. “Internal instability, corruption, and strong Iranian influence in Iraq are the most important factors for this ‘exodus’ of foreign investors from the country,” he tells The Cradle.
On the other hand, Naser al-Tamimi, a UK-based political economist and Senior Associate Research Fellow at the Italian Institute for International Political Studies, says that QatarEnergy is in an expansionary phase and has increased its global energy portfolio over the past few years.
Participating in Iraq’s $27 billion project that combines traditional hydrocarbons and renewable power, including oil production, gas processing, solar power, and a critically important water re-injection facility, would be the Qatari company’s most ambitious move yet. As Tamimi observes:
“The attraction is clear. Participating in one of the industry’s most ambitious planned projects would showcase that QatarEnergy is a major international player, not just an LNG exporter. The success of such a project may open the door for Qatari [or Gulf Cooperation Council (GCC) firms] to participate in other ambitious projects inside Iraq.”
In addition, the vast oil and gas reserves in Iraq are highly attractive investment targets, particularly if Arab governments are involved in their development. But for QatarEnergy, there may be another compelling reason for their interest in Iraq, says Widdershoven:
“Qatar’s involvement in Iraq will provide Doha with influence in a potentially strong future gas producer, and it is better to have your ‘enemies’/potential direct competitors closer to your side.”
Piece of a larger puzzle?
Qatar’s moves on Iraq’s energy sector have also garnered attention from geopolitical analysts who connect it to the rapidly changing global energy order. While some suggest that Qatar’s Iraqi engagement is aligned with the US strategy to source alternative supplies to Russian oil, others, such as Widdershoven, point out that Doha’s focus is primarily on natural gas and not crude oil: “To think Doha is doing it on the request of Washington is giving [US President Joe] Biden’s Administration too much credit,” he notes.
Speaking to The Cradle, Gawdat Bahgat, professor of National Security Affairs at the National Defense University’s Near East South Asia Center for Strategic Study, contends that “Qatar is not taking part in an anti-Russia coalition. Like other [Persian] Gulf states, Qatar has been trying to work with both the west and Russia adopting a neutral stance.”
In this context, Qatar, like many other Global South states, is developing its investments based on national interests. In today’s increasingly multipolar environment, that means calibrating long-term strategies that provide Doha leverage with both Washington and Moscow. As Widdershoven notes, “Doha is not anti-Putin,” and it would be a mistake to assume that “Qatar will ever be Washington’s ally against Moscow,” as “no Arab Gulf countries will only bet on Washington, but rather on all without showing their cards in their hand.”
Instead, Qatar appears to be hedging its bets and seeking a long-term advantage in having access to Iraq’s potential natural gas reserves for the future.
Despite Qatar’s investment interest in Iraq’s energy sector, there are ongoing concerns about the country’s political stability and its strong relationship with Iran. Some experts believe that opening up the energy sector to a neighboring Arab state could be a countermeasure against Iranian influence in Iraq, a move that would be welcomed by western and other Persian Gulf states.
Iraq is in dire need of investments to boost its weak economy, and its government structure is too fragile to risk rocking too many geopolitical boats. According to Widdershoven, the making or breaking of new Prime Minister Sudani will depend on whether he can attract more investments to the country and secure its basic needs.
Tamimi believes that Qatar’s investment will also help jumpstart Iraq’s energy sector, which has been experiencing a decline in foreign investment interest. “If the deal proceeds, it will boost confidence in Iraq among international contractors and suppliers and create a range of new business opportunities,” he says.
Rivalry in the Persian Gulf
Nevertheless, Qatari investors are likely to face some competition from their Persian Gulf neighbors, particularly the UAE, which has a strong presence in Iraq. In 2021, both the UAE and Saudi Arabia announced significant investments in various sectors to strengthen economic and trade ties with Baghdad, and their oil and gas companies are already involved in projects throughout the country.
For example, Sharjah-based Crescent Petroleum recently signed three 20-year contracts with the Iraqi Ministry of Petroleum for the evaluation, development, and production of oil and natural gas in the Diyala and Basra Governorates in eastern and southern Iraq.
According to Tamimi, “This may increase the competitiveness and importance of QatarEnergy and other Gulf companies within the regional/global energy map, but also lead to cooperation with non-western companies active in Iraq, particularly the Chinese (and perhaps Russian) firms.”
But while the potential payoffs of a Qatari investment are considerable, so are the risks, he argues:
“Iraq’s political instability means that even routine projects are subjected to substantial delays, and this is far from a routine project. Even if the Qatar deal does go through, the future of the projects could remain uncertain as relations between TotalEnergies and the Iraqi government are strained.”
Additionally, although countering Iran has indeed been a major focus of Abu Dhabi and Riyadh – which have wielded financial resources in Lebanon and Iraq to weaken their ties to Tehran – it is important to note that Qatar’s stance towards Iran and its political leadership has been significantly different from that of the UAE and Saudi Arabia.
The Doha-Tehran axis
Qatar has enjoyed fairly consistent relations with the Islamic Republic, even during periods when its GCC allies have not. This is why Widdershoven believes that Qatar’s Iraq investment could benefit Iran as well, as there would be a regional Arab state involved in Iraq’s oil and gas sector that would be flexible in cooperating with and alongside Iran in this vital sector.
The “Doha-Tehran axis is here at play, which could be easily marked as a win-win solution for both,” says Widdershoven. Moverover, according to Professor Bahgat, “if the newly signed agreement between Tehran and Riyadh holds, it might help to de-escalate the tension between these two major regional powers,” which could, in turn, speed up investments from other Persian Gulf countries to Iraq.
That may change if Iran and Russia continue to increase their defense cooperation and shift the Persian Gulf’s military balance of power. While Arab states are unlikely to turn on Moscow, they will undoubtedly register strong complaints about an Iranian advantage, which will almost certainly play out in the Iraqi theater.
Iraq’s Arab neighbors will always find it challenging to compete with Iran’s existing political and paramilitary network of influence in the country. But it would be far more effective for Persian Gulf countries to take a soft power approach – rather than a rejectionist one – through investing in useful and critical Iraqi projects and by offering other economic incentives to balance Iran’s influence in Baghdad.