Qatar crisis: how the world's richest nation ended up in a desert storm amid claims it bankrolls extremists

It was seized on as a major plus in the days before Theresa May formally notified the European Union of the UK’s intention to leave. A £5 billion investment pledge that showed the nation remained open for business. The cash was a big gesture for Britain but chump change for Qatar, the wealthy Gulf state that has already ploughed £40 billion into a Monopoly board of trophy UK assets. What would it buy next to sit alongside the quintessential luxury of Claridge’s or the gleaming Canary Wharf tower?

“I am still looking — even after Brexit there will be opportunities QIA [Qatar Investment Authority] can really hunt for,” said Sheikh Abdullah bin Mohammed bin Saud al-Thani, chief executive of the Gulf state’s £250 billion sovereign wealth fund. “Whenever the [British] government would like the QIA to step in we are ready.” Fast-forward two months and the focus is less on its overseas investments and more on a severe domestic crisis. Since Monday, when its near neighbours Saudi Arabia, the United Arab Emirates, Egypt and Bahrain said they were severing all ties, the Qatari currency has slumped and panicked residents have dashed to change their money into dollars.

The world’s richest nation on a per capita basis — and perhaps, ironically, a large shareholder in Sainsbury’s — is falling back on emergency measures to keep supermarket shelves stocked. If sanctions bite, what will happen to Qatar at home — and to the billions it has invested abroad, especially in London?

It is a rare setback for this speck of a nation, half the size of Wales. Qatar may be small, with far less in its main sovereign wealth fund than Abu Dhabi, but over the past decade it has announced itself on the world stage — and in the capital — with a string of flashy acquisitions. There is Harrods, The Shard, the HSBC Tower and The Connaught, and then stakes in the London Stock Exchange, Barclays, Heathrow Airport and British Airways owner IAG. It might even have bought Formula 1 if the stars had been aligned.

Call it a strategy or a spending spree, the plan devised by the ruling al-Thani family has brought it good headlines and built influence. Qatar has invested its riches wisely in preparation for the day its plentiful natural gas resources run out. But the country’s reputation has been dogged by claims that it supports Islamic extremists, something it strenuously denies.

Reports suggest Saudi Arabia and its partners cut transport and trade links after a $1 billion kidnap bounty the state stumped up to secure the release of a royal falconry party went to an al Qaeda affiliate.

Such allegations have taken the sheen off Qatar’s international standing, but have never blocked trade. In 2014 the Obama administration warned that Qatar and Kuwait remained fertile ground for terrorist financiers. That ratcheted up pressure on then prime minister David Cameron to press the emir on a trip to London to cut off the flow of funds.

Until this week there was little sign of this happening. Qatar is a crucial gas supplier to the UK. It was controversially awarded the 2022 World Cup tournament and has engaged British engineers to help it construct air-conditioned football stadiums. It intends to use the event to build its reputation as a tourist destination and long-haul stopover.

It spreads the word via the state-funded 24-hour global news channel al-Jazeera, regarded by others in the Gulf region as an irritant. Qatar’s ruling family are cultured — consolidating a love of horse racing by becoming the first commercial sponsor of Royal Ascot — and maverick, as seen by the abdication of Sheikh Hamad bin Khalifa al-Thani in 2013 in favour of his 33-year-old son Tamim.

However well-drilled they are, experts fear the dispute will weigh on Qatar’s economy. Its stock market has plunged 10 per cent in value and credit rating agency S&P has cut Qatar’s creditworthiness to below that of the UK. It is heavily reliant on imports so cutting off road links through Saudi Arabia will be costly, as will denying it goods from Dubai’s Jebel Ali container port. At least Qatar Airways has its own cargo line, operated from Doha’s lavish $16 billion international airport, which opened in 2014.

There is no sense this crisis will be over quickly. Some fear the worst lurch towards instability in the region since Iraqi dictator Saddam Hussein invaded Kuwait, prompting the first Gulf War.

Political tensions have seen the United Arab Emirates warn Qatari sympathisers they could face a prison sentence of up to 15 years, while Turkey has sided with Doha and pledged to send troops if necessary. Donald Trump, whose decision to make Saudi Arabia the destination of his first overseas trip may have emboldened the kingdom’s rulers to act, has only confused matters. He initially appeared to praise Saudi Arabia’s actions before offering to broker peace talks. The US has a large military base in Qatar.

If trouble at home persists, London estate agents are rubbing their hands at the prospect of more Qatari cash pouring into the safe haven of the capital’s bricks and mortar. The nation has become leader of a pack of overseas investors that have preyed on prime London real estate. The al-Thani clan already own mansions on Mayfair’s smartest streets as well as several apartments in One Hyde Park, the most expensive block of flats in the world.

More impressive are the three adjoining properties on Cornwall Terrace close to Regent’s Park, owned by Sheikha Moza bint Nasser, the glamorous second wife of the former emir. So far Westminster Council has rejected plans to knock them into a single, 13-bedroom, £200 million palace complete with swimming pool, spa, gym, beauty salon, a children’s floor, games rooms and fumoir. If more investment does come London’s way, there is a suggestion it would not be because the QIA had undergone a change of tack.

“This is not the first time we’ve heard these criticisms of Qatar’s foreign policy, and they seem to have had no effect whatsoever on Qatar’s ability to make deals and work with global financial institutions,” says Jess Delaney, head of data and research for Institutional Investor’s Sovereign Wealth Center, who points out it could weather a breakdown in diplomacy because the QIA does not invest elsewhere in the Middle East or with fellow Gulf funds. But, he concedes, “If this event adversely impacts Qatar’s economy and political stability then the QIA’s investment strategy could suffer, but it’s too early to speculate on that front.”

Others think it could at least lead to more scrutiny. “With Brexit, these investments have been heralded as part of the internationalisation of UK investment, but as we see there are now questions as to the stability of these investments,” says Ian Goldin, professor of globalisation and development at Oxford University and a former vice-president of the World Bank. “Globalisation offers greater choices, but also leads to greater uncertainty. Careful analysis of the deals and ensuring that they meet our ethical and other standards is more vital than ever.”

That’s true enough, but Qatar has invested so much in London that it may be too late to stand back and ask if it passes muster. The vast property portfolio it has amassed suggests its quest to diversify income has been a success. Now it is time to see if Qatar has bought enough influence on the world stage to benefit it when the going gets tough back in Doha.

Follow James Ashton on Twitter: @mrjamesashton