Wealth Of Bahrain And Qatar: Money And Power

Qatar and Bahrain are two of the richest countries in the Middle East and North Africa (MENA) region. Qatar's finance minister, Ali Sharif al-Emadi, famously stated that Qatar has too much money and that its wealth could withstand sanctions. Qatar's GDP of $191.4 billion ranked it as the 54th largest economy in the world, while Bahrain ranked 99th with a GDP of $37.7 billion. Both countries have benefited from their oil and gas industries, which have contributed significantly to their economic growth. However, Bahrain has faced challenges due to its limited oil reserves and has diversified its economy into sectors like finance, manufacturing, and tourism. Despite these differences, both Qatar and Bahrain have substantial financial resources that have contributed to their economic success and global recognition.

Qatar's finance minister says huge wealth means the country can withstand sanctions

Qatar's finance minister, Ali Sharif al-Emadi, has asserted that the country's vast wealth will enable it to withstand sanctions imposed by neighbouring countries. In July 2017, Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt severed diplomatic and transport ties with Qatar, citing accusations of supporting terrorism. Qatar's finance minister, however, remained confident in the country's economic resilience.

Al-Emadi highlighted Qatar's significant financial resources, including sovereign wealth funds, central bank reserves, and a strategic reserve from the ministry of finance. He stated that these assets amounted to "250 per cent of gross domestic product." This financial strength, according to Al-Emadi, positioned Qatar in a better economic situation than its rivals, including Bahrain and Egypt, whose bonds he described as "junk bond level."

Al-Emadi also emphasised Qatar's status as the fastest-growing country in the region, outpacing the nearest Gulf Cooperation Council country by 40%. He argued that the country could easily defend its economy and currency, and that any economic losses due to sanctions would be mutual, impacting the sanctioning countries as well. Qatar's ability to import goods from other regions and its plans to further diversify its economy contributed to this confidence.

While Qatar's finance minister projected optimism, the sanctions did cause disruptions to import flows and impacted the country's currency and stock market. Nonetheless, Al-Emadi assured that there was no reason for concern, and Qatar's substantial reserves and investment funds provided a buffer against economic shocks.

Qatar's financial prowess is closely tied to its role as the world's top liquefied natural gas exporter. This energy sector dominance has contributed significantly to the country's overall wealth and ability to withstand economic pressures.

Qatar's GDP is ranked 54th in the world, while Bahrain's is 99th

Qatar's economy is one of the highest in the world based on GDP per capita, and it typically ranks among the top ten richest countries globally. The country's economy has continued to grow despite sanctions imposed by its neighbours, Saudi Arabia and the United Arab Emirates. This is mainly because Qatar exports primarily to Japan, South Korea, India and China, and neither Saudi Arabia nor the United Arab Emirates have imposed trading penalties on these countries for trading with Qatar.

Qatar's economy is heavily dependent on its large natural gas reserves and oil production, which generate substantial revenue for the government. Qatar has the world's third-largest proven natural gas reserve and is the third-largest exporter of natural gas. Petroleum and natural gas account for more than 70% of total government revenue, over 60% of gross domestic product, and about 85% of export earnings.

Bahrain, similarly, has a high-income economy that is heavily dependent on oil and gas. Petroleum is Bahrain's most exported product, accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP. Despite efforts to diversify, oil still comprises 85% of Bahraini budget revenues. Bahrain has the second-highest-valued currency unit in the world and has successfully diversified its economy into banking, heavy industries, retail, and tourism. It is the main banking hub in the Persian Gulf and a centre for Islamic finance.

Bahrain's economy is heavily dependent on oil and gas

Bahrain has worked to diversify its economy due to limited oil reserves. It has stabilized its oil production at about 40,000 barrels per day, and reserves are expected to last 10 to 15 years. Bahrain's oil sector can be divided into two parts: refining and crude oil production for export. In terms of revenue, oil exports are much more important than refining margins. Bahrain's oil exports come from its 50% share of the Abu Saafa offshore field, which it shares with Saudi Arabia. In 1972, the two countries agreed that Bahrain would receive 50% of the revenues without being charged production costs. Bahrain has, at times, received a larger share of the revenue, and Saudi Arabia has continued payments even when the field was closed due to low oil prices.

Bahrain has also invested in the banking and tourism sectors, with its capital, Manama, being home to many large financial institutions. Bahrain's banking and financial services sector, particularly Islamic banking, have benefited from the regional boom driven by the demand for oil. Bahrain is the main banking hub for the Persian Gulf and a centre for Islamic finance, with strong regulatory frameworks attracting international financial institutions.

Despite the success of economic diversification, the oil and gas sector remains a strong component of Bahrain's economy. In April 2018, the Bahraini government announced its biggest oil and gas discovery since the 1930s, with an extensive reservoir off Bahrain's west coast estimated to contain some 80 billion barrels of tight oil. Bahrain also announced the discovery of 10-20 trillion cubic feet in onshore deep gas reserves beneath the legacy Bahrain field.

Bahrain has the second-highest-valued currency unit in the world

Bahrain's economy is heavily dependent on oil and gas, with petroleum being the country's most exported product. Accounting for 60% of export receipts, 70% of government revenues, and 11% of GDP, it's no surprise that Bahrain is considered a rich country in the Middle East and North Africa (MENA) region. However, it's interesting to note that Bahrain's oil wealth is limited compared to its Persian Gulf neighbours.

Despite this, Bahrain has successfully diversified its economy beyond oil and gas. Since the late 20th century, the country has heavily invested in the banking and tourism sectors. Bahrain's capital, Manama, is home to many large financial institutions, and the country's banking and financial services sector, particularly Islamic banking, have benefited from the regional boom driven by the demand for oil. Bahrain is now recognised as a high-income economy by the World Bank.

The country has also invested in heavy industries, retail, and telecommunications, with the government using its oil revenues to build advanced infrastructure. Additionally, Bahrain has successfully attracted investment from other Persian Gulf states by investing in infrastructure development and improving its standard of living in areas such as health, education, housing, electricity, water, and roads.

All these factors have contributed to Bahrain's strong economy and the strength of its currency, the Bahraini Dinar (BHD). As of 2021, the Bahraini Dinar is the second-highest-valued currency unit in the world, with 1 BHD equalling $2.65957. The strength of the Bahraini Dinar is a reflection of Bahrain's economic stability and successful diversification efforts.

Qatar's finance minister says the country has better finances than its rivals

Qatar's wealth is largely derived from its natural gas and oil reserves, which have contributed to the country's status as a high-income economy. In addition, Qatar has successfully diversified its economy beyond natural resources, with notable growth in the banking and tourism sectors.

In 2017, Qatar's finance minister, Ali Sharif al-Emadi, asserted that the country's wealth placed it in a position of strength relative to its rivals. He stated:

> "We have sovereign wealth funds of 250 per cent of gross domestic product, we have Qatar Central Bank reserves, and we have a ministry of finance strategic reserve."

Al-Emadi's comments came in response to sanctions imposed by Saudi Arabia and its allies, who had severed diplomatic ties with Qatar, accusing it of supporting terrorism. Despite these sanctions and downgraded financial prospects by credit rating agencies, Al-Emadi maintained that Qatar's finances were superior to those of its competitors, specifically mentioning Bahrain and Egypt's bond ratings. He further emphasized Qatar's status as the fastest-growing country in the region, outpacing the nearest Gulf Cooperation Council country by 40%.

Qatar's resilience in the face of sanctions can be attributed to its significant financial reserves and successful economic diversification. The country's financial industry, particularly Islamic banking, has thrived, benefiting from the regional oil boom. Additionally, Qatar has made notable strides in self-reliance, particularly in food production, and has continued to attract foreign investment.

In recent years, Qatar has also demonstrated a commitment to economic modernization and trade diversification, as outlined in its National Vision 2030. The country has opened up to foreign investment, with laws allowing for up to 100% foreign investment in businesses. Qatar's hosting of the 2022 FIFA World Cup further elevated its global profile and showcased its state-of-the-art infrastructure.

While Qatar's economy remains heavily dependent on natural gas and oil, with revenue streams from Qatar Airways and other state-owned enterprises, the country has demonstrated financial robustness and a proactive approach to economic challenges.

Frequently asked questions