QATAR'S ENERGY MINISTER CONFIRMS POSSIBLE JOINT

C O N F I D E N T I A L SECTION 01 OF 03 DOHA 000811 SIPDIS E.O. 12958: DECL: 11/18/2018 TAGS: ENRG EPET EINV ETTC PREL QA IR RU SUBJECT: QATAR'S ENERGY MINISTER CONFIRMS POSSIBLE JOINT VENTURE WITH IRAN AND RUSSIA TO DEVELOP SOUTH PARS GAS REF: A. STATE 115979 ¶B. L/EGAN-NEA/BLONG EMAIL 17 NOVEMBER 2008 ¶C. DOHA 747 (EXDIS) ¶D. DOHA 798 (EXDIS) DOHA 00000811 001.2 OF 003 -------------- (C) KEY POINTS -------------- -- Qatar's Energy Minister confirmed to Ambassador November 18 that Russia, Iran, and Qatar are actively discussing a joint venture to develop Iran's large South Pars gas field, which the Minister portrayed as purely commercial. -- Ambassador warned that the joint venture could trigger the Iran Sanctions Act (ISA). Ambassador briefly described the provisions of the law. Al-Attiyah said his legal team was already examining closely the potential consequences for Qatar of involvement with Iran's energy sector. -- Once that legal review was done, Qatar would weigh the pros and cons and decide whether to proceed with the joint venture on the basis of its own national interests. But he reiterated that the joint venture was just an idea, a proposal still far from adoption. -------------- (C) COMMENT -------------- -- At the beginning of the meeting, Al-Attiyah appeared to think that any USG objections to the joint venture, as expressed in U.S. law, would center on U.S. company participation in the joint venture. -- When Ambassador pointed out that provisions of the Iran Sanctions Act could affect Qatari companies significantly involved in a joint venture to develop Iran's gas fields (per Ref B),the Minister appeared a bit surprised, but immediately began hinting strongly that Qatar was in a good position to respond commercially. -- If sanctions were applied under the Act, Al-Attiyah suggested, but in a surprisingly avuncular manner, that Qatar could take the United States off the list of countries to which Qatar supplied liquefied natural gas (LNG). -- He appeared to believe Qatar had the upper hand with the United States, at least commercially, especially when he indicated Qatar was prepared to write off Qatar's investments in the Golden Pass LNG terminal, if a deal with Iran proved lucrative enough. -- Qatar has no shortage of potential gas customers, bolstering the Minister's confidence. Qatar routinely hosts senior leaders from around the globe, many of whom attempt to secure gas contracts with Qatar. The Indian and British Prime Ministers were both recently in Doha and gas imports were high on their agendas. -- Given the substance of the exchange, it was ironic that there was little tension in the meeting, with both the Ambassador and the Minister expressing optimism that the issue could be resolved in a way that left the bilateral relationship still strong and intact. In fact, Al-Attiyah ended the meeting with a repeated assurance that the joint venture idea was still just that, an idea. End Key Points and Comments. ¶1. (C) Drawing on Ref A, Ambassador met November 18 with Minister of Energy and Industry and Qatar Petroleum (QP) Chairman Abdullah Bin Hamad Al-Attiyah to express strong U.S. concerns about development of a gas cartel and talks on a possible Qatar-Iran-Russia joint venture on LNG. Also attending the meeting were the Minister's senior technical advisor and QP board member Abdulla Salatt and Econoff. ¶2. (C) Al-Attiyah began by stating that he wanted to give the United States confidence that "we've never thought of this (group) as a gas OPEC." He continued that Qatar is happy it is involved in the discussions with Russia and Iran because it allows them to better control any cooperation by others on gas issues. DOHA 00000811 002.2 OF 003 ¶3. (C) Implying that one or both of the other group members wanted agreements on price, Al-Attiyah stated that "we removed everything on price" from the discussions, and he had told his counterparts that "no one can discuss price except me and my (contract partners)". (Note: Al-Attiyah was also quoted in local press November 18 as dismissing the idea of a gas OPEC. In those comments, he noted that he could not cut gas exports to Qatar's customers without financial penalty; he would not do anything to threaten contractual agreements in gas trade; and he favored producer-consumer discussions to try and create stability in the gas market.) ¶4. (C) Ambassador acknowledged that a gas cartel was not a primary subject of concern and asked the Minister to clarify Qatar's intentions with the publicly announced potential for a Russia-Iran-Qatar joint venture on gas. ¶5. (U) Note: Moscow's ITAR-TASS news agency reported November 12 that the three countries were discussing a joint venture where gas produced in Iran's South Pars field -- the massive field shared with Qatar -- would be transported by pipeline to Qatar where it would be liquefied for further export. However, a November 18 report from the same news agency quoted Gazprom Deputy Chairman Alexander Medvedev as saying of the joint venture: "A draft project is in an initial stage, and work to study the draft has just begun. It is too early to forecast when the joint venture might be established." Medvedev also downplayed the potential for a gas OPEC, saying "the partnership between Iran, Qatar and Russia is, above all, aimed at the realization of concrete projects." Further confusing the issue, on November 18 Tehran's IRNA news agency quoted Iran's Oil Minister Gholamhossein Nozari as saying: "There is agreement on setting up of a joint company which would be able to develop work in the three countries or any other world spot. But to have Iran's gas go to Qatar and be changed into LNG there, we do not accept that by any means... The Islamic Republic agrees to the two countries, Qatar and Russia, investing in South Pars and the production of gas to be done on partnership basis in Iran." End Note. ¶6. (C) Al-Attiyah asserted that "a joint venture is different, purely commercial." Ambassador responded that any involvement with Iran necessarily has political overtones, and underscored the potential legal ramifications for any significant Qatari investment in Iran's energy sector under the Iran Sanctions Act. Al-Attiyah said "we know it very well" and assured that any joint venture would not use American companies or technology. After Ambassador explained again that the Act covers not just U.S. companies but foreign companies such as Qatar Petroleum, Al-Attiyah assured he would have his legal experts review the appropriate legislation in the context of any proposal. Salatt added that Qatar would make sure it is not "paralyzed under sanctions." ¶7. (C) As the conversation progressed, Al-Attiyah downplayed the joint venture proposal, saying the three parties "just have an idea" and are pursuing it in ongoing discussions. He reiterated that there is no political angle for Qatar and that Qatar is only looking at it from a commercial perspective. Ambassador responded that the USG looks at any deal with Iran as having political and security components, and explained why. ¶8. (C) Al-Attiyah said "I'm in business, looking for opportunities...I never mix business with politics." Ambassador reiterated that as Qatar makes commercial decisions, it needs to take into account their potential political and commercial ramifications. ¶9. (C) Al-Attiyah noted that, in his view, any joint venture with Iran could in the future use U.S. companies. He referenced the U.S.-Iranian talks on Iraq security matters and speculated that U.S. policy on Iran would change in the near future. Ambassador attempted to disabuse the Minister of the notion that U.S. law on Iran might change, certainly any time soon, given the regime's regional policies, its nuclear program, and its support for terrorism. ¶10. (C) Remaining cordial, Al-Attiyah said Qatar would do what is in its commercial interests. At the end of the day, if the U.S. pushes Qatar too hard, Qatar could make a commercial decision to stop supplying LNG to the United States. Al-Attiyah clarified that "I'm not (making a threat) DOHA 00000811 003.2 OF 003 but if America tries to push us we don't have to export." ¶11. (C) He then recalled how in the past the USG had cut off the supply of spare parts to Gulf Helicopters (a QP subsidiary) because it had a logistics contract with Shell and Total for Iranian oil operations. He noted that the company replaced its fleet with European helicopters and asked: "who is the loser here?" In response to Ambassador's comment that both sides lose, Al-Attiyah responded that "no, we are ok." He then recalled a similar episode that occurred over ties with Sudan. Salatt added that his personal opinion was that USG law hurts U.S. interests much more than it hurts those of Iran. ¶12. (C) Ambassador noted that we have a strong bilateral relationship on energy and Qatar had quite a bit invested in the Golden Pass LNG terminal in Texas. He pointed out that his concern was to make sure Qatar examines all potential angles of any deal, and that it weigh carefully the arguments against such a joint venture. Moreover, Ambassador could not believe Qatar was unconcerned by the prospect of U.S. sanctions. Al-Attiyah responded with a wink that "1 billion (dollars) is nothing in our business." ¶13. (C) Separately, Al-Attiyah noted that QP had recently signed an LNG joint venture agreement with Chevron in Venezuela and asked why that was different. Ambassador responded that the specific sanctions in question apply to Iran, so U.S. laws concerning such transactions with Venezuela were not the same. Al-Attiyah concluded that "we are not doing anything without carefully weighing the pros and cons. I hate legals (sic) but we will examine (your concerns) closely and have our legal department look at possible consequences. The joint venture is just an idea, anyway." LeBaron