New Climate Financing Targets Present Opportunity for the Gulf

Following two weeks of COP29 negotiations, exhibitions, and panel events, delegates representing governments around the world reached a major consensus. Most significantly, they agreed wording on a new climate financing target for developing countries, international carbon market standards, and a support programme for national adaptation plans (NAPs) for the least developed countries.

These three key victories for the climate agenda present great opportunities for the Gulf states, particularly Saudi Arabia, the United Arab Emirates, and Qatar—collectively referred to as the Gulf 3—to play a leading and supportive role in investing in a 1.5C-aligned and resilient future, which was the fundamental aim of the 2015 Paris Agreement.

At the 2009 Copenhagen Climate Summit (COP15), developed countries agreed to mobilise $100 billion of annual climate financing for developing countries by 2020. This target was unfortunately never met, with the deadline extended to 2025 during the Paris Agreement signifying a commitment to updating the target to increase its ambition by the end of the decade. This brings the focus to 2024’s negotiations, which culminated in this target being updated to $300 billion annually by 2035.

This target and metric are highly contested. Developing countries want to increase the target further as their financing needs are much greater than this amount. The Overseas Development Institute has estimated that the need is closer to $1.3 trillion per year by 2035, which is the new cumulative goal. Moreover, much of this financing is currently provided in the form of debt rather than grants, adding to existing debt obligations, which is especially challenging for small and developing nations.

The new agreement requires the 24 developed nations, across Europe, the United States, Japan, Australia, and New Zealand, to deliver on this target. A broader climate financing target of $1.3 trillion has also been set by 2035, and “voluntary” contributions from countries outside the original 24 are allowed to be included in this figure.

Fossil-fuel-dependent states, including the Gulf 3, have faced criticism for their role and influence over the talks, but the opportunity remains for them to contribute further, as part of this new metric for South-South financing.

Documenting and disclosing existing investment flows can build transparency and show the world that the Gulf 3 are serious about contributing to global climate finance flows. Once this reporting infrastructure is in place, the next opportunity for the Gulf 3 would be to demonstrate their leadership and commitment to South-South climate financing by increasing financial flows from the baseline to help meet the $1.3 trillion annual funding target by 2035.  Alongside the likes of China and Korea, this effort will help to further increase South-South climate financing.

According to the World Investment Report released earlier in 2024 by the UN Conference on Trade and Development, foreign direct investment outflows from the Gulf 3 totalled some $38.2 billion in 2023, down from its peak  of $58.2 billion in 2022. While a more detailed breakdown of the share of these investments that can be considered climate financing and the proportion  allocated to other developing countries is not available, this demonstrates the scale of capital available from the Gulf 3 for this opportunity.

A significant chunk of this financing came from Saudi Arabia’s sovereign wealth fund, known as the Public Investment Fund (PIF), with some $620 billion in assets under management. Of the thirteen “vital and strategic" investment sectors PIF has identified for the upcoming five years, seven are crucial to climate financing going forward: food and agriculture, metals and mining, transport and logistics, automotives, real estate, construction and building, utilities and renewables.

A similar sector focus can be seen in the investment portfolios of the UAE and Qatar. The Abu Dhabi Investment Authority (ADIA), Mubadala Investment Company (MIC), Emirates Investment Company (EIC), and Qatar Investment Authority (QIC), which boast a combined portfolio of $1.8 trillion, are responsible for driving investments that can help to fill this global green financing gap. In particular, the Abu Dhabi Fund for Development has a designated mandate for concessional and sustainable financing to local and global emerging economies.

COP29 also led to defined rules for both Article 6.2 and 6.4 in relation to carbon markets. The International Emissions Trading Association estimates this can raise $1 trillion of additional financing for developing countries by 2050, by channelling funding into nature-positive projects, particularly in developing nations. Article 6.2 defines the framework for countries to make bilateral agreements to exchange and trade carbon credits. Article 6.4 creates a centralised international carbon market, supervised by the UN who then validates, issues, and verifies carbon credits.

The defining of Article 6.2 and 6.4 market mechanisms means that legal and regulatory frameworks now exist for the Gulf 3 to partner bilaterally and multilaterally with countries around the world to improve the supply and demand for these carbon credits, working towards a high-quality and high-price carbon credit market.

In Baku last month, Saudi Arabia’s PIF launched a carbon credit exchange called the “Regional Voluntary Carbon Market Company,” with the auctioning of 1 million tons of carbon offset credits. Last year, the UAE Carbon Alliance announced targets to buy USD450m of Africa’s carbon market initiative, with the UAE additionally considering developing its own Emission Trading System. At the same time, Qatari firm Emsurge has announced a public-private partnership to fuel its own carbon market development.

The outcomes of COP29 present a critical opportunity for the Gulf 3 to align their financial resources with global climate goals. By scaling investments through sovereign wealth funds like PIF, ADIA, and QIC, these nations can help close the global climate financing gap and drive South-South cooperation. Transparent documentation and a commitment to increasing flows will showcase their leadership in building a resilient, 1.5C-aligned future.

Photo: WAM

Climate Policy and Cross-Border Hydrocarbon Development in the Gulf

This article is part of a series exploring regional energy cooperation in the Gulf and is published in cooperation with Istituto Affari Internazionali.

The Gulf countries are leading global producers and exporters of oil and gas. They have long reserves lives at current production levels, well beyond 2050, and substantial potential to increase reserves through field development, enhanced recovery, and exploration. They are intrinsically low-carbon producers measured by upstream emissions per barrel, although this is obscured in Iran and Iraq by high levels of flaring of unused associated gas (a by-product of oil production) and leakage of methane. They have strong involvement of state oil companies in oil and gas production, though this varies from an effective monopoly (Kuwait) to a leading role for international operators (Iraq and Oman).

With the exception of Iraq, they have large domestic petrochemical industries. Saudi Arabia and, increasingly, the UAE, have extensive international investments in refining and petrochemicals across the US, Europe, and Asia. While this is mainly on their own account, Kuwait does have a stake in the important new Duqm refinery in Oman. The region’s oil exporters also make use of the extensive oil storage and bunkering facilities in the UAE and Oman. On the other hand, Qatar is the world’s biggest LNG exporter and has a major expansion programme to be completed during 2026-27, Oman and the UAE are smaller LNG exporters (the UAE also expanding), while Iran is an important supplier of gas by pipeline to Turkey and Iraq.

The role of the Gulf states as oil exporters has limited the potential for cooperation between them. The dominance of the state in the upstream industry means that cross-border hydrocarbon investment is very limited. Mubadala Energy, the energy arm of the Abu Dhabi government strategic development company, has some upstream assets in Qatar and Oman, and utility Taqa has oil operations in the Kurdistan region of Iraq. QatarEnergy recently entered a project in southern Iraq led by TotalEnergies for development of oil, gas, water injection and solar power. Sanctions and political disputes have prevented any GCC investment in Iran’s hydrocarbon sector. There has been some interest, for example, and various plans since the early 2000s for gas and electricity connections, and most recently, discussions between Saudi Arabia, the UAE, and Iran in July 2023 concerning investment and the development of shared fields.

Gas is more promising for cooperation, given that some of the Gulf states are relatively gas-short. The most notable project, Dolphin, exports gas from Qatar by pipeline to the UAE, with small volumes continuing to Oman. Dolphin faced opposition from Saudi Arabia, which argued that the pipeline crossed its own maritime territory. A similar plan to supply Qatari gas to Kuwait was entirely blocked by Saudi Arabia, which did not want the smaller GCC states to be linked beyond its influence. Although LNG exports from Qatar to the UAE stopped during the boycott of Doha between June 2017-January 2021, Dolphin continued operating as normal, a sign of its importance to both countries, and of the promise of energy projects to constrain conflict.

Some oil and gas fields in the Gulf lie across borders. In general, countries have developed them competitively, extracting as much as possible without an agreement with the neighbouring state. The most notable field affected by a boundary dispute is the large gas-field Dorra, known in Iran as Arash, which lies partly in Kuwaiti waters, partly in the Kuwaiti section of the Partitioned Neutral Zone with Saudi Arabia, and partly, in Tehran’s view, in Iranian waters. Kuwait’s shortage of gas leads to heavy domestic use of polluting and expensive oil. An agreement on Dorra, perhaps via a joint development zone without concession of sovereignty, could be a way forward. Such agreements have enabled Saudi Arabia to supply half of the oil from the Abu Safa field to Bahrain as part of a boundary settlement and Qatar and the UAE to divide the resources of the offshore Bunduq oil-field.

The most important cross-boundary field, not just in the Gulf but in the world, is called the North Field in Qatar and South Pars in Iran. It is world’s biggest gas field. The field, which also contains shallower cross-boundary oil resources, has been developed by each side without formal agreement, but there are tacit understandings to avoid one side moving too far ahead of the other on extraction levels. Qatar imposed a moratorium on further development of the North Field in 2005, and lifted it in 2017. Ostensibly this was for technical reasons, more plausibly for gas market management purposes, but it also gave Iran time to catch up to and even exceed relative Qatari production levels. As Iran’s own output from South Pars increased, so eventually Qatar was able to decide to raise production further, without risking tensions with Iran over unfair levels of extraction.

More intra-regional gas trade would enable reducing the use of oil in the power sector. Qatar, Iran (if its gas resources were properly developed), and the Kurdistan Region of Iraq, would be natural gas suppliers by pipeline to neighbours. This would require more regional trust, and transparency to put gas supplies on a reliable commercial basis. Cross-border investment in gas-using sectors such as petrochemicals, multi-country gas networks, and robust arbitration procedures, could create structures that would be more resistant to politically- or commercially-motivated cut-offs. Iran is, for example, a 10 percent shareholder in Azerbaijan’s important Shah Deniz gas field and in the South Caucasus Gas Pipeline from Azerbaijan to Turkey via Georgia, along with BP, Russia’s Lukoil and Turkish and Azeri state entities. But the recent history of Russian gas supplies to Europe, and the interruption of federal Iraqi and Kurdistan region oil exports through Turkey, reveals how even long-standing pipeline deals with strong mutual profitability can be derailed.

As COP28 in Dubai signalled, climate policy will exert ever-greater influence on the oil and gas industry: first through requirements to zero-out its own emissions, second through a longer-term reduction in demand, at least for oil. The Gulf countries present a wide spread of economic and environmental vulnerability, and sophistication of climate policy ranges from the very limited (Iraq) to the relatively advanced (UAE). The Oil and Gas Decarbonisation Charter (OGDC) concluded at COP28 was signed by the national oil companies of Abu Dhabi, Sharjah, Bahrain, Oman, and Saudi Arabia, among others, but not by Iran, Iraq, Kuwait, or Qatar.

With the exception of Qatar, all of the Gulf countries are members either of OPEC or the OPEC+ alliance. OPEC and the OGDC, as well as other structures such as the Oil and Gas Climate Initiative, offer potential to foster cooperation on decarbonisation paths within the petroleum industry, which include ending flaring and methane leakage, improving energy efficiency, electrifying operations, and incorporating renewable and nuclear power, implementing carbon capture and storage, piloting carbon dioxide removal technologies, producing sustainable aviation and maritime fuels, and developing hydrogen and its derivatives.

Specific cooperation would include aligning standards and regulations; sharing technological learnings and best practices; conducting joint studies on regional carbon dioxide storage capacity or satellite monitoring of methane leakage; and possibly some shared infrastructure, though this is more challenging and probably not essential. Joint investments, either within the Gulf countries or in third countries, could include the production of low-carbon hydrogen and sustainable fuels.

This collaboration can also include policy-related and diplomatic endeavours, on areas such as carbon caps, prices or taxes, international carbon trading under the Paris Agreement’s Article 6.4, dealing with the growing use of carbon border tariffs, and appropriate certification and regulation for low-carbon hydrogen.

The global energy market has been evolving rapidly, notably with the rise of Asia as the world’s key importer and consumer of energy and emitter of greenhouse gases, and the evolution of the natural gas business into a truly internationalised market via LNG trade. Most recently, the Russian invasion of Ukraine, the elimination of most of its pipeline gas exports to the EU, and a near-total ban on imports of Russian oil by the EU and other Western countries, have reshaped the global energy market and the patterns of trade in Gulf energy. The increasing US-China tensions, and the moves towards more diversity and robustness in supply chains and greater domestic self-sufficiency in key energy-related materials and technologies, is another emerging and evolving theme.

Greater Gulf cooperation on hydrocarbons, as a part of balanced strategies incorporating climate protection, could manage some of these threats and promote longer-term cooperation solutions to problems facing the region’s critical economic sector.

Photo: Aramco

Qatar and Iran Devise Game Plan for the 2022 World Cup

In just the last two months, Iran and Qatar have signed 20 bilateral agreements—14 were signed during Iranian President Ebrahim Raisi’s trip to Doha in February, and another six were signed when Qatari transport minister, Jassim bin Saif Al Sulaiti, traveled to Kish Island earlier this week. Among the 20 agreements, Iran and Qatar decided to waive visa requirements for the citizens of both countries, expand transportation links by air and sea, find practical ways in which Kish and other Iranian islands and free zones can play a role during the 2022 World Cup, increase trade through commercial ports, and link free zones. Moreover, Raisi proposed the establishment of an Iran Trade Center in Qatar “to introduce Iran’s capacities and potentials to Qatari merchants and economic actors.”

During his two-day visit to the island of Kish, an Iranian resort destination located just 270 kilometres from Doha, Al Sulaiti was hosted by Iran’s Minister of Roads and Urban Development, Rostam Ghasemi. The Iranian government has made Kish the focal point of its offer to assist Qatar during the hosting of the 2022 World Cup. The trip included visits to the port of Kish Island and the Kish International Airport expansion project, as well as some of the sporting facilities located on the island. Aside from the prospects for the World Cup, Iranian and Qatari delegations are hoping for expanded connectivity between the island and Doha to enable more trade and tourism. Al-Sulaiti and his delegation also met onetime presidential hopeful Saeed Mohammad, the former head of Khatam al-Anbiya, a major IRGC-linked construction firm. Mohammad is now the head of the Supreme Council of Free Trade-Industrial and Special Economic Zones.

Iranian officials have ambitious plans for the 2022 World Cup—which may prove difficult to realise. While the tournament will be hosted by Qatar alone, there is potential for other countries in the region to play a role by accommodating teams and tourists, particularly given capacity constraints in Qatar itself. Iran cannot offer the leisure experiences that many football fans will expect during their trip, but Iranian officials hope that those fans seeking to justify the journey to Qatar with more cultural and natural attractions could be drawn to Iran. Officials want to “create the grounds for foreign fans and tourists to travel to [mainland] Iran during their leisure times” stated Ghasemi.

Under the proposed plans, tourists could visit Kish and either decide to stay on the island for the entirety of their trip or obtain a visa to visit other Iranian cities. Leila Azhdari, the official in charge of foreign tourism at Iran’s tourism ministry, has stated that “the foreign ministry had agreed to waive visas for travel from Qatar for two months during the World Cup, which will end on December 18.” According to the plan, tourists will be able to apply for “free single or multiple-entry passes for 20-day stays” during the World Cup.

Even if a visa scheme can be devised, logistical challenges will remain. Currently, there are no flights from Kish to Doha. While there were talks of Kish Air trying to establish a route from Kish to Doha from 2018, this route was never launched. Just last month, Mohammad claimed that there will be 400 weekly flights from Kish to Doha during the World Cup and they are in talks to secure four cruise ships to ferry passengers during that period. There is currently only one established ferry route that goes from Bushehr to Doha, owing to the fact that marine diesel is not subsidised by Iran and so operating these routes is less economical.

A lack of transport infrastructure has not prevented private sector entrepreneurs and Kish’s local government from preparing for the World Cup. In January 2020 a special committee was formed by the management of the Kish Free Zone Organization and a budget of IRR 520 billion (approx. $2 million) was allocated to standardise two existing football fields and to build three new ones. The committee also targeted the completion of new five five-star hotels by November. According to Masihollah Safa, Chairman of the Association for Hotel Owners in Kish, there are 52 hotels in total on the island with 12,000 rooms in four- or five-star hotels and another 8000 rooms in budget accommodations and unofficial housing that could be used during the World Cup.

Kish is also being promoted as a destination for Iranians inside and outside the country seeking accommodation during the World Cup. Iran is playing in the tournament on November 21, 25, and 29, meaning that if fans wish to watch all three matches in the group stage, they must stay in Doha for at least nine nights. The expense of such a trip may be prohibitive for many Iranians and most Iranians do not have international bank cards. Using Kish as a gateway will allow Iranian fans to book travel packages that include transportation, accommodation, and game tickets. These packages include options for return flights on the day of the matches so that the fans do not need to secure accommodation in Doha.

The Kish Free Zone Organization is also organising a soccer festival during the 2022 World Cup and is attempting to secure an agreement with the Iranian national team to host their training camp on the island, according to Mohsen Gharib, Chairman of the Association of Investors in Kish. The island is also being put forward as a possible base camp for other national teams competing in Qatar.

Al Sulaiti’s visit to Kish appears to have been successful. Businessmen who attended the meetings between Iranian and Qatari government officials were generally pleased with the fact that relations between the two countries have been elevated to this level. Some business leaders are concerned that politically connected firms might crowd-out private businesses seeking to engage with Qatari counterparts.

I spoke to Iran’s Ambassador to Qatar, Hamidreza Dehghani, following the Qatari delegation’s visit to Kish. He acknowledged the many remaining hurdles facing both the potential role for Kish during the World Cup and also for the future of trade and economic relations between Doha and Tehran. Finding alternative modes of payment for foreigners and solutions for the issue with visas were top of his mind. More importantly, he believed that work must be done to counter the negative perceptions toward Iran if it is to be an attractive destination for foreigners.

But there is optimism that the strong relations between the Iranian and Qatari governments might finally translate into mutually beneficial economic engagements as diplomatic dialogue is increasingly focused on questions of regional economic integration. More than four decades since it was first touted as a resort destination, Kish might finally have its moment.

Photo: IRNA

Why Qatar Wants to Facilitate a US-Iran Breakthrough

On February 15, Mohammed bin Abdulrahman Al Thani, the foreign minister of Qatar, travelled to Tehran in the latest instance of Doha's efforts to act as a facilitator for the resolution of international conflicts.

Al Thani delivered a letter from the Emir of Qatar to Iran's President, Hassan Rouhani. Beyond matters related to bilateral issues, the contents of the letter likely included Qatar’s offer to facilitate dialogue between Iran and the United States on issues related to the Joint Comprehensive Plan of Action (JCPOA).

This trip was not the first time Qatar has attempted to play a role in resolving the conflict between Tehran and Washington. Just over a year ago, a day after the assassination of Iranian military commander Qassem Soleimani, the Qatari foreign minister made an unannounced trip to Tehran to deescalate tensions. Shortly afterward, Emir Tamim bin Hamad Al Thani's made his first official visit to Iran.

Qatar's diplomatic efforts surrounding the conflict between Iran and the United States cannot be characterized as mediation. After all, Qatar does not have direct involvement in the negotiations between Tehran and Washington, nor is it overseeing any meetings or presenting any initiatives. But the less significant role of facilitator is nonetheless important.

Until recently, Oman and, to a lesser extent, Kuwait took on the role of facilitators in the Middle East, be it in between Iran and the United States, or Iran and Saudi Arabia, or between Yemeni factions. Qatar is trying to take a further step in this regard and act as a facilitator for a wide range of international conflicts. The Qatari Foreign Ministry touts that the emirate “hosts negotiations between conflicting parties and contributes as a facilitator of dialogue between them." Examples of diplomatic achievements include "an important role in reaching Doha Peace Agreement in Darfur, releasing of Djiboutian prisoners of war in Eritrea, releasing hostages in Syria, [and] ending the presidential vacuum in Lebanon." Moreover, Qatar is involved in the Palestinian-Israeli conflict through a humanitarian capacity, it is hosting the most recent intra-Afghan talks, and attempted to facilitate the resolution of the issue between Iran and South Korea over the oil tanker in the Persian Gulf just recently. 

The focus on the US-Iran tensions reflects not just the significant security issues these tensions pose for the Persian Gulf region, but also the appreciation of Qatar’s leadership for Iranian assistance during the blockade imposed by fellow members of the GCC. The recent détente between Qatar and the other GCC states marked by the Al Ula Summit are unlikely to negatively impact the deeper relations built with Iran over the past years. This is despite the fact that curbing diplomatic and economic ties with Iran was one of the conditions set when the blockade was first imposed. Qatar did not comply with these demands.  

In contrast, the blockade propelled Qatar's post-conflict regional approach to enhance its relations with Iran. While Qatar had recalled its ambassador from Tehran in solidarity with Saudi Arabia following the January 2016 incidents at Saudi diplomatic facilities in Iran, Doha restored its diplomatic representation in Tehran by reinstating its ambassador soon after the blockade was imposed. Furthermore, to guarantee the food security of its population, to ensure an air-route for its leading international airline, and to secure regional diplomatic support, Qatar continued to deepen its relations with Iran. 

Iran and Qatar share the largest gas reserves in the world—a unique feature in the bilateral relationship between the two countries that has provided a basis for constructive relations. Along with expressing a desire to bring Iran and the United States back to the negotiating table, Qatar has repeatedly called for an inclusive GCC-wide dialogue with Iran. Statements from Qatar's Emir, foreign minister, and defence minister have described Iran as "our neighbor" and "part of [the region’s] fabric" and noted that Iran’s stability is "[Qatar’s] stability." 

In an interview a day before Joe Biden's inauguration, Foreign Minister Al Thani stated that he hopes that Iran and the United States "will reach a solution with what has happened with the JCPOA" and that Qatar will welcome the invitation if it is asked by the stakeholders to play a role. Additionally, according to Al Thani, resolving the issues around the JCPOA "will help relations between the GCC and Iran" as everything is "interconnected at the end of the day." He has further argued that "the time should come when the GCC will sit on the table with Iran and reach a common understanding between the countries that we have to live with each other, we cannot change geography." 

The Emir of Qatar was among the first world leaders to welcome the JCPOA, calling it "a positive and important step" in his address during the 2015 United Nations General Assembly, not long after the deal was struck. Since then, Doha has been vocally supportive of the agreement—it even tried to persuade the Trump Administration to stick with the deal.

The diplomatic outreach has picked-up since the election of Joe Biden. The Qatari foreign minister has been in contact with the U.S. National Security Adviser, Jake Sullivan, and the Special Representative for Iran, Robert Malley. It can be expected that he will speak to Secretary Anthony Blinken in the coming days as well. Iran is likely to be high on the agenda for this call.

In the end, the European parties to the nuclear deal—France, Germany, and the United Kingdom—are best positioned to formally mediate between the US and Iran in any period before direct talks. However, Qatar’s diplomacy may help facilitate this subsequent stage of mediation, in a role similar to that played by Sultan Qaboos of Oman in 2013. 

While in Tehran, Al Thani made clear his hopes for renewed diplomacy, stating, "We hope that with the return of the US to the nuclear deal as soon as possible, challenges and sanctions can be alleviated within the framework of the deal and Qatar will not spare any efforts to make that happen." Doha is certainly eager to notch another diplomatic success.

Photo: IRNA