VZCZCXRO1922
PP RUEHDE RUEHDH RUEHDIR
DE RUEHDO #0735/01 3551404
ZNY CCCCC ZZH
P 211404Z DEC 09
FM AMEMBASSY DOHA
TO RUEHC/SECSTATE WASHDC PRIORITY 9596
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 DOHA 000735 
 
SIPDIS 
 
E.O. 12958: DECL: 12/20/2019 
TAGS: ECON ENRG EFIN QA
SUBJECT: QATAR UNFAZED BY DUBAI DEBT - OUTLOOK POSITIVE 
 
Classified By: Classified By: Ambassador Joseph E. LeBaron, for reasons 
 1.4 (b, d). 
 
-------------- 
(C) KEY POINTS 
-------------- 
 
-- In November, just before the Dubai crisis, the government 
of Qatar held the largest sale of debt by an emerging market 
government in history. The sale, which was oversubscribed by 
a factor of four, was assigned a rating of  AA-  by 
Standard & Poor,s Rating Service. 
 
-- The head of Qatar,s branch of a regional law officer (and 
former adviser to Dubai,s leadership) tells us Qataris are 
much less exposed to the fallout from Dubai than are Kuwaitis 
and Saudis. 
 
-- Accurate GDP figures for Qatar are hard to come by. 
Estimates of real GPD growth for 2010 range up to 18.5%. Most 
estimates place Qatar in 2010 among the countries with the 
highest GDP growth rates in the world. 
 
-- An economic planner for the Amir,s economic adviser 
expects Qatar,s natural gas sales to Asia to continue to 
climb and noted that Qatar,s ability to act as a spot 
supplier of natural gas will continue to expand, even though 
new finds of natural gas and extraction technologies are not 
good developments for Qatar. 
 
 
------------ 
(C) COMMENTS 
------------ 
 
-- While difficult to measure statistically, the Qatari 
economy as a whole continues to show positive signs of 
strength.  The success of the recent bond issue and the 
limited impact Dubai,s debt crisis has had on Qatar 
underscore the markets, confidence in Qatar. 
 
-- The reliance of the Qatari economy on hydrocarbons will, 
for the foreseeable future, link Qatar,s economy to global 
oil and gas prices.  Qatar,s ability to act increasingly as 
a spot supplier for natural gas should allow it to take 
better advantage of any positive changes in natural gas 
prices. 
 
End Key Points and Comments. 
 
------------------------------- 
(C) After the Dubai Debt Crisis 
------------------------------- 
 
¶1. (U)  With the announcement November 27th of the massive 
debt restructuring in Dubai, many analysts expressed concern 
about the potential for spillover effects into the other Gulf 
economies.  This concern was evidenced by the eight-percent 
decrease in the Doha Securities Market 20 Index (DSM20) in 
the days immediately following Dubai,s announcement. The 
market for credit default swaps on gulf debt was also 
impacted. Prices for Dubai, Abu Dhabi and Qatari debt swaps 
rose 54, 23 and 17 basis points respectively.  The relatively 
small increase in the price of Qatari debt swaps highlights 
the perception that the Qatari credit risk post-Dubai remains 
favorable. 
 
¶2. (C) According to Ahmad Anani, head of the law office for 
Al Tamimi and Company which has offices throughout the GCC, 
on the whole Qatar is not highly exposed to much of the 
fallout from the Dubai debt crisis unlike its neighbors in 
Saudi Arabia and Kuwait.  Al Tamimi makes this assertion 
based on his current law practice but also from the perch of 
his previous job, where he advised the Dubai leadership on 
economic affairs. 
 
¶3. (U)  U.S. firms still see opportunity in Qatar. For 
example, California-based Pacific Investment Management Co. 
(PIMCO) recently increased its debt holdings in Abu Dhabi, 
Qatar and Ras Laffan Liquefied Natural Gas Company, lending 
credence to the idea that investors differentiate between the 
economic outlooks for Qatar and Dubai. 
 
----------------- 
(U) Bond Issuance 
----------------- 
 
¶4. (U) In November, just before the Dubai crisis, the 
government of Qatar held the largest sale of debt by an 
emerging market government in history. The government issued 
5, 10 and 30 year bonds in a sale that was well received by 
investors, taking in $28.0 billion in bids on $7.0 billion in 
debt, with over 60% of the offers being made by U.S.- or 
 
DOHA 00000735  002 OF 002 
 
 
European- based buyers. In trading after the sale, yields on 
five-year notes were 1.85 percent above U.S. Treasuries. 
 
¶5. (U) Standard & Poor,s Rating Service assigned a rating of 
'AA-' to Qatar,s  global bond issue saying "The ratings are 
supported primarily by the country,s solid fiscal and 
external balance sheets, its prosperous economy and string 
growth prospect, and its prudent long term policies." 
Additionally, Moody,s has rated the same issue as  As2,. 
 
-------------------------- 
(C) GDP Growth Projections 
-------------------------- 
 
¶6. (U) A recent report by the Oxford Business Group confirms 
early GDP growth projections in Qatar of 9 percent for 
calendar year 2009. According to the report, growth appears 
to be accelerating as 2010 approaches.  The Amir, Sheikh 
Hamad bin Khalifa Al Thani, publicly predicted 16% GDP growth 
in 2010. In October the IMF published a a real GDP growth 
rate for Qatar of 18.5% for calendar year 2010.  Should 
either the Amir or IMF's projections materialize, Qatar will 
maintain its position as the fastest growing economy in the 
world for the second straight year. 
 
¶7. (C) In contrast to the public optimism of the Amir, in a 
November 4th meeting Frank Harrigan, Director of Economic 
Affairs and the General Secretariat for Development Planning, 
stated that any economic statistics in Qatar are, "detached 
from reality." There simply are no good statistics, he said, 
and this poses a problem for government economic planners. 
Harrigan predicted that nominal GDP (in a meeting that 
occurred hours before the official figures were released) 
would fall because of price and volume effects in hydrocarbon 
markets.  The glut in global natural gas markets in 
particular (Qatar has the world,s third largest natural gas 
holdings) affected Qatar.  He indicated that both prices and 
volumes of gas sold were down for Qatar.  This is in line 
with Qatar,s official estimates of nominal GPD growths for 
Q2 2009 (Qatar,s fiscal year begins in April) released 
following our meeting.  The estimates showed a 4.2 percent 
decline from the previous quarter and a 29.7 percent drop 
from the previous year. 
 
¶8. (C) Harrigan reported that the non-hydrocarbon nominal GDP 
growth was positive, but because it makes up a "very small 
overall portion" of GDP (sources have told the Embassy that 
hydrocarbons make up about 70% of the total economy), overall 
GDP would align with the hydrocarbon figures. 
 
¶9. (C) Harrigan offered that GDP is not the best measure of 
economic activity in Qatar, given the preponderance of 
hydrocarbons in the economy.  He said gross national income 
figures adjusted for trade flows would produce a better 
snapshot because it would allow for a better comparison of 
hydrocarbon prices compared to a basket of imported goods. 
Qatar would look less wealthy if wealth were measured in this 
way, he noted. 
 
-------------- 
(C) LNG Demand 
-------------- 
 
¶10. (C) Harrigan maintained that natural gas demand continues 
to increase in East Asia.  This should prove to be a good 
development for Qatar in the period ahead, he predicted. 
However, continued development of technologies to extract 
natural gas from shale and discoveries of new deposits of 
natural gas, he explained, have pushed supply up relative to 
demand for the time being, resulting in a fall in the overall 
natural gas price. 
 
¶11. (C) Qatar,s ability to act as a spot supplier of natural 
gas will continue to expand. Harrigan said that 70% of 
Qatar,s sales of LNG now occur on the spot market (versus 
30% from long-term contracts).   This is a marked change from 
the past, when the figures were reversed. 
LeBaron