Streetwise Professor

I conjectured that Qatar’s sale of half of its Rosneft stake reflected at least in part the dramatic change in the emirate’s circumstances between December (when it initially bought in) and September (when it sold off), specifically the cold war with Saudi Arabia, the UAE, and the rest of the Gulf Cooperation Council (oxymoron alert!) that broke out over the summer. This conflict has put substantial financial strains on Qatar, which would suggest it bailed on Rosneft (at what price???) to raise cash and reduce risk.

This story from Bloomberg is consistent with that: private depositors have been fleeing Qatar’s banks, and the state is stepping in, putting about $11 billion into these banks. Liquidating investments like the Rosneft stake is one way of raising that cash, and reducing debt. (This raises the possibility that if the crisis drags on, Qatar may sell the rest of its 4.7 percent share of Rosneft.) That is, Qatar could have been a very motivated seller–war clouds can do that to a country. And if it was a motivated seller, CEFC probably obtained its position at a good price, perhaps even a fire sale price. That’s not evident from the reported terms of the transaction, which means that there are side deals.

One other thing about the Qatar-GCC standoff. There are reports that Trump kept the cold war from going hot:

Saudi Arabia and the United Arab Emirates considered military action in the early stages of their ongoing dispute with Qatar before Donald Trump called leaders of both countries and warned them to back off, according to two people familiar with the U.S. president’s discussions.

The Saudis and U.A.E. were looking at ways to remove the Qatari regime, which they accused of sponsoring terrorism and cozying up to Iran, according to the people, who asked not to be identified because the discussions were confidential. Trump told Saudi and U.A.E. leaders that any military action would trigger a crisis across the Middle East that would only benefit the Iranians, one of the people said.

Donald Trump, peacemaker. Not that he’ll get credit. Note that early on, Trump’s pro-Saudi message clashed with Tillerson’s more neutral approach. This story suggests that Trump’s private and public positions may have been different, and that he was really on board with Tillerson all along. Alternatively, Trump initially tweeted his gut reaction, but Tillerson and others quickly persuaded him to moderate his course. Either way, the outcome conflicts with the prevailing narrative about Trump.