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Buying Security: Qatar and Qatar Holding

Fabiana Sofia Perera wrote "Buying Security: Qatar and Qatar Holding" as part of the 2014 Humanity in Action Diplomacy and Diversity Fellowship. The research essay was first published in Transatlantic Perspectives on Diplomacy and Diversity (Humanity in Action Press 2015). The complete book is available for purchase on Amazon.


Qatar’s ambitions far surpass its size if not its riches. Qatar’s small population (just around two million) and landmass (around 11,000 square kilometers) make it one of the smallest countries in the Middle East and one of the smallest in the world.  Yet the country’s influence far surpasses its size. Qatar Investment Authority, the country's sovereign wealth fund (SWF), is the 13th largest in the world. This paper investigates Qatar's sovereign wealth fund investments. The paper argues that Qatar uses sovereign wealth fund investments as a way to build establish relationships with countries with large military capacities, thus linking the economic security of these countries to its own domestic security.


If Qatar follows through and hosts soccer’s World Cup tournament in 2022, it will become the smallest country in the event’s almost century-old history to do so. Moreover, it will join the ranks of rapidly growing economies – South Africa, Brazil, Russia – that have hosted or will host the Cup. Hosting the World Cup is seen as an opportunity for the country to show off its recent success. When Rio submitted its bid to host the Olympics in 2016, then President Lula Da Silva said, “All we need is an opportunity to show what a great nation we are. Rio deserves this. Brazil deserves it. The people of Brazil deserve it.” Surely Qatar feels the same way about hosting the Cup. The World Cup epitomizes the attention that Qatar has paid to raising its public profile. One might attribute the effort to competition with its glitzy, famous neighbor, Dubai, or to self-aggrandizement by the rulers or to national pride, but Qatar’s measures appear to be part of a larger effort to establish a meaningful international presence. Qatar’s sovereign wealth investments have been one of the most prominent features of this effort.

Qatar’s ambitions far surpass its size if not its riches. Qatar’s small population (just around two million) and landmass (around 11,000 square kilometers) make it one of the smallest countries in the Middle East and one of the smallest in the world.  Yet the country’s influence far surpasses its size. When Hamad bin Khalifa Al Thani seized power from his father in June 1995, the New York Times wrote less than a hundred words on the event, stating only that the Gulf Cooperation Council recognized him as the leader of the country one day after the United States recognized him as the new ruler. In contrast, when Sheik Hamad bin Khalifa Al Thani abdicated in favor of his son in June 2013, the story received extensive coverage in the Times, which referenced the departing emir’s “high-profile interventionist policy.”

These policies have brought about a number of benefits, but among the most valuable has been prospects for increased security. This paper will investigate Qatar’s sovereign wealth fund as a major component of Qatar’s security strategy. It will summarize the sovereign wealth fund’s investments and argue that Qatar increased its involvement outside of its borders as part of an effort to gain support from other nations to maintain its security in an unstable neighborhood. 

Theoretical Background

There is a large literature that analyzes investment decisions by firms and what country conditions are more likely to attract these firms. Democratic regimes, which are associated with lower political risk, are thought to be more likely to attract foreign direct investment (at least in the non-commodity sectors). (1) Higher per capita income and lower balance of payments deficit are also associated with increased inward flows of FDI. (2) Membership in the WTO and preferential trade agreements has also been shown to be related to increased inward FDI. (3)

While most of the literature has focused on how private firms make the decision to invest in other countries, we are interested here in how a country makes the decision to invest in firms located abroad. There are three major types of sovereign investment: international reserves, public pension funds and state-owned enterprises. (4) International reserves or foreign-exchange reserves are liquid assets held by the central bank and other monetary authorities in recognized reserve currencies. These are used to finance international payment imbalances.  Most of these assets are held in gold, convertible foreign currencies and bonds and securities issued in convertible foreign currency. Foreign exchange reserves are somewhat homogenous. Most foreign exchange reserves are held in U.S. dollars (60.9%). The second most widely used currency for reserves is the euro (24.5%). (5)  Public pension funds are investments made by a country’s government to meet future obligations to its citizens. Public pension funds are denominated in the local currency and make most of their investments domestically. State-owned enterprises (SOE) are businesses that are wholly or partly owned by the state. Like sovereign wealth funds, state-owned enterprises, especially China’s SOEs, have experienced significant growth in the past few years. Out of the 500 largest companies in the world, 88 are Chinese SOEs, including the third and fourth largest companies in the world (Sinopec Group and China National Petroleum). (6)

Sovereign wealth funds (SWFs) are government investment funds owned and managed by national governments. Forty-three countries own the 76 sovereign wealth funds currently in existence. Of these, the majority were set up to invest wealth derived from commodities, especially oil.  About half of all sovereign wealth funds were established to manage oil wealth.  Sovereign wealth funds are very concentrated. Of the estimated $5 trillion held by these funds, about half of it is held by five funds. (7) As such, they represent the largest concentration of capital the world has ever known. (8) Qatar’s Investment Fund ranks 13th overall among SWFs by size and is the sixth largest oil-funded SWF.

In addition to representing a significant size of the world’s wealth, SWF deals have increased markedly in the past decade. Their rise in size and number of investments is fueled by the rise in commodity prices. (9) During the first half of 2014, SWFs participated in deals worth $50.2 billion, a 23.1% increase over the same time period the previous year. (10) Nonetheless, the growth in sovereign wealth funds has been somewhat slower than expected. High inflow/high return scenarios projected that SWF’s assets would total $9.3 trillion. (11)

Perera Table 1 (b)

SWFs are government investment vehicles funded by foreign exchange assets that manage these assets separately from foreign exchange reserves. SWFs need not be entirely denominated in foreign currency, but they do need to have a significant foreign currency component. Singapore’s Temasek Holdings, for example, one of the largest SWFs in the world is only partially denominated in foreign currency. (12) SWFs manage either commodity revenue, as is the case for the SWFs established by oil-exporting countries, or through balance of payment surpluses.

In the mid-2000s, SWFs emerged as a major player in foreign direct investment. FDIs are private capital flows from a parent firm to a location outside the parent firm’s home nation. (13) Though we know little about what determines investment by SWFs, there is a body of literature on what determines FDI. Dunning’s paradigmatic work on the subject suggested that firms invest internationally for three reasons: ownership advantages, locational advantages and internationalization advantages. (14) Though useful for understanding a firm’s decision to locate production abroad, this framework sheds little light into why a country might invest in a company owned by another country, which is what SWFs do. Other scholars have suggested that there are differences between vertical firms, horizontal firms and knowledge-capital firms. Vertical firms produce different goods at different locations. This is done to access low wages for parts of the production process. (15) Horizontal firms replicate production in different locations (i.e. they produce the same goods in different countries). This is a strategy used by firms to access markets in the face of trade restrictions. (16) Finally, in the knowledge-capital model, firms can either adopt a horizontal or a vertical structure. (17)

The Case of Qatar

In the case of Qatar, inward FDI into the country can be at least partly explained by the presence of oil and natural gas in the country. Indeed, most inward FDI into Qatar is focused on this sector, not the least because of the restrictions placed on foreign investment in other sectors, including services and real estate. Qatar’s outward FDI, on the other hand, is much more heterogeneous and is mostly generated by government spending. This is in contrast to advanced industrialized economies where outward FDI is driven by private domestic companies, even if they do so with support of their home government. The interesting question is then: what drives Qatar’s outward FDI?

Qatar’s main vehicle for sovereign investment is the Qatar Investment Authority (QIA). The Qatar Investment Authority was founded by the state of Qatar in 2005. Qatar was a relative latecomer to SWFs. Abu Dhabi and Kuwait had established vehicles to invest their oil revenues in 1976. Norway started its SWF in 1990 and Kazakhstan, Iran and Algeria did so in 2000. (18) The QIA was established by Emir Hamad bin Khalifa Al Thani. The country’s prime minister, Sheikh Hamad bin Jassim bin Jaber Al Thani, prime minister of Qatar and a second cousin of Emir Hamid bin Khalifa Al Thani, (19) served as head of QIA until July 2013. The new emir, Tamim bin Hamad Al Thani, son of the previous emir, replaced Hamad just one month after ascending to the throne of Qatar. The new emir named Ahmad Al-Sayed the new chief executive of QIA. (20)

Except for the high-profile top official, the QIA is notoriously opaque. It does not make public its list of investments or financial statements, but rather insists that “as is usual with many global investment institutions which are not listed on the public markets,” it “does not publish financial information. We are acknowledged, however, as a well resourced, responsible investor, as manifested by our track record of transactions.” (21)

The QIA has five major enterprises: Qatar Holding, Delta Two LTD, Qatari Diad, Hassad Food and Qatar Sports Investments. (22) Qatar Holding is the prime vehicle for strategic and direct investments by the state of Qatar. Delta Two is another direct investment vehicle of the QIA. Qatari Diad is a real estate and development company that invests inside the country. Hassad Food makes investments in food and agriculture. Qatari Sports Investments specializes in sports and leisure industries and invests inside and outside of Qatar. Given the motivation of this paper, we are concerned here with investments made by Qatar Holding, the investment arm of Qatar’s SWF.

Qatar Holding’s Investments

As explained above and consistent with its parent organization, Qatar Holding does not make public its list of investments. Under the “portfolio” section of its website, it says simply: “Our portfolio includes some of the world’s most prestigious institutions covering a wide range of industry sectors. Qatar Holding’s investments cover more than 30 countries from across the world.” Some information regarding Qatar Holding’s investment is available in its press releases. Qatar Holding’s media section published 36 press releases detailing 17 investments made by the SWFs strategic arm. The investments reported by Qatar Holding are summarized in the table below as the best available alternative to a list of investments by the organization:

Fabiana Table 2

There are 91 mentions of “Qatar Holding” in the New York Times in the period from 2007-2014. In addition to the investments summarized in the press releases above, the New York Times mentioned eight additional investments made by Qatar Holding. The New York Times also included 40 pieces (including both articles and blog posts) on Glencore’s takeover of Xtrata, a mining company of which Qatar Holding was the second-largest shareholder. Qatar Holding’s investments reported by the New York Times but not in the organization’s press releases are summarized below.

Perera Table 3

As can be seen from the preceding list, the majority of Qatar Holding’s investments are in OECD countries, which is consistent with investments by other SWFs. (23) Further, the selection of industries is similar to that of other SWFs, with investments in banking accounting for the majority of deals made by Qatar Holding in the period for which we have information.

To summarize, Qatar’s SWF, in existence since 2006, has grown to be one of the 15 largest in the world. The majority of its investments are in OECD countries. Further, most of its investments are in the banking and real estate sector, though the exact composition of its portfolio is difficult to calculate given the fund’s notorious lack of transparency.

Investing in Security

To return to the motivation for this paper, while Qatar’s selection of target countries does not appear to differ significantly from that of other SWFs, the idea that Qatar targets countries for investment based on security considerations cannot be dismissed, as most of the other major SWF countries face similar security considerations. Therefore, it is possible that when facing a similar security problem, all are pursuing the same strategy. Of the 20 largest sovereign wealth funds, eight belong to oil-rich countries in the Middle East (UAE, Saudi Arabia, Kuwait, Libya, Qatar and Algeria). These countries all face somewhat similar security concerns. Competition between Iran and Iraq, emerging Pakistani nuclear capabilities and Israeli capabilities all constitute threats to the Gulf countries. (24) The smaller Gulf countries, Qatar included, have to deal with having Saudi Arabia as a neighbor, in addition to the other threats.

Qatar thus faces a potentially unstable security environment in its neighborhood. In addition, Qatar faces challenges related to its status as a small state. (25) Small states have been argued to have a more limited range of action and be more susceptible to external economic considerations because of how important trade is to their economies.(26) In the case of Qatar, its status as an energy exporter alleviates some of the pressure that other small states face regarding trade: as important as it is for Qatar to import the myriad items it does not produce, it is important to other countries to have access to its natural gas.

Because they are more vulnerable than larger states but have more limited resources (not just a smaller military, but also smaller capabilities to monitor international developments), (27) small states are more inclined to pursue alliance-building policies as a way to ensure their security. (28) In the case of Qatar, the investments of Qatar Holding can be seen as a way for the country to pursue alliances with countries that might come to its defense should they be threatened. By investing in key industries, and in many cases in emblematic companies, in OECD countries with large defensive capabilities, but otherwise little interest in the small state of Qatar, the country is making a bet on its survival by tying the fate of Harrod’s, Heathrow Airport, Barclays and Tiffany’s, among others, to the fate of a small state, far away, in a very unsafe neighborhood.

Qatar’s strategy has paid off in some respects. In April 2003, following joint military operations during Operation Desert Storm in 1991, the U.S. Combat Air Operations Center for the Middle East moved from Saudi Arabia to Qatar’s Al Udeid Air Force Base. (29) In May 2003, the U.S. Senate passed a resolution thanking the people of Qatar for “their cooperation in supporting the Armed Forces” during Desert Storm and expressing a desire to “build upon this military cooperation.” (30) The Royal Air Force also temporarily used Doha as a base during their involvement in the wars in Iraq and Afghanistan. They relocated their fleet out in 2009. (31) This is all good news for a country that has the second smallest army in the Middle East (ahead only of Bahrain).

There are a few other signs of increased security cooperation. France recently sent Éric Chevallier, formerly its ambassador to Syria, to represent the country in Doha. After Dr. Chevallier’s appointment, the prime minister of Qatar invited General Favier of the Gendarmerie Nationale to Qatar to discuss security cooperation between the two countries. (32) Separately, the United States and Qatar signed one of the largest security cooperation agreements of the year in July 2014. The deal, worth $11 billion, committed Qatar to buying Patriot missile defense systems, Apache attack helicopters and anti-tank missiles. (33) Likewise, in 2013 Qatar became the first Arab state authorized to buy tanks from Germany. Qatar purchased 62 tanks from Germany, about 10% of all the tanks Germany sold that year. (34)

Though the arms sales and high level meetings point to increased security cooperation between Qatar and the countries where QIA has invested, the evidence up to this point is far from conclusive. What is clear is that the emirate’s aggressive foreign policy and investment strategy have made it an important player in the world stage – certainly a more talked about country than others with the same population size (Nimibia, Lesotho) or land mass (Gambia, Vanuatu).


To conclude, while Qatar Holding has certainly been successful as an investment organization, perhaps its greatest triumph is as part of the security apparatus of this small country. Through its investments, Qatar Holding has effectively formed a modern alliance between this small Gulf state and the nations with some of the world’s most advanced militaries. However, the strategy of Qatar Holding should not be seen in isolation. Rather, it is part of a larger foreign policy strategy of a small state with World Cup-size ambitions. Whether the country’s actions are successful as a security strategy remains to be seen; all that we can tell for certain is that its bold actions have succeeded at getting the country noticed, so that the normal reaction to “I am going to Qatar” is no longer a blank stare and a request to explain where that is. Instead, comments like the one Egypt’s former ruler Hosni Mubarak made when visiting Doha are the norm now: “All that noise from this little matchbox?” (35)


 •     •     • 

About the Author

Fabiana Sofia Perera is a PhD student in the Department of Political Science at The George Washington University. Perera is also an Honorary Teaching Fellow and Teaching Coach at The Global Language Network and served on the board of the alumni association of the Hispanic Association of Colleges and Universities for six years. Fabiana is a Humanity in Action Senior Fellow (Diplomacy and Diversity 2014).


Perera, Fabiana Sofia. "Buying Security: Qatar and Qatar Holding." In Transatlantic Perspectives on Diplomacy and Diversity, edited by Anthony Chase, 183-193. New York: Humanity in Action Press, 2015.


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