Stemming ISIS funding — US Asian allies diversify away from Qatari LNG

While the US is assembling an anti-ISIS coalition mainly from the Middle East and Europe, Asia is just as anxious about the rapid spread of the ISIS contagion—similar to the Ebola virus—in a globalized world.

On 25 September Admiral Locklear, Commander of U.S. Pacific Command, disclosed that ISIS has recruited at least 1,000 Asian fighters using social media.

The Asia Pacific is currently plagued by a myriad of homegrown jihadist networks, from Philippines to Indonesia to Afghanistan and Pakistan. Now, recruitment for ISIS appears to be ramping up among sympathizers in Asia’s Muslim population, especially in Indonesia and Malaysia.

As such, U.S. Asian allies such as Japan and South Korea have joined the Washington-led coalition in order to stem the ISIS contagion to their region.

However, they may be missing another half of the picture to stem funding of ISIS—Qatari liquified natural gas.

LNG and Qatar’s war chest for ISIS

Over the past decade, Qatar through its position as the world’s largest LNG exporter has catapulted the tiny Gulf state to being the world’s richest country per capita, and its sovereign wealth funds are hunting investment opportunities across the globe.

However, some Qatari citizens are hunting for unsavory investments.

A 7 September New York Times article revealed how Doha provides “safe haven, diplomatic mediation, financial aid and, in certain instances, weapons” to Islamist groups, including many U.S. designated terrorist fundraisers for Al Qaeda affiliates such as Hajaj al-Ajmi and Abdel Wahab al-Humayqani.

Admiral James Stavridis, former NATO SACEUR, also criticized that wealthy Gulf donors act as “angel investors” in funding ISIS, especially from Qatar. While most Arab states have laws prohibiting terrorist fundraising, Stavridis and other current U.S. officials suggest that the Qatari government has done less to stop the flow of terrorist funding and do not enforce their laws.

Adm. Stavridis further argued that cutting off the cash flow is the “fourth front” in the war against ISIS, along with helping the Kurdish Peshmerga and the Iraqi military, and carrying out a bombing campaign.

Given Qatar derives its wealth from being the world’s largest LNG exporter to the biggest consumer market in Asia, U.S. Asian allies would likely need to stem their wealth transfer to the Qatari war chest that funds ISIS, especially while ISIS is beginning to metastasize in Asia.

East Asian allies indirectly underwrite Qatar’s war chest for ISIS

Currently 75% of the LNG market is in Asia, mainly consumed by Japan, South Korea, Taiwan, India and China. Japan is the top LNG importer at 37% of global supply in 2012, and together with the second largest importer South Korea, these two countries consume 52% of global LNG supply, according to International Gas Union.

Tokyo and Seoul are joined by Taiwan as the largest LNG buyers—collectively importing over half of the global supply. Japan is also Qatar’s largest market, followed by India and South Korea, with the Qatari government deriving 60% of its revenue from gas export earnings.

Given Japan, South Korea and Taiwan are close U.S. allies that are also facing a growing ISIS threat to destabilize the Asia Pacific, these allies would need to diversify away from Qatari LNG so as not to fund both sides of the war—i.e., on the one side supporting the anti-ISIS coalition while on the other side funding the Qatari war chest supporting ISIS.

Up to now, importers like Tokyo and Seoul have had few supply alternatives to the tiny Gulf state, whose LNG exports represent about a third of global supply. Of the 29 LNG importing nations, 26 buy from Qatar.

However, a new wave of suppliers from Australia, U.S., Canada and east Africa are coming online to displace Qatar. According to Laszlo Varro, head of gas, coal and electricity markets at the International Energy Agency, “As North American LNG flows to Japan and Korea, the Japanese and Koreans will buy less LNG from Qatar.”

Asian consumers could diversify to sources from US, Canada and Australia

Thus Qatar is sweetening its gas sales to lock-in long-term Asian buyers before the new wave of suppliers gain market share and deflate prices. According to Reuters, Asian demand is the prize of LNG producers, and Qatar even agreed to supply additional LNG to China and South Korean buyers last winter.

Nonetheless, Asian buyers would need to consider the blowback of transferring wealth to the Qatari coffer that helps finance ISIS. Being close U.S. allies, Japan, South Korea and Taiwan have compelling reasons to diversify away from Qatari LNG as part of their support of U.S.-led anti-ISIS campaign. Tokyo and Seoul as the world’s two largest LNG consumers with over 50% of export market share, can make a significant impact on stemming financial remittance to the Doha coffer.

And while India and China have the highest projected energy demand growth over the next decade, they should also consider diversifying to new sources from North America and Australia, as well as Cypriot and Israeli sources given Netanhayu is looking at the Asian export market . Jerusalem, Delhi and Beijing have their own terrorist problems in Gaza, Kashmir, and Xinjiang, and it would not be in their interest to remit funds to Arab Gulf states that are complicit in fomenting instability and jihadists in their home front.

About the Author
Dr. Christina Lin is a California-based academic and consultant specializing in China-Mediterranean/Middle East relations. She has extensive US government experience working on China security issues, including policy planning at the Department of Defense, the Department of State, and National Security Council--where she also worked on CFIUS cases.
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