On December 2, Qatar’s Minister of State for Energy Affairs, Saad Sherida al-Kaabi, announced the withdrawal of his country from the Organization of the Petroleum Exporting Countries (OPEC) effective starting from January 2019. The Minister said the decision was a strategic one, which is based on economic considerations that has nothing to do with politics and aims to serve Doha’s long interests.

This sudden and unexpected development came almost one month after the governmental reshuffle in Doha during which Saad Sherida al-Kaabi was named as the new Minister of State for Energy Affairs. Before assuming his new position, al-Kaabi was the CEO of Qatar Petroleum (QP) and the Chairman of Qatar Gas (QG). He joined QP in a very early stage and rose quickly to the highest position. During the last 12 years, al-Kaabi directed QP’s Oil & Gas ventures directorate, where he oversaw all of Qatar’s oil and gas fields’ developments as well as all the exploration activities. In this sense, al-Kaabi was seen as an ambitious and aggressive actor.

Doha is not a big player in terms of oil, it produces around 650k b/d which makes it OPEC’s 11th biggest oil producer accounting for less than 2 percent of the total output. However, when it comes to the gas, there is a different story to tell. The small Gulf Emirate is the world’s leading LNG exporter and holds the world’s third largest gas reserves which accounts around 14% of the global reserves. Before 1997, Doha’s exports of gas were almost zero. Within eight years only, Qatar managed to increase its LNG exports to around 20 million tons. In 2009, it almost doubled that quantity raising it to around 37 million tons and finally to around 77 million tons since the end of 2011.

The Saudi control of OPEC constrains the ability of small countries to express themselves and to play an effective role in the decision-making process.

In a press conference held in July 2017, al-Kaabi announced that QP will be increasing the North Gas Field production by the equivalent of one million barrels of oil per day and double the size of the new gas project in the southern sector of the North Field to 4 billion cubic feet/day. The announcement came amid the Gulf Crisis, which made it a huge challenge. However, despite being under blockade from its neighbors, al-Kaabi’s statement gave the impression that Doha is in favorable position to carry out such a project in terms of timing and costs.

The huge project will take around five to seven years to finish. It is expected to raise Qatar’s gas production from 77 million tons per year to around 110 million tons per year, that is around 43% increase, which is almost equal to the equivalent of 6.2 million barrels of oil per day. Once completed, the mega project will further enhance Qatar’s position to the top of the global gas industry and help Doha defend its leading position against newly coming rivals such as Australia and even U.S.

The decision to quit OPEC is expected to give the Gulf Emirate both the ability and the flexibility needed to better utilize its resources and to focus on expanding its powers in the gas field. Being a minister now means that al-Kaabi enjoys the ultimate power to undertake his ambitious project and turn it into reality. Although the Qatari Minister ruled out the political factor in the decision to quit OPEC, it is really hard to neglect such a dimension in Doha’s calculations. The Minister himself indirectly admitted this fact when he said “We are not saying we are going to get out of the oil business but it is controlled by an organization managed by a country.”

OPEC is being used by the big players to suit their national interests by utilizing the capacity of the smaller players and forcing them to accept policies which might not necessarily serve their own interests at certain times and circumstances.

The Saudi control of OPEC is obviously constraining the ability of small countries to express themselves and to play an effective role in the decision-making process. The organization is supposed to take into consideration the interests of its member states and to utilize their joint powers to their greater good. Instead, OPEC is being used by the big players to suit their national interests by utilizing the capacity of the smaller players and forcing them to accept policies which might not necessarily serve their own interests at certain times and circumstances.

The decision to quit OPEC had a wide support among Qataris. Qatar’s former PM and FM Sheikh Hamad bin Jassim al-Thani expressed his support for the decision by saying “It is a wise decision. This organization has become useless, and adds nothing to us. It’s used for purposes that hurt our national interest.” Like other Gulf countries, Qatar depends on oil and gas revenues to support its economy. However, according to IMF estimates, Doha would need the price per barrel to be around $47 to break even on its fiscal budget compared to $88 in Saudi Arabia. As a small oil player, Qatar had not much to lose by quitting the organization and thus, the political message was much stronger than the step itself.

From this perspective, the decision to quit OPEC is not only a protest against such mechanism which is increasingly monopolized by Saudi Arabia, but also a statement which says that Doha is no longer willing to play by rules and conditions dictated by Saudi Arabia. It is a declaration that from now on, Doha will put its national interest ahead of anything else and will pursue it by following a more independent foreign policy.

The decision to quit OPEC is not only a protest against OPEC, which is increasingly monopolized by Saudi Arabia, but also a statement which says that Doha is no longer willing to play by rules and conditions dictated by Saudi Arabia.

Many experts speculate that no serious consequences will follow Doha’s decision to quit the organization whether regarding the oil prices or regarding OPEC itself. After all, Doha is a small player in OPEC and it is not the first time a member state decides to withdraw its membership. However, this doesn’t mean that the step will be merely symbolic either. Most probably, Qatar’s decision will raise more questions about the way the organization is running and most probably about the feasibility of its existence as long as it is seen under the control of one state.

By leaving OPEC, Doha managed to highlight again the negative implications of the Saudi foreign policies since MBS rose to power in the Kingdom in the last few years. Many countries are feeling frustrated and tired as a result of this shaky reckless Saudi behavior. In this context, the Qatari decision might encourage others to follow the same line especially if Riyadh maintained the same attitude in the future.

In a bid to pressure a close ally over rising oil prices, US President Donald Trump cautioned Saudi Arabia hinting that it would be improbable for Saudi Arabia to endure two weeks without military support from the Trump Administration.

President Trump was quoted: “We protect Saudi Arabia. Would you say they’re rich? And I love the king, King Salman. But I said, ‘King, we’re protecting you. You might not be there for two weeks without us. You have to pay for your military. You have to pay.”

While the president didn’t indicate the timing of his remarks and the White House indicated that the call focused on “issues of regional concern”, it is highly possible that they were made during his call with King Salman bin Abdulaziz al-Saud over the weekend.

SPA, Saudi Press Agency, run by the state indicated that the two leaders discussed “efforts to maintain supplies to ensure the stability of the oil market and ensure the growth of the global economy.”

Trump has been making remarks akin to these about other close allies such as Germany, Japan and South Korea to shoulder more of the responsibility by taking “more of the financial burden of their defense.” These statements have alerted many international observers and concerned other US allies like the pro-Israel lobby over the reliability of the commitment and support of US towards its allies.

Trump’s confrontational statements about a country US deems a close ally were made during a campaign rally on Tuesday in Mississippi which drew a standing ovation from his supporters.

Crude oil prices have rocketed to a four-year high and in retaliation Trump is pressuring OPEC to lower the costs which has peaked to over $80 per barrel for Brent in the last month. Saudi Arabia, the world’s top oil exporter and the de facto leader of OPEC, plays a critical role in the oil cartel.

“OPEC nations are, as usual, ripping off the rest of the world and I don’t like it,” President Trump said, angered. “Nobody should like it. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices. We want them to start lowering prices and they must contribute substantially to military protection from now on.”

While it is too early to tell whether this spat will snowball into a major crisis, King Salman’s silence on the matter is keeping the fog in the air.

The most curious subject for the global economy for 2017 is the future of the American economy under a Trump presidency. Donald Trump is going to take charge of an economy with strong growth, rising inflation and a low unemployment rate. In the electoral period he promised to cut tax rates, increase spending on infrastructure and defense, and ease economic regulations. Considering his statements after the election and his newly established cabinet, it seems that he will strive to be a man of his word. But, of course, the actions of President Trump will be different from the promises of presidential candidate Trump. Even if Trump can do some of what he promised, his economic policies will increase both growth and inflation further.

The most curious subject for the global economy for 2017 is the future of the American economy under a Trump presidency.

In the final meeting of 2016, the Fed raised interest rates by a quarter percentage point to between 0.50% and 0.75%. The Fed forecasts three interest rate rises in 2017. The Fed will implement a tighter monetary policy to fight increasing inflation caused by Trump’s expansionary fiscal policy. But, it is not so clear whether a policy mix of expansionary fiscal policy and contractionary monetary policy will strengthen the U.S economy. This policy mix will cause the dollar to appreciate and the public debt to increase. A strong dollar will inevitably harm the export performance of the U.S. Therefore, this policy mix might increase both the trade and public deficit, exacerbating the twin-deficit problem of the U.S. So at the end of the day, it would not be so easy for the Fed to increase interest rate three times in 2017.

EU countries have not breathed a sigh of relief since the global financial crisis spread to the EU in 2010. Growth remains sluggish; unemployment is still high and some big banks cannot restore their balance sheets. To shore up growth, the European Central Bank (ECB) decided to continue its quantitative easing (QE) program until December 2017, but at a slower rate. The Fed and the ECB are using exactly the opposite policies. Therefore, the value of the dollar against the euro will continue to increase in 2017. This can give the EU a competitive edge in exports, which will bring higher growth.

EU countries have not breathed a sigh of relief since the global financial crisis spread to the EU in 2010.

It must be underlined that the effectiveness of the expansionary monetary policy of the ECB depends on the fiscal policy and the health of the banking sector. As Mario Draghi, the president of the ECB, underlined, expansionary monetary policy is not enough to revive economic growth, and thus expansionary fiscal policy should be used. So far EU countries, many of which have been using austerity policies since the global financial crisis began, are far away from using fiscal policy tools to boost growth. If expansionary monetary policy is complemented by expansionary fiscal policy, EU countries will grow faster in 2017. If not, this anaemic economic performance of the EU will continue this year.

The economic performance of EU countries also depends on the banking sector. The ECB’s negative interest rate policy is hurting Eurozone banks through profit margins. The Italian government set a 5 billion euro rescue package to bail out Monte dei Paschi Siena (MPS), which is the oldest surviving bank in the world. Although this package was adequate to rescue MPS, there is a concern that it will not be enough to stabilize the entire Italian banking system. There are some serious concerns about two big German banks as well, Deutsche Bank and Commerzbank. So, the European banking sector will be monitored carefully in 2017.

In 2017, Britain will grow faster than forecasters predicted during the referendum process.

In 2017, Britain will grow faster than forecasters predicted during the referendum process. Before the referendum many politicians, economists and analysts claimed that Brexit would cause a recession. But, so far economic indicators have shown that this is not the case. The way Britain will exit from the EU (whether it will be a soft exit or hard one) is critical for the future of the British economy. Brexit will cause headaches in some areas (e.g. the financial sector and labor market) in the short-run. But, in the long-run, Brexit can make the British economy stronger.

We should not skip China when talking about the global economy. China is still suffering from a transition from an export-led growth model to a consumption-led one. This is not an easy process. It seems that the Chinese economy will be on a more stable path this year. Parallel to 2016, it is expected that China will grow between 6-7% this year. But, it must be noted that growing debt and the shadow banking system are still two important challenges that the Chinese government should deal with.

After analyzing the global economy, let’s talk about the Turkish economy. The Turkish economy shrank in the third quarter of 2016 for the first time since 2009. This contraction occurred mostly due to the failed coup attempt and working day losses due to religious holidays. Economic growth is expected to pick up gradually in 2017. Leading indicators are showing that consumption and production recovered in the fourth quarter and the Turkish economy ended 2016 with a modest growth rate.

Monetary policy might not support economic growth in 2017. If the Fed increases interest rates aggressively, the Central Bank of the Republic of Turkey (CBRT) will have no option but to tighten monetary policy by raising interest rates. This situation is not unique to Turkey. The Fed’s interest hike and the rise in the US bond market rates are reducing the demand for emerging market assets. For this reason, emerging market central banks will increase their policy interest rates in 2017. This trend already began in November 2016.

Economists and businessmen are more optimistic about the export performance of Turkey in 2017.

In a situation where expansionary monetary policy is not on the table, expansionary fiscal policy should step in to bolster economic growth. Thanks to restructuring of the public sector, Turkey has ample space to implement expansionary fiscal policy. A low public deficit and debt strengthen the government’s grip on this issue. The government should use demand-stimulating fiscal policies and put new structural reforms into practice to restore consumer and business confidence. Increasing domestic consumption and private investments is vital to nurture economic growth.

Economists and businessmen are more optimistic about the export performance of Turkey in 2017. But, export cannot be the main driver of economic growth this year. Restoring relations with Russia, depreciation of the TL and moderate oil prices are positive signs for the current account balance. Restoring relations with Russia since the second half of 2016 will continue to increase export and tourism revenues in 2017. Although the depreciation of the TL has not caused a high increase in exports so far due to weak global trade and high dependence of Turkish export goods on imported inputs, a weak TL is suppressing import demand. OPEC agreed to cut oil production for the first time since 2008. Although this will cause an increase in oil prices, under the assumption that all members of OPEC keep their promises, market analysts do not expect a sharp increase. It is expected that oil prices will fluctuate between 55 and 65 dollars per barrel in 2017. This may cause a slight increase in the current deficit, but this effect will not be so salient.

After a tough year everyone wants to be optimistic about this year. Although there are still some uncertainties (e.g. Trump’s actions as president, the future of the EU, geopolitical risk related to the Middle East), it is expected that the global economy and the Turkish economy could fare better in 2017.