In its ongoing dispute with Qatar, ostensibly over the funding of terrorism, the Gulf Cooperation Council (GCC) has apparently created a list of demands for the world’s largest LNG exporter.

U.S. Secretary of State Rex Tillerson said June 21 that he is hopeful demands from Saudia Arabia, the United Arab Emirates (UAE), Egypt and Bahrain “will soon be presented to Qatar and will be reasonable and actionable.”

Tillerson added that the U.S. supports Kuwaiti mediation efforts to resolving sanctions on Qatar that have created logistical problems due to a blockade of country, raised tensions over its ties with Iran and led to worries of food shortages and even the death of camels worth $75,000 each.

Ultimately, steps to isolate Qatar could lead to increased popularity for LNG supplies from the U.S. and Australia, both of which lack the regional pressures of the Gulf States. However, U.S. LNG terminals are time-consuming projects and any benefits would take time to reap.

Several GCC nations, likely led by Saudi Arabia, enacted the embargo against Qatar on June 5.

Tillerson’s statement came a day after department spokeswoman Heather Nauert said the Gulf States have yet to publically produce details about claims that Qatar is involved in the financial support of terrorism. Qatar itself said June 19 it was unsure what specific accusations it faces or how to remedy them.

“We are mystified,” Nauert said, adding that “at this point, we are left with one simple question: Were the actions really about the concerns regarding Qatar’s alleged support for terrorism or were they about the long-simmering grievances between and among the GCC countries?”

Charles Dewhurst, BDO’s international liaison partner and leader of the U.S. natural resources practice, said that Qatar’s predicament likely stems from an ongoing “cold war” between Saudi Arabia and Iran.

The two countries are locked in a regional rivalry that has pulled Gulf States into the fray. Qatar is an outlier, however, because it walks a fine balance with Iran due to shared interests in offshore gas fields in the Persian Gulf.

“Qatar has nurtured relationships on both sides to be seen as somewhat as neutral,” Dewhurst told Hart Energy. “This has probably been a long time in coming for whatever reason. Saudi Arabia, I think, led this. They felt the time was right to pull Qatar away from Iranian influence.”

Vulnerable, But Valuable

Qatar, on the surface, looks to be in a vulnerable position but it also has tremendous strategic value. For the U.S., a military base in Doha is strategically important to its fight against ISIS terrorists in the region.

Qatar also provides almost all of the natural gas used in the UAE’s major cities, including Abu Dhabi and Dubai.

Those gas shipments were excluded from the GCC countries’ sanctions, Dewhurst said. Whether Qatar might retaliate by cutting off natural gas to its most dependent neighbors remains to be seen.

“To me, that probably suggests that this whole strategy by Saudi Arabia and the GCC wasn’t particularly well thought through,” Dewhurst said, “In that the GCC countries, excluding Saudi Arabia, are so heavily dependent on Qatar for natural gas.”

Qatar’s Minister of Foreign Affairs Sheikh Mohammed bin Abdulrahman Al-Thani said in a government press release June 19 that while Qatar could legally discontinue shipments to the UAE, ethically “we do not want to harm the UAE people, who will be affected by the disruption of electricity as a result of the stoppage of the Qatari gas supply.”

He added the UAE people have “no fault in what happens.”

However, the ability for Qatar to export LNG is in question, which could have dire consequences for its exports to Asia—particularly China, India and Japan.

From a geopolitical perspective, Dewhurst argues that China and India will allow the dispute to interfere with their energy supply. But if a long-term stalemate develops, “clearly it would be an opportunity for the U.S.”

It may benefit U.S. LNG anyway, as it becomes a popular source of supply because of the nation’s stability and because the country isn’t susceptible to the pressure being exerted on Qatar.

Because of its proximity and stability, Australia, which is the second-largest LNG exporter, is also likely to be a big beneficiary for similar reasons.

On Its Own

For now, Qatar appears to be isolated logistically, though the U.S. has been increasingly vocal in support of the country.

In a June 14 report, the International Energy Agency (IEA) said that the “spat” with Qatar has caused logistical and operational headaches for lifters of Qatari crude, condensate and LNG—although supplies have yet to be disrupted.

The port city of Abu Dhabi in the UAE swiftly enforced a ban on oil tankers carrying Qatari oil, which could lead to a backlog of cargoes and increased shipping costs, the IEA said.

Qatar pumps more than 600,000 barrels of oil per day (bbl/d) of crude and exports about 500,000 bbl/d—nearly all to Asia.

“Due to the political row, crude from Saudi Arabia, the UAE and Bahrain cannot be co-loaded with Qatari crude, limiting co-loading of Qatari grades to crude from Iran, Iraq, Kuwait and Oman, which are not part of the dispute,” the IEA said.

Qatar has limited air, sea and land links but so far reports suggest that Saudi Arabia has not restricted tankers carrying Qatari crude from stopping at Saudi terminals. Egypt is bound by international law to allow free passage through the Suez Canal which links the Red Sea to the Mediterranean Sea.

Nauert said June 20 that Tillerson is determined to remain engaged in the situation.

“He has been delivering the same message to other diplomats overseas. We are encouraging all sides to de-escalate tensions and engage in constructive dialogue,” she said. “We, once again, call on all parties to focus on the core regional and international goal of fighting terrorism, to meet the commitments that were made in Riyadh, Saudi Arabia, and to constructively resolve this dispute.”

The GCC last dealt with a major dispute in March 2014, according to the Al Jazeera Centre For Studies. Three member states—Saudi Arabia, the UAE and Bahrain—withdrew their ambassadors from Qatar—the first such steps taken in 30 years.

The action was taken in response to a Qatari policy that supported democratic movements during the Arab Spring. The action was resolved without major disruptions to Qatari policy.

Darren Barbee can be reached at dbarbee@hartenergy.com.