By Jonathan Saul, Tom Finn and Maha El Dahan
LONDON/DUBAI (Reuters) - Qatar is building a sugar refinery in a bid to avoid supply disruptions after neighboring Gulf Arab states severed economic and political ties with Doha more than a year ago, sources say.
In normal trading conditions, building a refinery in Qatar would make little commercial sense because of depressed sugar prices, surplus world stocks and the presence of regional refineries that could provide supplies, the sources said.
But they said Qatar, with its huge financial resources generated from gas exports and as host of the 2022 World Cup, wanted to avoid any shortfall for the desert nation that depends heavily on imports to feed its 2.7 million population.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed ties with Qatar in June 2017, accusing it of fomenting regional unrest, supporting terrorism and getting too close to Iran. Doha denies all the accusations.
"This will strengthen our independence and by God’s will help break restrictions imposed on our economy. Now, more than ever, we must be able to support ourselves," a senior Economy Ministry official told Reuters.
He said the refinery would be near Hamad port, 40 km (25 miles) south of Doha, and would start up by the end of 2019 or early 2020. The official declined to provide further details.
Two sources with knowledge of the initiative said the new refinery would have capacity to produce 110,000 tonnes of sugar a year, exceeding annual consumption estimated at 80,000 tonnes. The sources did not give a value for the project.
A presentation by the Transport and Communications Ministry showed the planned plant would refine 300 tonnes of sugar a day, saying operations were expected to start by 2020.
Qatar previously relied on imports of white sugar from the UAE and Saudi Arabia. Once the boycott started, Qatar turned to supplies from India and other producers.
Food prices rose after the boycott, with Saudi Arabia cutting off imports by closing Qatar's only land border.
A Middle East based trade source said the project did not make economic sense based on the investment needed to adapt Hamad port and the cost of packaging, which would need to be imported.
Another regional trade source said the refinery was likely to bring in raw sugar from Brazil to be refined into white sugar. "This has to be viewed as a strategic project for Qatar," the source said.