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MADRID — Qatar’s $300 billion sovereign wealth fund plans to invest in Spanish projects funded by European Union COVID recovery funds under a deal to be signed during the visit of the Gulf state’s ruler to Madrid this week Spanish government sources said on Tuesday.

The bilateral deal represents the first major deal between a European nation and a non-EU country aimed at leveraging the reach of the EU’s Next Generation programme, of which Spain has received 70 billion euros ($73.33 billion ) is obtained.

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It is expected to be signed between Qatar Investment Authority (QIA) and Spanish investment agency Cofides on Wednesday during Emir Shekih Tamim bin Hamad Al-Thani’s visit to the Spanish capital, one of the sources said. The investments in sustainability and digitization projects should be implemented within two to three years.

“QIA has a budget that’s practically 40% of Spain’s GDP…their investments are heavily focused on Asia and they want to invest more in Europe,” the source said, without giving specific numbers.

ENERGY HUB AMBITIONS

Spain wants to increase imports of liquefied natural gas (LNG) from Qatar to ensure gas supplies, the source said. The Mediterranean nation has spare LNG terminal capacity and the most LNG regasification plants in Europe and is aiming to position itself as a gas supply hub for EU countries looking to reduce their energy dependency on Russia.

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In 2019, before the COVID-19 pandemic upended global supply and demand, LNG from Qatar – currently the world’s largest exporter – accounted for 11% of Spain’s gas imports. Since then, Algerian, Nigerian, Russian and American exports have played bigger roles, according to Spain’s oil and gas regulator CORES.

Spain’s main gas company Naturgy currently has two contracts with Qatargas, a subsidiary of Qatar Energy, for a combined offtake of 1.5 million tonnes per year by 2024 and 2025 respectively. A source for the company told Reuters it had no plans to end the contracts to extend.

Repsol, Spain’s other leading gas company, declined to comment on a possible deal to buy gas from Qatar.

Qatar currently exports 77 million tons of LNG per year but aims to reach 126 million tons by 2027.

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The Spanish government source declined to say how much of the increased capacity might be destined for Spain, acknowledging that Spain’s hub ambitions have been constrained by a lack of northbound re-export capacity. “Right now our export capacity is low, but it is in our interest to ensure gas supplies,” he said.

The Qatari Emir landed in Madrid on Tuesday and met the King and Queen of Spain. Other agreements with Spanish companies are expected to be announced during his visit, including a possible Spanish energy company Iberdrola, of which Qatar’s sovereign wealth fund is the majority shareholder. ($1 = €0.9546) (Reporting by Belén Carreño and Isla Binnie, additional reporting by Andrew Mills from Doha; Editing by Aislinn Laing and Tomasz Janowski)