A year ago, the four Arab states of Saudi Arabia, the United Arab Emirates, Bahrain and Egypt imposed a full land, sea and air blockade on Qatar.
Since then, the richest country in the world per person, was forced to tap into its sovereign wealth fund and do everything it could to shore up its economy, banking system and currency.
And those efforts have been paying off.
Earlier this year, Qatar raised $12bn in a bond issue, which showed that despite the rift with its Gulf neighbours, international investors still feel confident betting on Qatar’s future growth.
The peninsula is reshaping supply lines and developing domestic goods while pushing ahead with its $200bn infrastructure plan. The world’s largest exporter of liquefied natural gas is also busy forging new long-term supply deals.
So, how has the year-long blockade on Qatar affected Gulf economies?
Ayham Kamel, head of MENA at global risk consultancy Eurasia Group, talks to Counting the Cost.
CTC: How has Qatar weathered the blockade?
Kamel: Qatar is in a much better position right now. It seems that the economic cost of the blockade, or the crisis, has been limited. The government has managed to intervene in certain sectors, it has managed to provide some guarantees and the central bank has provided much-needed liquidity.
It is contained, but it’s far from ideal because obviously the position of Qatar, its geography, its trade links. So this is far from a preference, but I think one year after the beginning of the Qatar crisis with the other GCC members, the economy is not crashing and Qatar seems to have adjusted to what is a very challening situation.
CTC: Can you explain more about how Qatar adjusted to the crisis?
Kamel: The sovereign wealth fund reserves were absolutely important in providing not only stability, but a measure of credibility to the financial sector that Qatar has significant reserves to intervene in the market and help the government manage the crisis.
Obviously, the Qatar gas exports did help the country manage its relationships with a lot of countries and make sure that the trade links and LNG exports are maintained.
But most importantly, on the diplomatic front, we’ve seen an effort to engage with alternative powers – not only the US, but broadly to establish new trade links, try to cement those.
So you have Qatar not really in an isolated position internationally, and that’s a function of both, the importance of the gas reserves and gas exports, but also the financial cushion that Qatar has through its sovereign wealth fund, the Qatar Investment Authority. It is in a much better situation today.
CTC: What is the broader regional impact of the blockade?
Kamel: The impact on the Saudi economy is quite limited, but it’s certainly there. The exports that used to go from Saudi Arabia to Qatar – industrial sector certainly, agricultural goods as well – that has gone down. But given the size of the Saudi economy, it’s a very limited impact.
I think you will see that when it comes to the UAE and Dubai specifically, some of the repercussions have been more serious or more tangible. Be it financial transactions being shifted from Dubai to London or New York where Qatar has been involved, so there’s a loss of business volumes there. And certainly when it comes to Jebel Ali and the exports through Jebel Ali, that have now been rerouted to Oman. So we’ve seen a bit more of an impact there.
I think for the GCC countries at large this isn’t an ideal situation economically.
Certainly in terms of pure economic cost, the impact on Qatar is heavier than anywhere else. But given the financial reserves, we haven’t seen the Qatari economy crack, we haven’t seen a crisis develop in a way that creates panic in Doha or that forces the government to spend much more significant amounts or foreign reserves to prop up the economy.
CTC: What are the implications on LNG exports?
Kamel: LNG exports have been stable and global demand has been healthy. Qatar’s relationship with most of its energy partners hasn’t been damaged as a result of the Gulf crisis. Unless there’s an actual disruption in the Persian Gulf, which is unlikely unless we see a confrontation with Iran …, then that LNG export will continue to provide Qatar with much needed revenues. It’s unlikely to change in the future.
Also on this episode of Counting the Cost: Turmoil in Italy; Turkey’s currency woes; trade wars; plus OPEC’s big oil supply decision.
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