The Economist Intelligence Unit
Source: The Economist Intelligence Unit
Saudi Arabia, the UAE, Bahrain and Egypt have all cut transport and diplomatic ties with Qatar, accusing it of funding and supporting regional terrorism. Although Qatar Airways has in turn cancelled all flights to Saudi Arabia, the material effects of the fallout are likely to hit Qatar hardest, as much of its food is imported via Saudi Arabia and the UAE. Qatar is therefore likely to make conciliatory moves in the coming months in order to smooth over the situation—a tactic it has previously used at times of diplomatic acrimony—but long-term tensions will remain, particularly over Qatar’s support for certain Islamist groups.
The dispute has so far involved the four countries cutting all diplomatic ties with Qatar, cancelling flights to and from the country, shutting down borders, and stating that Qatari troops will be removed from the Saudi-led coalition in Yemen. It stems ostensibly from comments allegedly made by Qatar’s emir, Sheikh Tamim bin Hamad al‑Thani, criticising the US’s tough approach to Iran and offering support for Islamists (although the Qatari authorities deny that he made such comments). However, in reality, this incident represents the boiling-over of more deeply rooted tensions. Egypt, Saudi Arabia and the UAE have long-standing issues with Qatar’s support for the Muslim Brotherhood, and its more cordial ties with Iran than other Gulf Co-operation Council (GCC) members have frustrated its Gulf neighbours, the UAE, Saudi Arabia and Bahrain, who are all directly opposed to the spread of Iranian influence across the region. Highlighting the long-term nature of these tensions, the four countries also clashed with Qatar in 2014, resulting in a similar severance of diplomatic ties.
Shifting US policy
The US under the presidency of Donald Trump has made clear that it intends to push back against Iran, while also confronting Islamists and jihadis. This has in turn led to a tightening of ties with countries such as Saudi Arabia and Egypt, with US foreign policy now more closely aligned with their own domestic and regional goals. The strengthening of these relationships is likely to have played an important part in the spat with Qatar, with Saudi Arabia and its allies emboldened by firmer US support than under the previous administration of Barack Obama. Indeed, the breakdown in relations also comes on the back of a spike in US criticism of Qatar, over its support for the Muslim Brotherhood.
Economic pressure to grow
The severing of transport ties, in particular, will ramp up pressure on Qatar to fall more closely into line with Saudi-led GCC foreign policy; Qatar imports much of its food via Saudi Arabia, and the closure of ports to Qatar-bound shipments therefore presents a tangible problem that could push up prices. It will also dramatically increase reliance on other trading partners, such as Turkey and Iran, in the short term. Moreover, Qatar’s stockmarket has tanked owing to the uncertainty and the likely negative impact on Qatar’s economy. Consequently, Qatar will probably seek to make some conciliatory moves. The previous dispute in 2014 was gradually smoothed over following a number of small concessions and gestures by the Qatari authorities, including expelling several Egyptian Muslim Brotherhood members. Something similar is likely to occur this time, possibly facilitated by the mediation of the more neutral GCC members, Kuwait and/or Oman, both of which have avoided cutting ties with Qatar.
Nevertheless, Qatar’s relations with Iran are likely to remain robust, given that they share the world’s largest gasfield, and Qatar’s support for the Muslim Brotherhood is a long-standing strategy by the emir, who believes that political Islam is the future of the region, and he is therefore unlikely to completely reverse this policy overnight. Tensions will therefore reoccur intermittently in 2017‑21, and will remain particularly tense with Egypt, where Qatari support for the Muslim Brotherhood, and for Islamists in neighbouring Libya, represents what the Egyptian authorities see as a clear security threat.
Impact on oil prices
The dispute also raises questions over the world’s oil market. OPEC, which includes Saudi Arabia, the UAE and Qatar, agreed to continue its quota of production cuts for a further nine months in late May. However, the rise in geopolitical tensions between major oil producers such as these increases the risks of the OPEC deal collapsing, which would lead to a flooding of the market as the world’s largest producers abandon the policy of restricting supply. Oil prices fell in response to the fallout and would be driven significantly lower if the OPEC deal was to break down completely.
However, Qatar is a relatively small oil producer in OPEC terms, meaning that it cannot undermine the deal on its own, and Saudi Arabia, in particular, OPEC’s largest producer, has been a major advocate of the agreement. There is a possibility that Iran and Iraq could sidestep their portion of the cuts in tandem with Qatar, but it is unlikely at this stage, with the extension of the cuts still in its infancy. As a result, the drop in oil prices should be viewed as a short-term knee-jerk reaction to a spike in political risk rather than a long-term alteration in the likely supply-side make-up of the oil market.
The Economist Intelligence Unit
Source: The Economist Intelligence Unit
