In­ter­na­tional busi­nesses caught in Qatar cross­fire

Kuwait Times - - BUSINESS -

In­ter­na­tional busi­nesses are be­ing caught in the cross­fire of Qatar's dis­pute with its Arab neigh­bors as it de­lays ship­ments, length­ens travel times and prompts con­tin­gency plans in case the cri­sis deep­ens. The feud be­tween Arab pow­ers threat­ens to un­der­mine the re­gion's progress in po­si­tion­ing it­self as busi­ness friendly and raises con­cerns that some firms may be forced to pick sides.

Saudi Ara­bia, the United Arab Emi­rates, Bahrain and Egypt cut diplo­matic ties with Qatar on June 5 and im­posed eco­nomic sanc­tions, ac­cus­ing it of fund­ing ter­ror­ism, a claim Qatar re­jects. Many multi­na­tional busi­nesses, from builders to law firms and banks, have a base in Dubai from where they serve the re­gion, in­clud­ing Qatar. "Qatar is a valu­able mar­ket for us and we want to con­tinue here but it has be­come dif­fi­cult and if there's no im­prove­ment we will have to re­view our strat­egy [in Qatar]," said a com­mer­cial man­ager at a Euro­pean con­struc­tion ser­vices com­pany with a re­gional head of­fice in UAE.

The com­pany may be forced to stop bid­ding for new con­tracts in Qatar or wind down its op­er­a­tions al­to­gether if sanc­tions in­ten­sify, the man­ager, who de­clined to be named be­cause of the sen­si­tiv­ity of the mat­ter, said. Global banks are also in a bind. Some have joined lenders from the UAE, Saudi Ara­bia and Bahrain in cur­tail­ing new busi­ness in Qatar, while oth­ers in­clud­ing a few large Asian, Euro­pean and US banks are still pro­vid­ing fi­nanc­ing.

Cri­sis re­sponse

Many of the big in­ter­na­tional banks have strong re­la­tions with both Qatar and Saudi Ara­bia. HSBC, JPMor­gan and Deutsche Bank were in­volved in sov­er­eign bond is­sues by both Qatar and Saudi Ara­bia last year. The three banks de­clined to com­ment on how they are re­spond­ing to the cri­sis. Sus­pended land, sea and air links with Qatar have had the most im­me­di­ate im­pact on busi­nesses. For Wil­liam Grieve, a Bahrain-based busi­ness­man with con­sult­ing work in Manama and Doha, his weekly 40-minute flight to Qatar is now a 10-hour jour­ney via Kuwait.

"When two ele­phants fight, it is the grass that suf­fers and that's what's hap­pen­ing now," said Grieve. A Doha-based ex­ec­u­tive at an in­ter­na­tional en­gi­neer­ing firm said the sit­u­a­tion had al­ready forced his com­pany to de­lay some projects. "As a satel­lite of­fice in Qatar we rely on be­ing able to bring staff across from UAE reg­u­larly. Sev­eral jobs have had to be post­poned due to build­ing ma­te­ri­als be­ing held up in Jebel Ali port (in UAE)," he said.

"Where nec­es­sary, em­ploy­ees have had to travel for seven hours via Oman to get to Qatar." One con­struc­tion firm in Doha has been forced to by­pass the port of Jebel Ali and im­port raw ma­te­ri­als ei­ther di­rectly or via Oman - and dis­cov­ered that it has ac­tu­ally low­ered costs in do­ing so, a sales man­ager at the firm said. Risks to busi­nesses, how­ever, could in­crease as the four coun­tries that cut ties with Qatar are now step­ping up pres­sure. Last week they is­sued 13 de­mands to Doha, in­clud­ing clos­ing Al Jazeera television, curb­ing re­la­tions with Iran and shutting a Turk­ish mil­i­tary base. Qatar is re­view­ing the list but has said the de­mands are not rea­son­able or ac­tion­able.

Op­por­tu­ni­ties and risks

Gov­ern­ments dom­i­nate the com­mer­cial land­scape of the re­gion but they have worked hard to cul­ti­vate a busi­ness friendly im­age and are keen to at­tract for­eign cap­i­tal. Qatar at­tracted 133 bil­lion riyals ($36 bil­lion) in for­eign in­vest­ment in 2015, the lat­est avail­able fig­ure. Op­por­tu­ni­ties in the re­gion in­clude oil gi­ant Saudi Aramco's planned ini­tial pub­lic of­fer­ing in 2018, po­ten­tially the world's big­gest IPO ever; the 2022 World Cup in Qatar; and the Dubai World Expo 2020.

A Qatari of­fi­cial down­played con­cerns about the rift mak­ing life harder for busi­nesses and said it was an op­por­tu­nity for new firms to en­ter a lu­cra­tive mar­ket. "Don't be­lieve all the hype about busi­ness be­ing af­fected. Qatar can weather the storm. It is busi­ness as usual for us here," said the of­fi­cial who de­clined to be named un­der gov­ern­ment brief­ing rules.

Still, the CEO of the Qatar Stock Ex­change, Rashid al-Man­soori, said the bourse may look to Asia or Europe for new con­sul­tants as trans­port costs for its cur­rent Dubai-based ad­vis­ers have soared. And the dis­pute has left some com­pa­nies wor­ried about the po­lit­i­cal risks at­tached to com­mer­cial deals. On June 20, At­tor­ney Gen­eral Ali al-Marri said Qatar would pur­sue le­gal ac­tion against firms and in­di­vid­u­als that caused harm to Qatar.

"No­body is be­ing asked to pick sides and I don't know if it will come to that, but if it did there would be some un­com­fort­able and po­ten­tially costly decisions to be made," said an Aus­tralian busi­ness­man work­ing for a multi­na­tional with in­ter­ests in Doha, Dubai and Riyadh. Some com­pa­nies are al­ready turn­ing down busi­ness for fear of be­ing ac­cused of a con­flict of in­ter­est. Law firms, for ex­am­ple, are be­ing ap­proached by Qatari in­di­vid­u­als and busi­nesses about po­ten­tial class ac­tion law suits in the United States re­lat­ing to the em­bargo.

"We have been ap­proached to rep­re­sent those who have been da­m­aged by the cri­sis but we are not in a po­si­tion to ac­cept as we are con­flicted," one lawyer said. "Al­though we have busi­ness in Qatar, we also have clients in UAE and Saudi Ara­bia. All the law firms do." For busi­nesses the dry­ing up of fi­nan­cial flows be­tween Qatar and its neigh­bors has made it trick­ier to make pay­ments. One ex­ec­u­tive at a global en­gi­neer­ing com­pany, with a re­gional head­quar­ters in Dubai, said his firm was mak­ing con­tin­gency plans to pay Qatar-based staff salaries through its Euro­pean of­fice if the dis­pute stops pay­ments be­ing made be­tween Doha and Dubai. — Reuters


WASH­ING­TON, DC: Qatar's For­eign Min­is­ter Mo­hammed bin Ab­dul­rah­man Al-Thani speaks dur­ing a lun­cheon hosted by the Arab Cen­ter of Wash­ing­ton, DC.

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