Economic impact of Gulf diplomatic rift
The diplomatic rift between Qatar and its Arab Gulf neighbours could cost the latter billions of dollars by slowing trade and investment and making it more expensive for the region to borrow money as it grapples with low oil prices. With an estimated US$335 billion of assets in its sovereign wealth fund, Qatar looks able to avoid an economic crisis over the decision on Monday by Saudi Arabia, Egypt, the United Arab Emirates and Bahrain to cut air, sea and land transport links. Qatar's newly expanded port facilities mean it can continue liquefied natural gas exports that earned it a trade surplus of $2.7 billion in April, and import by sea goods that used to come over its land border with Saudi Arabia, now closed.
Brisk business
On the streets of Qatar, however, supermarkets witnessed higher-than-normal activity. Some reported a sudden surge in customer inquiries from 11am local time.
"I think it's better to stock up on things my family and I need rather than being left out," a supermarket customer told Al Jazeera. A few currency exchange outlets that Al Jazeera visited also reported a jump in transactions on Monday. Bank managers, meanwhile, reported nothing out of the ordinary.
But parts of the GCC economy could suffer badly if the dispute drags on. The region's carriers, which have made Dubai, Doha and Abu Dhabi travel hubs, are likely to face losses owing to the diplomatic rift. Fresh produce, eggs and milk remain in high demand in supermarkets, according to staff. Because they all rely heavily on oil and gas exports, the GCC states have only weak trade and investment ties with each other, which will limit the economic fallout of their dispute. The UAE is Qatar's biggest trading partner from the GCC but is only its fifth largest globally.
Similarly, Saudi Arabia and other GCC countries traditionally account for only about 5 to 10 per cent of trading on the Qatari stock market, according to exchange data, suggesting even a total pullout would not sink the market. Some foreign bankers said the whole region could end up paying more to borrow if diplomatic tensions persisted. “If this dispute goes on for a while, the ramifications could be huge,” said an international banker based in the Gulf, declining to be named because of political sensitivities. “Asset managers will not differentiate between Qatar and the rest of the GCC, and international managers will take their hands off any credit from the GCC. If Qatar is seen as a terror financing or compliance issue, then asset managers will be cautious."
Saudi Arabia, the UAE and Bahrain withdrew their ambassadors from Qatar for eight months in 2014, but that had minimal market or economic impact because it did not involve a ban on transport links.This time, Saudi Arabia has promised to "begin legal procedures for immediate understandings with brotherly and friendly countries and international companies to apply the same procedures as soon as possible". (Source: Al Jazeera and news agencies)