Possible economic fallout of diplomatic rift for rich Qatar

By Sabir Shah
June 08, 2017

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LAHORE: Due to host the 2022 Football World Cup and becoming the first Arab country to do so, the state of Qatar has been labelled a terrorist state by fellow Muslim nations like Saudi Arabia, Bahrain, the United Arab Emirates, Yemen, Maldives, Libya and Egypt etc, all of whom have cut off diplomatic relations with a nation having the November 2016 IMF-calculated highest per capita global income (US $147,747), even ahead of the prosperous Luxembourg.

The economic impact of the current crisis is bound to threaten Qatar, meaning thereby that that there could be significant challenges ahead for this Gulf state.

Possible economic repercussions for Qatar:

The “Al-Jazeera Network” states: “Saudi Arabia, the United Arab Emirates, Egypt and Bahrain have cut off diplomatic ties with Qatar and say they will suspend air, sea and land transport with Qatar. The diplomatic rift has wreaked havoc with airlines in the region, with major long-haul carriers such as Doha-based Qatar Airways and Dubai’s Emirates suspending flights, leaving many passengers stranded at airports in the Gulf. Several people have expressed concern on social media over disrupted travel, with images posted of travellers stranded at airports.”

The “BBC” maintains: “With a population of about 2.7 million people, this tiny nation on the north-east coast of the Arabian Peninsula is trying to punch above its weight. People know about it thanks in part to its national airline (Qatar Airways), its international news station (Al Jazeera) and through sport (notably winning the right to host the 2022 football World Cup and being a former sponsor of perhaps the world’s most famous club, Barcelona). And with a distinctive skyline in the capital Doha, it has succeeded in attracting multinationals to open offices there. So these latest developments mean there’s a lot at stake.”

The prestigious British media house asserts: “Abu Dhabi’s Etihad Airways and Dubai’s Emirates are suspending all flights to and from Doha, starting from Tuesday morning. Both carriers operate four daily return flights to Doha. Budget carriers FlyDubai and Air Arabia are also cancelling routes to Doha, with other airlines, including Bahrain’s Gulf Air and Egyptair expected to follow suit. It comes after Saudi Arabia, the UAE, Bahrain and Egypt all said they would stop flights in and out of Qatar, and close their airspace to the country’s airline, Qatar Airways. And it is Qatar’s flag carrier that risks being the biggest loser. Its flights to places like Dubai, Abu Dhabi, Riyadh and Cairo will stop. That is dozens of flights a day.”

The “BBC” adds: “But being banned from large chunks of airspace in the region would also cause a major problem, forcing it to alter flight paths, inevitably adding time to some flights. And as well as cranking up fuel bills, that could annoy passengers Qatar Airways’ growth has come through positioning itself as a hub airline, connecting Asia and Europe via Doha. “If a journey to Europe that used to take six hours now takes eight or nine because it has had to change routes, then that makes it far less appealing and passengers might look elsewhere,” says Ghanem Nuseibeh, director at advisory firm Cornerstone Global. British Airways is one of a number of European airlines to fly to Doha. It said on Monday that it will “continue to offer a full schedule.”

The “BBC” has gone on to write: “Desert states, by their nature, struggle to grow food. And food security is a particular issue for Qatar given the only way in by land is a single border with Saudi Arabia. Every day hundreds of lorries cross the border, and food is one of the main supplies. About 40% of Qatar’s food is believed to come via this route. Saudi Arabia has said it will close that border and when the lorries stop, Qatar will become reliant on air and sea freight. A new port, a medical zone, a metro project and eight stadiums for the 2022 World Cup are just some of the major construction projects going on in Qatar right now. Key materials, including concrete and steel come in by ship but also by land from neighbouring Saudi. The closure of that border could, as with food - push up prices and lead to delays. A materials shortage is already a threat that looms over Qatar’s construction industry. This risks making things worse.”

A bit of past history leading to the current diplomatic crisis:

It is imperative to note that in 2014, Qatar’s relations with Saudi Arabia, Bahrain and the UAE had reached a boiling point over Qatar’s support for the Muslim Brotherhood and the extremist groups in Syria.

This row had culminated in the three aforementioned countries withdrawing their ambassadors from Qatar in March 2014.

Remember, Qatar had supported the democratically-elected Egyptian President Mohamd Morsi with diplomatic support and the state-owned Al-Jazeera Network, before he (Morsi) was deposed in a military coup.

By the way, in December 2015, the “Al Jazeera America” had reported: “Numerous reports suggest that the Saudi-led coalition against opposition groups in Yemen has indiscriminately attacked civilians and used cluster bombs in civilian-populated areas, in violation of international law.”

Media archives bear testimony to the fact that Qatar had offered Egypt a $7.5 billion loan during the year Morsi was in power.

Here follow the salient features of Qatar’s economy:

Ruled since 1825 by an absolute monarchy, led by the Al-Thani Family, Qatar has a Purchasing Power Parity GDP of $334.5 billion, an official exchange rate GDP of $156.6 billion, a labour force of 1.691 million, an unemployment rate of just 0.7 per cent, budgetary revenues of $41.71 billion, a Tax-to-GDP ratio of 26.6 per cent, an inflation rate of 3.8 per cent, exports of $64.69 billion, imports of $33.76 billion, an external debt of $159.2 billion and its reserves of Foreign Exchange and Gold currently rest at $36.03 billion.

Qatar is a high income economy, backed by the world’s third largest natural gas and oil reserves

The Western Asian state of Qatar is surrounded by water on three sides and shares and shares its sole land border with Saudi Arabia, its biggest adversary today.

In early 2017, Qatar’s total population was 2.6 million: 313,000 Qatari citizens and 2.3 million expatriates.

The CIA World Fat Book states: “Although the government has maintained high capital spending levels for ongoing infrastructure projects, low oil and natural gas prices in recent years have led the Qatari Government to tighten some spending to help stem a $12 billion budget deficit in 2016 - 7.8% of GDP. Qatar’s reliance on oil and natural gas is likely to persist for the foreseeable future. Proved natural gas reserves exceed 25 trillion cubic meters - 13% of the world total and, among countries, third largest in the world - and proved oil reserves exceed 25 billion barrels, allowing production to continue at current levels for about 56 years. Despite the dominance of oil and natural gas, Qatar has made significant gains in strengthening non-oil sectors, such as manufacturing, construction, and financial services, leading non-oil GDP to steadily rise in recent years to just over half of the total.”

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