Is Qatar facing a Qatastrophe?

What’s Happening in Qatar?

News broke on Monday morning that a number of Middle Eastern countries (the UAE, Saudi Arabia, Egypt, Bahrain, Libya, Yemen and the Maldives) had severed political ties with, and placed heavy restrictions against, Qatar.

At first glance, you may think the effect on the international community will be minimal, given that Qatar is a small state tucked away with just one land border with Saudi Arabia. However, whilst Qatar has a small population of just 2.7 million people spread across 11,437 sq km, it is one of richest states in the Middle East, which means that the implications of sanctions could be far reaching.

The action taken against Qatar involves the following:

·        No direct flights between Qatar and Egypt, Saudi Arabia, the UAE or Bahrain

·        The air space of those countries is closed to Qatari flights

·        Land border between Saudi Arabia and Qatar is closed

·        Ejection of all Qatari Nationals from UAE, Saudi Arabia and Bahrain

·        Travel ban on individuals from the Middle Eastern countries travelling to Qatar

·        Discussion of those countries banning nationals from living & working Qatar

Undoubtedly the longer the restrictions are applied the greater the effects will be to Qatar, but the implications for the wider international community are many.

1.      Oil Price

Qatar has been built on oil and gas money.  However, whilst Qatar is an oil and gas producing state, overall production constitutes a very small fraction (around 3%) of total OPEC production.  Also, the majority of the energy produced is  exported via sea, thus being unaffected by the closure of the land border with Saudi.  The short term impact was for the oil price to rise slightly after the news broke, but it is unlikely that the restrictions will have a significant long term impact.

2.      Business & Trade

Qatar is a desert location where the population is heavily reliant on imported goods to keep the energy and construction sectors going, and also to feed it’s population (around 90% of food is imported).  This will obviously be affected, as will the cost of food. A lot of people drove across the border to shop for food to save money, but now the border has closed this is no longer possible. Consequently, food will have to be imported by sea or air, which means more costs and potential inflation of the Qatari Riyal. 

Qatar has extensive construction & infrastructure projects ongoing, given that it is due to host the 2022 World Cup, and that it is a major energy hub. These projects require a massive amount of materials which,  up until now, had come through Saudi Arabia by road combined with via sea and air freight, but the closure of the road could result in shortages in materials that could cause significant delays.

A lot of international businesses have corporate offices in Qatar that service the Middle East, thus requiring travel across the region (in & out of Qatar). In the short term, travel restrictions to the Middle Eastern countries will be a major inconvenience limiting travel and lengthening journey times. However, should the restrictions remain in place, companies could choose to move out of Qatar and set up in other Middle Eastern locations. The recent Qatari boom in industry will almost certainly be could be stemmed. This was reflected when, the Qatari share index dropped by 7% upon revealing the news.  

3.      Qatari Nationals Abroad

As the Middle East has developed into a global business hub and companies have flocked to establish a presence in the region, this has also created a large amount of job opportunities for residents both in their home country and elsewhere in the region. Many Qataris who have emigrated to other Middle Eastern states to find work have now been given a 2 week window in which to return home, which means leaving jobs and assets behind. The sheer numbers of Qataris living abroad also means that it’s unlikely that there will be enough jobs to support those returning home, potentially creating an unemployment crisis for the gulf state.

4.      Non-Qatari Nationals working in Qatar

Some of the Middle Eastern countries involved have also made it clear that nationals cannot travel to, or reside in, Qatar. This means that expats from affected countries currently in Qatar must, in theory, return home, again leaving behind jobs with no guarantee of work. Furthermore, from June 6th there are no more direct flights home, so they will have to take indirect journeys via non-affected countries such as Oman or Kuwait. The full extent of this sanction being enforced has yet to be seen though. Early indicators are that Egypt, for example, has not taken such a firm stance as there are 180,000 Egyptian nationals currently resident in Qatar.

The UAE have, however, taken a tougher stance as an Etihad spokesman has revealed that foreigners residing in Qatar and in possession of a Qatari residence visa would also not be eligible for a visa on arrival in the UAE.

Even outside the Middle East, some other states are expressing concern about the welfare of their citizens residing and living in Qatar. One such example is that of the Philippines, who have banned workers from going to Qatar. This will cause issues internally as there are currently over 140,000 Filipino workers in Qatar but if other nations follow suit the implications will become even more prominent as figures suggest up to 90% of the Qatari population is from overseas.

5.      Travel

Doha is a central hub for travellers using Qatar airways both within the Middle East and further afield. Therefore the air space restrictions have had two immediate consequences. The first is that flights to the affected Middle Eastern countries have been cancelled, which means that travellers looking to return home to the aforementioned countries are unable to travel directly and must search for alternative, indirect, routes that are more expensive and time consuming. Secondly, for international travellers looking to access Qatar from further afield, flights will be much longer and more costly to Qatar Airways more as they will have to make detours around airspace that is closed to Qatari aircraft.

In short, Qatar faces a crisis which could have a massive knock on international effect, however only time will tell what the true extent of that effect will be and how much disruption it will cause. This will depend largely on how long the sanctions remain in place.

As things stand there is no indication of how long this could last, but there doesn’t seem to be any sign of concession from either side yet; currently the only potential for reaching a resolution is through the intervention of Oman or Kuwait who have yet to show their allegiance in the stand off.

Have you been affected by the current situation in Qatar? I’d be really interested to hear about your experiences in the comments below, and how you see things progressing.

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