07 June 2017
CM Industrial By CM Industrial

Is Qatar Facing a Qatastrophe?

News recently broke that several 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, while Qatar has a small population of just 2.7m 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:

·        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. Here’s some of the things that could be affected on a global scale:

1.      Oil Price

The short-term impact has been a slight rise in the price of oil, but it is unlikely that the restrictions will have a significant long-term impact. Despite Qatar being built on oil and gas money, its overall production constitutes a very small fraction (around 3%) of total OPEC production. Additionally, most of the energy produced is exported via sea, meaning that closure of the land border with Saudi will not affect business.

2.      Business & Trade

Qatar is a desert location that’s heavily reliant on imported goods. Around 90% of all its food is imported, while its energy and construction businesses are also reliant on imports. This will obviously be affected by a closed border.

Qatar has extensive construction & infrastructure projects ongoing, given that it’s a major energy hub and due to host the 2022 World Cup. These projects require a massive amount of materials which, up until now, had come through Saudi Arabia. Shortages in materials and significant delays can now be expected, thanks to these restrictions.

A lot of international businesses have corporate offices in Qatar that service the Middle East too, 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 stemmed. This was reflected in a 7% drop of the Qatari share index 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 for work have now been given a two-week window to return home. This means leaving their jobs and assets behind.

The sheer numbers of Qataris living abroad 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 example is the Philippines, which has 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. 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. Secondly, for international travellers looking to access Qatar from further afield, flights will be much longer and more costly to Qatar Airways 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 to find out the true extent of disruption that 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 standoff.

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