Crisis is Costing Qatar

Arab superpowers triggered last month a geopolitical regional power shift following a decision on June 5 by Saudi Arabia, Egypt, the United Arab Emirates and Bahrain to cut diplomatic and transport ties with Qatar over terrorist funding. Despite Kuwait attempts at reconciliation, at press time there had been no breakthrough in talks after the four Arab countries announced a list of 13 requirements to restore ties. The requirements included an end to terrorist funding, the shuttering of Al Jazeera satellite channel and curbing of ties with Iran.

Doha’s Minister of Foreign Affairs Sheikh Mohammed bin Abdulrahman al-Thani said the demands are “designed to be rejected.” The statement was followed by a 3.1% fall in the stock market on July 2, resulting in a $1 billion market loss.

The effects of the economic fallout from the diplomatic crisis are already evident. Two days after the cut in ties, global credit rating agency Standard and Poor’s lowered Qatar’s long-term rating from ‘AA’ to ‘AA-’ on negative implications of the decision.

“We believe the recent developments might result in an outflow of external funding for Qatari banks over the next few months, depending on how the situation evolves,” S&P Global Ratings credit analyst Mohammad Damak told Gulf News. The downgrade is also expected to be worse on predictions of more pressure on the economic growth, S&P’s credit analysts Benjamin Young said in the same report. Rating agencies Moody’s and Fitch have expressed concern as well. In the second week, Fitch said a downgrade in Qatar’s credit rating is possible over concerns of deepening the crisis.

“While some discussions have taken place to resolve the crisis, it is becoming more likely that the crisis will be sustained and negatively affect Qatar’s economy and its credit metrics,” said Fitch Gulf analyst Krisjanis Krustins.

On another front, the pressure applied by the four Arab nations had, at press time, already put a squeeze on Qatar’s tourism sector, with Doha hotels, usually fully booked by Saudi Arabian, Bahraini and other GCC nationals for Eid, seeing a sharp drop in occupancy rates.

In an exclusive interview with Business Today Egypt, Head of the Arab Investors Federation Gamal Bayoumi analyzes the impact of severed ties on Qatar, Gulf countries and the USA, and looks at how Qatar’s investments in Egypt and abroad could be affected.

What’s your assessment of what’s happening between Qatar and the Arab World?

Qatar is seeking to play a role in the region. This in and of itself is not bad, but when this role is to tear apart the unity of the countries in the area and be a tool used by foreign forces to threaten Arab countries, the situation turns serious.

What role should Qatar be playing?

Qatar must play the same role that Malta played in the European Union. Both of them are the smallest countries in each region, but Malta used to be the country that reconciled between European countries and opened channels for dialogue among them. Unlike Qatar, Malta would never resort to outside forces to enhance its existence in its region.

Does the current crisis signal an end to Qatari influence in the region?

Qatar has gone too far in dealing with its neighbors, especially Egypt. It has one of the largest US military bases that poses a serious threat to countries in the region. It used to devote [its] mass media [outlets] to launch a massive aggression [campaign] on any country opposing it, especially Egypt. The latest crisis also revealed how Qatar plays a vital role in causing instability in the region.

How will Qatar’s investments in Egypt be affected in the light of the current situation?

Qatar is one if the biggest investors in Egypt, ranking fourth in Arab investments in Egypt after Saudi Arabia, the United Arab Emirates and Kuwait. According to the Central Bank of Egypt, Qatari investments in Egypt reached $104.8m in 2016; I do not believe that these investments could be affected, as the cornerstone of the economy and investment is to make profits regardless of political disagreements, and the same case applies to Qatar’s interests in Egypt.

And Qatar’s investments in the West?

Without any doubt, the same applies to its interests in the West.

What about Qatar’s economy? Will there be a heavy impact?

It will be marginal, as its main returns are from gas and oil exports. In addition, its population is small, which means less expenditure.

Could this crisis impact Egyptian investments abroad?

Unfortunately, total Arab investments abroad has remained at $1,800 billions since 2009 until now and does not exceed $68 billion in the region. So it is not a surprise that, at the moment, Egyptian investments abroad is $140 billion.

What sectors see the bulk of Arab investments?

The Banking, services and tourism sectors are the main attractions for Arab intraregional investments. They make up 82%, while 9% goes to the industrial sector, and only 3% for agriculture. This situation is also true for Qatar.