Thursday 19 October 2017

Saudis may win Qatar tussle but get hurt

Scale of the spat is uncharted territory for the neighbouring Gulf states

People shout slogans as they hold Turkish and Qatari flags during a demonstration in favour of Qatar in central Istanbul. Photo: Reuters
People shout slogans as they hold Turkish and Qatari flags during a demonstration in favour of Qatar in central Istanbul. Photo: Reuters

Glen Carey and Marc Champion

Saudi Arabia dwarfs Qatar on almost any measure, yet there are plenty of ways the row between the Gulf neighbours could end up hurting the world's biggest oil exporter - even if it wins.

All week the Saudis and their allies have ratcheted up pressure on Qatar, cutting diplomatic ties and imposing a blockade by land, sea and air. The stated goal is to force Qatar to stop cosying up to Saudi Arabia's rival Iran and bankrolling Islamist groups across the region. Qatar says it's being punished for things it didn't do.

The disagreement is long-standing. The scale of the current crisis is new, and it's erupted into a Middle East already polarised by war. Saudi Arabia has struggled to impose its will in Syria and Yemen. Now discord has spread to the inner circle of Gulf monarchies, at a time when the Saudis and their young Prince Mohammed bin Salman are urgently seeking foreign investment to modernize an oil-dependent economy.

"Most worrying is that Saudi Arabia and the UAE may repeat the mistakes that were made when the Saudi leadership decided to launch a war in Yemen," said Yezid Sayigh, a Beirut-based senior fellow at the Carnegie Endowment for International Peace. "They had no clear political strategy, based their action on false assumptions, have incurred heavy financial costs and a growing human toll, and are probably now worse off in terms of their security."

From the Saudi viewpoint, Qatar has been stirring up trouble all over. That includes promoting the Muslim Brotherhood, whose advocacy of Islam through the ballot box is disliked by some Gulf monarchs. It includes cordial ties to Iran, with which Qatar shares a giant gas field. It includes sponsoring the Al-Jazeera television network, which has been critical of Saudi allies. Rounding up the charge-list: Support for Islamic State and al-Qa'ida - something the Saudis have also been accused of and, like Qatar, deny.

"Qatar for many years has taken steps to support certain organisations and intervened in situations," Saudi Foreign Minister Adel al-Jubeir said. "We view Qatar as a brother state," he said. "But you have to be able to tell your friend or your brother what is right or wrong."

The Saudis and UAE have hinted they'll take further steps, including curbs on bank lending to Qatar and transactions in its riyal currency. Gas-rich Qatar has financial resources of its own, though, to withstand a siege. Its $335bn sovereign wealth fund owns stakes in global companies from Volkswagen to Barclays.

Qatar will be motivated to resist by the perception that what the Saudis are really after is regime change, according to Sanam Vakil, associate fellow with the Middle East and North Africa Programme at Chatham House in London. Insisting "that Qatar capitulate on these demands is a challenge to its sovereignty," and therefore the legitimacy of the ruling family, Vakil said. "I find it hard to believe they will just roll over."

So far, they haven't. Week one of the standoff ended with Qatar defiant. Food imports that usually come across the Saudi border have been sourced elsewhere, Foreign Minister Mohammed Al Thani told reporters in Doha. "We can live forever like this," he said. "We aren't ready to discuss an intervention into our sovereignty."

That doesn't mean the pressure won't tell eventually. The Saudi economy is four times bigger than Qatar's. Its population is more than 10 times larger, and that internal market helps insulate the Saudis from any fallout, said James Reeve, the London-based senior economist at Samba Financial Group.

Bloomberg

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