QATAR CRISIS – Why it happened, and what it will cost GCC

FDG3A1 Close-up of a red pushpin in a map of Doha, Qatar.
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Markets have already reacted to the shocking development with shares on the major bourses in the region sinking to some of the lowest levels in recent times.

Qatar’s benchmark index tumbled 7.8 per cent in the early trade, marking the biggest intraday drop since December 2009.

Dubai Financial Market, Abu Dhabi Exchange and Saudi Tadawul were all down at the time of writing.

“Stock markets across the region have encountered unexpected selling pressure following this development of political risk across the Gulf, with the potential for political risk being something that was not priced into the regional markets beforehand and has resulted in the stock markets being caught off-guard,” said Jameel Ahmed, Vice President of Corporate Development and Market Research at FXTM.

“It was expected that it would be possible for emerging market assets to come under pressure this week with the upcoming UK election potentially encouraging investors to develop a more “risk-off” approach in mind, but this news is something that was unforeseen and has attracted the main attention for the beginning of what was already being viewed as a busy week for the financial markets,” Ahmed added.

Read : Saudi, Bahrain, UAE, Egypt break diplomatic ties with Qatar

Airlines: immediate victims

The region’s airlines will be the immediate victims of the latest diplomatic rift as the countries have announced a blanket ban on travel and transportation to Qatar.

Qatar Airways will be the hardest hit as it can no longer fly a dozen or more flights to some of the Middle East’s biggest markets.

The UAE’s Etihad Airways and Emirate Airlines have already announced that they were suspending all flights to Doha effective Tuesday.

“As instructed by the UAE government, Emirates will suspend its flights to and from Doha, starting from the morning of 6 June 2017, until further notice,” said an Emirates spokesperson in response to AMEinfo’s question on the regional developments.

“The last flight from Dubai to Doha will depart as EK847 at 02:30am on 6 June. The last flight from Doha to Dubai will depart as EK848 at 03:50am on 6 June,” the airline said.

Queries made to Qatar Airways, Saudia Airlines, Egypt Air and Gulf Air received no immediate response.

It is not yet clear whether the ban will have any impact on other global airlines that use Doha as a hub.

Trade troubles

The countries’ decision to close all land, sea and aviation ports to Qatari vessels and craft, a move that could have serious impact on the economies and private businesses in the region. As Qatar’s trade with the four nations comes to a halt, the country will probably encounter massive loss as trade with Saudi Arabia, the UAE, Bahrain and Egypt accounted for 8.7 per cent of Doha’s total trade in 2016.

The fate of Qatar’s liquefied natural gas (LNG) exports still unknown. It is the world’s largest exporter of LNG, shipping 79.6 million tons of the super-chilled fuel last year, according to the International Group of Liquefied Natural Gas Importers.

Japan and South Korea were the largest recipients, importing roughly 12m tons each, closely followed by China with approximately 11m tons. Tankers carrying exports from the Ras Laffan terminal in Qatar have to pass through the Strait of Hormuz to be able to navigate to buyers’ ports. The strait crosses the UAE’s waters.

What has happened?

In a shocking development in the GCC region, four countries severed diplomatic relations with Qatar on Monday.

Saudi Arabia, UAE, Bahrain, Egypt and Yemen have cut their ties accusing Qatar of destabilising the region.

Qatar called the decision “unjustified”, with “no basis in fact”.

The UAE has given Qatari diplomats 48 hours to leave the country after Abu Dhabi accused Doha of “supporting, funding and embracing terrorism, extremism and sectarian organisations,” state news agency WAM said.

Meanwhile, citizens from Qatar have also been banned from visiting or passing through the UAE. Emiratis have also been asked not to visit Qatar.

Abu Dhabi’s state-owned Etihad Airways said it will suspend all flights to and from Doha from Tuesday morning until further notice.

The last flight from Abu Dhabi to Doha will depart at 02:45 local time on Tuesday, the airline’s spokesman said in an email.

Saudi Arabia’s official news agency SPA Riyadh cut diplomatic ties and closed borders with its neighbour to “protect its national security from the dangers of terrorism and extremism”.

A Saudi official cited by SPA said the country decided to “sever diplomatic and consular ties with Qatar, and to close all land, sea and aviation ports”.

“(Qatar) embraces multiple terrorist and sectarian groups aimed at disturbing stability in the region, including the Muslim Brotherhood, ISIS (Islamic State) and al-Qaeda, and promotes the message and schemes of these groups through their media constantly,” SPA said.

Bahrain’s state news agency said the country was cutting ties with Qatar because Doha was “shaking the security and stability of Bahrain and meddling in its affairs.”

Egypt said it cut ties with Qatar, accusing the Gulf Arab state of supporting “terrorist” organizations including the Muslim Brotherhood, Egypt’s state news agency reported.

It also said that Qatar’s policy “threatens Arab national security and sows the seeds of strife and division within Arab societies according to a deliberate plan aimed at the unity and interests of the Arab nation.”

The statement said all Egyptian ports and airports would be closed to Qatari vessels and planes.

The move comes two days after King Salman and Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, met in Riyadh and discussed regional developments.

It also comes two weeks after the four countries blocked Qatari news sites including Al Jazeera after they published controversial comments by Emir Sheikh Tamim bin Hamad Al Thani. The comments appeared to be criticizing Saudi Arabia and outraged the countries.

But Doha quickly deleted the comments and dismissed them as fake, and said its news agency was hacked.

The countries have also accused Qatar of supporting Iran, which they deem as a “global sponsor of terrorism”.

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