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Tuesday, 6 June 2017

The aftermath of cutting ties with Qatar

Qatar’s Foreign Ministry issued a statement saying a move by Egypt, Saudi Arabia, the UAE, Bahrain and Yemen to cut diplomatic ties had no legitimate justification and is founded on baseless allegations. Interestingly, the Statelet’s official statement acknowledged only that Saudi, the UAE, and Bahrain had cut ties, largely sidestepping Omm El Donia. The folks in Doha said Qatar was “exposed to an instigation campaign based on allegations that amounted to … fabrications, which proves that there are premeditated intentions to cause damage to the State.” Great writing there, folks. Not turgid or facile in the least. Don’t you have a few pet khawaget you could have paid to apply some polish?

The statement also included a promise that Qatar’s citizens and economy will be shielded from any impact. What’s looking more and more like a straight-out blockade will “not affect the normal course of life of the citizens and residents of the State and that the Qatari Government will take all necessary measures to ensure this and to thwart attempts to influence and harm the Qatari society and economy.”

Yes, it’s a blockade (or nearly so): Qatar imports nearly all of its food, and 40% of it comes in via the land border with Saudi. Saudi Arabia’s closure of Qatar’s only land border resulted in trucks carrying food for Qatar lining up across the border, unable to enter the country, according to Bloomberg. “That could mean significant trouble for Qatar, which relies on food trucked in from Saudi Arabia,” the Associated Press reports. An Iranian official said his country is willing to export food to Qatar by sea.

Also cutting ties with Qatar: Yemen, the Tobruk-based internationally recognized government of Libya, the Maldives and Mauritius all joined the fray. The Saudi-led Arab coalition fighting Yemen’s Houthi rebels also expelled Qatar from its alliance, according to BBC.

Silent yesterday: Oman and Kuwait, also members of the Gulf Cooperation Council. Kuwait is positioning itself as a mediator (more below), and Oman is both (a) a very quiet diplomat and (b) reportedly struggling with the illness of its leader.

Gulf airlines are canceling flights to Qatar, with UAE flag carrier Etihad, Saudi Arabia’s Saudia, Emirates, Flydubai, and Air Arabia suspending flights there. Egypt’s ban on flights from Qatar started at 6:00am CLT today. Egypt had announced suspended air and sea links to Qatar and closed its airspace to Qatari planes.

Qatari shares were down 7.3% yesterday. The Statelet’s USD-denominated bonds “tumbled and contracts used to bet the Qatari riyal will weaken surged the most since 2009,” according to Bloomberg. “The potential risks that Qatari investors face, including the QIA, are going to increase and new deals are probably going to become more difficult to complete and face greater scrutiny,” Sven Behrendt, managing director of political risk consultant GeoEconomica, tells Bloomberg.

On the macro level: The impact of the severing of ties appears to have not shaken investors, who see these events as a regular occurrence. Prices of crude oil fell 1% yesterday, after rising 1.6% when the break was first announced, according to Reuters. Emerging markets investors downplayed the effect this would have beyond Qatar’s equity markets, Bloomberg reports. Disruptions of air travel so far appear to be the greatest issue on hand, with global airlines group, the International Air Transport Association, calling for countries to open up air routes, Reuters reports. Bloomberg sees Qatar Airways are being the biggest loser from the whole blockade.

Okay, so what’s happening here at home?

Egypt gave Qatar’s ambassador two days to leave. Egypt also recalled its chargé d’affaires from Doha, and Egyptian diplomatic sources tell Al Shorouk the siege could yet be escalated.

Egypt is asking Greece to look after the interests of Egyptians in Qatar, the Foreign Ministry said in a statement on Monday. Greece has reportedly accepted, according to Reuters.

El Sisi calls for punishment of nations “proven to support terrorism”: President Abdel Fattah El Sisi and Defense Minister Sedki Sobhi explained Egypt’s severing of ties with Qatar at a meeting with France’s Defense Minister Sylvie Goulard in Cairo yesterday to discuss military and security cooperation, according to an Ittihadiya statement. He reiterated his calls for countries to punish nations that have been proven to support terrorism. The three also discussed military and security cooperation and conflict in Libya.

Prime Minister Sherif Ismail formed a committee to look into the status of Egyptians living in Qatar. He assured the public that the severing of ties would not have an impact on Egypt’s gas imports, Al Masry Al Youm reports.

As for Qatar’s investments in Egypt, Ismail said it was too soon to tell how that would be impacted. He added that Qatari students currently studying in Egypt would be impacted.

Egyptian banks have reportedly halted dealings with Qatari banks following the decision to cut diplomatic ties, sources told Reuters. Four bankers Reuters spoke to said the “halt to transactions with Qatari banks came on internal orders from management at their banks, and excludes the opening of letters of credit required for imports. Some banks have stopped accepting Qatari currency while others are halting some treasury transactions, the bankers said. Bankers at three other lenders said they had not received any orders and that it was business as usual so far. There had been no official communication to banks from the Central Bank of Egypt on the split, the bankers said.”

If you’re banking with QNB Alahli, don’t panic: The central bank issued a statement reiterating that QNB Alahli Bank is an Egyptian joint stock company that operates as an independent legal person under the jurisdiction of the Central Bank of Egypt, Al Borsa reports. QNB Alahli retains a strong financial position and continues to serve its clients, the statement added.

Egyptians living in Qatar fear losing their jobs, Amina Ismail writes for Reuters. “Egyptians are scared. They have jobs and a stable life here with their families. There is a state of panic,” one person told her. The status of some 250k Egyptian workers there is so far unchanged, said Manpower Minister Mohamed Saafan.

Naguib calls for business boycott of Qatar: Egyptian businesses should withdraw their investments from Qatar and halt dealings there, Naguib Sawiris said via his spokesperson.

The official reaction internationally did not carry much substance:

Kuwait, which did not join its other GCC neighbors in cutting ties with Qatar, appears to have positioned itself as a mediator. Kuwait’s Emir Sheikh Subah Al Ahmed Al Subah urged Qatar’s Sheikh Tamim to work to calm the situation, pressing him in a phone call not to take any action which would make matters worse, Kuwait News Agency reports. Diplomatic sources said that Kuwait delivered a final ultimatum to Tamim on behalf of KSA, Egypt, the UAE and Bahrain before the four broke off ties.

Iran blamed “The Great Satan,” of course, saying US President Donald Trump’s visit to the region stage for yesterday’s events — and warning that “it is not unlikely that we would witness more negative incidents in the region,” according to Reuters. The head of Turkey’s parliamentary committee on national security and foreign policy says Turkey was “sad” and offered to work “to normalize ties.” Russia issued a benign statement calling for a “stable and peaceful” situation in the GCC and hoped the rift will not affect “the common determination and resolve” in the joint fight against “international terrorism,” Reuters says.

Donald Trump has vowed to “calm the Gulf flareup,” Bloomberg reports. US Secretary of State Rex Tillerson briefly remembered he had a voice, saying, “We certainly would encourage the parties to sit down together and address these differences, and we — if there’s any role that we can play in terms of helping them address those, we think it is important that the GCC remain unified.”

Israel’s Defense Minister Avigdor Liberman was cheering from the sidelines and said now would be a great time for Israel to collaborate with others on fighting terrorism, Times of Israel reports.

The western English-language press is, by and large, taking the same line: Qatar had it coming, but US President Donald Trump is also to blame. See coverage in the Guardian, the New York Times and the Financial Times.

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