December 2017 Overview l Qatar Diplomatic Crisis - Where are we now?
The political and economic boycott of Qatar, which began on 5 June 2017 when Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic ties with the State of Qatar and imposed restrictions on the movement of goods and individuals to and from Qatar, continues to have a significant impact on trade in the Middle East and has caused significant disruption to supply chains.
Currently, as at 17 December 2017:
- The Qatar embargo continues without the enactment of any laws or regulations by any of the boycotting quarter of Gulf states. Although the UAE and Saudi authorities have issued Cabinet level resolutions and official statements by their respective central banking authorities in relation to other aspects of the embargo (for example updating lists of individuals and organizations that are suspected of being involved in terrorist-related activities and introducing limits on dealings with certain Qatari banks), the restrictions imposed on the movement of goods, vessels or aircraft between the countries have largely been introduced in the form of circulars issued by port authorities or statements made by federal transportation and civil aviation authorities.
- International relations: In August 2017, Qatar restored diplomatic ties with Iran by sending an ambassador to Tehran. Qatar also asked the World Trade Organization (WTO) to set up a dispute panel to adjudicate on its row with the UAE.
- Economy: According to BMI Research Qatar's gross domestic product will slow to 1.9% this year from 2.2% last year. Qatar has been forced to repatriate significant sums from its sovereign wealth fund to shore up its struggling economy. The research firm said that Qatar's economy would grow 2.5% in 2018. The IMF has forecasted that Qatar’s non-oil economy will slow to 4.6% this year from 5.6% last year as a result of the country’s continued isolation. Moody’s estimates that Qatar spent US$ 38.5 billion, or 23% of its GDP, to support its economy in the first two months of the sanctions. Qatar's finance minister told the Financial Times in October 2017 that the Qatar Investment Authority, the country’s sovereign wealth fund, repatriated more than US$ 20 billion into the country since the stand-off with its neighbors began in June.
- Business: There are still no publicly released restrictions on investment between Qatar and the boycotting countries, but Qatar has been experiencing economic slowdown and challenges in attracting investors and tourists. The government has offered to subsidize private companies in a bid to prevent them from leaving, reducing rent in the country’s southern logistics zones for the next two years. Moreover, new investors in the zones will be completely exempt from paying rent for a year if they obtain building permits by certain deadlines.
- Banking: Under mounting pressure, Qatar’s central bank relaxed banking and foreign exchange regulations for expatriates living in Qatar, ordering conventional and Islamic banks in the State to allow residents with expiring visas to conduct all their banking operations throughout the official three-month period for renewing their residency after the visa expiry. This order also applies to foreign exchange companies that are in possession of central bank licenses and conduct activities including foreign exchange, and transfer and receipt of money. The central bank said this procedure is aimed at facilitating the transactions of residents in Qatar and to guarantee the smooth functioning of their financial affairs.
- Shipping: The shipping ban by the boycotting countries remains in place. Qatar inaugurated a new US$ 7.4 billion deep sea port along its Gulf coast in September 2017 as a regional transport hub to help shield its economy against the sanctions. The Hamad port, 40 km south of Doha, is one of the largest such facilities in the Middle East. The port has been receiving large quantities of food and building materials for construction projects since the boycott began, and allows Qatar to import goods directly from countries such as China and Oman instead of through a major re-export hub in Dubai. Qatar has expanded shipping routes to India, Oman, Turkey and Pakistan and announced plans to raise its liquefied natural gas (LNG) output by 30% in an apparent effort to prepare for greater economic independence in the long term.
- Supply of goods: The restriction on the shipment of goods to and from Qatar by air, sea and land corridors are still in place, with no direct shipments of goods to and from Qatar. However, there is now a clear practice by the Qatar authorities to prohibit the import of goods of Saudi, UAE, Bahraini or Egyptian origin, including indirect shipments, although, as far as we are aware, the relevant Qatari authorities have not published or officially confirmed this position.
- Movement of people: To attract investors, Qatar opened up its visa regime in September 2017, offering visa-free entry for citizens of 80 countries and becoming the first GCC country to create a permanent resident status for expatriate workers who have “given service to Qatar” or possess “skills that can benefit the country.” Although there are no restrictions issued by the Qatar authorities prohibiting travel to Qatar by nationals and residence visa holders of the boycotting countries, the ability of Qatar nationals and Qatar residence visa holders to enter or travel through the boycotting countries has been significantly restricted in practice.
- Updated Terrorist Watch Lists: The UAE, Saudi Arabia, Bahrain and Egypt further extended their terrorist watch lists on 22 November 2017, adding two organizations and 11 individuals. The latest additions bring the list to 79 individuals and 23 organizations, including from nine Arab countries, suspected of sponsoring terrorism and linked to Qatar.