By Kartik Mittal
Last year, a quartet of powerful regional allies comprising Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt abruptly announced a complete and total diplomatic and economic stalemate against another regional pseudo-ally, Qatar. The four countries accused Qatar of supporting and funding terrorism and manipulating internal affairs of its neighbouring states.
Widely regarded as the most advanced Arab State for human development by the UN, 85% of the country's population comprises of expatiates, set against just 313,000 Qatari citizens in a population of 2.6 million. The country is also a high-income economy, backed by the world's third-largest natural gas reserves and oil reserves.
The 2017 Qatar diplomatic crisis began as an extension of the Qatar-Saudi Arabia proxy conflict, and now further elevated with the extension by other regional allies. The Saudi-led coalition cited Qatar's alleged support for terrorism as the main reason for their actions, insisting that Qatar violated a 2014 agreement with the members of the Gulf Cooperation Council (GCC). Saudi Arabia and its allies have also cited the media arm of Qatar, Al Jazeera, for engaging in media conspiracy, and Qatar's proximity with Iran.
Now, entering its eight month, the blockade by the GCC nations effectively amounts to economic sanctions on Qatar, with bans freezing airspace, travel, trade and diplomacy. Its effect has been widespread, and has hit several companies operating out of the country, and including its citizens and expatriates. The abrupt enforcement also has frozen several of its regional assets, disrupting everyday operations.
As a small gas-rich nation, Qatar has been balancing its trade with its oil and gas exports subsidising its heavy food and industrial imports. With its land border with Saudi Arabia closed, Qatar's food imports initially dropped substantially, before recovering via expensive alternatives. The blockade is also an extension of the regional differences, especially manifested after the 2011Arab spring. Al Jazeera, the State-funded broadcaster in Doha, was one of the significant nerve-points in the diplomatic blockade, with GCC members accusing the channel of "negatively portraying" local governments.
Action High Tide
The complete shutdown of Al Jazeera was one of the terms for diplomatic re-establishment put forward jointly by Saudi Arabia, the UAE, Bahrain and Egypt.
The direct losses incurred by Qatar, along with indirect losses, would amount to several billion dollars. The country is already exploring legal avenues to claim compensation from the GCC countries. Several senior ministers have also indicated that Qatar has contracted a specialised legal team to study the actions taken by the blockading countries against it.
While the GCC blockade is geopolitical, the calls for a wider global support, including from the UN, is farfetched. The issue was momentarily complicated when US President Donald Trump took credit for the GCC's actions. But it did not gain any traction, as international consensus had called for the resolution of the diplomatic crisis through dialogue.
For the legal purist, finding the isolation of Qatar by its GCC neighbours to be illegal is apparent, especially as the gas-rich nation has virtually been cornered over its movements — both financially (for its current instruments and investments in the GCC countries) and physically, having to re-route its land and sea movements via Iran.
Ironically, despite all the extreme measures by the GCC quartet to armtwist Qatar, countries including the UAE and Oman continue to depend on Qatar's gas pipeline. Qatar continues to pump around 2 billion cu ft of gas a day to the UAE, showing no signs of impact from the sanctions.
Qatar gas links also sometimes work in diplomatic charm offensive, as in the case of lowering charges for countries it seeks to partner with. In fact, coinciding with India-Qatar bilateral talks, the country lowered its selling price by nearly 50%, and also proposedfor a direct deep-sea gas pipeline to the Indian subcontinent via Oman.
Increasing oil prices, along with a deepening trade deficit, is significantly affecting the rupee, which has lost nearly 0.65% this calendar year. With the current inflationary oil price against the rupee, it would be interesting to see how Qatar positions its gas sale, especially as it now depends more than ever before on the commodity to outbalance its revenue loss from the GCC.
Positioning its pricing would be key to retaining its customers, and will be the primary driver for its narrowed down economy.
An Expanding Gulf
For India, rising commodity prices could spell trouble for the rupee. Crude oil accounts for more than a third of India's gross imports alone. Therefore, any changes in its price directly impacts the country's balance of trade and thereby on the broader current account — the gross balance of money going in and out of the country — including from trade, investments and remittances.
India's position on the conflict has been non-partisan, and in line with that of the UN: pushing for dialogue and discussion for an amicable resolution. The region is of increasing focus for India's ministry of external affairs, especially as the country is aligning its foreign policy to counter regional threats. Therefore, it is also of the best interest for India to hope for a faster dispute resolution.
(The writer is Senior Solicitor, Zaiwalla & Co)