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Global Affairs

How Qatar is Weathering the Gulf Crisis: Alongside New Partners

 5 min read / 

A little more than a year after the start of the Gulf crisis, there is an unexpected crop of new beneficiaries from the Saudi-led blockade against Qatar. To take just one example, the Turkish entrepreneur Serkan Ucar – profiled in a recent feature by Reuters – is set to sign his first contract in Qatar, where his family business will supply scaffolding, aluminium and other parts for one of the 2022 World Cup stadia. Indeed, a large collection of Turkish firms are now engaged in the country, many of them hoping to win contracts to work on the extensive infrastructure that will need to be erected ahead of the next edition of the football tournament.

Running the Blockade

Given the geopolitical context, this growing interest from outside investors is a welcome one for the tiny Gulf state. Last June four of Qatar’s Arab neighbours severed diplomatic ties with Doha after accusing the emirate of supporting terrorism, a charge it steadfastly denies. The quartet, led by Saudi Arabia and the UAE, cut key supply routes, causing trade in and out of Qatar to plummet, and analysts predicted disastrous long-term consequences. It was hard to disagree; Qatar relied on imported food and it seemed as if its economy would be decimated without the ability to ship oil and gas, which accounted for around 85% of its export revenue. Observers remarked that Saudi guards could smother Qatar’s entire land border while the UAE, which had provided an essential port of call for international shipping firms before they sent smaller vessels into Qatar’s shallower waters, could impose a de facto maritime blockade.

Yet rather than succumbing to the siege, as had been initially anticipated, Qatar found ways around it. Where once shipments stopped at the Dubai suburb of Jebel Ali, they now pass through the nearby ports of Sohar and Salalah, thanks to Doha’s ever-closer ties with Oman. New partners such as the Czech Republic are filling import gaps and providing fresh commercial routes for Qatar Airways, enabling the national carrier to avoid Gulf airspace. Having previously focused on trade with its Gulf Cooperation Council (GCC) neighbours, Qatar has used the sanctions imposed on itself as a spur to diversify, pushing industries such as manufacturing, defence and even agriculture to innovate. In a stark reversal from concerns at the beginning of the blockade, many now believe the boycott will actually help the country long-term, forcing it to implement changes which will be vital when the nation’s oil and gas eventually run out, and some even want June 5, the day the blockade started, to be made a national holiday.

Golden Cushion

Cynics suggest it is easy to take an economic gut-punch when you have a $320bn sovereign wealth fund to cushion the blow, and there is certainly merit to that argument. Qatar has used its vast investment fund to replenish drained foreign capital reserves, and fund managers have wielded their chequebooks to make new friends, ploughing $35bn into the US while increasing their stake in Russian oil giant Rosneft. Moody’s says that in the months after the boycott, Qatar pumped$38bn into its economy, a war chest few other states can muster.

Qatar has employed some unusual solutions, however, as well as hard cash. Just take the herds of cows that have been imported en masse from the US and kept in air-conditioned barns. The cows are vital in the short run because Qatar can no longer import milk from Saudi Arabia, yet they are also part of a long-term drive
towards agricultural self-sufficiency. In pursuit of this objective, scientists are also growing vegetables using hydroponic technology and modern greenhouses
are being flown over from South Korea.

Agriculture is not the only domestic industry that is receiving new attention. In an attempt to wean the country off hydrocarbons the Qatari government
is striving to build a new high-tech economy, powered by foreign nationals. Hamad Port, which opened last September, includes a ‘free zone’ where international companies can set up without the burden of state control. Now the government is planning two more zones and promising major tax breaks to those who use them. The strategy seems to be working already: local media reported this week that non-oil and gas revenues rose 5% in the first quarter, with construction and manufacturing both showing growth of over 15%.

World Cup Benefits

Of course, much of this boom is down to the upcoming World Cup, which continues to generate controversy. Fifa’s decision to award the tournament to such a small country, with no football heritage and an inhospitable climate, has led to sustained accusations of bribery (again, Qatar denies the claims). Critics in the international media have also focused on the country’s history of mistreatment of migrant workers building World Cup stadia.

Yet the negative headlines have abated in recent months, thanks largely to a raft of labour reforms which have quelled concerns among the international community.
Meanwhile, authorities have been using the upcoming tournament to reward not only existing allies such as Turkey but also to bridge closer relations with European partners such as France, whose state-owned public transport operator will run the new Doha metro. The Qatari Emir is visiting French President Emmanuel Macron in Paris imminently, suggesting the charm offensive is paying off.

Indeed, a number of powerful political figures have softened their stance on Qatar in the 12 months since the GCC boycott. The EU signed its first cooperation agreement with Doha in March. But that development is nothing compared to the U-turn performed by Donald Trump, who tweeted his support for the blockade but has since hosted the Qatari Emir and now even claims it is the Saudis and Emiratis who are funding terror.

None of this is to say the tiny country’s economy has not taken a battering, and it remains to be seen whether Qatar’s economic miracle will last once the 2022 World Cup is over. Yet the boycott has undeniably provided a wakeup call, showing the path to a more sustainable future – one with initiatives that should be sustained
even post-embargo.

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