The Gulf Crisis: Secondary Effects

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by James Spencer

There is a putative Chinese curse: “may you live in interesting times.” It’s especially the case where the markets are concerned. Markets hate instability, and yet that is exactly what they have experienced this past week in the Gulf as Saudi Arabia, Bahrain, and the United Arab Emirates try to coerce Qatar into toeing their line.

The media has been full of such headlines as the Financial Times’ “Qatar counts economic cost of its Gulf rivals’ anger”, or The Washington Post’s “Three maps show how the Qatar crisis means trouble for Qatar Airways.” These have been matched at street level by reports of “panic buying for food” from the International Business Times. Reuters reports that “Qatar and its neighbours may lose billions from diplomatic split,” which makes Qatar’s position sound dire.

Perhaps on the back of this, there have been whispers of potential coups among Qatar’s ruling al-Thani clan. The current emir, Tamim, has politely declined Donald Trump’s offer of mediation in the White House. As his grandfather discovered, coups are easier when the monarch is abroad.

Would-be hegemons Turkey and Iran have both “selflessly” promised Qatar immediate aid. Ever-ready to exploit a foothold on the Arabian Peninsula, Iran exported food to Qatar and charitably offered its airspace to Qatar Airlines (for 2000 ‘Great Satanic’ Dollars per flight.) Thus, ironically, the coercive actions of KSA and the UAE designed to force Qatar away from Iran have actually pushed the only other Wahhabi state into the arms of the 12er Shi’a Islamic Republic. Iran is making much political capital. It needn’t expend much to profit actively from the situation.

Three further aspects have received less consideration but have similarly dire potential the longer the situation continues.

Qatar is not the only country set to lose billions from the split. According to the same Reuter’s report, Saudi Arabia and the UAE “provided $309 million of Qatar’s $1.05 billion of food imports in 2015.” Such trade interruption is a bad idea at the best of times, but in a time of austerity, with the price of oil well below Middle Eastern budgetary calculations, it’s worse than ever. Such a loss to is unlikely to help business in Saudi Arabia, either in terms of political risk (can the markets predict and price in such uncertainty?), or in terms of cash flow for the businesses affected. That’s not good news for the strategically vital Vision 2030, which relies on growing the private sector.

Secondly, it is reported from Kuwait that “deeper OPEC cuts may be needed.” Although “Qatar remains committed to oil supply cut deal,” this is likely to be a good-will gesture. Should the good will run out, the Qataris have spoiling capacity: the president of the OPEC Conference is Muhammad bin Salih al-Sada—also the Minister of Energy and Industry of Qatar.

Finally, the co-ordinated diplomatic, economic, and information operations across four states suggest prior preparation and co-operation. Yet there seems to be a lack of any appreciation for the friction of operations, that not everything will go according to plan and schedule. This is not the first time it has happened: the same failing has been seen in the conflict in Yemen (now in its third year), with Vision 2030 (which has suffered reverses), and now this operation. Whether this is as a result of youthful impetuousness (as Ayatollah Khamenei suggested over Yemen), excessive optimism, or bad advice is unclear, but the House of Saud can be ruthless with those who are seen not to advance their position, as King Saud discovered when he was forced to abdicate. Coup discussions may be taking place in Riyadh, too. The markets would hate that.

James Spencer is a retired British infantry commander who specialized in low-intensity conflict. He is an independent strategic analyst on political, security and trade issues of the Middle East and North Africa and a specialist on Yemen

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