Last reviewed 14 June 2017

A diplomatic situation has broken out in Qatar recently with several regional states cutting diplomatic ties with the Arab country. Paul Clarke reports on the possible implications for trade.

Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain have broken diplomatic ties with Qatar in a move swiftly followed by the Maldives and the Yemeni Government.

More significantly, the USA became involved in the dispute after the UAE’s ambassador in Washington said that economic pressure on Qatar was set to increase. The Turkish Foreign Minister and the King of Jordan have also intervened to try to end the dispute.

The crisis arose when Saudi Arabia accused Qatar of supporting terrorist and sectarian groups aimed at destabilising the region, including the Muslim Brotherhood, al-Qaida, Islamic State and groups supported by Iran (the Saudi’s main regional rival).

The countries involved banned flights to and from Qatar but have since clarified that position.

The UAE’s Civil Aviation Authority has confirmed that the air embargo imposed on Qatar applies only to airlines from that country or registered there. This statement was echoed by Saudi Arabia and Bahrain.

Egypt has also said that it will allow airlines and aircraft that are not registered in Egypt or Qatar to use its airspace to fly to and from Qatar.

Meanwhile, Qatar’s ambassador to Russia has maintained that “this is not a diplomatic rift as most people want to present, this is really an illegal blockade”. The Saudi foreign minister has objected to the use of that term arguing that it has only denied the Qataris use of its airspace “and this is our sovereign right”.

Trade implications

In trading terms, Qatar has already announced that it is now exporting metals via ports in Kuwait and Oman, as well as through one of its own container ports. This was confirmed by the chief executive of Norsk Hydro, the company which owns 50% of the Qatari plant producing more than 600,000t of primary aluminium per year.

However, the country is heavily dependent on food imports and they mainly enter across its land border with Saudi Arabia.

As the parties to the dispute are all members of the Organisation of the Petroleum Exporting Countries (OPEC), there is also likely to be some impact on oil prices but Qatar is one of the Organisation’s smallest oil producers and in any event will still be able to ship both oil and gas by sea.

The inaugural Qatar-UK Business and Investment Forum held earlier this year in Birmingham was told that, in 2015, UK exports to Qatar totalled £2.6 billion representing an increase of 16% from 2014, while in the same year, Qatar exports to the UK doubled to reach £2.7 billion.

The Foreign and Commonwealth Office (FCO) has warned of severe disruption of movement in Qatar due to full closure of all air, naval and border crossings but, perhaps not surprisingly given its preoccupation with Brexit, the Department for International Trade (DIT) has yet to comment.