One Year After the Blockade, Qatar's Economy is Strong

Published June 10th, 2018 - 12:09 GMT
A view of skyscraper Doha. Despite the year-old blockade Qatar is in an upbeat mood (AFP File Photo)
A view of skyscraper Doha. Despite the year-old blockade Qatar is in an upbeat mood (AFP File Photo)

By Eleanor Beevor

A year ago, a fake news story spiralled into an incendiary international standoff. In May 2017, Qatar’s official state news agency was hacked, and a story was planted.

That story claimed that Qatari Emir Tamim bin Hamad al Thani had pushed for bettering its relations with Iran, and had defended Hamas and Hezbollah. Qatar vociferously denied the story, but it did not stop Saudi Arabia, the UAE and a number of other countries severing diplomatic ties with Doha in June.

Then in July 2017 a quartet of regional powers – Saudi Arabia, Egypt, the United Arab Emirates and Bahrain imposed a blockade on Qatar. They said that Qatar had a history of supporting terrorist groups, and that until it submitted to a series of conditions from the blocking quartet, the blockade would remain in place. Those four countries closed their ports to Qatari ships, and limited the use of their airspace by Qatar airways. They gave all Qatari expatriates within their borders two weeks to leave the country, banned their own citizens from going to the Emirate, and all their shared borders with Qatar were closed.

Standoff brewing

Though the standoff was greeted with tremendous shock, it had been brewing for a long time. Much to the chagrin of Saudi Arabia and the UAE, Qatar had always pursued a foreign policy independent of the rest of the Gulf Cooperation Council (GCC), and refused to cede to pressure from its fellow GCC members.

A major rift emerged during the Arab Spring, when Qatar backed Islamist influences in the uprisings, including the Muslim Brotherhood in Egypt. This was anathema to Saudi Arabia, whose ruling House of Saud has long feared Islamist opposition groups.

Qatar’s development of the Al Jazeera broadcasting network, a wildly influential force in Middle Eastern media, was also deeply resented by other regional powers. But as always for the Gulf States, the greatest crime is that of getting too close to Iran and its proxies. Suspicion was already in the works because of Qatar’s shared gas fields with Iran.

But the final straw was in April 2017, when Qatar paid out over a billion dollars in ransom fees to Iran-backed Shiite militias in Iraq. This was in exchange for the release of a party of kidnapped falcon hunters that included members of the Qatari royal family. The ransom included the condition that those militias allowed humanitarian aid and evacuations in areas of Syria under their control.

Al Jazeera plays a critical role in Qatar's soft power. /AFP

This was too much for the other Gulf powers to accept. After the ransom was paid, Qatar’s adversaries seized on the news as proof that Qatar was an incorrigible boost to terrorist organizations, and the blockade began.

They began by issuing a list of demands immediately after imposing it. Qatar would have to shut down Al Jazeera, sharply curtail its cooperation with Iran, and end support for the Muslim Brotherhood and other Islamist groups. It was given a 10-day ultimatum, and when Doha refused, it settled in for the long haul.

Draining Qatar’s coffers

Whether Doha could have anticipated that the blockade would still be in place a year later is unknown. But perhaps it needn’t have been worried. The aim of the blockading quartet was to dent Qatar’s economy, to isolate it diplomatically, and ultimately to weaken the nation and turn it into a more pliant partner for their regional pursuits. Yet 12 months later, the quartet has little to show for its efforts.

Draining Qatar’s coffers was always going to be tricky. The emirate is small, but its oil and gas reserves have allowed it to stash away an incredible wealth over the years. However, unlike a huge number of resource-rich countries, Qatar reinvested this resource wealth into diversifying the economy. It poured a great deal of money into education, and has developed an active sovereign wealth fund for making high-return investments overseas. Before the blockade, the country had the highest GDP per capita in the world, at $98,000 per person in 2014.


This is not to say the blockade had no effect. It was looking bad for Qatar’s economy for a while. In the early days of the blockade, investors fled from Qatari stocks, bringing Doha’s benchmark index to a seven-year low in November 2017. Doha was forced to divert money from its sovereign wealth fund to survive the initial shocks.

Buoyant economy

But even though it had the cash to bunker down for some time, this didn’t prove necessary. Qatar’s economy has actually grown throughout 2017, it was announced this week, and is predicted to rise next year as well. This is in a large part due to a rise in hydrocarbon prices.

Though the blockading states have shuttered their doors to Qatari exports, there are many more energy hungry countries wanting to buy. India is one such example – Qatar is one of India’s biggest suppliers of Liquefied Natural Gas (LNG). And India’s purchases of LNG from Qatar are up 27.3% from 2017.

Dr. Kristian Ulrichsen, an expert in the political economy of the Gulf at Rice University’s Baker Institute for Public Policy, agreed that though the picture was mixed, Qatar’s economy had recovered extremely well from the initial shocks. He told Al Bawaba:

“Qatar has managed to weather the disruptive impact of the diplomatic and trade embargo and emerge relatively unscathed to the point where the first anniversary of the crisis finds it with a smaller fiscal deficit, a substantive increase in foreign reserves, an improved trade balance, and a banking sector that had recovered the initial outflows in the immediate aftermath of the blockade.

To be sure, the crisis has not been cost-free, and Qatar Airways, in particular, reported a substantial (but undisclosed) loss for 2017-18, as the closure of much of the regional airspace around Qatar led to a significant rise in operating costs as flights had to be rerouted and journey times have increased, but these have proven relatively manageable so far.”

Qatari Airways Taking Off (AFP)

Compex blockade

The blockade failed to keep buyers and investors out of Qatar, but the geopolitical impact of the blockade is more complex. Yet there too, Qatar has certainly not become the pariah that the blockading quartet had hoped for. This is quite striking given how close the Trump administration has grown to Saudi Crown Prince Mohammed Bin Salman.

On matters such as Iran and Israel-Palestine, the US could not have hoped for a more accommodating partner. Vice versa, Prince Mohammed found in Trump a true Iran hawk, and a partner willing to forgive some of his most controversial foreign policy moves.

Tamim bin Hamad al Thani with Donald Trump (AFP)

Initially, Trump announced he was on board with the blockade, despite opposition from his then-Secretary of State Rex Tillerson. But this April, Trump was welcoming Emir Al-Thani to the Oval Office and hailing him as a partner in the fight against terrorism – the very opposite of the line that the blockading quartet are pushing.

No doubt a great deal of expensive Qatari lobbying played a role. But Qatar were far from alone in spending a lot of money on lobbyists. Even before the blockade, the UAE were attempting to push the Trump administration into passing anti-Qatar legislation, by awarding contracts to key Trump fundraisers in exchange for their discrete lobbying efforts.

Ultimately, the attempt to isolate Qatar failed because the West felt that blockading it was disproportionate and counter-productive. Dr. Ulrichsen continued:

“Blowback from the blockade has rebounded more against the quartet than against Qatar, as it has damaged their reputations as reliable foreign policy partners in Western eyes. They wish to see an end to a crisis, which they see as a distraction from the real challenges in the Gulf and the Middle East, and see the quartet, rather than Qatar, as the stumbling block to a resolution.”

One year in to the blockade, and the quartet behind it appear no closer to convincing the rest of the world that the exercise is necessary. Even the most sympathetic American administration to Saudi Arabia appears to be losing patience.

The blockade ended the prospects of a more integrated GCC, complete with a European Union-style single market. But Qatar seems to be rising to the challenge of going it alone. At this milestone in time, it appears that the blockading powers have less control over Qatar than ever.


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