Qatar businesses hit as rift with GCC neighbours continues
Businesses based or operating in Qatar are continuing to suffer, according to reports, as key neighbours and former allies of the leaf-shaped, super-rich mini-state show no sign of back-tracking on their decision, announced on Monday, to cut all ties with Doha.
In what has been described as an “extraordinary step” in regional diplomatic terms, Qatar neighbours Saudi Arabia, Egypt, the United Arab Emirates and Bahrain – all of which, like Qatar, are members of the Gulf Cooperation Council – announced on Monday that they were cutting diplomatic and transport links to Qatar, citing its alleged role in fueling extremism and terrorism.
Yemen, Libya’s eastern-based government, and the Maldives later joined the other states in saying they also would be cutting their ties with Qatar, according to press reports.
The news immediately sent shares on the Qatar Stock Exchange falling, resulting in a 7.27% decline by the end of Monday. Oil prices rose initially on the news, then fell on concerns that the rift could weaken OPEC’s ability to tighten up on its members’ production.
Press reports, including one in today’s Financial Times, noted that these other Gulf states were thought to have been moved to take action after becoming “enraged” by Qatar’s reported payment of as much as US$1bn to jihadis to free members of the Qatari royal family who had been kidnapped in December, 2015, while in Iraq on a hunting trip.
The deal to free the Qatari royals, the FT noted, had “heightened concerns among Qatar’s neighbours about the small but rich state’s role in a region plagued by conflict and rivalries”.
Qatar is the world’s largest exporter of liquified natural gas, and its wealth has enabled it to establish itself in diplomatic circles in spite of its relatively small size.
Qatar has denied it supports terrorists groups and said that the claims by its neighbours had been “founded on allegations that have no basis in fact”.
All of this is taking place against the backdrop of preparations to host the 2022 FIFA World Cup – even as the choice of Qatar remains controversial in some quarters.
Today, the Reuters news agency reported that “some” Saudi Arabian and United Arab Emirates commercial banks are holding off on doing business with Qatari banks, as a result of the matter, and that the potential for such problems as “a funding crunch for some Qatari banks” could materialise if the stand-off continues.
Meanwhile, foreign banks were reported to be assessing how much they’ve loaned to Qatar, which is reported to have borrowed from non-Qatari institutions to fund its activities, and the country’s currency also is described as being “under pressure” as a result of the rift.
Qatar Investment Fund
The London-listed Qatar Investment Fund plc, which markets itself as the means by which international investors are able to access the Qatari stock exchange, issued a board statement to the London Stock Exchange on Monday, after the Qatari exchange closed, in which it said that it had noted “today’s news in Qatar regarding cuts in diplomatic ties with Saudi Arabia, Bahrain, United Arab Emirates, Egypt and Yemen”, and that this had seen the QE index close down “by 7.27% today”.
The statement added: “The last reported NAV of the fund [per share] was US$1.2393 (25 May 2017), announced on 30 May 2017.
“The board estimates that the NAV has reduced by approximately 8 to 10%.”
According to information on the QIF website, the top five investors as of 30 September included City of London, with 29.53%; Qatar Insurance Co, 21.14%; Qatar Holdings, 11.64%; Lazard Asset Management, 8.27%; and 11607 Capital Partners, 7.34%.
A spokesperson for the Qatar Investment Fund noted that while members of the board of directors are in Europe, the Qatar Insurance Co, the fund’s investment adviser, is in Doha, which is where locally hired people working for the fund are to be found.
Among the developments on Tuesday was an offer by GCC member Kuwait to mediate in the dispute, with Reuters reporting that Kuwait’s ruler, Sheikh Sabah Al-Ahmad Al-Jaber al-Sabah, was traveling to Saudi Arabia to meet with that country’s King Salman, in an effort to help resolve “the worst infighting among the Arab world’s strongest and richest powers in decades”.
IMF report: Qatar ‘well positioned’
This, it said, was in spite of the fact that the country’s macro-economic performance had been “adversely impacted” by lower hydrocarbon prices, which had resulted in a deterioration in its fiscal and external balances, from previous “large surpluses”.
The situation had forced Qatar’s authorities to cut current expenditures, and to place greater emphasis on raising non-hydrocarbon revenues, it added.