6 key sectors likely to feel impact of Qatar-Gulf row

It won’t be business as usual after Qatar’s latest diplomatic fallout with its neighbors. Several of Qatar’s key economic sectors are likely to be impacted following a decision by Saudi Arabia, the United Arab Emirates, and Egypt to cut diplomatic ties with the country. Saudi Arabia has urged friendly nations, as well as international companies to do the same after accusing Qatar of supporting terrorist groups to destabilize the region. Doha, however, has called the allegations “baseless and unfounded.” But, as far as business is concerned, Qatar’s air and maritime transport, gas exports, and even food supplies could be affected. Argaam has compiled a detailed list of these sectors below.

1) Gas. There are concerns that Qatar, the world’s largest seller of liquefied natural gas (LNG), may see gas supply disruptions to the UAE and Egypt— both of which are heavily reliant on Qatari gas via pipelines and LNG. The UAE alone imports nearly 1.9 billion standard cubic feet per day (scf/d) of gas through the Dolphin Pipeline from Qatar, which is about 30 percent of the UAE’s total gas consumption. So far, this pipeline has been unaffected. However, any disruptions could force UAE to seek replacement for LNG supplies as demand peaks in the hot summer months.

“Gas supplies from Qatar could be potentially be disrupted if the other Gulf countries blocked Qatari tankers traversing the Arabian Gulf,” said Jason Tuvey, Middle East economist at Capital Economics. “However, a maritime dispute is unlikely as it could block GCC countries’ own oil shipments,” Tuvey added.

2) Air transport. Qatar’s aviation industry– which contributes 11 percent of domestic GDP, according to the International Air Transport Association– is likely to suffer from the move by its GCC neighbors to cut off land, sea, and air travel to and from Qatar. Flagship carrier Qatar Airways will have to reroute several flights as it has been blocked from flying in Saudi, Egyptian, and Bahraini airspace, according to media reports. The airline’s key regional competitors, UAE-based Emirates and Etihad, could also face some impact from having to suspend flights to Doha. 

“The aviation sector will be the first and hardest hit due to the reliance of Qatar Airways on other Gulf markets and the operational effects of the airspace restriction on its routes,” said Graham Griffiths, analyst at Dubai-based Control Risks. “The maritime sector will also be seriously affected to the extent that goods being shipped to or from Qatar are re-exported through other Gulf ports such as Jebel Ali.”

3) Shipping. Ports in Saudi Arabia and the UAE have barred all ships carrying the Qatari flag. The Saudi Ports Authority has ordered shipping agents to turn away vessels flying the Qatari flag and ships owned by Qatari citizens or companies. Goods from Qatar will also not be unloaded in Saudi ports, the Authority said on its official Twitter account. The UAE’s Fujairah port has done the same, which further raises concerns over disruption to oil and gas shipments to and from Qatar. Meanwhile, Egypt is yet to announce whether it will take any action against Qatar-owned or flagged ships crossing the Suez Canal route.

“This would be a serious escalation given the critical nature of the Suez and one that would be more difficult to implement due to how vessels coming from Qatar are flagged and chartered,” said Griffiths. “We think Egypt will avoid such an escalation for now.”

4) Regional trade. Trade ties with fellow GCC members could suffer. Qatar exported QAR 23.2 billion worth of goods in 2016 to GCC countries, including Egypt and Yemen, according to data from the Ministry of Development Planning & Statistics (MDPS). The country imported goods worth nearly QAR 20 billion from these countries in the same year. Exports from the UAE alone amounted to QAR 10.6 billion.

“The most meaningful relationship in terms of trade is between UAE and Qatar,” Oman-based U-Capital said in a report on Tuesday. 

5) Food supplies. Qatar imports nearly all the food it consumes. Since it shares a land border with Saudi Arabia, much of the country’s food supplies come through the Kingdom. Food security, therefore, may be affected in the nation following the closure of the Saudi border. Local media outlets and social media users reported a surge in shoppers at supermarkets in Doha on Monday, as citizens and residents tried to stockpile on groceries ahead of potential food shortages, particularly during the holy month of Ramadan.

6) Construction and infrastructure. Another vital sector that will see the impact of the row is construction and infrastructure, especially projects related to the World Cup 2022. A significant proportion of raw materials and equipment for construction projects in Qatar is brought into country by road from Saudi Arabia, the UAE, and Oman. The closure of transport links could increase operational costs and lead to delays.

Write to Reem Abdellatif at reem.a@argaam.com

Jerusha Sequeira contributed to this article