Saudi Arabia vs. Qatar: How MBS’s Blockade Not Only Failed to Achieve Its Goals but Backfired

If your country was under threat from a powerful expansionist rival, turned into political island by a trade blockade, had its airspace restricted and its borders shut, you probably wouldn’t expect its economy to thrive. But, at least in the case of one shunned nation, you would be wrong.

The “Qatar crisis,” as the land, air and sea blockade by Egypt, Saudi Arabia, Bahrain and the United Arab Emirates quickly became known, was meant to break the Qatari economy and force the country’s emir to give in to a set of demands from the Saudis – namely to fall in line with Saudi leadership of the Gulf, shut down Al Jazeera and cut ties with Saudi arch enemy Iran. The tiny emirate of roughly 2 million people, led by the 37-year-old Sheikh Tamim bin Hamad Al Thani, has refused to comply with any of the demands and remained defiant in the face of pressure from Saudi Crown Prince Mohammed Bin Salman, 32, and his campaign for regional domination.

At the beginning of the crisis – which many dubbed the biggest split in the Arab world since the Gulf War – hysteria set in as Qataris swarmed supermarkets fearing food shortages, the stock market collapsed and even hundreds of camels ended up dead as the Saudis closed the border.

As the crisis continued fears of a Saudi-led military incursion into Qatar grew – although with the U.S.’s largest military base in the Middle East located in the country that seemed unlikely. Doha turned for support to Turkey, which deployed troops to Qatar and, along with Iran, sent food and supplies. In the following months there were regular complaints of Qatari and UAE jet interceptions, reports of a missing Sheikh and even a Saudi plan to turn Qatar into an island – cutting the peninsula off with a maritime-canal, turning the border area into a military zone and nuclear waste site.

New trade routes

In the initial weeks after the blockade was announced, Qatar’s imports dropped nearly 40 percent from the same time a year earlier.  Today those numbers have returned to normal as Doha, the world’s top exporter of liquefied natural gas, responded by developing new trade routes, propping up its banks with state money and helping local firms develop domestic output of some goods – including food. Qatar has also begun to develop the world’s largest LNG field that it shares with Iran in the Persian Gulf

According to an International Monetary Fund report from March, Qatar’s banking system has recovered from initial outflows and the economy is expected to grow 2.6 percent this year. Even the country’s fiscal deficit is estimated to have narrowed to about 6 percent of gross domestic product in 2017 from 9.2 percent in 2016 , the IMF said.

As Forbes notes, Doha’s foreign reserves increased by $2.9 billion to $17.7 billion, HSBC said in a report to clients on Monday, adding that the stronger position was in part supported by continued improvement in Qatar’s trade balance.

Human rights

Qatar has long been the focus of criticism for human rights abuses as its foreign labor policy, the Kafala system, has resulted in widespread abuse and been dubbed a form of modern-day slavery. Human rights activists have long called for boycotts of the 2022 World Cup, which will be hosted in Qatar, due to the high number of worker deaths related to the event. One 2017 report published by the International Trades Union Confederation (ITUC) estimated some 1200 workers had already died building the venues, with years of work still ahead. Qataris, living under an absolute monarchy, also have very limited civil liberties, but both men and women are slated to vote in the first free elections for the country’s largely ceremonial parliament in 2019.

Human Rights Watch has praised Qatar in its World Report 2018 – entitled, “Qatar: Year of Crisis Spurred Rights Reforms.” The report credits Qatar for a range of significant human rights reforms during 2017 that if fully implemented “would usher in some of the most progressive human rights standards in the gulf region.”

The reforms include legislation that would improve labor standards for migrant workers, including a domestic workers law, and a draft law granting permanent residency to children born to Qatari mothers and foreign fathers and to some foreign residents living in the country.

The West is happy to sell weapons

Qatar is one of the most heavily invested countries in the world. For such a small country, it wields an oversized influence on global politics largely because it has invested hundreds of billions of its energy wealth, through its national wealth fund, in companies and property (there is a “Qatari quarter” in London) overseas – although it is nowhere in the ballpark of countries like China or Norway.

Qatar now wants the favor returned and is moving ahead with legislation that will allow full foreign ownership of companies operating in the country, which is much broader step than a more limited measure proposed recently by Saudi Arabia – which is competing with Qatar for new international business.

Qatar’s Ministry of Economy and Commerce is promoting the law overseas as providing many incentives to foreign investors including “exemption from customs duties and possibility of exemption from income tax.” The legislation follows a directive from the emir last year to open up the economy.

Qatar’s struggle against the blockade also includes lucrative arms deals. To ensure its stability, the emirate paid almost $1 billion to build the Al Udeid Air Base in the 1990s, where U.S. CENTCOM is headquartered and the British Royal Air Force also operates.

Shortly after the Saudis announced their blockade, U.S. President Donald Trump joined in and called Qatar “a funder of terrorism at a high level” – an endorsement of the blockade that surprised even the U.S. State Department which was working to “ease tensions.” Later that same week the U.S. signed a $12 billion deal to sell fighter jets to Qatar, as two U.S. warships arrived to carry out joint military exercises with the country. Months later, in December 2017, Qatar announced it would buy fighter jets and armored vehicles from France as part of 12 billion euro deal.

Qatar has also engaged in a year-long public relations campaign in Washington, D.C. to clean-up its image – including courting prominent U.S. Jewish leaders. The emirate has even gone as far as too engage in talks to purchase Newsmax – a right-leaning news agency owned by a close-friend of Trump. Allegations of decades of funding terrorism, including its long sponsorship of Hamas and its leaders, have not been forgotten so quickly. But, they do not factor largely in this crisis as Saudi Arabia too has been plagued by similar allegations of stoking Islamic extremism. As both countries vye for influence in Washington and the region those competing claims seem to cancel each other out and fall by the wayside.

As the Qatari crisis enters its second year there is little indication it will resolve anytime soon – but by the looks of it that may be both beneficial to the Qatari economy and the civil liberties of those residing in the tiny energy-rich emirate.