In June 2017, Saudi Arabia, UAE, Bahrain and Egypt imposed land, sea and air blockade on Qatar, accusing the latter of financing terrorist groups like Hamas and Hezbollah and its growing relations with Iran. One year later, Qatar seems to be steadily reviving from the sanctions. Qatar has refused to give in to the demands of Arab nations which include: reducing ties with Iran significantly, shutting down of state run media house Al-Jazeera, and stop financing terrorism. How did Qatar manage and what comes next?
Qatar’s Crisis management: International Engagement
Ninety percent of Qatar’s import of regular goods, including food, medicine and water came from Saudi Arabia before the blockade; the move blocked Qatar’s only land border with the country. Since then, Qatar has helped itself to become self-reliant and grow diplomatic ties with alternative international partners – not only the US but also Russia and Turkey.
When the crisis erupted, Turkey sent cargo planes full of dairy products and basic food to mitigate the food crisis. Because of no direct land route between Turkey and Qatar and longer import routes, the food and beverage prices jumped 4.2 percent within three months of the crisis, but as an alternative – Turkey, Iran and Qatar have been cooperating to open a new route. The trade route via Iran will bring down the transportation cost of Turkish and Iranian goods significantly. Moreover, regarding the Turkish investment in Qatar, Qatar's Chamber of Commerce Vice Chairman Mohamed bin Twar said: "Turkish companies here are handling projects worth about $11.6bn in Qatar, most of which is put into FIFA World Cup 2022 projects." Besides being one of the top suppliers of non-oil exports to Turkey, Qatar investment in Turkey is over $20 bn, which is second highest investment in Turkey by any country.
Outside Turkey, Qatar has been exploring options with Russia. Doha and Moscow signed a military cooperation agreement on air defence and military supplies in October 2017 when Russian Defence Minister visited Qatar. Based on this, Doha is planning to buy Russian missile defence system S – 400. Although Saudi king Salman has threatened to take military action to eliminate the defence system, Qatari ambassador to Moscow Fahad bin mohammed Al-Attiyah has confirmed the deal to be at an advanced stage. This could lower its dependence on US weapon import and diversify its options for future requirements.
The blockade did not affect Qatar’s LNG exports much. Qatar’s geographic position helped it to maintain its trade relation, which has been stable during last one year and added to the much needed revenue. Beijing is also helping Doha; Qatar’s export to the China has grown significantly in recent past. In September 2017, Qatar’s newly built Hamad port became operational which is creating job opportunities for Qatari youths, as well as skilled labour. The port is 14 times larger than Doha port and managing much of Qatar’s increasing trade with China and the rest of the world, decreasing dependence on the Arab neighbours. The port was partly built by China Harbour Engineering Company by bringing in various components from China, which is helping Qatar to boost manufacturing sector and diversify its economy.
Another major external player at the region, the US, was vocal about Qatar’s support to Islamic terrorist groups at the beginning of the crisis, but what changed with the US position in last few months is that White House has stopped accusing Qatar on financing terrorism. On January, 2018 during a strategic dialogue with Qatari Emir at the US State Department President Trump thanked the Emir for “Qatari action to counter terrorism and extremism in all forms.” This can be seen as Doha’s major diplomatic win over Washington’s position at the start of the crisis. Also, during the April 2018, meeting at White House, Trump said that the US and Qatar “have been great friends in so many ways” and “are working very well together”. Trump has offered to play a mediator to find a diplomatic solution to the GCC crisis as he added “we’re working on unity in that part of the Middle East and I think it’s working out very well”. Although no significant progress has been observed towards resolving the crisis, the addition of new external players like Russia and Turkey can make the crisis more intricate, which can be Washington’s one of the main concerns. Also, the shift in the US weapon export market as Qatar and Saudi Arabia has made few arms deal with Russia recently, can make Washington think seriously to increase pressure on the Arab nations to bring them at the negotiation table before it impacts GCC significantly.
Doha’s Domestic Changes
The blockade has forced Qatar to change many policies and as a result the share of hydro carbon in economy has significantly reduced to 40 percent from 60 percent in last year, signifying growth of non-hydrocarbon sector. To draw labour and talent to work in these sectors, recently, Qatar has approved a draft law allowing permanent residence to non-Qataris under certain conditions.
Although inflation rate has increased to 0.5 per cent in May 2018 from 0.1 per cent in April 2018, in a recent report IMF has forecasted Qatar’s economic growth to accelerate in 2019 According to the report Qatar’s real GDP will grow from 2.6 percent in 2018 to 2.7 percent in 2019 with both hydro carbon and non–hydrocarbon sectors contributing to the growth. The report also states, Qatar’s total revenue was $ 26.3 billion in 2017 and it is expected to rise to $ 28.9 billion and $ 31.5 billion in 2018 and 2019 respectively. With gradual decrease in country’s expenditure, it is expected that the fiscal balance would turn positive in 2019 to $ 3.4 billion.
With the highest per capita GDP in the world, proper use of its gas and oil revenue to diversify the economy and creation of active sovereign wealth fund to make high return investments overseas has helped Qatar to overcome the effects of the blockade. It has also innovatively increased self sufficiency, one of the examples of which is Baladna air conditioned dairy farm, which was built just after the blockade. The farm was built in the middle of the desert and imported nearly 8000 cows by air and ship from US, Australia and Germany to attain self sufficiency in dairy products. It is expected that by 2019, Qatar will be the exporter of dairy products.
Although, the blockade was meant to curtail Qatar’s political and diplomatic influence in the region, after one year of the crisis Qatar’s current status reinforces the fact that amid hostile neighbours Qatar has become self-sufficient. Doha has diversified the economy away from oil and gas by increasing the non-oil sector's contribution to the economy and by relying lesser on hydrocarbon revenues. In spite of some problems that Qatar is facing in terms of Qatar airlines and the US sanctions on Iran, the crisis seems to be a blessing in disguise for the emirate.