Qatar Video Report
Oscar Thompson
500706573
GMS 695, Section 011
Dr. Dale Carl
Wednesday, November 15, 2017
Background
In early June 2017, four Arab nations (United Arab Emirates, Saudi Arabia, Bahrain, and Egypt) broke off their relationship with Qatar due to claims that they are supporting terrorist groups within the transcontinental region. This diplomatic crisis includes a sea, land, and air embargo, in which these nations land and airspace is off limits to Qatari aircraft and imports. These alleged ties are with the Islamist groups of the Muslim Brotherhood and Hamas. In addition, these nations are concerned with Qatar’s funding of media company Al Jazeera, which has provided many anti-Semitic views in the past (Weinberg, Adaki, Rumley, 2014). Equally important is their apprehension with the relationship between Qatar and Iran, who competes with Saudi Arabia in the petroleum industry. On June 22nd, Qatar was given a list of 13 demands to comply within a matter of 10 days in order for the embargo to be removed, which included demands such as shutting down Al Jazeera, and scaling back cooperation with Iran (Wintour, 2017). Qatar refused and was later confronted with six broad principles to follow to combat terrorism and extremism (BBC, 2017). There are six members in the Gulf Co-operation Council, which are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, two of which (Kuwait and Oman) did not follow suit in severing ties with Qatar, and one of which (Kuwait) offered to mediate this conflict.
Importance
This issue is extremely important because it has negative repercussions on many external factors including the World Cup, Qatar Airways, Canada, world trade, and the Qatar economy. The Qatari stock market took a hit shortly after the severing, as it dropped more than 7% (Reuters, 2017). To make matters worse, that number doubled by the middle of September, as they hit a 52-month low (Perlman, 2017). The 2022 World Cup will be hosted by Qatar, but this crisis is impeding their ability to finance the infrastructure needed to successfully accommodate the event. A weaker economy means it is more expensive to import goods and less expensive to export, but Qatar is in desperate need to import materials for the competition’s facilities. Based on many sources, the entire rationale behind this blockade was for the World Cup to be dropped by Qatar, merely based on jealousy (Harwood, 2017). This was led by the UAE, who have always been in a popularity contest with Qatar, and believe this would make them inferior. Prior to the blockade, Qatar could source building materials needed for the World Cup from many of the Gulf states, but now they have had to look elsewhere, which means there may be an eventual shortage if this crisis persists. It also does not help that this is the smallest country to ever host the World Cup (Kerr, 2017). As a result, FIFA is carefully monitoring the progress of builders in Qatar.
According to Perlman (2017), “The number of visitors from the GCC, consisting of all Arab states in the Persian Gulf except for Iraq, fell by more than 70 percent.” This indicates a reduction in tourism, which could discourage other foreigners around the world to visit. Another deterrent is the air blockade, which limits availability to the country, as key flight paths had to be altered in accordance with this. Total tourism dropped by 44.6% over the previous year’s number (Burgess, 2017). This is just another source where Qatar is losing money. Qatar Airways has been establishing itself as one of the superior airlines in recent years, but this crisis is a major setback to their progress. Inevitably, the crisis led to flight cancellations and large route alterations because previously the airline heavily relied on the airspace of Saudi Arabia and the rest of the quartet, but now they are off limits. Qatar Airways is losing about 50 flights a day, 18 destinations, and around 18% of its seating capacity (Johnson, Huxham, 2017). Considering the airline is by far the most popular in the country, their profits must be plunging at an alarming rate. In response to the blockade, they have added new flights to many locations such as the Czech Republic, Oman, and new services to places like Australia and Brazil (Johnson, Huxham, 2017). This is most likely to compensate for lost flights within the Middle East, and to maintain certain profit levels. On the contrary, many airlines rely on profits from business and first-class seats, and a reduction in these in conjunction with an increase in operating costs could prove detrimental. With Qatar Airways being forced to re-route, operating costs will surely rise due to the fact that flight times may increase, which in turn, requires more flight crew and the costs associated with accommodating each of them. Qatar Airways is trying its best to make up for this setback, but they will continually be affected by external factors such as the demand for flights and the airspace they are permitted to.
Of all the ramifications Qatar is suffering from, their international trade is the least impactful because the majority of their trading partners are outside of the Middle East. All GCC countries make up only 5 to 10 percent of total trade with Qatar, while the UAE is only the fifth largest trading partner globally (Reuters, 2017). Moreover, the UAE is the only Middle Eastern country in Qatar’s top 10 trading partners (Workman, 2017). This suggests that despite the removal of trade with some of these countries, Qatar is able to keep trade levels relatively steady. As for most countries, their top 3 trading partners generally take up a large chunk of their total trade, so this crisis should not impact Qatar too severely. The only issue they face in regard to trade is their imports of food and animal products. The UAE and Saudi Arabia accounted for around US$309 million of US$1.05 billion of Qatar’s food imports in 2015 (Reuters, 2017). To remedy this, they will have to import more food products from their other trade partners and become more self-sufficient.
Canada is negatively impacted by this crisis as well. Canada is heavily invested in some sectors of Qatar and the investment is reciprocated. Some of the notable relations include:
• Around 9,000 Canadian expats have a job in Qatar (Allam, 2017).
• Many Canadian businesses are situated in Qatar such as EllisDon, Bombardier, SNC Lavalin, Stantec, etc. (Allam, 2017).
• More than $500 million has been invested in Canada by Qatar, and the Doha Bank opened a headquarters in Toronto (Allam, 2017).
• 40% of Western Canadian natural-gas assets are owned by the Qatari government (Allam, 2017).
Canadian companies need to be extremely careful about the moves they make because they do not want to upset another ally in Saudi Arabia, who they can rely on for future investments and trade. Equally important is their current standing within the country, as the economy is dwindling. Canadian companies will suffer financially due to the fact that they rely on the state of the economy. When these companies originally ran a country risk analysis, it must have been an appealing market to penetrate with respect to all three levels. If a company were to run one currently, they would most likely pass on the opportunity because it would yield a high risk, especially economically. On the economic level, personal expenditures would decrease, investments would decrease because it is more expensive due to the struggling economy and investments into Qatar are unattractive, and exports would likely decrease. In terms of operational risk, being located in a country that is ostracized is bad for the reputation of the company.
Lessons Learned
I believe Saudi Arabia, who are the leaders of this embargo, are being slight hypocrites. One of their main motives behind this is Qatar’s alleged support of terrorist groups, but Saudi Arabia has provided money and weapons to Islamist rebels just like Qatar (BBC, 2017). Also, the fact that these accusations are alleged and there is no proof means it is just speculation and that the same case could be made against Saudi Arabia. Additionally, the Saudi’s are doing this out of spite of Qatar’s relations with Iran, which is simply a way to try and beat out the competition. I view this as unfair and preposterous because if they want to beat their gas-field rival, they should do so in an ethical manner and one that would not create such tension and conflict. My suggestion is to create new demands, but to a lesser extent to try and create peace in a less demanding tone. For example, instead of requesting the shutdown of Al Jazeera, simply request more control of the type of news that gets released. I learned that countries can take extreme measures and get a bit out of control when there are better solutions out there. Furthermore, I expanded my knowledge on the relations within the Middle East and the opposing beliefs each country possesses.
References
Allam, O. (2017, July 10). How Canadian companies can navigate the Qatar crisis. Retrieved
November 6, 2017, from https://beta.theglobeandmail.com/report-on-business/rob-commentary/how-canadian-companies-can-navigate-the-qatar-crisis/article35648183/?ref=http%3A%2F%2Fwww.theglobeandmail.com&
BBC. (2017, July 19). Qatar crisis: What you need to know. Retrieved November 6, 2017, from
http://www.bbc.com/news/world-middle-east-40173757
Burgess, S. (2017, October 04). Tourists stay away from Qatar after boycott. Retrieved
November 7, 2017, from https://www.thenational.ae/world/gcc/tourists-stay-away-from-qatar-after-boycott-1.664185
Harwood, A. (2017, October 12). How football created the biggest crisis in the Middle East for
decades. Retrieved November 7, 2017, from http://www.independent.co.uk/voices/middle-east-football-crisis-qatar-world-cup-saudi-arabia-uae-blockade-al-jazeera-football-united-a7996276.html
Johnson, E., & Huxham, G. (2017, August 29). The GCC Crisis and Qatar Airways. Retrieved
November 7, 2017, from https://intpolicydigest.org/2017/08/13/gcc-crisis-qatar-airways/
Kerr, S. (2017, June 16). Neighbours’ blockade on Qatar raises fears for 2022 World Cup.
Retrieved November 7, 2017, from https://www.ft.com/content/1b16b4c6-5128-11e7-a1f2-db19572361bb
Perlman, E. (2017, September 14). Qatars stock market hits a 52-month low amid Gulf crisis.
Retrieved November 7, 2017, from https://theqatarinsider.com/2017/09/14/qatars-stock-market-hits-52-month-low-amid-gulf-crisis/
Reuters. (2017, June 05). Ramifications could be huge: Qatar and its Gulf neighbours could lose
billions from rift in Middle East. Retrieved November 6, 2017, from http://business.financialpost.com/news/economy/ramifications-could-be-huge-qatar-and-its-gulf-neighbours-could-lose-billions-from-spat-in-middle-east
Weinberg, D. A., Adaki, O., & Rumley, G. (2014, September 10). The Problem with Al Jazeera.
Retrieved November 6, 2017, from http://nationalinterest.org/feature/the-problem-al-jazeera-11239
Wintour, P. (2017, June 23). Qatar given 10 days to meet 13 sweeping demands by Saudi Arabia.
Retrieved November 6, 2017, from https://www.theguardian.com/world/2017/jun/23/close-al-jazeera-saudi-arabia-issues-qatar-with-13-demands-to-end-blockade
Workman, D. (2017, November 12). Qatar’s Top Trading Partners. Retrieved November 13,
2017, from http://www.worldstopexports.com/qatars-top-15-import-partners/