A Re(new)ed Brotherhood

As the drudge of 2020 came to a long-awaited close, 2021 rolled in with little goodness to offer. With the world’s eyes focused on America’s Next Twitter Disaster, few paid attention to the “progress” in the Gulf. On the 5th of January, Saudi Arabia, Bahrain, Egypt, and UAE lifted sanctions placed on Qatar and formally ended the diplomatic blockade that began in June 2017. After disagreements with the Qatari government regarding their alleged sponsoring and supporting of militia and terror cells, their biased coverage of Gulf news and interference in Egyptian and Lebanese politics, the GCC decided to bury the hatchet.

Well, at least they seem to be.

But after three and a half years, what’s in it for Qatar?

In its state of isolation, the Qatari government has had to take many new steps and policies to keep its economy running. Qatar’s foreign direct investments (FDIs) dropped substantially as an immediate consequence of the embargo, recording a 321.73% decline in 2018. Their foreign supply chain for domestic food, which accounted for 90% of the national consumption, became vulnerable. Citizens began to panic purchase, food was scarce, and the nation was militarily compromised. These provoked the government to make quick, important decisions to keep the country running.

Qatar accelerated efforts to diversify sources of imports and external financing. It took assistance from neighbours Turkey – who were in opposition to the GCC’s actions – and received dairy and poultry in less than 48hours after the imposition of sanctions. Amid an acute food crisis and shortage of basic amenities, Turkish exports increased by 90% in the first four months. Qatar’s relationship with Iran and Turkey and Kuwait and Oman's neutral standpoint allowed it to re-establish various trade links, which previously used Arabian routes. Though this increased the time of movement and raised costs, it provided food on the table for many. As a more sustainable measure, Qatar adopted a self-sufficiency model for the dairy industry, and companies like Baladna and Agrico had to adapt quickly to achieve this. Today, the Qatari economy, which once imported 72% of its dairy demand, produces it on its own in the northern

region, where fodder and groundwater are plentiful. Furthermore, Qatar invested $444m in a 530,000 sq.m food storage and processing facility at the Hamad Port and aimed at producing 60% of its total food demand by 2020. Such steps were beneficial for densely populated areas like al-Rayyan and al-Khor, which suffered from food shortage during the blockade’s early phases.

Following rumours of the Saudis and the Emiratis’ plan to annex Qatar, which was abandoned due to diplomatic pressure from then-US Secretary of State Rex Tillerson, the Qatar Emiri Air Force (QEAF) expanded its military power with new trade deals in the West. Their once meagre air force, which contained only 12 Dassault Mirage 2000s and half a dozen Alpha light trainers, now comprises British Typhoon jets worth $8billion, French Dassault Rafale, AH-64 Apache helicopter gunships along with C-17, C-10 transporters. The Pentagon awarded Boeing a $6.2 billion contract to manufacture 36 new F-15QAs for the QEAF by 2022 as part of its $12bn deal signed in June 2017 – a move that could soon make Qatar a significant military concern to the Saudis and Emiratis. QEAF expanded its Al Udeid Air Base to house many Qatari, American, British and Gulf Coalition forces – an investment of $1.8 billion, making the biggest Western airbase in the Middle East even bigger. Qatar also strengthened its naval position through a €4bn alliance with Fincantieri S.p.A which would ensure the delivery of 10 surface vessels by 2026.

As the Middle East faces a rapid surge in domestic energy demands due to infrastructural and economic growth, Qatar began to expand its LNG trade across Asia and Europe during the blockade. The industrial hub of Ras Laffan played a large role in this endeavour. In fact, in 2019, Qatar decided to leave the Organization of Petroleum Exporting Countries (OPEC) to morph its oil economy into a self-sufficient one. Diplomatic relations with Iran gave it access to the Strait of Hormuz for trading with the Asian market, while the trade embargo forced ships to travel to Europe around the Cape of Good Hope. With higher transportation costs, the oil and natural gas industry took a hefty short-term hit but irregularities in oil prices and stocks.

But, they used the opportunity to inflate its long-run economic strategy.

Qatar currently has an LNG production capacity of some 77 million megatonnes per year (Mt/year) and plans to raise it to 100 million Mt/year by 2027 with six new trains. Qatar Petroleum (QP) has also launched an LNG trading arm that could target shorter-term volume placements on a global scale. It reaffirmed its commitment to the UK gas market through a 25-year agreement for up to 7.2 million Mt/year of import capacity. It laid the screws on long-term projects in France and Belgium, further boosting its economy until the middle of the 21st century.

While many sectors have been able to keep things at bay, some have taken gigantic blows. Growth in tourism – which in 2017 recorded a 25.13% increase – fell by 3.29% after the blockade. Furthermore, the COVID -19 lockdown caused a 30% drop in the first quarter of 2020.

In the immediate aftermath of the embargo, nationals from 80 countries were given visa-free entry. The development of the Qatar National Museum and expansion of the Hamad International Airport and other tourist attractions were also expedited. But none of these measures was sufficient enough to keep the tourism sector profitable. Many reckon that Qatar’s hosting of the FIFA World Cup (FWC) in 2022 would tip the scales in their favour – with increasing foreign direct investments and surging tourism from across the globe.

The national airline, Qatar Airways (QA), lost roughly 50 flights a day and 18% airlines total seating capacity. In 2017, Airline Weekly called it “the fourth-worst performance in the entire global airline industry”. They had to cancel Airbus A350 deliveries worth $1.2 billion and declared a $703 million operating loss for the FY2017, despite receiving $500 million in subsidies. To compensate for lost Gulf destinations, QA added new flights to the Czech Republic, France, Macedonia, Oman, Australia, Brazil, and Chile. It also paid Iran $100million/year during the travel ban to use its airspace.

But this had little effort because net flight costs were expensive nonetheless. As per QCAA (Qatar Civil Aviation Authority) regulations, a new air-crew must replace an existing one when it exceeds its maximum permitted log – even if it's mid-air. As airspace restrictions forced flights to take new and longer routes (as shown below), fuel consumption rose, additional crew finances had to be accounted for, and net additional costs took a spike.

It is important to note that the blockade has heavily sapped the Qatari treasury. In keeping industries running and bailing out banks, real-estate prices and salaries of foreign workers have dropped significantly. While Qatar has expanded its global connections amid Arabic isolation,

the 2021 reconciliation agreement is a welcome handshake – one that they might want to squeeze with ripe smiles. 

The agreement stands as a move to bolster the economic interests of Gulf nations. Qatar’s refusal to accede to the thirteen demands of the GCC stands with little chance of changing. The International Energy Agency (IEA) in 2017 claimed that the Gulf spat led to logistical headaches with growing shipping costs for all GCC members, forcing each nation to take close attention to self-sufficiency. It was as if the Gulf States had moved from the stage of cooperation to a state of self-reliance. 

The reconciliation agreement is perhaps a symbol of the failure of such a model. As a matter of fact, it portrays the inability of the Saudi Arabian clout and makes Qatar the noisy neighbours everyone must be wary of. With QA demanding a $5 billion compensation payment from the GCC and many more nuanced aspects of the agreement left to be ironed out, this deal is by no means an olive branch just yet. 

Qatar’s position with Iran and Turkey is of particular concern to the GCC, and it will be interesting to see how the Arabian political dynamic would play now. Before the blockade, Doha had concerns about Iran filling more regional power vacuums and raising sectarian temperatures instability in the Gulf. Thus, Qatar has been careful in maintaining a pragmatic partnership with the Iranians. Sheikh Tamim could use these gains to ensure a more prominent role for Doha in regional affairs. Having built on Qatari-Irani relations, he might be able to present himself to newly-elected POTUS Joe Biden as the preferred intermediary to establish better diplomatic relations with Tehran after the collapse of the Joint Comprehension Plan of Action (i.e. the Iran nuclear deal). 

The turn of the new year could result in a renewed unity amongst the Arab nation - or further turmoil and hegemony. 

The die has been cast. 

Written by Abhik Chatterjee

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