Qatari Shakedown

by Ashraf Laidi
Jun 5, 2017 15:28

Qatari stocks tumbled more than 7%, the worst decline since 2009 after Saudi Arabia led an immediate regional break in economic and political relations with Qatar, which includes Bahrain, UAE, and Egypt. The severing of ties follows punishing Qatar for its support of Islamist groups and relations with Iran. Qatar's airlines are among the biggest losers after Saudi Arabia banned Qatari planes from landing in the kingdom and said it will prohibit them from using Saudi air space as of Tuesday. 

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Qatari Shakedown - Gulf Bourses June 6 2017 (Chart 1)

Qatari Imports and Exports

Despite Qatar's vast cash and asset holdings, the nation could grow economically vulnerable from any blockade that involves food and other non-energy imports. Thus, if Saudi and UAE's decision to cut sugar exports to Qatar extends to other necessities, we may hear of a sovereign debt issue sooner than later. From an exports standpoint (mainly gas), Qatar's biggest markets are Japan, S.Korea, India, China, Singapore and the UK.  The problem arises in Qatar's imports, whereby, the UAE is the 3rd largest market.

Considering the US has backed Saudi and UAE's decision to break from Qatar, how will Doha's $35 bln planned investment in the US will be affected? I am not quite suggesting that Qatar's sovereign wealth fund has to (or can) start selling some of its US-based assets, but if the boycott extends to the point of impacting its economy, then selling assets is an option. Or will it be debt issue?

 

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