Blockade of Qatar Could Boost Iran

An extended deadline for a Qatari response to a list of 13 Saudi-led demands expired on July 5 with no sign that Qatar would capitulate. The alliance of Saudi Arabia, the United Arab Emirates, Bahrain and Egypt had demanded a month earlier that Qatar halt support for Islamist groups – including, controversially, the Muslim Brotherhood – close a Turkish military base and shut down the popular Al Jazeera network. Also high on the list of demands was scaling down diplomatic ties with Iran. 

As Atlantic Council writes in the article Saudi-led Blockade of Qatar Could Boost Iran, the blockade, especially if prolonged, is likely to benefit Iran both geopolitically and economically. According to some reports, Qatar now faces possible expulsion from the Gulf Cooperation Council (GCC). The GCC, comprised of six Persian Gulf states, was established in 1981 during the Iraqi invasion of Iran primarily out of fear that Iran’s newly established government would try to export its Islamic revolution. Far from becoming a cohesive military and economic union, however, the GCC has been fraught with divisions that are increasingly difficult to repair.

Qatar’s ouster from the GCC could practically mean the collapse of the Council, given that two other members -- Kuwait and Oman -- have not followed the Saudis’ aggressive approach toward Qatar and are unlikely do so if the crisis persists. To Iran, this would be a monumental strategic gain.

The effort to isolate Qatar follows Saudi Arabia’s ill-considered intervention in Yemen and failure to defeat the Houthis despite more than two years of warfare. The young Saudi crown prince, Mohammad Bin Salman, has spearheaded both the Yemen and Qatar policies. A de facto paralysis of the GCC would be another blow to MBS’s credibility.

It would also undercut President Trump’s strategy of building a regional coalition against Iran, something Trump trumpeted during his recent visits to Saudi Arabia and Israel. Secretary of State Rex Tillerson traveled to Kuwait July 10 continuing a so far unsuccessful effort to mediate the crisis.

Meanwhile, with Qatar cut off from its usual source of supplies from Saudi Arabia, the Qatari ruler, Tamim bin Hamad Al Thani, has been obliged to reach out to Iran. The Emir told President Hassan Rouhani in a telephone conversation that “Qatar has open arms for interaction and cooperation,” adding that “relations between Iran and Qatar have always been developing and powerful.” Rouhani reciprocated by vowing that “Tehran will stand by Qatar's government” and that “Iran’s air space, ground, and sea will always be open to Qatar as a ... friendly nation.” Since June 6, all flights conducted by Qatari airlines have crossed Iranian airspace en route to Africa and Europe. 

Short of a coup or a Saudi-led military invasion, the Qataris will not surrender to the Riyadh-led demands. Quite simply, such a move by Qatar would negate the very existence of the country as a sovereign state. The Qatari foreign minister, Sheikh Mohammed bin Abdulrahman al-Thani, said recently, “we are not prepared to surrender and will never compromise the independence of our foreign policy.”  Also, and perhaps even more critically, yielding to those demands would indicate a significant weakness of the Emir and could make him vulnerable to calls for his abdication, given that the country’s history is replete with coups. Therefore, giving in to the Saudis’ demands is not an option for Qatar. The Saudi demands reflect deep hypocrisy about the Kingdom’s own role in promoting religious extremism. A new report published by the right-wing think tank, the Henry Jackson Society, singled out Saudi Arabia as the “foremost” financier of Islamist extremism in the United Kingdom and elsewhere. “While entities from across the Gulf and Iran have been guilty of advancing extremism, those in Saudi Arabia are undoubtedly at the top of the list,” the report reads. 

The role of the Saudis in supporting extremist groups in Syria has been established since 2013. Meanwhile, there is no shortage of experts who maintain that, “The fountainhead of Islamic extremism that promotes and legitimizes such violence lies with the fanatical ‘Wahhabi’ strain of Islam centered in Saudi Arabia.”

The rift comes at a time when Saudi Arabia continues to burn through its foreign reserves.

The ratings agency Moody’s has lowered its outlook on Qatar’s economy. The agency says, “The likelihood of a prolonged period of uncertainty extending into 2018 has increased and a quick resolution of the dispute is unlikely over the next few months, which carries the risk that Qatar’s sovereign credit fundamentals could be negatively affected.”  That said, the agency emphasized that the Qatari government has sizeable assets, including roughly $35 billion in net international reserves at the Qatar Central Bank and more than $300 billion of assets managed by the Qatar Investment Authority. The agency added that Qatar will likely continue to grow in nominal terms despite the blockade. 

Many experts believe that Qatar, the wealthiest country in the world as measured by GDP per capita, can withstand the storm for quite some time.  “The boycott is expensive but manageable,” says Florence Eid-Oakden, chief economist at Arabia Monitor. “Qatar is a small country: there aren’t many mouths to feed compared to Saudi Arabia and the UAE, so a few flights of food restocked supermarkets.” Iran and Turkey have been delivering fresh produce to Qatar since the crisis began. Iran has also offered Qatar the use of three of its ports to import supplies. The Qataris haven’t used them yet, but the offer demonstrates Iran’s preparedness to maximize its gains by capitalizing on the rift that has emerged within the GCC. Qatar is obliged to be on good terms with Iran primarily because the two countries share the world’s largest gas field in the Persian Gulf. The North Field that belongs to Qatar provides approximately 60 percent of its export revenues. Iran and Qatar hold the world's second and third largest natural gas reserves behind Russia, respectively. The blockade is also likely to force Qatar to expand its trade relationship with Tehran to complete its $200 billion World Cup mega project. 

Iran may benefit from engineering services exports, which have room for a large increase, while foreign builders working in Qatar may be forced to pick sides. Meanwhile, according to Eid-Oakden, “a lot of the companies doing these construction projects in Qatar are based in Dubai. Projects could be cancelled or halted.” This can open doors to Iranian construction and engineering companies. According to the chairman of the International Consultants and Contractors Association of Iran, Mohammad Reza Ansari, “about $2 billion worth of technical and engineering services were exported from Iran since the implementation of the nuclear deal in January 2016.” He adds, “There is room for Iran to increase the export of technical and engineering services to at least $25 billion per year.”

To the Saudis’ surprise, Iran could be the big winner of the Qatar crisis.