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Qatar row fuels concerns over commodity trade

Mena / 07-06-17 / by
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Oil industry represented by fuel tanks and chimneys

The diplomatic spat between Qatar and its neighbouring countries has stoked concerns about the implications on the country’s commodity trade.

The dispute broke out after Saudi Arabia, the UAE, Egypt and Bahrain said on Monday they would cut all ties with Qatar, accusing the country of supporting terrorism, an allegation Qatar has denied.

Measures taken include expelling Qatari citizens and asking their own citizens in Qatar to leave. The Gulf states have also closed transport links to Qatar, including Saudi Arabia’s sole land border to the country.

“What’s troubling is that Saudi Arabia has cut off the land border with Qatar and that affects different imports that Qatar depends on, whether it be food or construction materials,” Bryan Plamondon, director of Middle East at IHS Markit, tells GTR.

“It’s one of the main ways that Qatar imports its food supplies and its construction material for all the activity with the FIFA World Cup coming up in 2022.”

Reports on Tuesday showed Qatari consumers emptying their local supermarkets, worried that stocks of food and water would run out. However, Plamondon says it is difficult to say whether Saudi Arabia will actually resort to banning all food export to Qatar, given the serious consequences the move would have for the Qatari population.

“It seems that right now it is targeting more travel of Qataris to and from the GCC countries, rather than the flow of goods and services. There is really no evidence we can point to that says that the Saudi land border closure is a hard closure, that they are not going to allow any type of good to flow in, but that is a risk that we will have to keep monitoring,” he says.

“But certainly we could see disruptions and delays for those types of imports.”

With Qatar being the world’s top seller of liquefied natural gas (LNG), the crisis has fuelled concerns that the supply disruptions would spill over into the international gas market.

“So far, in terms of any of the energy exports, it seems like all the LNG and oil cargos are still continuing as planned – it’s business as usual. Cargos that are heading to Asia, or even specifically with the Dolphin pipeline with the UAE, so far, from what the industry sources have reported, those flows are still continuing,” Plamondon says.

The Dolphin pipeline pumps around 2 billion cubic feet of gas per day to the UAE. Cutting it off would be of no interest to any of the parties.

“Qatar still has ways to export its LNG cargos to Asia that don’t require the use of any territorial waters for the UAE or Oman, so they can circumnavigate those maritime borders without too much trouble,” he continues.

This will, however, likely cause delays and higher costs on energy exports. For example, the decision by UAE port Fujairah, a regional ship re-fuelling hub, to deny access to Qatari ships will force ships to direct to other regional ports for fuel.

But pathways such as the Strait of Hormuz and the Suez Canal are reportedly still clear for Qatari LNG vessels.

Reports on Tuesday said regional diplomats have begun efforts to solve what has been said to be one of the biggest crises in the Persian Gulf in decades.

IHS Markit predicts the dispute could last for several weeks, if not months. But at some point, Qatar will likely agree to the demands of its neighbours, leading the Arab states to halt their escalation. Failure to comply, the company says, would increase the likelihood of sanctions against Qatar, and possibly military action by Saudi Arabia and the UAE, with US acquiescence.

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