Qatar’s financial markets stabilized on Monday after a week of losses as the government showed it could keep the economy running in the face of sanctions by its neighbours, led by Saudi Arabia.
The finance minister of the world’s richest country per capita played down the economic toll of the confrontation, and said the government was “extremely comfortable” with its financial position, with the resources to endure the pressure.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Qatar a week ago, accusing it of fomenting regional unrest, supporting terrorism and getting too close to Iran, all of which Doha denies.
The biggest diplomatic rift in years among the rich states of the Gulf has disrupted Qatar’s imports of food and other materials and caused some foreign banks to scale back business.
On Monday, it was becoming clear that Qatar could keep the economic damage from becoming critical. Some of its food factories were working extra shifts to process imports from nations outside the Gulf, such as Brazil. Shipping lines have re-routed container traffic via Oman instead of the UAE.
Such measures may involve delays and raise costs for Qatar; on Monday Fitch put Qatar’s AA credit rating on Rating Watch Negative, saying a sustained crisis could hurt its credit outlook. But they are unlikely to prevent the economy from functioning in any fundamental way, economists say.
The diplomatic confrontation has become a major test for the United States, which is closely allied to the countries on both sides. Qatar hosts the Middle East headquarters for U.S. air forces; Bahrain hosts the main base for the U.S. Navy.
As the world’s leading exporter of liquefied natural gas, Qatar’s wealth has allowed it to crown its small Gulf peninsula with skyscrapers. It has also given the government the means to take an outsized role in regional affairs, sponsoring factions in revolts and civil wars and brokering peace deals across the Middle East. Several neighbors have been furious for years.
“STARVE THE BEAST”
In Washington, U.S. President Donald Trump, who has strongly backed the countries imposing sanctions on Qatar despite a more neutral stance taken by the State Department and Pentagon, said the measures were helping to stop terrorism funding.