Alliance formed against Qatar will have consequences for trade with the region

12 Jun 2017

Business

On the 5th June Saudi Arabia, Bahrain, Egypt, the United Arab Emirates and the internationally recognised Yemeni government cut diplomatic relations with Qatar over accusations that Doha has been supporting terrorism.

Saudi Arabia, the UAE and Bahrain have now closed their air space and territorial waters to Qatar. Saudi Arabia has also closed its land border with Qatar, Qatar’s only land border with another country. Egypt has closed its airspace to all flights to and from Qatar.

The direct consequence for businesses will be difficulty in conducting trade and shipping operations. The alliance against Qatar are now blocking Qatar-flagged vessels, along with other vessels heading in and out of the country.

This will affect companies with trade routes to and from Qatar and logistics and shipping companies, with large trade volumes or retail operations in Qatar.

Egypt has not yet indicated whether it intends to block Qatar-linked vessels/cargo from using the Suez Canal – a common route for tankers.

Some banks in the region may refuse to accept Qatari currency, and it is understood that some Saudi, UAE and Egyptian banks are suspending dealings with Qatari banks and may not recognise letters of credit or other payments until guidance is sought from their respective central banks.

There are no current indications that the situation will de-escalate. Tensions in the region have mounted due to Qatar’s bold foreign policy and alleged support for militant Islamist groups, especially during the Arab Spring uprising that began in 2010.

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