Gulf reconciliation: The tough road ahead

January 13, 2021 1:44 PM

After three and a half years of land, sea and air blockade on Qatar, the Arab quartet including Saudi Arabia, Egypt, UAE and Bahrain signed a US and Kuwait mediated agreement, welcoming Doha back into the GCC fold.

gulfA closer look at the GCC dispute suggests that the road ahead is challenging. (Photo source: AP)

By Dr Yatharth Kachiar, 

After three and a half years of land, sea and air blockade on Qatar, the Arab quartet including Saudi Arabia, Egypt, UAE and Bahrain signed a US and Kuwait mediated agreement, welcoming Doha back into the GCC fold. The 41st summit of the six-member Gulf Cooperation Council (GCC) held in Al-Ula, in northwest Saudi Arabia, concluded with the signing of ‘Al-Ula declaration’ and a final communique. There is still a lack of clarity on concessions made by Qatar to achieve reconciliation with its gulf counterparts. A closer look at the GCC dispute suggests that the road ahead is challenging. If it succeeds, the reconciliation will bring significant economic benefits to all the players involved.

The possible pitfalls

The reconciliation deal is not the outcome of a genuine desire for conflict resolution. Instead, it is achieved mainly under pressure from the outgoing Trump administration that seeks diplomatic win before vacating office. Simultaneously, for Saudi Arabia, the reconciliation presented an opportunity to gain scores with the incoming Biden administration that might take a tough stance against Riyadh’s dismal human rights record. The original points of contention between Qatar and Saudi-led bloc remain unresolved.

In 2017, the Arab quartet had accused Doha of supporting the “terrorist organizations”, meddling in other countries internal affairs, and aligning with Iran and Turkey. In a list of 13 demands, the Arab quartet asked Qatar to shut down its flagship news network Al Jazeera, sever ties with the Muslim Brotherhood, and end the Turkish military’s presence in the country. Qatar has achieved reconciliation without fulfilling any of these conditions.

The reconciliation agreement will have no impact over the ongoing geopolitical squabbles across the region. The proxy wars in Libya, Syria, and Yemen are likely to continue as they represent a fight for primacy and regional leadership. Qatar is most likely to maintain its relations with non-state actors, such as the Muslim Brotherhood, Lebanese Hezbollah, and Houthis, cultivated over a period after investing enormous resources.

The GCC blockade has made the Qatari economy more resilient in past few years. Qatar’s gas-fueled wealth helped Dohasurvive the blockade as it built new shipping routes to offset the closure of its only land border with Saudi Arabia. Qatar also forged deeper ties with Turkey and Iran, who rushed to Doha’s aid to fulfil the shortage of necessary commodities like food and medical supplies in the blockade’s initial period. Perhaps, the worst-hit was Qatar’s national airline that was forced to longer and costly routes due to blockade of airspace by Saudi Arabia. However, after an initial deficit in 2017, Qatar became the only Gulf country to gain fiscal surpluses continuously for the next three years.

During the 41st GCC Summit, Saudi Arabia’s Crown Prince Mohammed bin Salman asked for Gulf unity in the face of the Iranian threat. However, Doha is unlikely to sever its ties with Tehran as the two countries share the giant offshore gas field ‘the North Dome’, a significant source of Qatar’s gas wealth. The gas field has been fundamental to Qatar’s economic development. Further, it will be difficult for Qatar to cut its ties with Turkey, a country that supported Doha in times of its need.

The possible gains

If the GCC states could avoid the possible pitfalls, the end of gulf dispute will generate enormous economic dividends. In any case, it is a crucial stepping stone for the Gulf countries to boost their economic attractiveness. At present, the Gulf States are in a critical need for investments to diversify their oil-based economies. The GCC countries face a larger fiscal deficit and economic decline due to low oil prices and COVID-19 pandemic. The oil prices are still below the pre-COVID levels after hitting rock-bottom in 2020 due to Saudi-Russian oil war, and the pandemic hit demand.

As per the IMF estimates, in 2020, the GCC economies contracted significantly with Oman leading at 10 %, Kuwait (8.1%), UAE (6.6%), Saudi Arabia (5.4%), Bahrain (4.9%), and Qatar (4.5%). Countries like Saudi Arabia are already far too stretched in terms of resources devoted to regional tensions, to materialize its ‘Vision 2030’. The end of a dispute with Qatar will allow the GCC states to focus their energies on building robust and sustainable economies. The improved relations with its GCC counterparts would enhance the prospects for non-oil based economy of Qatar as well.

India’s stakes

The GCC countries are home to over 9.3 million Indian expatriate population that remitted over USD 49 billion in 2019, a total of two per cent of India’s GDP. The GCC is also India’s largest trading partner, with UAE and Saudi Arabia among the top five trading countries. Over 34 per cent of India’s oil imports come from GCC; and Qatar, particularly, leads the liquefied natural gas imports. In 2017, when the diplomatic crisis initially broke out, New Delhi referred it as the GCC states’ internal matter and hoped for its speedy resolution.

India has built stronger economic ties with Saudi Arabia and UAE; however, Qatar’s importance as an LNG supplier to India cannot be overstated. Qatar’s LNG imports are critical for New Delhi as it aims to increase the natural gas share in its energy basket to 15% by 2030 from the current 6.3%.However, compared to Saudi Arabia and UAE, Qatar’s investment flows into India has been modest. The end of the GCC dispute will open India’s options for attracting better investment from Qatar. In December 2020, India decided to set up a task force to identify specific projects for investment by Qatar in various sectors, including energy.

One possible sector where India and Qatar could forge stronger ties in education. Many western universities have their campuses in Qatar that make Doha an attractive option for Indian students looking for quality education without the West’s high living cost. In case the rift resurfaces, India is likely to pursue its traditional course of maintaining neutrality and taking every precaution to ensure that relations with Qatar remain on an even keel. For now, the possibilities for engagement are immense and should be tapped as soon as possible.

Conclusion

Over a period, Qatar has managed to emerge out of Saudi Arabia’s shadows and carve an independent role for itself at the world stage. The enormous wealth gave Qatar the necessary confidence to pursue its regional ambitions that are at odds with Saudi-led bloc. That is the fundamental cause of the rift between Qatar and Saudi-led bloc. As long as the underlying conditions that triggered the conflict remain unchanged, the dispute may resurface soon. The GCC states have taken the partial step towards resolving the dispute. However, achieving complete reconciliation will require a deeper commitment towards regional stability and economic progress over self-seeking ambitions for supremacy.

(The author is Research Associate, Vivekananda International Foundation. Twitter: @YKachiar Views are personal.)

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Burgeoning surplus: US states scale back Covid-19 vaccine orders as interest in shots wanes
2Kabul blast: Bomb kills at least 30 near girls’ school in Afghan capital
3UK Prime Minister Boris Johnson welcomes wins in local elections