Qatar is a nation whose name is usually not mentioned in the news. It is relatively small with a population of about 2.3 million people and located next to Saudi Arabia, jutting into the Persian Gulf. Recently, its relations with its neighbors have deteriorated. In the summer of 2017 CNN reported that nine of Qatar’s neighboring states have moved to indefinitely sever diplomatic ties due to claims that the Qatari government supports terrorists as well as Iranian claims in the region. Among these nine, Saudi Arabia, Egypt, Bahrain, and the UAE spearhead an embargo. Not only will this embargo cut off trade between the respective nations and Qatar but Saudi Arabia, the UAE, and Bahrain have ordered their citizens to leave Qatar. This embargo includes a blockade by air preventing trade to Qatar. Saudi Arabia, the largest country behind the blockade is the sole route by which food imports can enter the country. Although Turkey and Iran are still able to send exports to Qatar, the situation has presented little hope to Qataris as well as those watching from the outside. Qatar, as well as many of the countries behind the blockade, sits on the Gulf Cooperation Council (GCC). With this tension presents a new, fractured image of the gulf.
Map published by the Arab Center in Washington DC illustrating the GCC and the Gulf Crisis
The embargo was initially a thorn in the side of Qatar Airways. By taking a financial hit and being forced to avoid Saudi airspace, Qatar Airways has been forced to remove 18 flight destinations. Furthermore, grocery stores have seen items disappear from the shelves, only to have the items replaced in a matters of days with Turkish products. Despite Qatar Airways’ loss, its CEO has claimed that the airlines has actually grown since the embargo was initiated as the airlines announced more frequent flights to large European cities. Despite initial growth, the CEO also accepted the fact that the company may take a loss in the long run and has stated the need for the company to find alternative financing in the future. As the company has no sort of bankruptcy protection similar to that of the U.S’s Chapter 11, this alternative stream could likely come in the form of economic stimulus by the government through an injection of capital. 38.5 billion USD has in fact already been injected into the economy after the principle stages of the embargo when investors pulled out their money. In a Moody’s report this not only had the effectof mitigating the blow of disinvestment but it also prevented the country’s currency from depreciating to a greater extent.
Despite the embargo, Qatar Airways has still managed to grow and claim the year as a success
Injecting capital into the country’s primary industries is a simple feat for the Qatari government. In its ranking of Richest Countries in the World per capita, Fortune placed Qatar as number one. Due to its population of about 2.3 million people and booming oil industry, the total GDP is 124,930 USD per person. Although this is a per capita rating, it gives one the idea of how much money is in the country and ultimately at the hands of the county’s king, Tamim bin Hamad Al-Thani. There has also been claims by the central bank governor, Sheikh Abdullah Bin Saoud al-Thani, alluding to the extremely deep pockets of Qatar. In an interview with CNBC in the summer of 2017, Al-Thani said that the country has about 340 billion USD in reserves, 40 billion coming from reserves and gold, and the other 300 billion held in reserves by the Qatar Investment Authority. Al-Thani further stated that the country’s inflows are greater than its outflows as the nation’s sovereign wealth fund has made a series of investments in global luxury brands and real estate in many of the world’s large cites like New York and London.
So despite being a small country blockaded by most of the region’s dominant powers, Qatar has managed to survive. Throughout history there have been many nations who have blamed their lack of development on sanctions. So what differences lie in Qatar that make them so immune to disaster? The short answer is: A lot of money, and many friends.
“The illegal actions of our neighbors have been the catalyst for us to accelerate our economic plans and renew our commitment to diversification and sustained growth,” said King Tamim bin Hamad Al-Thani in an article by the Huffington Post. The saving grace for Qatar seems to have been a diversification of allegiances. Turkey, Iran, and Hungary are among the countries that have exported food to Qatar. In addition, the blockade has made Qatar turn its head to alternative trade routes. In order to circumvent the embargo, 5 new trade routes were established, going to India, Oman and Turkey.
Perhaps the most interesting factor about the embargo has been its awakening effect on the government, investors and people. In addition to turning to alternative allies for its food imports, the country has also seen the embargo as an investment opportunity. The Qatari conglomerate Power International Holdings has taken on the challenge of airlifting about 10,000 cows into the country to grow the country’s own dairy business. The current amount of cows in the country can supply about 30-40% of the country’s dairy needs. With an additional influx of cattle, Qatar could greatly increase its food security. So far the combined effort of investment and alternative import sources have even had the effect of lowering the level of food inflation in the country.
Agricultural fields being created in Qatar’s desert – courtesy of the Guardian
Qatar’s finance minister, Ali Shariff Al-Emadi, also attributes Qatar’s growth amidsts blockade to more foreign investment. Usually, foreign investment becomes a scarcity when a nation faces an embargo by its regional powers. Such an event causes investors to lose confidence and at times causes the country to liquidate its foreign investments. However, no such plan exists in Qatar. in 2017, the Qatar Investment Authority stated it had no plans on liquidating foreign investments. In fact, it had plans to expand its investments. In its history, Qatar has always been more open to foreign firms than its neighbors. Now that it faces sanctions, the country is liberalizing to an even greater extent as it opens open to more foreign firms, creates more lenient permanent residency laws, dropping visa requirements for 80 countries, and cutting rent in half for many businesses. Although the embargo is hardly a year old, there seems to be no sign that it will have any real detriment to Qatar’s economy.
So is there a lesson in all of this?
“As one door closes, another opens” This old phrase reminds us of the various opportunities in life. As it stands true for individuals the same can be said for nations. In the developing world, many states are highly dependent on the imports of large developed countries. Even low income countries with vast areas of fertile land will still depend on food aid. The dependency has placed a number of developing states at the whim of their wealthier contributors. Governments fear to deviate from the plans of western nations as it could mean the withdrawal of food imports, aid or perhaps lead to sanctions. Qatar’s actions have demonstrated the ability for countries to evade the harsh blow of economic sanctions through the temptation of capitalistic gain.
By not touching its foreign investments, liberalizings its borders to foreign companies, launching new domestic investments and creating alternative trade routes, Qatar has been able to stave off economic disaster. While this may be an easy feat for one of the wealthiest countries in the world, how can this be a lesson to a low income country? The answer is that the world is no longer as polarized as it once was. There are no longer only low and high income countries. There are a number of rising economies seeking new avenues for investment. Brazil, India, China, and South Korea are a handful of such countries. Rising and low income economies are collectively known as the ‘global south’, and even now the world is seeing more south on south investment that circumvents the traditional paradigm of relying on investment from the wealthy countries of Europe or the United States.
Secondly, Qatar demonstrates how sometimes the better option for a state is to reinvest in its own food industry instead of taking the easier route of relying on food imports/food aid. Collectively the continent of Africa imports about 35 billion USD worth of food annually. While farms are present in many parts of the continent, they are not commercialized to distribute on a larger scale. Therefore,food security remains an issue on the continent. However, countries like the Democratic Republic of the Congo have taken steps in launching their own mega farms. The already poor DRC currently spends about 1.5 billion USD on food import, but with its proposed project, the country plans to dampen this expenditure as well as create jobs.
So in persevering against its embargo, Qatar is reminding the global community that there are investment opportunities to be had in unlikely places.