The images apparently showed a country in near panic. Supermarket shelves were empty, the airports in chaos and the borders jammed with cars. Invasion or natural disaster?
The country is Qatar and it is the victim of neither. Instead, a diplomatic and economic boycott – a blockade, in effect – is under way. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed ties with Qatar on Monday and Qataris rushed to the supermarkets to stock up on food and water. The borders were jammed because the countries behind the boycott ordered Qatari diplomats and citizens to leave.
It would seem easy to strangle Qatar. The country forms a peninsula that juts into the western Persian Gulf, its only land border shared with Saudi Arabia. But four days into the boycott, Qatar, an energy powerhouse, seemed far from economic catastrophe.
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Still, the fear among the Qataris and the countries that trade with it is that the boycott, if it endures, could do lasting damage to Qatar. "It all depends on how long the standoff lasts," said Syed Basher, a former research economist at the Qatar Central Bank, now a professor of economics at East West University in Bangladesh.
Damage to the global energy trade is also possible if the boycott is tightened, blocking shipments of oil and liquefied natural gas (LNG) to the export markets. Qatar, a British protectorate until 1971, is a member of the Organization of Petroleum Exporting Countries (OPEC) and the world's biggest exporter of LNG.
If oil and LNG exports were choked off, Qatar's lifeblood would drain away quickly and the global energy markets would take a blow. Qatar's oil and gas exports are intact, though Japan is on edge. Japan depends heavily on imported gas and is the biggest buyer of Qatari LNG.
The Saudi-led boycott was triggered by accusations that the Qataris were supporting Islamist militants and the Muslim Brotherhood, which the Saudis declared a terrorist organization in 2014, and cozying up to Iran, the Saudis' great regional rival. The boycott is a more serious replay of 2014, when Saudi Arabia, Bahrain and the UAE temporarily suspended relations with Qatar for its support of the Brotherhood.
So far, the energy markets' reaction to the Qatari crisis has been calm as traders have trouble judging the boycott's potential impact. A blockade of all tankers calling at Qatar's ports certainly would rattle the oil and LNG markets, but that hasn't happened. Nor has OPEC solidarity shattered. Qatar, one OPEC's smallest oil producers, has given no sign that it wants to sabotage the cartel's planned production cuts, which are aimed at propping up the price.
Brent crude, the international benchmark, has been gently drifting downward this week, reaching $48 (U.S.) a barrel. Olivier Jakob of the Swiss oil-market intelligence company PetroMatrix, said "the crisis has, for now, [had] a limited impact."
Kuwait, the Persian Gulf country that is trying to broker a truce between Qatar and its Arab detractors, on Tuesday said that Qatar remains committed to the planned supply cuts of 1.8 million barrels a day by OPEC and non-OPEC countries. Analysts, meanwhile, do not believe that the Saudis will allow the Qatar crisis to escalate into a full-blown energy war.
"We do not believe that the rift will immediately imperil regional energy security," said Helima Croft, head of commodity strategy at RBC Capital markets. "Egypt is unlikely to close the Suez Canal to Qatari tankers, and at this point, efforts to disrupt Qatari shipments will likely have a marginal effect, absent further deterioration."
If Qatar's energy exports seem safe for the moment, what about Qatar itself?
The country is very wealthy, thanks to oil and LNG industries. According to Moody's, the ratings agency, its per capita gross domestic product (measured at purchasing-power parity) is almost $128,000, the highest in the world.
Qatar is the home of al-Udeid, the biggest U.S. air base in the Middle East, which provides the country with a lot of income. Its wealth is allowing it to host soccer's 2022 World Cup, which is coming with $200-billion in infrastructure spending. Qatar also has sunk fortunes into Al-Jazeera, the state-funded Arab satellite news channel that broadcasts in Arabic and English.
The Qatar Investment Authority, the country's $335-billion sovereign wealth fund, has high-profile investments around the world, including in Volkswagen, Tiffany, Siemens and Canada's Brookfield Property Partners. Qatar and Brookfield together bought London's Canary Wharf, Europe's premier office development, for £2.6-billion ($3.7-billion [U.S.]) in 2015.
Moody's says the country has a "very high level of economic resilience," meaning it should be able to endure the Arab blockade for some time before stress set in. "A severe economic deterioration is unlikely," Mr. Basher said. "Qatar has a lot of money to purchase goods from anywhere in the world. There will be short-term disruptions for sure, but it is now more of an operational management issue to deal with this unexpected sanction."
He also notes that Qatar doesn't trade much with the other members of the Gulf Co-operation Council (Saudi Arabia, UAE, Bahrain, Kuwait and Oman). But it's obvious that the longer the blockade lasts, the more Qatar will hurt, potentially giving the Saudis and the other backers of the boycott considerable negotiating power.
"It is clear that this time Qatar will have to make some tangible [political] changes," Mr. Basher said.
Eric Reguly