UAE’s decision to cut ties with Qatar and its consequences

uae cut off ties qatar consequences

United Arab Emirates, along with Saudi Arabia, Bahrain and Egypt cut ties with Qatar, accusing the Gulf country of supporting terrorism and extremist groups, including Muslim Brotherhood, ISIS and Al Qaeda, and promoting their messages and schemes through their media.

This decision has been taken in response to the threat to the security and stability of the region posed by Qatar and its failure to honor international commitments and agreements.

What are the measures adopted by UAE?

  1. UAE severed all relations with Qatar, including diplomatic relations, giving Qatari diplomats 48 hours to leave the country.
  2. Qatari nationals will be banned from entering UAE or crossing its points of entry, while it has been given a time frame to Qatari residents and visitors of 14 days to leave the country for security reasons. UAE nationals are likewise banned from traveling to or staying in Qatar or transiting through its territories.
  3. UAE will close airspace and seaports for all Qataris in 24 hours and ban all Qatari means of transportation, from crossing, entering or leaving UAE territory.
  4. Etihad Airways, Emirates and Flydubai said they would suspend all flights to and from Qatari capital Doha till further notice.

What will be the consequences?

Markets reacted immediately rising oil prices up, while Dubai and Abu Dhabi financial markets reported light losses.

The impact on liquefied natural gas (LNG) is still unclear. Qatar meets almost a third of global LNG demand and UAE is one of the regular buyers.

It is presumable that LNG export to UAE will be stopped and UAE will have to use other suppliers.

But Qatar exports natural gas also through a pipeline operated by Dolphin Energy, which is owned by Abu Dhabi’s Mubadala Development Co., Total SA and Occidental Petroleum Corp. The pipeline supplies UAE and Oman and can send 3.2 billion cubic feet per day of gas, though it only uses about two-thirds of that capacity.

If it will be shut down, that would cause a severe problem in UAE, as demand for electricity peaks in the summer, and it would surely compromise Qatar’s reputation as a reliable energy provider.

An impact is likely to be felt on the UAE’s tourism industry, from hotel bookings to car rentals and everything in-between, particularly over periods such as the Eid holiday, where 25 to 30% of visitors are Qataris, followed only by Saudis and Kuwaitis.

The companies based in UAE that are in partnership or in business relations with Qatari companies might be affected as well.

 

Mara Di Marco
General Manager, UAEstablishment

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