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MIDDLE EAST UPDATE: Qatar Blockade Persists One Year Later… With Little Negative Impact for International Business and Global Mobility
June 14, 2018
Last week marked one year since four Middle Eastern nations announced a coordinated severing of diplomatic ties and a trade and travel blockade against the Persian Gulf nation of Qatar. Now more than a year into the blockade, the situation continues to present trade and travel challenges and shows little sign of resolving anytime soon. However, the impact on the nation of Qatar has proven to be far less than intended by the blockading nations.
Newland Chase has been closely monitoring the evolving situation in the Gulf over the past year and takes the occasion of the blockade’s first (and hopefully last) anniversary to update readers on the current status and its ongoing if little impact on corporate mobility in the region.
June 2017: Start of the Blockade
On the morning of 5 June 2017, the Ministries of Foreign Affairs of Saudi Arabia, the United Arab Emirates, Egypt, and Bahrain announced that they were severing all diplomatic ties and closing land, sea, and air borders to the nation of Qatar, the tiny but wealthy peninsula in the Persian Gulf. With its sole land border closed, Qatari ships banned from numerous surrounding ports, and air space restricted to a narrow sliver in and out over the Gulf and flights to and from banned from major Middle East airports, the wealthy Arab nation was effectively isolated from its Arab neighbours.
In the days that followed, several other Middle East nations joined in the blockade, Qatari citizens were expelled from blockading nations, and citizens of blockading nations were recalled by their governments from Qatar. Diplomatic and consular posts of the participating nations were shuttered in Qatar, and Qatari diplomats were removed from the blockading nations. Shipping and air flights were rerouted around Qatar.
The blockading nations asserted that Qatar supported terrorism and destabilizing forces in the region and maintained uncomfortably close ties with Iran. Saudi Arabia, the UAE, Egypt, and Bahrain gave Qatar “13 demands” to be met in order to lift the blockade: including limiting diplomatic, economic, and military ties with Iran and Turkey, taking various steps against reputed terrorist groups, making financial restitution to the blockading nations for alleged past bad acts, shutting down their government-owned news and media outlets, and generally harmonizing their actions to the wishes of their blockading neighbours. For its part, Qatar responded by denying all allegations of bad acts, labelling the action as having “no legitimate justification” and a “violation of its sovereignty”, and refused to comply with any of the 13 demands.
Over the coming months, efforts to resolve the crisis by various world leaders – including the U.S., Kuwait, and the United Nations – have all proven less than fruitful. With substantial wealth at its disposal and increased imports from allies Iran and Turkey, Qatar and its monarchy have proven over the past year more than resilient enough to weather the storm.
Today: Diplomacy Still Failing
On Monday of this week, the government of Qatar filed suit against the government of the UAE, the de facto leader of the blockade, in the United Nations International Court of Justice, alleging human rights violations in expelling and banning Qatari citizens from its country and recalling UAE citizens (including family members of Qatari nationals) from Qatar.
In the most recent attempts at diplomacy, U.S. President Donald Trump hosted the leaders of Qatar, Saudi Arabia, and the UAE at the White House at separate state visits through March and April this year. At the time, observers were hopeful for conversation and movement toward a resolution. However, hopes dwindled when after those visits a U.S.-hosted Gulf Cooperation Council (GCC) Summit at Camp David planned for May was postponed to September arguably because of an absence of signs that the nations were yet prepared to take even tentative steps toward resolution.
The fraying of diplomatic patience was evident when newly-confirmed U.S. Secretary of State Mike Pompeo made his first trip to Saudi Arabia, where his message regarding the Gulf crisis was simply “enough is enough”. However, that direction doesn’t seem to be yet translating into any concrete action on the part of potential mediators or the opposing parties. With U.S. concerns centred more on North Korea at the moment, much real diplomacy by the U.S. in the Gulf may now be on hold.
Today: Impact on Qatar’s Economy
Now a year into the crisis, life in Qatar remains relatively normal for residents. Increased domestic production and new imports of food and other consumables from various nations, particularly Iran and Turkey, have now overcome the initial shortages created by the blockade. The world’s largest producer of liquefied natural gas, Qatar continues to export its primary income source. Qatari state-owned news outlet, Al Jazeera, continues to operate, albeit no longer in Saudi Arabia and the UAE. Qatar Airways, the state-owned airlines, suffered a “substantial” loss in the last fiscal year, but continues to expand with alternate routes. Construction continues on infrastructure projects in preparation for the FIFA World Cup Qatar is scheduled to host in 2022.
Undoubtedly, the blockade initially forced a draw-down of government cash reserves. In February, Bloomberg reported that the Qatari government had injected USD $43 billion into the country’s banks when more than USD $22 billion in deposits reportedly flowed out of the country since June 2017. However, since that time, bank reserves have risen once again as foreign trade normalized into its present pattern.
Overall, Qatar’s GDP growth for 2017 finished at 2.1 percent, and the International Monetary Fund (IMF) expects growth of 2.6 percent for 2018. While the blockade brought short-term shocks to the economy, the long-term effect appears to have simply accelerated already formed plans to diversify into an economy less dependent on oil reserves. The resulting “us against them” response to the blockade has seemingly only strengthened the country’s economic independence.
Today: Impact on World Economy
Companies doing business in the Middle East have certainly felt the impact of the crisis through increased costs and time for air travel and shipping through the Gulf region. However, the world economy as a whole has experienced little effect after the initial adjustment of the first months of the blockade.
Potentially, the biggest impact may yet to be determined when the Organization of the Petroleum Exporting Countries (OPEC) meets next week on June 22. While consumers decry the global oil prices’ return to USD $60+ a barrel levels, the leaders of Saudi Arabia, the UAE, and Bahrain could benefit from an additional increase in oil revenue to shore-up recent deficit government spending. However, it may be difficult for them to convince Qatar to cooperate in any cartel plans that benefit them given the ongoing blockade.
In a stroke of irony, the blockade may end up hurting Saudi Arabia more than Qatar if it blocks coordinated efforts to control OPEC production levels to the benefit of Saudi Arabia. With the last two years’ slump in oil prices and the Saudi monarchy’s recent slate of ambitious and expensive economic and social reforms, Saudi Arabia has been experiencing record budget deficits.
Today: Impact on Corporate Mobility in the Middle East
While the immediate impact on company personnel traveling in the Middle East for business or work has been on those with citizenship from one of the involved countries, there have been spill-over effects – both negative and positive – as a result of the ongoing crisis. Beyond the obvious impact on air and sea routes, the following summary highlights the current mobility status and recent developments impacting company personnel.
Traveling to Qatar – Citizens of other nations (nations not involved in the blockade) are not restricted and remain eligible for visas to Qatar. Citizens of Saudi Arabia, the UAE, and Bahrain are likewise not restricted and remain eligible for visas by the government of Qatar. However, they are restricted by their own governments from traveling to Qatar. Citizens of Egypt are not eligible for visas by the government of Qatar. Citizens of other nations holding residence permits issued by Saudi Arabia, the UAE, and Bahrain are not restricted and remain eligible for visas to Qatar.
In an unexpected result of the blockade, Qatar has employed immigration policy in an obvious effort to garner international favour, further opening its borders to international business. In July and August 2017, Qatar expanded its visa-on-arrival program to include the citizens of more than 80 nations. Also in August, Qatar became the first GCC nation to implement a permanent residence status for resident expats – offering PR to foreign nationals who “have given service to Qatar” or possess “skills that can benefit the country”. In September, Qatar introduced a new electronic travel authorization system to facilitate entry for citizens of otherwise visa-required nations holding visas or residence permits issued by the U.S., the UK, Canada, Australia, New Zealand, Schengen Area nations, or GCC nations.
Traveling to Saudi Arabia – Citizens of other nations (not involved in the blockade) are not restricted and remain eligible for visas to Saudi Arabia. Citizens of other nations holding residence permits issued by Qatar are not restricted and remain eligible for visas to Qatar. However, with the closing of the Saudi Arabian embassy in Qatar, application for visas must be made through their country of citizenship. Qatari citizens are restricted from travel to Saudi Arabia.
Traveling to the UAE – Citizens of other nations (not involved in the blockade) are not restricted and remain eligible for visas and visas-on-arrival to the UAE. Citizens of other nations holding residence permits issued by Qatar are not eligible to travel to the UAE using visitor visas for GCC residents, but remain eligible for other visas issued by the government of the UAE. Qatari citizens are restricted from travel to the UAE.
Traveling to Bahrain – Citizens of other nations (not involved in the blockade) are not restricted and remain eligible for visas and visas-on-arrival to Bahrain. Citizens of other nations holding residence permits issued by Bahrain are not restricted and remain eligible for visas from the government of Bahrain; however, they are not eligible for visas-on-arrival, even if their country of citizenship is otherwise eligible. Qatari citizens are not restricted and remain eligible for visas from the government of Bahrain, but in practicality few are being issued absent exceptional circumstances.
Traveling to Egypt – Citizens of other nations (not involved in the blockade) are not restricted and remain eligible for visas to Egypt. Citizens of other nations holding residence permits issued by Qatar are not restricted and remain eligible for visas to Egypt. Unlike the other three, Qatari citizens are not restricted and remain eligible for visas to Egypt.
Tomorrow: Where Do We Go from Here?
The blockade of Qatar will end at some point… but at present, there are no signs that “some point” is on the immediate horizon. There is currently little reason for Qatar to accede to the demands of Saudi Arabia, the UAE, Bahrain, and Egypt when it appears to be weathering any ill effects of the current blockade. Likewise, Saudi Arabia, the UAE, Bahrain, and Egypt show no indication of backing off their “13 demands”. With U.S. diplomatic attention currently diverted elsewhere, only Kuwait appears willing to help broker a resolution; but thus far, both sides have rebuffed those overtures.
While the blockade may fester for some time… it appears to be having little impact on corporate mobility and doing business in the Middle East, with travel and visa restrictions limited to citizens of the involved nations. If anything, the current situation has unexpectedly led to a further opening of opportunity for international business in Qatar, with increased availability of its visa-on-arrival scheme and an overall desire to engage new foreign trade and investment.
For more specific guidance on dealing with and/or capitalizing on any of the implications of the ongoing Gulf situation, readers are encouraged to reach out to their Newland Chase immigration specialists. Newland Chase supports companies from the largest multinationals to small- and medium-sized startups in their business travel and corporate immigration needs to all nations of the Middle East.
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