The political and economic boycott of Qatar, which began on 5 June 2017 when Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic ties with Qatar and moved to close off access to the Gulf country, continue to have a significant impact on international trade in the Middle East.

Since our previous alerts on 7 June 2017 and 12 June 2017 the following developments have occurred:

  1. Saudi Arabia, the UAE, Bahrain and Egypt issued a 13-point list of demands to Qatar on 22 June, which included curbing diplomatic ties with Iran, severing all ties with "terrorist organisations", closing the Al Jazeera television network, terminating the joint military cooperation with Turkey, aligning itself with other Gulf and Arab countries' policies, and consenting to audits and annual compliance monitoring. The demands were delivered to Kuwait, which was acting as mediator of the crisis, and Qatar was given 10 days to comply. On 2 July, the boycotting countries agreed to extend the deadline by two days at the request of Kuwait.
  2. On 3 July, Qatar responded to the demands but no specific details were publicly released. The Qatari foreign minister said that the demands were not aimed at tackling terrorism but at curtailing Qatar's sovereignty, and were impossible to meet.
  3. On 5 July, the foreign ministers of Saudi Arabia, the UAE, Bahrain and Egypt met in Cairo to consider Qatar's response and discuss the future of the crisis. They subsequently issued a joint statement condemning Qatar's negative response and confirming that the political and economic boycott would continue. The Saudi foreign minister said that further steps against Qatar will be taken at an appropriate time and will be in line with international law. Further consultations will be held in Bahrain at a later date.
  4. Finance: Approaching the 2 July deadline, Qatar's stock market sank as much as 3.1 percent, bringing its total losses to 11.9 percent since 5 June. The Qatari Riyal exchange rate against the US dollar has been severely affected as the Qatar Central Bank pegged the Qatari Riyal at 3.64 as of 5 July. Qatar has also withdrawn 60 billion Qatari Riyals (USD 16 billion) from its deposits and borrowed 10 billion Qatari Riyals (USD 2.65 billion). On 30 June, it was reported in the press that several British banks announced that they stopped trading the Qatari Riyals.
  5. Business: There are currently no publicly released restrictions on investment as between Qatar and the boycotting countries. In Saudi, the Saudi Ministry of Commerce and Investment recently gave its verbal instructions to government agencies to pause all applications for the issuance of commercial licenses and company registrations as well as other administrative actions that involve Qatari nationals.
  6. Updated Terrorist Watch Lists: Saudi Arabia, Bahrain, the UAE and Egypt updated their terrorist watch lists by identifying the names of 59 individuals and 12 organizations that are deemed to be engaged in acts of terrorism or activities supporting terrorism. In the absence of any official instructions or guidelines it is unclear what specific actions will be taken against those persons who appear on the list (or any party that has any financial, commercial or other type of connection with such persons).
  7. Shipping: Since Saudi Arabia, the UAE, Bahrain and Egypt (to a more limited extent - see below) banned all Qatari flag vessels or vessels owned by Qatari companies or individuals or carrying goods of Qatari origin from passing through their ports, shipping lines appear to have put in place alternative arrangements where the product is discharged first to a third party country (such as Oman) before onward shipment to Qatar. Shipments from the United States or European Union to Qatar are not prohibited.
  8. Oil and gas: State-run Qatar Petroleum announced its plans to increase gas production from its giant North Field by 20 percent amid the diplomatic crisis. It is the world’s biggest gas field which the country shares with Iran.