3. The Impact on the GCC
The GCC crisis has highlighted important features of the modern Gulf political landscape. The future of the bloc is now in question, not least as economic cooperation has been disrupted by the intra-GCC embargo. Politically, after having previously sought to position itself as a regional leader representing the Arab world’s most stable countries, it now evidently lacks the mechanisms or capacity to resolve its own internal disputes. In a part of the world where politics is highly personalized, there is a disjunction between the older generation of leaders in Kuwait, Oman and to some extent Bahrain, and their younger counterparts in the UAE and especially in Saudi Arabia and Qatar. The crisis has also served as an illustration of a new and more belligerent style of politics from the rising leaders in Saudi Arabia and Abu Dhabi in reaction against what they perceive as the weaknesses and failures of previous ‘softer’ approaches to Gulf diplomacy.
The GCC: another Arab Maghreb Union?
The GCC’s politics have always had a strong element of personalization. The grouping was founded rather more on a sense of fraternity and commonality between individual rulers, than on an EU-style process of institution-building. The founders shared common threat perceptions and a certain sense of common interest. There was a long legacy of border disputes and historical grievances between their countries, but they judged that there was more to unite them than to divide them. However, the generation that founded the GCC is no longer leading Gulf politics. As a result, traditional mediation mechanisms are not functioning, and its future as a bloc is in question.
Some citizens have criticized the GCC for acting as a ‘club of kings’ rather than of nations. By this view, the GCC has focused far more on the direct interests of the rulers, including internal security against dissidents, than on economic cooperation. To some extent, the bloc has also built ties at the societal level, by facilitating economic cooperation (especially in financial and property investment),38 labour-market mobility and migration between member states. In most GCC countries, there are disincentives for citizens to marry non-citizens; this applies especially to women, who usually lose their right to pass their citizenship on to their children (who are then deprived of a host of economic entitlements). But gradually individual states have been modifying their laws to make exceptions for other GCC citizens. For instance, in 2011 Saudi Arabia adopted legislation allowing Saudi men and women to marry GCC nationals without having to obtain the official permission that is required to marry other foreigners.
However, these leadership and societal ties have not been supported by any equivalent development of supranational institutions. GCC institutions have always remained subordinate to national politics, as was evident with the common currency project that was quietly shelved after a 2009 dispute about which city would host a proposed central bank. The current rift, in bringing about the perverse situation of a trade embargo within a bloc that officially has a common market, has emphasized the primacy of politics over economics.
Nonetheless, Qatar remains in the GCC and there continues to be some working-level contact and cooperation at the GCC level. The GCC has held two annual summits since the crisis began, but these no longer bring the heads of state together. Notably, the GCC’s joint military force, the Peninsula Shield, held military exercises in Saudi Arabia – including Qatari troops – in February 2019.
The UAE and Bahrain had called for Qatar to be expelled, but Kuwait and Oman have been keen to maintain the membership of the bloc and have tried to use the shared GCC identity as a basis for mediation. Through their mediation, all six members did agree to send representatives to the annual GCC summit that Kuwait hosted in December 2017. However, their participation was limited to the point of tokenism, with Saudi Arabia, the UAE and Bahrain dispatching only low-level representatives. On the eve of the meeting, moreover, Saudi Arabia and the UAE announced a new bilateral ‘strategic partnership’, signalling clearly their intention to deepen their relationship separately from the rest of the bloc. The GCC meeting broke up after a day, after a few routine remarks blaming the media for stoking tensions.
While it is unlikely that the GCC will be formally disbanded – not least because its members generally do not like to admit failure – the current rift does point to the end of an era for the bloc. It may increasingly come to resemble the Arab Maghreb Union, a North African regional bloc that has been unable to progress because of a long-running dispute between Morocco and Algeria, whose border has been closed for two decades. The GCC has always had its limitations, but had previously been the best-functioning regional bloc in the Middle East. Its paralysis compounds a wider problem posed by the striking absence of effective regional organizations, compared with any other area of the world.
The crown princes’ partnership
The ascent of Mohammed bin Salman in Saudi Arabia has brought in a new style of Saudi policymaking. In deliberate contrast to the subtle gradualism associated with King Abdullah, the new Saudi leadership has adopted a new style of sudden and spectacular but not always strategic action, designed for maximum dramatic effect. Thus, three months after King Salman came to the throne in 2015, Saudi Arabia led its first military intervention, intended to reverse the coup in Yemen. While it had voiced its anxieties about the coup for seven months, few had anticipated that Saudi Arabia would lead a military action. The new leadership appears determined to change the calculations that other actors make about what Saudi Arabia can and will do. Similarly with Qatar, the sudden announcement of the boycott was a demonstration that old assumptions about GCC diplomatic niceties would no longer apply.
Crown Prince Mohammed bin Salman’s new style of policymaking resonates with – and is probably influenced by – that of Crown Prince Mohammed bin Zayed in Abu Dhabi, with whom he has developed a close working relationship. The UAE had pressed other GCC countries to increase the pressure on Qatar for several years, but the balance tipped when Mohammed bin Salman became crown prince and brought the weight of Saudi Arabia into the equation. Both men are trying to realize long-pent-up ambitions for dramatic change at home and abroad, emboldened by their countries’ strengthened alliance and an apparent blank cheque from a US administration that prefers the simplicity of outsourcing Middle East policy to a small number of trusted regional strongmen. They have felt able to make unilateral foreign policy moves in a regional context where there is a perceived power vacuum resulting from the internal turmoil in most of the traditional Arab powers and the deep perceived uncertainty about the future role of the US in the region.
This degree of uncertainty is encouraging bold moves by some actors, including Mohammed bin Salman and Mohammed bin Zayed, but it also increases the risks of miscalculation and overstretch. Saudi Arabia and the UAE are positioning themselves to play a leadership role in the region, with passive support from the US, but they are taking on many challenges simultaneously and will come under challenge from regional rivals (most obviously Qatar, Iran and Turkey) as well as from their own military and diplomatic capacity. The two crown princes also appear intolerant of criticism, and dependent on a very small circle of local advisers and highly paid international consultants – a combination that sometimes means tough messages are muffled or avoided altogether.
The GCC crisis has introduced tactics that are new to intra-GCC politics, including the closure of airspace, a trade embargo and the sudden withdrawal of capital.
Tensions over Qatar had been simmering for years, but the previous assumption was that GCC leaders would address contention behind the scenes through high-level, personal mediation. Now, however, the crisis has introduced tactics that are new to intra-GCC politics, including the closure of airspace, a trade embargo and the sudden withdrawal of capital. Qatar has accused the Quartet countries of trying to trigger a currency crisis by trading the riyal at artificially low prices. It is not new for GCC countries to use their economic clout as leverage for political bargaining in their international relations, but they have not instrumentalized their economic weight in such a large-scale, sudden and visible way since the 1973 oil embargo (which had a much wider global impact). Also new in this context is the role of information warfare, ‘fake news’ and cyberattacks.39 After all, the crisis began with the hacking of Qatar News Agency, which US officials have reportedly attributed to the UAE. This was followed by accusations that Qatar may have arranged the hacking of email accounts of a top US Republican fundraiser linked to the UAE,40 while the emails of the UAE’s ambassador to the US were also hacked and leaked to the media.
In a battle for US support, Qatar and the UAE have ramped up their already hefty spending on lobbyists and PR firms in Washington. As part of this, they have sought to influence US think-tanks and op-ed writers by funding and courting them. As a result, there is a proliferation of analysis and articles on the Gulf states, which were traditionally given little coverage in US Middle East analysis, but these are all too often distorted, heavily spun, and influenced by commercial interests.
Some reports have suggested that the UAE and Saudi Arabia briefly considered a military invasion of Qatar.41 Speculation about this began after Kuwait’s emir said at the White House in September 2017 that he thanked God that a military confrontation had been avoided.42 It is uncertain whether the countries really did contemplate an invasion – the international reaction against Iraq’s invasion of Kuwait in 1990 would appear to be a strong deterrent – or whether it is another aspect of the information war. If the latter, both sides may stand to gain: the Quartet by adding another potential threat to Qatar’s risk calculations, and Qatar by portraying the Quartet as willing to act outside international law.
The impact on Qatar’s economy
Qatar’s economy has suffered both immediate and longer-term ill effects from the embargo, but an economic boycott by its GCC partners can have only a limited impact on a country that is the world’s largest exporter of LNG. Qatar has the world’s third largest gas reserves (after Iran and Russia), and it has concluded long-term supply agreements with a host of significant world powers. Even the UAE continues to obtain a third of its natural gas from Qatar through the Dolphin pipeline (which has remained unaffected by the boycott). Qatar typically provides more than half of India’s and Taiwan’s respective LNG supply, one-third of the UK’s, and one-fifth of China’s. It has well-established joint ventures with Shell and ExxonMobil, and it has recently signed a 25-year oil joint-venture agreement with Total.
In Qatar’s favour is the fact that while global carbon-reduction efforts present a risk to oil demand, demand for natural gas – which emits less carbon when burned than does coal or oil – continues to increase.
Also in Qatar’s favour is the fact that while global carbon-reduction efforts present a risk to oil demand, demand for natural gas – which emits less carbon when burned than does coal or oil – continues to increase. Qatar will benefit from this, although it is under growing supply competition from Australia, the US and Russia. Its key source of income has thus been broadly protected. However, Qatar has already been cutting gas prices to maintain market share,43 and the boycott may have encouraged this trend as the country has had an increased geopolitical – as well as economic – need to secure future gas agreements. Moreover, the boycott poses a significant risk to its attempts to diversify its economy beyond the energy sector on which it overwhelmingly depends. In April 2017 (i.e. before the embargo began) it had already decided to end its long-running moratorium on new gas developments.
The immediate impact of the embargo was a shock for Qatar, but its economy has since proved largely resilient. Imports and flights were immediately disrupted, as the country lost access to Quartet ports and airports. In June 2017, Qatar’s imports fell by 40 per cent by value compared with June 2016. Qatar Airways had to close 18 routes to neighbouring states, and its CEO said in March 2018 that he expected the airline to have incurred an unspecified ‘very large loss’ for the year.44 Quartet countries withdrew their capital from Qatari banks; the central bank said non-resident deposits dropped by $12.8 billion between May and December 2017.45 Qatari citizens living in Arab Quartet countries were expelled, although exceptions were subsequently made for Qataris married to Quartet citizens, and for Qatari pilgrims to Mecca.
In response, Qatar drew on its sovereign wealth fund, the Qatar Investment Authority (QIA), to inject liquidity into banks. The QIA is estimated to be worth around $300 billion46 – equivalent to more than $1 million for each of Qatar’s some 250,000 citizens. Qatar has also moved to create new shipping links to compensate for the loss of access to Quartet ports, and has ramped up imports through Turkey, Iran and Oman. Import costs increased, affecting food prices and disrupting the construction sector, but after the initial shock companies were generally able to adapt their supply chains: by the fourth quarter of 2017, imports were back up to pre-crisis levels.47 Over subsequent months, Qatar concluded agreements with shipping lines from key Asian markets, including China, India and South Korea, to establish new routes between Doha and their major ports. Qatar Airways managed to establish new routes, and in March it acquired a 25 per cent stake in Moscow’s Vnukovo International Airport, Russia’s third largest airport (having bought a similar stake in St Petersburg airport in 2016).
While Qatar has largely staved off the immediate shock of the embargo, it faces risks in terms of long-term investor confidence. Although a net exporter of capital, the country is reliant on foreign investment to support its drive for economic diversification as it needs to acquire the technology and know-how to develop non-oil sectors. Its diminished share of regional trade will constrain confidence in some of these sectors, particularly those that are geared to regional demand.
Qatar’s vast wealth is a double-edged sword for its diversification efforts. The country can leverage its sovereign wealth to build partnerships with international companies and to acquire technology, but its workforce is mostly imported and its citizens’ salary expectations are entirely out of line with their productivity levels. Qataris enjoy one of the highest levels of GDP per head in the world, and receive extensive economic benefits from the state without paying taxes. Virtually all jobs in the private sector are occupied by expatriates, who make up over 85 per cent of the population. It is difficult for Qatar to identify economic niches where its citizens can compete internationally yet still maintain the level of income that they expect.
The sectors Qatar is targeting include food processing, pharmaceuticals and manufacture of construction materials, but few citizens will work in these sectors. It is also seeking to position itself as a centre for Islamic finance (banking being a sector in which Gulf nationals do tend to work) and to develop tourism; for both these sectors, the GCC market is important.
If the trade aspects of the rift escalate, Qatar could suffer further ill effects. So far, GCC countries have not explicitly asked international businesses to choose between them and Qatar, and many of these businesses operate with all parties to the dispute. Foreign governments have also emphasized that they intend to keep doing business with both sides. But in a tense climate, the countries of the Arab Quartet could yet be tempted to seek to enforce a secondary boycott. Qatar’s market, with a GDP of $152 billion, is less than half the size of the UAE’s, and one-sixth of Saudi Arabia’s.48
Qatar would therefore appear to have an interest in winding down the embargo, especially as the 2022 football World Cup approaches. In theory, the event could also present an opportunity for reconciliation with neighbouring states that could benefit from shared tourism offerings, or even potentially hosting some of the matches.
However, none of the parties is currently faced with sufficient economic costs to be forced into a compromise. Qatar is neither being compelled to comply, nor willing to be seen as giving up its foreign policy preferences at the behest of its neighbours. While there has been domestic criticism of its foreign policy, the maximalist approach of its neighbours has resulted in a rallying around the flag in Qatar, and an unprecedented outpouring of nationalist sentiment in one of the world’s youngest countries. In the run-up to the one-year anniversary of the boycott, for instance, Qatar’s economy ministry ordered local retailers to remove goods from the Quartet countries from their shelves.
Qatar’s policy changes
Qatar has changed its policies since the rift with its neighbours, but rather than changing its foreign policy to accommodate its neighbours’ demands, it has instead focused on making itself a more attractive partner for Western and Asian countries, including by liberalizing its economy and making efforts to improve its poor record on labour rights.
Specifically on issues of extremism and terrorism, Qatar signed a memorandum of understanding on counterterrorism cooperation with the US in July 2017, shortly after the boycott began, and began a new counterterrorism dialogue with several US government departments.49 It also reportedly agreed to place two US Department of Justice officials in its general prosecution.50 Qatar has also emphasized its economic importance to the US; immediately after the crisis broke out, it signed a $13 billion deal to buy fighter jets from the US, and in January 2019 the QIA confirmed that it was on track to invest some $15 billion in the US over the next two years, in line with its earlier commitment to invest $45 billion there in 2015–20.51
Concerned that the embargo will damage its attractiveness to investors and to talented migrants, Qatar has also said it will introduce permanent residency for some expatriates – likely to be longer-term, higher-skilled migrants – and has eased visa requirements for short-term visitors. In 2018 it passed a law to allow 100 per cent foreign ownership of companies in all sectors. Previously, foreign investors were obliged to have a Qatari partner.
Qatar has also taken steps to improve its record on migrant workers’ rights, which had come under increasing external scrutiny as preparations for the 2022 World Cup brought the issue into the international media spotlight. In October 2017 it entered into a three-year programme of cooperation with the International Labour Organization (ILO, see Box 3), under which it has committed, inter alia, to ending the kafala sponsorship system for migrant workers in Qatar.52 The ILO opened a project office in Doha to implement the programme in 2018. The International Trade Union Confederation welcomed the move, stating that Qatar appeared to be embarking on real reforms to end modern slavery. In February 2019 Amnesty International reported that despite ‘nascent reforms’, migrant workers were still finding themselves vulnerable to abuses including forced labour and non-payment for months at a time.53 The Qatari government has also said it will introduce new legislation to protect the rights of migrant domestic workers, who are particularly susceptible to abuse. The extent to which legal reforms will be implemented remains unclear, especially as migrant workers typically have very limited access to the justice system in the Gulf states.
The heightened international pressure seems to have strengthened those members of Qatar’s political establishment who support such reforms against the entrenched interests of some of the country’s major employers. This is in a context in which Qatar has made efforts to position the boycott as a human rights issue – asserting, for instance, that the ‘blockade’ is collective punishment – and has therefore wanted to strengthen its credentials with the international human rights community.54 However, various reports have suggested that migrant workers have borne the brunt of the economic shock. There were reports in the early months of the crisis of workers in sectors such as tourism, construction and shipping being required to take extended periods of unpaid leave;55 Furthermore, hikes in food prices will of course have had a disproportionate effect on low-paid workers.
Box 3: Qatar’s pledges to the International Labour Organization
- Employment contracts will be lodged with the government to prevent employers from unilaterally changing contracts to lower wages.
- Employers will no longer be able to stop their employees from leaving the country.
- A minimum wage will cover all workers regardless of race.
- Identification papers will be issued directly by the state rather than employers.
- Elected workers’ committees will be established in each workplace.
- Qatar will establish a special disputes-resolution committee with a timeframe for dealing with grievances.
Stoking societal conflict in the Gulf
State-linked media have propagated nationalistic and mutually hostile narratives about the dispute, while the Quartet governments have in some cases criminalized any expression of sympathy with Qatar. Now, with the rallying round the flag in all the countries concerned, it is more difficult for citizens to express a view opposing their governments’ actions.
However, at least so far, the embargo seems to have had limited support at the societal level in Saudi Arabia and in Bahrain, although it is perhaps more popular in the UAE. Public opinion in the UAE is particularly difficult to evaluate because of the strength of legal and social taboos on publicly disagreeing with foreign policy. Nonetheless, there is a sense that Dubai is less supportive than Abu Dhabi because of the disruption to its trade and because it has traditionally pitched itself as a ‘politics-free zone’. Those who sympathize with the Muslim Brotherhood are silent but not non-existent; in a 2014 poll (after the ‘coup’ arrests) 29 per cent of Emiratis interviewed said they had a positive view of the Brotherhood.56
In Saudi Arabia, people have much else to preoccupy them. Dramatic changes are under way on the domestic political scene and in the economy. In terms of foreign policy concerns, Yemen and Iran loom much larger. Some express a sense among Saudis that Qatar deserved some kind of pushback for its foreign policy positions and for the editorial line taken by Al Jazeera, but not the full scale of what has befallen it. Many Saudis have family members in Qatar, or who were previously studying there or doing business across the border, and whose personal lives have thus been disrupted by the rift between the two countries. In Bahrain, there is anecdotally some disquiet among the Sunni community in particular as many Sunni families in Bahrain have relatives in Qatar, who they can now only meet in third countries.
In Qatar itself, the Arab Quartet’s approach appears to have turned the Qatari public against them, because the embargo has had the effect of punishing citizens as well as the government. This represents a significant missed opportunity for the Quartet. There has been some dissatisfaction inside Qatar with the foreign policy pursued by Emir Hamad and Hamad bin Jassim, as Qataris have suffered a considerable backlash in the wider Middle East for policies often seen as interfering.57 One 2017 poll by the Washington Institute suggests lukewarm public attitudes among Qataris both towards the Muslim Brotherhood and towards Iran,58 and these broad findings seem plausible given the lack of domestic Brotherhood presence in Qatar, as well as the traditionally widespread negative views of Iran among the Qatari intelligentsia and media. These factors might have presented an opportunity for the Quartet countries to use public diplomacy to encourage Qataris to press for changes in their country’s foreign policy. Instead, however, the Quartet’s blanket approach to punishing Qatar has encouraged Qataris to rally round their emir, and a generation of young Qataris has become more politicized as a result.
The ongoing stand-off is also characterized by a massive misinformation contest. A conflict that began with a well-orchestrated media hack has been further stoked by layer upon layer of propaganda and fake news. In some cases, too, professional standards have been badly compromised by Gulf media organizations.59 Diplomats’ time is consumed simply trying to figure out the basic facts. Even as Gulf governments talk about improving education among their nationals, and in some cases advocate for building up skills in critical thinking, the crisis has led them to foster a barrage of misinformation directed at their own nationals to dissuade or actively deter them from expressing critical or independent views. Competing versions of history are being promulgated, dragging up old border disputes and tribal battles.60
The impact of the crisis on people-to-people relations has a high social cost, creating a fresh identity conflict for young people of the region who are for the first time experiencing conflicts between their national and wider Gulf identities. Government-led propaganda campaigns risk deepening societal conflicts. This is short-sighted within a group of small states that are so geographically close and that have such intertwined histories.
Attitudes to the crisis in Kuwait and Oman
Kuwait and Oman have sought to tread a middle ground in the crisis since mid-2017, and to pursue a mediation role. Each state has its own objections to Qatari foreign policy. Kuwait has complained that Qatar – and especially Al Jazeera – has supported the Kuwaiti opposition, while Oman does not permit the Muslim Brotherhood (or any political parties). At the same time, the tactics used against Qatar have given rise to a sense of vulnerability in other small Gulf states, particularly Oman, and a fear that similar pressure could one day be brought to bear on them.
The tactics used against Qatar have given rise to a sense of vulnerability in other small Gulf states, particularly Oman, and a fear that similar pressure could one day be brought to bear on them.
Kuwait’s primary concern has been the damage done to the institution of the GCC, especially at a time of so many regional crises. It has taken the position that, while the Arab Quartet countries have some legitimate grievances, the GCC should be capable of resolving differences between its members around a table. Kuwait’s emir, Sheikh Sabah, engaged in shuttle diplomacy at the outset of the crisis, and Kuwaiti parliamentarians and civil society have credited him with preventing the dispute from escalating further. As already noted, Kuwait managed to secure attendance from all the GCC members at the organization’s December 2017 summit, but Quartet heads of state stayed away and the summit dispersed early with no substantive statements made.
From the outset, Kuwait’s parliamentarians have also expressed sorrow at the rift within the GCC.61 Some Kuwaitis have voiced concerns that their country could come under pressure from its neighbours because of the relative assertiveness of its parliament – members of which sometimes criticize other GCC countries. The Muslim Brotherhood notably plays an active role in Kuwaiti politics and cultural life, along with other Islamist and liberal opposition movements.62 Since 2013, moreover, Kuwait’s Brotherhood seems to have toned down some of its criticism of the government, apparently seeing itself as better off there than in most other Gulf countries.
The Muslim Brotherhood (like all political movements) is banned in Oman. But while Muscat has also had its concerns about Qatar’s foreign policy activism, it believes – like Kuwait – that contentious issues can be settled through diplomacy between the GCC leaders. Oman also has its own concerns that the Qatar crisis could set a precedent for pressure on other smaller Gulf states that tend to pursue an independent line in foreign policy. More specifically, one of the Arab Quartet’s demands of Qatar has been that it cut diplomatic ties with Iran, with which Oman has a long-standing cooperative relationship.
Omanis, both inside and outside government, are acutely aware that their country has fewer strategic resources than Qatar, and have expressed concerns that Oman could not necessarily count on the support of its traditional Western allies should it find itself isolated as Qatar has been.63 There is also a growing narrative that the two states’ neighbours, especially the UAE, do not respect their sovereignty and independence.64
Such concerns could result in Oman pursuing closer ties with other potential allies, such as Iran, China or Russia. It could also create internal divisions if Sultan Qaboos’s policy of neutrality comes to be regarded as unsustainable. There is, too, the context of the eventual succession to Qaboos. That the identity of his successor is not yet known creates some uncertainty as to the future direction of Muscat’s foreign policy, both within the region and globally.