Are The Arab Nations On The Brink Of War? The Rift Between GCC Monarchies Saudi Arabia and Qatar

By Shadow Governance Intel, the analytical arm of West Sands Advisory Limited, a UK-based business intelligence firm. Originally published at OilPrice.com.

Almost five weeks have passed since Saudi Arabia, its Gulf allies, and Egypt announced the start of a diplomatic boycott against Qatar—a fellow Arab monarchy which, the boycotters contend, encourages sectarianism in the Middle East and sponsors terrorist organizations.

Doha has refused to comply with KSA and friends’ demands that it shut down renowned news outlet Al-Jazeera, end the construction of a Turkish military base inside Qatar, and cut off ties with Hezbollah and terrorist organizations. The whole list of demands includes 13 points, each one bent on curbing the Qatari diplomatic initiatives that contradict the Saudi Arabian foreign policy agenda.

Risk consultancy Shadow Governance talks to OilPrice about the political players driving the landmark rift between GCC monarchies that has shaken Middle Eastern alliances without causing volatility in oil and natural gas prices.

1. Who are the most influential individuals in the GCC dispute?

Generally, the heads of government in Saudi, the UAE, and Egypt are most influential in driving the current dispute. Mohammed bin Zayed is staunchly against the presence of Islamic groups and Minister or State Anwar Gargash, a key Emirati power player with regards to foreign policy issues, has also been a vocal critic of Qatar since the crisis unfolded.

Adel Al Jubair, the Saudi foreign minister, is another figurehead of Saudi condemnation of Qatar. Jubair is likely to have strong backing from Crown Prince Mohamed bin Salman, who is reportedly on very good terms with Mohammed bin Zayed, and this UAE-Saudi nexus is the real engine driving forward confrontation vis-à-vis Qatar.

The influence of Abdel Fattah El Sisi is also notable here, as the Egyptian President is closely aligned with the Gulf monarchies leading the boycott of Qatar. He has his own networks in Saudi from time spent as a military attaché stationed in Riyadh, and Saudi has proven an ardent backer of his government over what has been a difficult few years, especially in regard to the power struggle against the Muslim Brotherhood.

2. What are the key Gulf political moves that require monitoring?

Qatar’s next move in response to the diplomatic attack is perhaps most worth watching going forward. On one hand, it may begin to slowly comply with GCC demands in certain areas, as it did during the previous crisis in 2014, which lasted for nine months. On the other hand, it may instead play the long game this time and resist the demands of the Saudi-led bloc, which most likely entails growing closer to Iran and Turkey.

Equally, it will be interesting to see whether the GCC countries move the goal posts, so to speak, in terms of expectations from Qatar. It is unlikely that the list of 13 demands these countries issued on the 23rd of June were meant to be met, and is indicative of the fact that GCC are not looking for a quick rapprochement with Qatar. Should they soften or alter their stance, it will signal a readiness to de-escalate tensions with Qatar.

Energy Markets

3. Is the GCC dispute about energy and if so, how will It impact global energy markets?

First and foremost, this dispute centres on political divergence between Qatar on the one hand, and Saudi Arabia, the United Arab Emirates, Bahrain and Egypt on the other. Disagreement over energy policy, which in the case of Qatar pertains to gas, does not appear to be a driving factor behind the dispute and neither has it impacted the energy markets so far.

That being said, given the UAE’s ownership of the Dolphin Gas Project, and Qatar’s reliance upon gas reserves to make up its budget, it is not unfathomable that power plays over energy assets may creep into the dispute. Should the outlook worsen, the disagreement may take on an energy dimension that could impact global energy markets, but this is still a long way away. In this sense, energy would be more of a victim of this dispute, as opposed to a driving factor of the crisis.

4. Does the GCC dispute change Saudi Arabia’s plans for the privatisation of Aramco?

In short, no. The privatisation of Aramco is part of a wider strategy unfolding in Saudi aimed at diversifying the economy. As such, it is unlikely to be used as a bargaining chip, or a point that will come under threat as a result of diplomatic tensions with Qatar. The most damaging outcome for the IPO would be a situation where there is a choice between doing business with either Qatar or Saudi, which could be a major disincentive for some investors.

Although the GCC crisis may pose some red flags to investors, and even knock confidence in certain sectors, Aramco’s listing is largely removed from these events so there are no indications that the IPO is under threat.

Political Implications & Forecasting

5. How does Turkey benefit from developing closer relations with Qatar and Iran? And how does this impact Ankara’s relations with Riyadh in light of the GCC dispute?

Firstly, it is important to understand that President Erdogan portrays Turkish involvement in the crisis as part of Turkey’s role as a regional power. This highlights that Turkey is active in the region and that it is a “decisive” power in disputes, which in this case is legitimised by its military presence in Qatar. Obviously, this is the line taken in Ankara and projected to the AKP’s constituency at home.

In any case, backing for Qatar should not necessarily be equated with direct confrontation vis-à-vis the GCC bloc. Turkey appears unlikely to challenge Saudi, and lose its commercial and political relations with the other GCC countries because of this crisis. The exception is Egypt, whereby Erdogan and Sisi have a series of bilateral disagreements that existed prior to this crisis.

6. Does Saudi Arabia’s targeting of Al-Jazeera pose a major significance in terms of Qatar’s relations with the other GCC countries and are all GCC countries on board?

Al Jazeera Network is integral to the Saudi-led targeting of Qatar, primarily because it represents all that the bloc of four countries perceive to be ‘wrong’ with Doha’s foreign policy. It is the mouthpiece for an independent actor, which isn’t conforming to the unified policy line generally taken among the wider GCC states, with Kuwait and Oman traditionally taking a passive and back seat position.

On a tangential note, the relative neutrality and less influential positions of the latter two is again apparent in this crisis, so it is inaccurate to say a unified GCC targeting of Qatar exists, but rather a Saudi-led faction which only makes up half of the GCC countries.

The Arabic language outlet of Al Jazeera, in particular, has been accused of playing host to figures that have been labelled as terrorists and extremists by the UAE, Egypt, and Saudi Arabia, therefore also linking it to the wider concerns that these countries have with the Muslim Brotherhood and other groups advocating political Islam.

7. What is the prospect of an escalation in the GCC region, both militarily as well as in terms of the termination of bilateral trade relations?

With reference to military confrontation, there is very little to suggest that any internal armed confrontation among GCC members will take place. The only military aspects to this crisis so far has been Turkey’s troop deployment to Qatar, which was not met with military confrontation by the GCC countries.

Previous armed confrontations between GCC states, such as that over the land border between Qatar and Saudi in 1992, have also not led to larger scale conflicts – and neither is it supposed this it is in the interests of any GCC country at present.

With respects to trade relations, the interdependency of GCC countries has become part of the fabric of the community since 1981. Commercial laws in the region often state that majority ownership of commercial entities, such as Public Joint Stock Companies (PJSC), must be local or GCC citizens. In this sense, the breaking of bilateral trade relations would be detrimental to all parties; and so, the motivation to harm each other, in a commercial sense, is likely to be lacking.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

9 comments

  1. vlade

    I’ve read an interesting article on this (not in English, so won’t post a link). It basically said that it’s going to go “Arabic”, which the author meant as going into prevaricating and various face-saving modes where it starts with a lot of bluster that gradualy dies down, both sides do some minor concessions and nothing much happens in the end.

    That is assuming that no third party (US/Iran/Turkey) makes moves or blunders that will force an escalation.

    Reply
    1. PlutoniumKun

      I’ve been very surprised at how sanguine the markets have been. My reading of has been that the Saudi’s hugely overplayed their hand by making their demands public. This led to a situation where they have given themselves no leeway to back down or compromise. Likewise, the Qatari’s seem determined to sit it out.

      But it may well be that from an Arabic perspective, this sort of situation isn’t a deal breaker as far as face saving stand downs can be done without too much harm to everyones reputation. I’m assuming that the energy markets and others have made a similar calculation – that as you say, over a few months there will be a series of step downs occurring and everyone will declare victory and go back to how it was before. The problem I see with this is that the new Saudi govt seems to be wilful and incompetent, so I do wonder if they have the ability to do this. Yemen has seriously damaged their credibility, one more failure might be seen as too much. We are all in trouble if the young prince Salman dreams of a lightening raid from the sands, just like in the old days.

      Reply
      1. skippy

        Trouble in Paradise…. say it ain’t so…

        Too much money in to few hands w/ attendant networking effects acerbated by esoteric divisions on the cusp of an energy shift. Many players know the jig is up, so the only recourse is petty games to diminish others in a game of last – man – standing. Hence so many non recourse military misadventures in a failed attempt to gain some essence of authority [projection of power – rare commodity these days].

        disheveled… Expectation – https://www.youtube.com/watch?v=G-Jr3Czk6rY

        Reply
      2. Louis Fyne

        …My reading of has been that the Saudi’s hugely overplayed their hand by making their demands public….

        if you want to be cynical and slightly conspiratorial, the Saudis played this drama in a ham-fisted way hoping to scare the oil market into topping $50/barrel.

        All kabuki theatre? especially since the Saudi military still has their hands full in yemen

        Reply
    2. sid_finster

      That is my feline take on it.

      I can’t see the Saudis launching into *another* war, especially since Yemen is going so swimmingly, and Turkey has an actual real military that can, you know, shoot back.

      Then there are the little inconvenience of the UAE receiving its electricity from Qatar and the US airbase there.

      On the other hand, MBS is a hothead and a stupid one at that.

      Reply
      1. Synoia

        Turkey has an actual real military that can, you know, shoot back.

        And the Saudi spat has opened the door to the putative ottoman (Ergdoganmen ?) revivalist.

        Reply
        1. Stephen Gardner

          Let’s not forget that Turkey is a NATO country. What happens if they get in a shooting war with Saudi Arabia? What is the US obligated to do? I think the Saudis know and even foolish and hotheaded MbS knows that he would not like the outcome.

          Reply
  2. Bobby Gladd

    I often wonder of late if we’re about to see just how little the U.S. is getting for spending more on its military than the next nine largest spenders combined.

    Reply

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