The Anatomy of a Disruption in the GCC

• Saudi Arabia, UAE and others cut diplomatic ties and shut borders to Qatar
• Crisis is seen as the worst in the region since the formation of the GCC
• Tensions present major economic challenges at a key moment

Long-simmering tensions between Qatar and its GCC neighbours burst into a regional crisis on Monday when Saudi Arabia and the UAE, together with several other Arab states, closed their land, sea and air borders to Qatar and cut diplomatic ties to the Gulf state.

In coordinated announcements, Saudi Arabia, the United Arab Emirates, Egypt, Bahrain and Yemen all said they had severed ties with Qatar, accusing it of supporting terrorism. The joint action dramatically escalated the dispute over Qatar's support of the Muslim Brotherhood and its seemingly soft line on Iran.

The UAE said that Qatar’s “involvement in destabilising the region and interfering in other countries” has caused it to “take the necessary measures for the well-being of the GCC.”

Saudi Arabia’s official news agency SPA said, "(Qatar) embraces multiple terrorist and sectarian groups aimed at disturbing stability in the region, including the Muslim Brotherhood, ISIS (Islamic State) and al-Qaeda, and promotes the message and schemes of these groups through their media constantly."

The crisis began in late May when the state-run Qatar News Agency allegedly carried comments by Qatar’s ruler Sheikh Tamim bin Hamad Al Thani criticising mounting anti-Iran sentiment and President Trump and King Salman’s singling out of Iran as the world’s main sponsor of terrorism.

Qatari officials eventually deleted the comments and blamed them on hackers as they appealed for calm. However, Saudi Arabia and the UAE accused Qatar of seeking to undermine efforts to isolate the Islamic republic.

The issue broke an uneasy détente between the Gulf States. In 2014, Gulf countries also led by Saudi Arabia fell out with Qatar over its backing of then-Egyptian President Mohammed Morsi, a Muslim Brotherhood member. Saudi Arabia, the United Arab Emirates and Bahrain all recalled their ambassadors from Qatar over the row. However, eight months later, the ambassadors returned to Qatar as the country forced some Brotherhood members to leave the country and quieted others. Qatar pledged to abide by regional policies and to avoid “interfering” into other nations’ domestic issues.

Border closures and evictions

The row has hurled the region into one of its most significant crises since the formation of the GCC in 1981. Perhaps the most significant step will be the closure of transport ties with Qatar and the extraordinary decision to evict Qatari visitors from the five countries.

Qatari citizens, who enjoy visa-free travel across the GCC and Europe, have been given two weeks to leave Saudi Arabia and the UAE. The UAE also gave Qatari diplomats 48 hours to leave the country, and Qatar has been expelled from the Saudi-led coalition fighting Houthi rebels in Yemen.

The crisis has also sent shock waves across the region’s financial markets and threatened to hamper its highly integrated markets. Qatar’s electrical grid, its financial system and even its gas exports are intricately linked into the rest of the GCC, and any disruptions could exacerbate existing sectoral shifts in the regional economy.

Stocks in Qatar plunged over 7 per cent on Monday, erasing nearly 30 billion Qatari riyals in market capitalisation and equities across the Gulf opened sharply lower but recovered ground throughout the day to post mostly moderate losses. Oil initially jumped 1.5% before paring gains, while questions lingered over the continuation of LNG shipments to Egypt and supplies of gas to the UAE through the strategic Dolphin pipeline, which accounts for around 30 percent of the country’s average daily gas consumption.

Business interruptions

The tensions put regional businesses in a difficult position. Regional companies with businesses or operations in Qatar were placed in a particularly challenging position; many have taken precautionary measures in the event of any long-term disruptions and have dusted off their crisis preparedness plans.

Saudi Arabia, the UAE, Egypt and Bahrain all said they would cut air and sea traffic to Qatar. Saudi Arabia said it would also shut its land border with Qatar, effectively cutting off the country from the rest of the Arabian Peninsula, affecting shipments of everything from foodstuffs to critical parts and supplied.

Emirates, Etihad Airways and other regional airlines announced on Monday that they would be halting all flights to Doha until further notice. Meanwhile, the closure of Saudi airspace means that Qatar Airways, one of the region's major long-haul carriers, will be forced to amend its flight paths around the country.

Qatar had appeared unperturbed by the growing tensions. The Qatari government said on Monday that the decision to cut diplomatic and economic ties was “baseless” and “without any justification,” state-run Qatar News Agency said, citing the foreign ministry.