Arab enemies may impose new sanctions on Qatar

Significance Hopes for a swift resolution of the Gulf crisis were dashed on June 23 when details emerged of a list of 13 demands sent by the four countries that launched a boycott of Qatar on June 5: Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain. Impacts The concept of the Gulf Cooperation Council (GCC) as a common market has been permanently damaged. An increased political risk premium will raise borrowing costs across the GCC. Firms in Qatar will find it harder to retain and recruit professional expatriate staff.

Subject Outlook for Pakistan-Gulf relations. Significance Pakistan's parliament last month voted against joining the Saudi-led military intervention in Yemen. Since then Pakistan's Prime Minister Nawaz Sharif and Chief of Army Staff Raheel Sharif have visited Riyadh to clarify the decision, reassuring Saudi Arabia of Pakistan's support in case of any external aggression against the kingdom. The Yemen intervention has exposed some faultlines in the relationship between the two allies, as well as in Pakistan's ties with other members of the Gulf Cooperation Council (GCC), some of whom -- most notably the United Arab Emirates (UAE) -- described Pakistan's decision as "dangerous and unexpected". Impacts Pakistan will lose leverage in GCC states as the latter opt to provide aid via multilateral, international mechanisms. Islamabad will be reluctant to share nuclear technology with GCC states -- primarily for fear of provoking Washington. China will increasingly become Pakistan's preferred diplomatic and economic partner, despite a degree of mutual suspicion.


Subject Eritrea and regional geopolitics Significance Hoping to mitigate its international isolation, Eritrea has over recent years aggressively pursued new alliances with Saudi Arabia and the United Arab Emirates (UAE), adding to its older but no less vital links with Egypt. However, shifting regional alignments in the wake of the 2017 Gulf crisis have placed Asmara squarely in the middle of some of the Arab world’s most serious political rifts, and greatly exacerbated tensions with its neighbours, with serious repercussions that the ruling People's Front for Democracy and Justice (PFDJ) will find it difficult to navigate. Impacts Access to eastern Sudan will be curtailed for some time, creating economic challenges for the PFDJ. Eritrean opposition forces may secure increased external support, although, except for Ethiopia, most channels will remain covert. Qatar’s withdrawal from the disputed border with Djibouti will complicate Eritrea’s lobbying for an end to the UN arms embargo.


Subject Prospects for the Gulf states to end-2017. Significance Gulf Cooperation Council (GCC) countries agree on the need to check Iran’s regional aspirations, but differ radically on how to achieve this goal -- pushing Saudi Arabia, Bahrain and the United Arab Emirates (UAE) to open confrontation with Qatar and leaving Kuwait and Oman caught uncomfortably in the middle. At the same time, they face the major challenge of adjusting their economies to long-term expectations of lower oil revenue.


Subject The Gulf 's cybersecurity agenda. Significance Offensive cyber capabilities are technological tools for intruding into external digital networks to delete, steal or manipulate data. All six states of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Saudi Arabia, the United Arab Emirates (UAE) and Qatar -- are developing these capabilities in the face of multiple threats. Impacts There is currently no indication that the GCC states are preparing cyberattacks against critical infrastructure. GCC states will continue relying on Western and Israel private firms for advanced surveillance tools. Efforts to nationalise the cybersecurity sector will advance slowly. Cyber espionage is almost certainly a fourth, covert GCC goal.


Significance The sultan this month paid his first foreign visit to Saudi Arabia, establishing institutions for ongoing cooperation. Under the previous ruler, Muscat was wary of Riyadh’s dominant influence in the Gulf Cooperation Council (GCC). However, both the regional environment and Oman’s economic situation are now in a state of flux. Impacts New Saudi investment in Oman would likely focus on the tourism and industrial sectors. Higher oil prices will provide only a temporary reprieve for Muscat’s structural economic problems. Omani interactions with the United Arab Emirates could become more fraught.


Subject Sudan's foreign relations. Significance As aftershocks from the Gulf crisis ripple across the Horn of Africa, Sudan appears to be playing a dangerous strategic game. Recent months have seen Sudan seek deals with Turkey and Qatar, as well as Saudi Arabia and the United Arab Emirates (UAE), even as these extra-regional powers are locked in a fractious rivalry that is playing out in Africa as a contest for influence. Impacts Even with external support, Sudan’s economic crisis is unlikely to ease quickly. Economic tensions may explode into a new wave of popular anti-government protests. Mismanagement and corruption will remain serious obstacles to wider investment and business in Sudan.


Subject Oman-Iran relations Significance Oman is the only Gulf Cooperation Council (GCC) member that maintains formal relations with all states in the region, including Iran, which has fallen out with the two most powerful GCC states, Saudi Arabia and the United Arab Emirates (UAE). Oman’s diplomatic channel to Tehran enables it to play the role of mediator between the United States and its Arab allies on the one side and Iran on the other. Indeed, US Secretary of State Mike Pompeo called Sultan Qaboos on May 16 to discuss alleged Iranian threats. Impacts An outbreak of hostilities between the United States and Iran would leave Oman isolated from other GCC states. Oman would reap economic benefits as a transshipment centre for Gulf states if Saudi Arabia and the UAE fight with Iran. A worsening Gulf crisis would increase smuggling between Iran and Oman, with Tehran eager to keep supplying Huthi rebels in Yemen.


Subject Prospects for the Gulf states in 2018. Significance The Gulf Cooperation Council (GCC) saw dramatic political changes in 2017. Mohammed bin Salman advanced to become Saudi crown prince. The GCC also split in a way not seen since its foundation in 1981, after three members -- Saudi Arabia, the United Arab Emirates (UAE) and Bahrain -- launched a boycott of Qatar in June.


Subject Saudi-Emirati strategic partnership. Significance The United Arab Emirates (UAE) and Saudi Arabia are accelerating their strategic partnership. On June 6 they held the inaugural meeting of the Saudi-Emirati Coordination Council (SECC), signalling increased assertiveness and a deliberate turning-away from the wider Gulf Cooperation Council (GCC). The partnership has become pivotal for the region but has delivered mixed results. Impacts The new SECC will eclipse the troubled GCC as the driver of Gulf policies and may deter US efforts to convene a GCC summit in September. Excluded Kuwait and Oman may look for other regional ties, as they face increasing pressure from the Saudi-Emirati duo. The two countries’coordination against Iran will define long-term alliances in the Middle East region.


Subject The Qatar crisis has an impact on South Asian migrant labour Significance On June 5, Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt cut diplomatic relations with Qatar and imposed a blockade, claiming that Qatar supports terrorism and interferes in the internal affairs of its neighbours. On June 23, Qatar was presented with a list of 13 demands to be fulfilled for relations to be restored. With Qatar unlikely to be willing or able to meet those demands, the Gulf faces a prolonged stand-off with economic and social ramifications for Qatar’s South Asian labour force. Impacts The future of the Gulf Cooperation Council (GCC) is in jeopardy. Heightened regional tensions are likely, with military confrontations between Saudi Arabia and Iran possible. Qatar may increase exports of liquefied natural gas (LNG) to South Asian countries.


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