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Trading  | June 24, 2017

One day after Saudi Arabia and its Gulf ally states finally released a long-awaited, 10-day ultimatum containing 13 demands from Qatar as a precondition for the resumption of diplomatic ties and an end of Qatar’s economic and naval blockade, the small Gulf nation balked and said the ultimatum is neither “reasonable” nor “realistic”, and infringes on its sovereignty and foreign policy. 

This list of demands confirms what Qatar has said from the beginning – the illegal blockade has nothing to do with combating terrorism, it is about limiting Qatar’s sovereignty, and outsourcing our foreign policy” said  Sheikh Saif Al Thani, director of Qatar’s government communications office, in a statement to Bloomberg.

As a reminder, the full list contained such demands as reducing diplomatic representation with Iran, shutting down the Turkish military base that is being established (Turkey has already balked at the threat), severing ties with terrorist organization, shutting down Al Jazeera and all affiliated channels, and so on. The demands are explicitly aimed at dismantling Qatar’s two-decade-old interventionist foreign policy, which has reflected the clout generated by its vast natural gas and oil wealth but incensed conservative Arab peers over its alleged support for Islamists they regard as mortal threats to their dynastic rule.

Al Thani dismissed the demands and said that while the list is “currently under review”, it is only “out of respect for our brothers in Kuwait” whose emissary delivered the Saudi-led demands Friday. Al Thani said that the demands do not meet the US and UK criteria for “reasonable and realistic measures.”

Meanwhile Qatar’s Foreign Ministry said it will soon issue an official response, one which we doubt Saudi Arabia will like as the bid/ask in the early stage of the negotiations is being established. 

“The State of Qatar is currently studying this paper, the demands contained therein and the foundations on which they were based, in order to prepare an appropriate response,” the ministry told Channel News Asia.

On Friday, Qatar’s news outlet Al Jazeera responded to Saudi demands that it be shut down as part of the “renormalization” process. “We in the network believe that any call for closing down Al Jazeera is nothing but an attempt to silence the freedom of expression in the region and to suppress people’s right to information,” Al Jazeera said in a statement.

“By accepting those demands and conditions Qatar will be subject to international accountability and violating its commitments regarding human rights conventions,” Qatar’s National Human Rights Committee said in a statement cited by Reuters.

Meanwhile, a senior United Arab Emirates official told Reuters what would happen if Qatar refused to comply with the Arab ultimatum, saying there would be a “parting of ways.”

The alternative is not escalation, the alternative is parting of ways, because it is very difficult for us to maintain a collective grouping,” UAE Minister of State for Foreign Affairs Anwar Gargash told reporters.

Gargash urged Qatar to meet the demands. “It would be wiser that [Qatar] deal seriously with the demands and concerns of the neighbors or a divorce will take place,” Anwar Gargash said on Twitter in Arabic, adding, that “the crisis is profound.”

He added that while diplomacy with Qatar remained a priority, that mediation efforts to resolve the dispute had been undermined by the public disclosure of the demands. “The mediators’ ability to shuttle between the parties and try and reach a common ground has been compromised by this leak,” he said. “Their success is very dependent on their ability to move but not in the public space.”

UAE Minister of State for Foreign Affairs Anwar Gargash

In other words, another attempt at a backdoor deal orchestrated by Saudi Arabia failed because someone leaked something, only this time it didn’t involve Trump being a KGB secret agent.

Gargash said that if Qatar fails to comply within the 10-day timeline set out in the ultimatum, it will be isolated. But he did not make clear what more could be done since the four Arab nations have already cut diplomatic relations with Doha and severed most commercial ties.

Despite the verbal assurance that there will be no further escalation, Qatar is preparing for the worst, as two contingents of Turkish troops with columns of armored vehicles have arrived in Doha since the worst crisis among Gulf Arab states for years erupted on June 5. Gargash said the Turkish deployment was a “meaningless escalation” and he hoped Ankara would act in a “reasonable way” adding that “we hope that Turkey prioritizes the interest of the Turkish state and not partisan ideology,” Gargash said.

The uncompromising positions adopted by both sides leave little prospect for a quick end to the crisis. The sanctions have disrupted Qatar’s main import routes by land from Saudi Arabia and by sea from big container ships docked in the United Arab Emirates. But Qatar so far has avoided economic collapse by quickly finding alternative channels and says its huge financial reserves will meet any challenges.

* * *

Finally, the last wildcard in this diplomatic spat remains the US, whose often conflicting flipflopping on Qatar is a topic all in itself: last week Rex Tillerson asked that a list of Saudi demands be produced and sure enough, he got what he wanted which however, may not be what the former Exxon CEO had in mind.

After Tillerson pressed all sides to resolve the dispute, the president praised Saudi Arabia’s move on Twitter, citing Qatar’s history of “funding Radical Ideology.” On June 9, Tillerson called on Saudi Arabia to ease what he called its “blockade,” only to have Trump, at a White House news conference hours later, say the move had been the right one. At the same time, the Defense Department made clear the importance of its base in Qatar, from which the U.S. conducts its air operations against Islamic State.

“The Saudis and the Emiratis certainly look like they feel empowered by Trump, and the Qataris look like they also felt empowered by the Defense Department,” said Lori Plotkin Boghardt, a fellow who specializes in U.S.-Gulf relations at the Washington Institute. She said that only increased “the chance that both sides of the conflict will continue to dig in their heels.”

Now Tillerson is taking the lead. As Bloomberg reports, on Tuesday, his spokeswoman said the U.S. was “mystified” about why the coalition hadn’t listed its demands of the tiny nation, saying the U.S. suspected that the dispute was more about long-simmering tensions between them and not focused on Qatar’s funding of terrorism.  Tillerson’s efforts to encourage a resolution has been helped in recent days by President Donald Trump staying quiet after earlier comments undercut his secretary of state.

The Saudi demands were “a halfhearted response to U.S. pressure,” said Rob Malley, who coordinated Middle East policy for President Barack Obama’s National Security Council. “The real question is if whether it’s an opening gambit starting from a maximalist position or whether from Saudi Arabia’s and the Emirates’ point of view, it’s not time to negotiate.” Qatar’s foreign minister said on June 19 that his country wouldn’t bargain away what it sees as its sovereign rights and called on the Saudi alliance to conduct negotiations in a “civilized way,” after first lifting the blockade. He said Qataris were united behind their emir.

* * *

But wait, there’s more, and as we reported last week, the already convoluted situation became even more complex when the U.S. and Qatar signed a deal last week to sell as many as 36 F-15 fighter jets to Qatar. And on Thursday, Qatar’s state-backed airline, Qatar Airways Ltd., announced it would seek to buy a stake of as much 10 percent in American Airlines Group Ltd. American’s CEO scoffed at the move as “puzzling at best and concerning at worst.”

Finally, all of this takes place just days after the shocking Saudi shake up in which the Saudi King unexpectedly announced he was stripping the current Crown Prince, his nephew Mohamed bin Nayef (MBF), of all titles and obligations, and replacing him with his belligerent son, and advocate of more military intervention in the region, Mohamed bin Salman (MBS), a move which according to Petromatrix means that “with MBS now having greater control of Saudi Arabia and with Jared Kushner having a large control of the White House it is not really a question of if but rather of when a new escalation with Iran starts.”

With so many moving pieces in the Qatar crisis, anyone who is confident they have it “all figured out” will be wrong.

A revolutionary initiative is helping average Americans find quick and lasting stock market success.

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