Gulf Crisis Creates Opportunity for Asian Nations (JMD on Pragati)

Gulf Crisis Creates Opportunity for Asian Nations

The rift between the Gulf
countries and Qatar has
created a space for Asian
countries to step in to
engage with the small
peninsular state.

There’s a silver lining for Asian countries in the
six-month old crisis in the Gulf that pits a UAE-
Saudi-led alliance against Qatar. That is as long
as Saudi Arabia and the United Arab Emirates
shy away from attempting to harness their
financial muscle to shore up lagging
international support for their diplomatic and
economic boycott of the idiosyncratic Gulf state.

Asian nations, including India, Pakistan, Sri Lanka,
Bangladesh, Indonesia and the Philippines, whose
nationals populate the Gulf’s labour force, have
already reaped initial benefits with Qatar, eager to
put its best foot forward, significantly reforming its
Qatar recently became the first Gulf state to introduce
a minimum wage, albeit criticized by human rights
groups for being at $200 below earning levels in
many of the labour-supplying states. It has also
sought to improve workers’ rights and committed to
improving their living conditions.

Qatar was under pressure to reform the kafala
system long before the Gulf crisis erupted, but the
dispute with its Gulf neighbours strengthened its
interest in being seen to be doing the right thing.
Its moves are over time likely to persuade other
Gulf states to follow suit.

The boycott as a result of its refusal to accept 
UAE-Saudi demands that would curtail its
independence has forced Qatar to restructure
trade relationships, diversify sources for goods
and services, creative alternative port alliances,
and recalibrate the strategy of its national carrier,
Qatar Airways.

The UAE, Saudi Arabia, and their allies insist that
Qatar unconditionally break its ties to various
political groups, including the Muslim Brotherhood,
adhere to Saudi and UAE foreign policy, reduce
relations with Iran, shutter the Al Jazeera television
network, and accept monitoring of its compliance.
Qatar has rejected any infringement of its sovereignty
and called for a negotiated solution.

The two countries have so far shown no willingness to
compromise on their insistence on unconditional Qatari
acceptance, but have also shied away from escalating the
dispute, by among others pressuring third parties to
choose sides.

The dispute has further divided the Arab world with some
countries like Egypt and Bahrain siding with the UAE and
Saudi Arabia, others like Jordan, Lebanon, Tunisia, and
Algeria sitting on the side lines and calling for a negotiated
solution, and finally nations like Oman and Algeria who have
stepped in to help Qatar offset the impact of the boycott.

The fracturing of the Arab world was on display at a meeting
in Cairo in mid-November of Arab foreign ministers. Saudi
Arabia was able to wrest a statement condemning Iran and its
Lebanese ally, Hezbollah, but failed to achieve a consensus as
Lebanon teetered on the balance because of Saudi pressure.

Without breaking the stalemate and the initiation of
negotiations that at best would achieve a face saving formula
that falls short of a fundamental resolution, the dispute is likely
to settle in as a fact of life and further undermine the Gulf
Cooperation Council (GCC) that groups the six Gulf states. Saudi
Arabia and its allies have said they were not contemplating
military intervention even if they have sought to foster tribal
opposition to Qatari emir Sheikh Tamim bin Hamad Al Thani
led by lesser known members of the ruling family.

The UAE’s articulate ambassador to Russia, Omar Ghobash,
suggested in June that “there are certain economic sanctions that
we can take which are being considered right now. One possibility
would be to impose conditions on our own trading partners and
say you want to work with us then you have got to make a
commercial choice.”

Six months later, the UAE and Saudi Arabia have yet to act on their
threat, creating business opportunities as Qatar settles in for the
long haul and structurally ensures that it will no longer depend
primarily on its Gulf neighbours.

Food is one key area, making food security a Qatari priority. 
Turkey and Iran were quick to step in to fill the gap created by the
Saudi ban on export to Qatar of dairy and other products. With the
import of some 4,000 cows, Qatar has sought to achieve a degree of
self-sufficiency with domestic production within a matter of months
accounting for approximately 30 percent of consumption. Nonetheless,
with a minimal food processing industry, Qatar will seek to diversify
its sources, creating opportunity for Asian producers.

With the loss of some 20 Gulf destinations as a result of the boycott,
state-owned Qatar Airways, the region’s second largest airline, may
be the Qatari entity most affected by the crisis. Against the backdrop
of a likely annual loss, Qatar Airways is looking to expand its route
network elsewhere and weighing stakes in other airlines.

Asia is an obvious target. Qatar is scheduled to initiate flights to
Canberra in Australia, Chiang Mai and Utapao in Thailand, and
Chittagong in Bangladesh in the next year. The airline has rejected
proposals that it bid for Air India, but plans to move ahead with plans
for the launch of a domestic Indian airline. Elsewhere, Qatar Airways
acquired a 9.61 percent stake in troubled Hong Kong-based 
Cathay Pacific for $662 million.

Similarly, Qatar has had to compensate for its loss of port facilities,
primarily in the UAE by diverting to Salalah in Oman and Singapore.
While that solved the Gulf state’s immediate bottlenecks, it is probable
that Qatar will take an interest in other Asian ports in competition with
Saudi Arabia and the UAE.
Given Saudi interest in China-backed ventures such as Pakistan’s
Gwadar and the Maldives, Qatar could well look at Indian alternatives,
including the Indian-supported Iranian port of Chabahar, a mere 75
kilometres further up the coat from Gwadar. Singapore port has stepped
in with Qatar availing itself of shipping and logistical services. Vietnam
and India see opportunities in the sale of food and construction materials.

Perhaps most fundamentally, Asian countries like India, in a bid to ensure
the security of their energy supplies, are looking at diversifying their
sources and increasing the non-Middle Eastern portion from producers like
the United States. Indian Oil minister Dharmendra Pradhan adopted a tough
stand in recent talks with OPEC Secretary General Sanusi Mohammad
Barkindo, advising him that India was looking at alternative sourcing. India
recently cut crude oil imports from Iran because of stalled negotiations over
the development of an offshore gas deposit in the Gulf, forcing Iran to look 
for alternative buyers in Europe.

The Gulf, irrespective of if and how the crisis may be resolved, is unlikely to
return to the status quo ante. As a result, the crisis is certain to influence
political, economic and commercial relationships for decades to come. That
creates opportunity that Asian nations potentially can capitalize on.


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