(MENAFN- The Peninsula) By Satish Kanady / The Peninsula
The Saudi-led nations' decision to lay siege to Qatar will adversely affect the trade balances of blockading countries as well. 'The physical closure of Qatar's land, air, and sea borders with the blockading nations will affect trade linkages in both directions. We therefore expect the boycott to adversely affect the trade balances of boycotting countries that previously had trade surpluses with Qatar, particularly Saudi Arabia., ratings agency S & P Global Ratings said yesterday.
However, the countries not participating in the siege, such as Oman and Kuwait, may benefit from diverted trade routes. In 2016, goods exports from Qatar to the GCC and Egypt accounted for 11 percent of Qatar's total exports, or roughly 6 percent of current account receipts ($6bn).
Although intra-GCC trade is relatively limited as a proportion of total exports or imports, this is not to say that its complete suspension would not be meaningful from a ratings perspective. For example, the UAE, with which Qatar has the most substantial trade linkages, depends on gas imports from Qatar through the Dolphin pipeline to meet about 30 percent of its energy needs.
'We expect that the Dolphin pipeline will remain open, absent a further significant escalation in tensions between Qatar and the UAE. Should the pipeline be shut off, this could result in higher fuel costs for national electricity generators and fiscal costs for the individual UAE emirates, the ratings agency said. For some emirates, such as Ras Al Khaimah (RAK), Qatar is also an important customer, importing roughly 12 percent of RAK's limestone production for use in its infrastructure program.
According to S & P analysts, RAK's quarrying companies are making efforts to expand into new markets. Without this offsetting growth, Qatar's boycott could ultimately harm RAK's fiscal position, as government revenues are closely tied to the profitability of government-related entities.
The ratings agency expects that the impact of weaker relations on economic growth through reduced investment, regional trade, and lower corporate activity will intensify the longer the situation lasts, but that the overall impact should be relatively limited.
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