(MENAFN- The Peninsula) By Sachin Kumar / The Peninsula
A recent report by a global think tank has termed the siege imposed on Qatar as a ‘strategic failure'. The report written by Gabriel Collins of Rice University's Baker Institute for Public Policy, said the siege against Qatar ‘grinds toward strategic failure'.
The report said that the blockade against Qatar is likely to weaken as time progresses.
'The worst of the post-blockade capital flight is likely over, the country is rebuilding its trade links and food supply chain to bypass imports previously obtained via Saudi Arabia and the UAE, and LNG exports remain robust, underpinning Qatari cash flow, said the report authored by Gabriel Collins, J.D., who is the Baker Botts Fellow in Energy & Environmental Regulatory Affairs for the Baker Institute Center for Energy Studies.
The report added that Qatar could very likely withstand the effects with decreasing impact each year as it increasingly emphasises economic relationships outside the Gulf region.
According to the report financial markets recognise Qatar's fundamentally strong position, and traders are pricing a future that sees Doha successfully resisting the blockade.
Credit default swap prices for five-year Qatari sovereign debt, which had spiked in early July 2017 immediately after the siege, have fallen significantly, said the report. It shows investors trust on Qatari economy.
The report adds that Qatar's trade patterns bolster its siege resistance. In 2016, slightly more than 15 percent of Qatari imports came from the blockading countries, a small enough share that building new trade networks to replace those lost imports in a fairly short time is a realistic possibility.
The ‘rapid rebuild' thesis is enhanced by the fact that much of what Qatar imports from its neighbors—food and basic material supplies—are highly fungible and can be procured from many other sources.
As per the report, less easily replaceable goods—such as gas turbines and critical technology components for liquefied natural gas (LNG) liquefaction plants—are sourced outside the Gulf region and generally lie beyond the reach of the anti-Qatar coalition.
'Qatar's key LNG buyers lie outside the Gulf region, and those that can supply advanced technology goods—such Japan, China, and South Korea—all have compelling strategic interests in seeing Qatar remain a stable baseload global energy supplier, added the report.
The report noted that many of the same countries embargoing Qatar are also blockading Yemen, and after more than two years they have still been unable to force a decisive strategic resolution, despite intensive use of military force. The evidence suggests that even blockade lasting multiple years would likely still fail to coerce Qatar into making the concessions desired by the embargoing countries.
The report said that Qatar will be able to withstand the effect of blockade as it is diversifying its economic relations with other countries. Qatar is net self-sufficient in steel production (including rebar critical for construction as it prepares for the 2022 World Cup).
'The new Hamad Port—capable of storing enough cereal grains to satisfy multiple years of local consumption, able to handle more than 3.5 million 40-foot shipping containers per year, and able to accept 1.7 million tonnes per year in general cargo—is already replacing import trade that formerly came by land from Saudi Arabia and by sea from the UAE, said the report.
'To the extent that incremental supplies of cement, certain steel products, and other goods may be needed for World Cup 2022 and other projects, seaborne supplies procured from India, Iran, and Turkey— among other potential partners—can very likely fill any gaps left by the cessation of land shipments from Qatar's neighbors, added the report.
As the embargo continues, diplomatic and political relationships between many Arab countries will likely suffer further damage, and Iran's relative influence in the region will likely rise as a result, noted the report.
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