Gulf nations still at risk from spat with Qatar, Moody's says

A lingering dispute with Qatar has ensnared several members of OPEC and could curb overall economic growth potential.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Sept. 13, 2017 at 8:33 AM
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Sept. 13 (UPI) -- The ongoing row between Qatar and its Gulf neighbors, many of which are OPEC members, is credit negative, Moody's Investors Service said.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt this week accused Qatar of offering misleading statements on lingering diplomatic disputes in the region. Riyadh's allies said Qatar was offering a duplicitous stance on the issue by saying it was ready for dialogue while at the same time "denying the fact that they support terrorism and extremism and finance the publication of the discourse of hatred and sedition."

Saudi Arabia in June led a coalition of Middle East countries in severing ties with Qatar, adding a layer of geopolitical risk to the global energy market. Saudi Arabia is the largest oil producer in the Organization of Petroleum Exporting Countries, Qatar is a leading natural gas supplier and the Persian Gulf is a choke point for the flow of energy supplies from the region.

The countries accused Qatar of supporting terrorist networks and called on the nation to downgrade its relations with the Muslim Brotherhood in Egypt and close its al-Jazeera media outlet, among other things.

Moody's Investors Service said in a report emailed to UPI the dispute is credit negative for all members of the regional Gulf Cooperation Council, though Qatar and Bahrain are the most exposed to risk.

"The severity of the diplomatic dispute between Gulf countries is unprecedented, which magnifies the uncertainty over the ultimate economic, fiscal and social impact on the GCC as a whole," Steffen Dyck, a senior credit officer at Moody's and co-author of the report, said in a statement.

For Qatar, the report found there should be no actual disruptions to its ability to export oil and natural gas, though imports have become more expensive. Other regional countries like Kuwait and Oman, meanwhile, could actually benefit because of trade diversions that resulted from the dispute, though the overall impact on growth will be negligible.

Meanwhile, any shock to investor confidence could disrupt foreign direct investments in the region and curb the potential for economic growth.

"Any loss of high-quality FDI that would otherwise create jobs, promote technological transfer, and foster the private sector would be a setback for GCC states' ambitions to diversify away from state-led employment supported by the oil sector," the report read.

The dispute, meanwhile, has been an ongoing concern for the U.S. government given the military presence in the region. U.S. Secretary of State Rex Tillerson was in Kuwait in July to discuss the issue.

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