There are growing expectations of a limited Qatar-Saudi reconciliation, at least on airspace.
Qatar Rift
- We concluded in our 30 Nov deep dive into the rift that a deal was “possible but unlikely”. Since then there have been several reports of progress towards at least a limited deal, possibly with Saudi Arabia alone, following Jared Kushner’s visit to Doha on Wednesday (QNA, NYT). The latest reports, which have been received hopefully by many well-informed Gulf analysts such as Hussein Ibish (BB), have raised the probability from about 20% to 40% for at least a limited deal on airspace within the next week. If nothing happens within that timeframe then the probability will dip once again until there is a push by the Biden Administration. If a deal is done it will be somewhat ironic given indications that Kushner may have provided a US greenlight ahead of the launch of the embargo in 2017 and steered his father-in-law to initially support it.
- Bloomberg was the first to report, late on Wednesday, that the two countries are “nearing a preliminary deal… likely to include reopening airspace and land borders” but which does not include UAE, Bahrain or Egypt. The report cites three people “with knowledge of the talks” but has no on the record confirmations from officials. The article suggests the move would be driven by Saudi concerns about changes in the geopolitical environment under Biden. Qatar’s Al Jazeera subsequently ran an article also saying that a preliminary deal was close.
- Qatar’s foreign minister said on Friday in comments to the Rome MED conference that “Right now there are some movements that we hope will put an end to this crisis” but said he could not predict the timing. He also said any deal would involve all four boycotting countries, not just Saudi Arabia. His Saudi counterpart will be speaking to the conference at 2.30pm UK (9.30am EST) and is likely to be asked about (MED).
- The Saudi ambassador to the UN said in an interview on Monday that the rift could end within 24 hours (it didn’t) although he made the prediction dependant on the usual accusations: “If Qatar recedes from its previous stances, stops its support for terrorists, halts grants to extremist media, as well as stopping its interference in the internal affairs of other Arab countries” (MEE, RT-Arabic).
- These caveats, also repeated in recent weeks by the Saudi foreign minister, remain one of the key reasons we are still sceptical about the chances for a breakthrough. The most that Qatar is likely to offer is a reduced focus on Saudi Arabia in Al Jazeera coverage (as it did in 2008, see NYT) and various assurances, which would be hard for Saudi Arabia to publicly market as a vindication for over three years of embargo.
- Prince Turki al-Faisal, the former Saudi ambassador to the US and intelligence chief but who has no role in the government currently, denied there had been any development regarding Qatar in an interview with CNN-Arabic.
- There has been no material rally this week in Qatari equities or bonds, relative to peers, suggesting markets remain sceptical, as well as the fact that the real economic impact for Qatar of a resolution would be small. Possible indicators to watch include the relative performance of Almarai, the Saudi company that used to supply much of Qatar’s dairy requirements, and local firm Baladna, which grew dramatically to fill the supply gap following the embargo.
- If a deal does happen it is likely to be driven by Saudi concerns about Iran, desire for good relations with Biden and growing Saudi-UAE tensions which include:
- Longstanding differences over Yemen policy: The UAE supports an independent South Yemen and is deeply opposed to Islah, the local Muslim Brotherhood affiliate, whereas Saudi prefers a unified Yemen and needs to engage with Islah to balance Houthi influence in the northern region along its border.
- Divergence in oil policy: Saudi is the most hawkish on production cuts, whereas the UAE is leaning towards a maximum output strategy. These differences came to the forefront in the context of this week’s OPEC meetings (Rt).
- Differing approaches to Iran: UAE is making greater efforts that Saudi Arabia to mitigate tensions, including condemning the killing of Fakhrizadeh. It doesn’t want to be the target of an Abqaiq-style attack.
- Courting Israel: MBS is frustrated about domestic opposition to normalisation with Israel, something he would like to do, resulting in a sense that the UAE has gained an economic and diplomatic advantage as the first mover.
- However, despite all this, the core friendship between the crown princes of Saudi Arabia and Abu Dhabi seems to be strong and economic cooperation between the two countries is growing and should be sufficient for now to overcome the differences listed above. However, these tensions and the changing circumstances with Biden approaching mean that the UAE’s ability to override the desire of some Saudi policymakers to end the rift, as it did in January and June, may not work a third time.
- If no deal materialises, it may be that it was just a bluff by Saudi Arabia to nudge UAE into line on the OPEC+ deal.
- If Saudi is really ready to reconcile, it would be surprising if Bahrain didn’t follow, although it is in a difficult position as it is reliant on ongoing funding from both Saudi Arabia and UAE. It would likely need assurances that a deal could unlock financial support from Qatar. The upcoming annual Gulf summit, hosted (virtually) by Bahrain, would be the obvious moment to announce any deal.
- There are no signs of a breakthrough with UAE, potentially setting up a situation for a long-term bilateral rift that no one else wants, similar to the US-Cuba relationship. This would be a loss of Dubai, both because it would benefit from Qatari visitors and investors and because the embargo undermines its offering as a neutral hub for commerce.
- Oman would benefit the most from a deal because of the improved chances of unlocking coordinated GCC financing.
