A breakdown in relations between Qatar and its Arab neighbors isn’t just making life more difficult for the country’s citizens, facing food shortages due to tighter border controls.
CEOs from all corners of the globe could be affected by having their company’s imports into the country blocked. There’s also a risk that global energy costs could spike, should there be disruptions to the movement of Qatar’s vast natural gas supplies.
Saudi Arabia, Egypt, the United Arab Emirates, Bahrain and Yemen all cut relations with Qatar on Monday claiming the country, an Iran ally, isn’t doing enough to clamp down on terrorism.
The Gulf state, although a geographically small nation, is also a very wealthy one. It imports more than $30 billion of overseas goods each year, including goods from the U.S. and many European countries. Some of those products—primarily construction materials, machinery, cars, food and medical equipment—are no longer getting in.
“We know that some shipping lines are no longer taking bookings that have Qatar as their destination. So it’s a problem not only for the goods that are stuck in transit, but also for those who were looking to send goods there shortly.”
Trucks have been blocked from crossing the Saudi border and sea-bound trade also has been held up as vessels lose port access.
“We’re already seeing an effect,” Anastassia Beliakova, senior trade policy manager at the British Chamber of Commerce, which represents thousands of UK companies, told Chief Executive.
“We know that some shipping lines are no longer taking bookings that have Qatar as their destination,” Beliakova said. “So it’s a problem not only for the goods that are now stuck in transit, but also for those who were looking to send goods there shortly.”
U.S relations with Qatar soured after Donald Trump sided with Saudi Arabia in the dispute. “During my recent trip to the Middle East I stated that there can no longer be funding of radical ideology. Leaders pointed to Qatar—look,” he tweeted yesterday.
The UAE port of Fujairah, a major refueling hub, has barred any vessels flying Qatari flags. More seriously, there are concerns that Egypt might block tankers carrying Qatari cargo from using the Suez Canal, the main shipping artery to Europe and beyond. Cairo, however, would be flouting an international agreement to let all countries access the man-made waterway.
Representatives from two major European exporters to the Gulf, Unilever and Jaguar Land Rover, didn’t respond to requests for comment.
The Qatari government told citizens when the crisis broke out on Monday that it had already taken necessary measures to “ensure that normal life continues”, while confirming that the country’s sea and air ports remained open for trade.
Many shipping companies, however, plot courses with multiple stops because it would make little financial sense to only deliver goods to one destination on a single round trip. That’s why many vessels with Qatari cargoes are currently experiencing delays as they are barred from other ports.
“Presumably, there will be a solution and different routes will be planned, but at the moment all we are hearing is that a large number of freight companies are not working that route,” Beliakova said.
“And it is particularly a problem for companies supplying something under a letter of credit that might have to incur some penalties for delayed deliveries.”
On the flipside, there could be a silver lining for American companies and other exporters. Qatar is largely reliant on Saudi Arabia and the UAE for its foods supplies, including sugar, potentially leaving a gap in the market.
“Should this continue for a long time they’ll have to seek other sources of supply,” Beliakova said.