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Moment Research & Consultancy

Egypt, Saudi Arabia Among Gulf States Cutting Ties to Qatar

IMG_8706Egypt, Saudi Arabia Among Gulf States Cutting Ties to Qatar

Monday June 5, 2017

The emir of Qatar, Tamim bin Hamad al-Thani, at the South American-Arab Countries summit in Riyadh in November 2015. Faisal Al Nasser / Reuters

Arab countries began cutting off diplomatic relations with the Persian Gulf emirate of Qatar on Monday, accusing it in general terms of supporting terrorism.
Egypt accused Qatar specifically of supporting the Muslim Brotherhood, Egypt’s state news agency reported. A Cairo court sentenced the group’s spiritual leader, Mohammed Badie, to life in prison last month for murder and violence in connection with nationwide protests in August 2013 after the military ousted elected Islamist leader Mohammed Morsi.

The official Saudi news agency reported that Saudi Arabia broke diplomatic relations — as well as all land, sea and air contacts — with Qatar to protect itself from “the dangers of terrorism and extremism.”

Saudi Arabia “urges all brotherly countries and companies to do the same,” according to the official report.
Bahrain, meanwhile, accused Qatar of backing terrorism and interfering in Bahrain’s internal affairs. Like Saudi Arabia, it cut air and sea contacts and added that it was giving its citizens in Qatar 14 days to leave.

A fourth country, the United Arab Emirates, echoed the same accusations and accused Qatar of was undermining regional stability.

Qatar said last week that hackers had posted fake remarks by its emir, Sheik Tamim bin Hamad al-Thani, criticizing some leaders of fellow Gulf Arab states and calling for an easing of tensions with Iran, a regional adversary.

But several Gulf Cooperation Council states rejected Qatar’s explanation, leaving local media to unleash a barrage of attacks accusing the emir of cozying up to Iran.

Qatar has been long accused of maintaining relations with and backing Islamist movements and groups in the region.

IMG_8713Egypt gives Qatari ambassador 48 hours to leave following severing of diplomatic ties

Egypt announced on Monday that Qatar’s ambassador to Cairo had 48 hours to leave the country following a decision earlier in the day to sever ties with the Gulf state, state news agency MENA reported.
Egypt said it was cutting ties with Qatar due to its insistence on “supporting terrorist organizations” and meddling in Egypt’s internal affairs.

Meanwhile, Egypt informed its charge d’affaires in Doha that he should return to Cairo within the next 48 hours.

The decision to cut ties with Qatar followed a move on the part of Bahrain to sever diplomatic and transport links with the Gulf state. This in turn prompted similar actions on the part of Saudi Arabia, the UAE, Egypt, Yemen and the eastern-based government of Libya.

All of the governments said that their decision was based on Qatar’s ongoing support for terrorist organisations such as Daesh and Al-Qaeda, as well as interference in the internal affairs of nations in the region.

Egypt said it took the decision “in light of the continued insistence of the Qatari government to take a stance against Egypt.”

FILE PHOTO - A man looks as the world's biggest LNG tanker DUHAIL as she crosses through the Suez CanalQatar’s dispute with Arab states puts LNG market on edge

Saudi Arabia and key allies on Monday cut ties with Qatar, the world’s top seller of liquefied natural gas (LNG), stoking concern over any supply disruptions to neighbouring countries spilling over into global gas markets.
Saudi Arabia, along with the United Arab Emirates and Egypt – both highly reliant on Qatari gas via pipeline and LNG – and Bahrain said they would sever all ties including transport links with Qatar, an escalation on past diplomatic spats.

They accuse Qatar, which supplies roughly a third of global LNG – natural gas that has been converted to liquid form for storage or transport – of supporting extremism.

As the rift lifted oil prices, LNG traders took a wait-and-see approach, alert to potential disruption of regional energy flows but erring on the assumption that any trade shocks could be contained given well supplied global markets.

Qatar’s top clients in Japan and India quickly received reassurances that supplies would continue as usual.

“I cannot see this impacting exports of Qatari LNG outside the Arab world at all and it won’t likely impact LNG and gas pipeline exports within the Arab world either,” Morten Frisch, an independent LNG and gas industry consultant, said.

Still, traders startled by the development began to plan for all eventualities, especially any upsets to piped gas supplies from Qatar to the United Arab Emirates (UAE).

The UAE consumes 1.8 billion cubic feet/day of Qatari gas via the Dolphin pipeline, and has LNG purchase agreements with its neighbour, leaving it doubly exposed to tit-for-tat measures, industry sources and traders said.

So far flows through Dolphin are unaffected but traders say even a partial shutdown would ripple through global gas markets by forcing the UAE to seek replacement LNG supply just as its domestic demand peaks.

With LNG markets in bearish mood and demand weak, the UAE could cope with Qatar suspending its two to three monthly LNG deliveries by calling on international markets, but Dolphin piped flows are too large to fully replace.

“A drop off in Dolphin deliveries would have a huge impact on LNG markets,” one trader monitoring developments said.

Spot LNG prices <LNG-AS> have not yet reacted.

Egypt, while relying heavily on Qatari LNG brought in by Swiss commodity trade houses, is less vulnerable than the UAE because it has no direct deals with Qatar, domestic gas output is squeezing out the need for imports, and traders would be liable for any moves by Qatar to restrict exports.

“Trafigura, Glencore and Vitol frequently take LNG from Qatar and deliver it to Egypt but they take ownership of the cargoes at the Qatari port and don’t use Qatari ships, meaning technically that Qatar shouldn’t have sway,” one trade source said.

In reality though, Qatar can block exports to certain countries by issuing so-called destination restrictions.

“It’s not clear yet,” another LNG trader said of potential impacts to deliveries from Qatar to Egypt.

Egypt is halfway through its annual LNG cargo delivery programme for the year, with 50 shipments left to arrive, of which at least 10 are of Qatari origin, a Cairo-based energy source said.

Retaliatory measures such as suspending LNG supply deals would leave Qatar free to push more volumes into Europe where it has access to several import terminals.

Under that scenario, trade houses with supply commitments to Egypt could turn to the United States, Algeria and Nigeria for replacement cargoes, traders and industry sources said.

The deterioration in ties between Qatar and Egypt contrasts with 2013 when the producer gifted five LNG cargoes to Egypt – when Mohamed Mursi, leader of the Muslim Brotherhood, served as president.



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