The deepening ties between Tehran, Ankara and Doha can break
Since the
onset of the Qatar crisis, Iran has
feverishly
cultivated two new regional parties, but this new axis is far from stable
Majid Rafizadeh
The latest developments in the region, specifically the formation of a new Qatari-Turkish-Iranian axis, could have a significant impact on the geopolitical, strategic and socio-economic landscape.
In the past, the region was mainly thought of through the predominant narrative of Shia groups led by the Iranian government versus the Sunni-led coalition. On the one hand, Iran, Hizbollah, the Houthis, Iraqi Shia militias and Bashar Al Assads regime cooperated closely to expand their influence. On the other, the Sunni-led coalition stood opposed to Mr Al Assad, the Houthis and Iran Revolutionary Guard Corps military adventurism.
But the current Qatar crisis has added a new layer of complexity to the geopolitical equation.
Turkey, a country with a predominantly Sunni population, was traditionally opposed to Shia Iran. In February 2017, the Turkish foreign minister, Mevlut Cavusoglu, criticised the Iranian government for attempting to weaken Ankara and its allies by implementing sectarian policy in the region. Irans foreign ministry spokesman, Bahram Qassemi, responded by accusing Turkey of supporting terrorist groups. The two countries fight on opposite sides in Syria and have significant differences regarding the Kurdish question.
Nevertheless, when the recent crisis began, Turkey had to make a decision between Qatar and other Gulf states. Ankara not only chose Qatar, it significantly bolstered ties with Doha, signing 15 trade agreements relating to gas, technology and logistics. Militarily speaking, Turkish leaders plan to ratchet up the presence of their forces in Doha to 3,000 troops and last week, Qatari and Turkish navies carried out a joint exercise. Mutual support for the Muslim Brotherhood and Hamas, another commonality between the two countries, has also increased. Tehran, meanwhile, sees the current moment as ripe for exploitation. Iranian leaders have offered assistance to both Qatar and Turkey. Land trade is expected to pass through Iran. The Iranian government also decided to shift its strategic policy by joining Turkish forces against some Kurdish groups in Syria.
The last diplomatic crisis in 2014 took almost eight months to resolve, when Saudi Arabia, Bahrain and the UAE chose to withdraw their diplomatic staff from Doha over similar allegation. A de-escalation this time could take even longer, as Doha, so far, has not responded to mediation efforts led by Kuwait and rounds of the shuttle diplomacy by US.
The longer the row continues, the worse it will be for Qatars economy. That is the case especially when it comes to the growth of the non-oil sector, which could slow to 3.6 per cent this year from about 5.6 per cent last year, according to Abu Dhabi Commercial Bank and Economist Intelligence Unit (EIU) estimates.
Investors confidence is wearing thin evident by sluggish trading on the Qatar Exchange -- and the prospects of foreign direct investments are waning. Banks are facing the possibility of funds outflow and the cost of borrowing for lenders is on the rise as rating agencies changed their outlook on major financial institutions in the country. The cost of imports, especially food items, has climbed, stoking fears of fast rising inflation.
The construction sector is also finding it difficult to procure supplies to continue building projects, which also casts doubt on Dohas ability to finish on time all the stadiums and infrastructure projects it needs to successfully host the World Cup football tournament in 2022. The transportation and tourism sectors have also taken a hit, with the countrys flag-carrier, Qatar Airways, having to fly longer routes, adding to its operational costs. Export of LNG, which accounts for about 60 per cent of Dohas revenues, is also facing headwinds as customers use the row with Arab neighbours as leverage to lower prices.
It is a nightmare scenario. Its clearly in Dohas interest to take steps to end the impasse that is stifling growth. Its intransigence comes at a high opportunity cost.
State of the economy
Although it has the highest per capita income in the world, Qatars overall economic growth is expected to weaken and the country is likely to post a fiscal deficit this year. As an Opec member, Qatar has to comply with oil output cuts, which adds further pressure on its ability to generate revenues, economists said.
The EIU is forecasting the economy growing 1.6 per cent for 2017-18, while Oxford Economics is projecting gross domestic product (GDP) expanding by 1.4 per cent.
We expect the economic growth to be weak for 2017-18, owing to the likely impact of the current dispute on the non-oil economy, said Pat Thaker, the regional director of Middle East and Africa at the EIU. Oil production will also be constrained by the recently extended Opec agreement. Nonetheless, the impending launch of the long-awaited US$10bn Barzan natural gas development will provide a partial offset to these negative trends.
Qatar is also forecast to post a 2.2 per cent fiscal deficit, largely due to the Arab sanctions, according to BMI Research, a unit of the Fitch Group, which in June had forecast a fiscal surplus for 2018. BMI has also revised its estimate of the 2017 deficit of 1.2 per cent to 3.8 per cent. Spending will rise as the government aims to soften the blow of the boycott on the local population, for example, by subsidising more expensive food sources or reorganising supply chains after the closure of the border with Saudi Arabia, said Amy McAlister, an economist at Oxford Economics, who is forecasting a fiscal deficit of 4.2 per cent this year.
However estimates vary. The EIU is forecasting a deficit of 7.1 per cent.
Theres a risk that oil prices could be lower and/or the government will loosen fiscal policy to counter the impact of the diplomatic crisis, resulting in budget deficits, said William Jackson, an economist at Capital Economics.
Export of natural gas, which makes up the biggest chunk of Qatars revenue stream, is also facing headwinds. The diplomatic row, coupled with new competition, has put Doha under pressure as a producer as customers manoeuvre to renegotiate prices.
Japan, Qatars biggest customer, is reassessing its long-term contracts while India has offered a new deal altogether.
Gen Mohammad Hossein Bagheri, Irans chief of general staff, visited Ankara on August 15, a trip that was characterised as a milestone by both Iranian and Turkish state news outlets. The Iranian official said the trip was necessary for better consultation and cooperation on various military and regional issues.
The writer is president of the International American Council
