BREAK THE ICE

Saudi Arabia 2021 | ECONOMY | FOCUS: THE DÉTENTE WITH QATAR

Riyadh and Doha have made the first move to put an end to over three years of estrangement between Qatar and the rest of the GCC, and chances are that the easing of hostilities will have many economic benefits in 2021.

For almost 14 centuries, parts of the Arabian Peninsula that form the modern-day Saudi Arabia have been a center of gravity in the Arab world and the larger MENA region due to cultural, historical, and religious reasons. Given this central role, Saudi Arabia has sought to maintain good diplomatic ties with almost all countries in the region and beyond since the foundation of the Kingdom in 1932.

On rare occasions, however, diplomacy fails, and Saudi Arabia's relationships with some of its neighbors or fellow Arab nations have broken apart. Still, in keeping with the principles of the Islamic and Arab cultures, Saudi Arabia's leadership has always been keen to do away with any bitterness and come to a reconciliation. The cutting of diplomatic ties between Saudi Arabia—along with its allies—and Qatar was one such occasion.

After over three years of diplomatic crisis between Saudi Arabia and Qatar, the former took the initiative in the early January 2021 to restore diplomatic ties with Qatar. Crown Prince Mohammed bin Salman welcomed the Emir of Qatar in the iconic city of Al-Ula, when the Emir arrived in the Kingdom to attend the 41st GCC summit.

Saudi Arabia's expression of goodwill led to the signing of Al-Ula agreement and the reopening of borders with Qatar. Other GCC countries soon followed suit and joined the process of reconciliation. Kuwait, another GCC member, had earlier assumed the role of a mediator to repair diplomatic ties between Qatar and the rest of the GCC. On January 16, Saudi Arabia's Ministry of Foreign Affairs announced its decision to reopen the Saudi embassy in Doha. Thus, Saudi Arabia's goodwill, along with Kuwait's mediation, effectively saved the GCC, restoring it to its previous status.

This is of utmost importance for Saudi Arabia and its fellow Arab neighbors, given the current instability in the Middle East and the threats posed on the region. Evidently, Riyadh believes that by imposing an embargo for some three years, it has already sent its message to Doha, and a continuation of the blockade can only harm the stability of the region.
Aside from improving the geopolitical situation of the GCC, the renewal of diplomatic ties between Riyadh and Doha will have a number of economic knock-on effects. Some observers have argued that political discord in the bloc was, in part, behind the decline in oil and gas prices, and therefore a more united GCC can surely do a better job in recovering the oil market.
Although Saudi Arabia is the larger exporter of hydrocarbons and will profit more than Qatar from the readjustment of oil prices, Qatar has a lot to gain from the easing of the blockade, as well. The relatively small peninsula of Qatar is home to one of the largest air fleets in the region—Qatar Airways—and the embargo had prevented Qatari aircrafts from using Saudi airspace, creating quite the headache for the Qatari airline, as it had to find alternative routes for flights to Africa and Latin America.
What is more, the last year of the diplomatic crisis between Riyadh and Doha was accompanied by another calamity that brought businesses across the world, including in the GCC, to a standstill: the COVID-19 pandemic. However, as light at the end of tunnel is becoming visible in 2021, there is hope that the détente with Qatar can lead to a healthier economic recovery in the gulf region as a whole.

Both Saudi Arabia and Qatar are currently witnessing a construction boom; while Saudi Arabia is working on several megaprojects related to the Kingdom's Vision 2030, including the Red Sea Project, Nemo, and Ad-Diriyah, among others, Qatar is preparing to host the 2022 FIFA World Cup.

Given the huge volume of ongoing construction in the two countries, the reopening of borders will enable international contractors to move more freely across the Arabian Peninsula once again, in turn leading to faster and cheaper construction activities.

Local construction businesses in both countries, meanwhile, will have an opportunity to venture into the other country. As Saudi Arabia's local construction sector is more sophisticated and less dependent on expats than that of Qatar, chances are that Saudi companies will have the upper hand and enjoy a positive trade balance.
Above all, however, by ending the rift in the GCC, Saudi Arabia has underscored its leading role in the Gulf region and the wider Middle East, while reuniting the Arab nations of the region in working toward the benefit of their shared interests.