Unable to force Qatar to capitulate directly, the “quartet” of Saudi Arabia, the United Arab Emirates, Egypt, and Bahrain have increasingly been trying to shift pressure on Qatar to the United States and Europe. The UAE is now imposing informal secondary sanctions on Western banks, as the Financial Times reports:
Abu Dhabi has launched an informal boycott of western banks with significant Qatari shareholders, broadening the impact of the Arab quartet’s two-month embargo against the gas-rich state.
Officials have told bankers that lenders such as Credit Suisse, Deutsche Bank and Barclays are unlikely to win significant mandates in the capital of the UAE in the coming months because of large shareholdings held by Qatar’s sovereign wealth fund and members of the ruling family. [….]
Some quartet officials have suggested that sanctions could be extended to companies doing business with Qatar, although western officials say they have warned their allies against imposing more expansive restrictions.
“We have been told there is an informal boycott, there is nothing we can do,” said one banker. “There is no public blacklisting, but behind-the-scenes skulduggery.”
Estimates vary, but Abu Dhabi’s sovereign wealth funds have about a trillion reasons why foreign banks would want to do business in the Emirates. Likewise, the Abu Dhabi National Oil Company is privatizing parts of its businesses with multi-billion dollar IPOs organized by foreign banks.
There’s some limited signs that the economic pressure is having an effect. The normally rock-steady Qatari riyal, which like most Gulf currencies is pegged to the U.S. dollar, is undergoing some minor inflation. Secondary sanctions on banks operating in Qatar, whether imposed formally or not, would be a huge blow to Qatar.
But the move also has the potential to backfire. Some banks are already moving operations from Dubai’s financial hub to London and New York to reduce any potential exposure to political pressure from the quartet.
Perhaps more troublingly for the quartet, there’s little evidence that Americans believe—or particularly care—about the accusations they are making against Qatar despite the PR battle each side is waging in the American media. The Saudis have paid at least $138,000 for anti-Qatar TV ads while the Qataris have hired trucks to drive around Washington’s Dupont Circle:
— Matthew Levitt (@Levitt_Matt) August 2, 2017
As we’ve written before, the evidence seems to suggest that this crisis was at least partly the result of Saudi Arabia and the UAE convincing President Trump that Qatar was a uniquely bad actor in the region. While Qatar does plenty of bad things that the U.S. would prefer to cease, the crisis now seems to be driven by parochial Gulf mud slinging that is of precisely zero strategic interest to the United States. UAE funding for think tanks or whether Qatar hosts a Taliban embassy that the United States wanted opened are inconsequential compared with actual U.S. objectives in regards to Qatar like continued operations at al-Udeid airbase and getting them onside against Iran. As new U.S. envoys arrive in the region for shuttle diplomacy, they would do well to filter out the noise being generated by both sides.