Qatar Sues Banks Over ‘Brazen Scheme’ Tied to Saudi Embargo
Qatar Sues Saudi Arabian, U.A.E. Banks Over Currency Trades
(Bloomberg) -- Qatar sued banks in Saudi Arabia, Abu Dhabi and Luxembourg for allegedly crafting a “brazen scheme” to manipulate local currency and bond markets during an embargo that has cost the country billions of dollars.
In a lawsuit filed Monday in New York, Qatar accused Riyadh-based Samba Financial Group and First Abu Dhabi Bank PJSC of being “in league” with their home governments to destabilize Qatar through an “illicit blockade” starting in 2017.
A related suit filed in London on Monday accuses Luxembourg-based Banque Havilland SA, which has historic ties to the Middle East, of leading the alleged financial attack. The bank’s alleged presentation outlining the scheme and named “Qatar Opportunity” was found in November 2017 in the email of the United Arab Emirates’ ambassador to the U.S., according to the complaint.
The banks “launched a campaign of financial warfare against Qatar,” the gas-rich country said in the New York complaint. The alleged plan included coordinated fictitious price quoting known as spoofing as well as so-called crossing transactions known as wash sales, Qatar said.
Banque Havilland referred to a November 2017 statement in which it noted that a number of articles had been published about the matter. It said an investigation “led by external legal counsel” had “established that the bank did not engage in any transaction contemplated in the related articles published at the time.”
Abu Dhabi’s FAB has previously denied the accusation. FAB and Samba didn’t immediately respond to requests for comment on Monday.
The New York suit said Saudi Arabia is planning to further isolate Qatar by relocating a nuclear-waste disposal site to its border with Qatar and building a canal that would turn the smaller nation into an island.
Qatar said the lawsuits seek to recover billions of dollars in losses plus unspecified punitive damages.
Banque Havilland prepared a PowerPoint presentation about the scheme that said one goal was to deplete Qatar’s financial reserves “so that it would be unable to complete its preparations to host the 2022 FIFA World Cup games,” according to the suit. That would ultimately force Qatar to share the giant soccer event with Saudi Arabia or the U.A.E., Qatar said, citing the bank’s plan.
The effort to devalue the Qatari riyal forced Qatar to liquidate nearly $3 billion in U.S. Treasury bills and notes it held in New York, according to the complaint. Qatar alleges the scheme forced it to draw down foreign currency reserves and use more than $40 billion to support its riyal.
Qatar’s central bank is investigating suspected attempts to devalue its currency at the height of a diplomatic standoff with its Gulf neighbors in June 2017. Saudi Arabia, the U.A.E., Bahrain and Egypt broke ties with the country and accused it of backing terrorism, a charge Qatar denies. The Qatari riyal came under pressure in the offshore market during the first months of the embargo.
Qatar, the world’s biggest liquefied natural gas exporter, pegs its currency to the dollar, like most of its neighbors. When the embargo began, local banks provided cash to meet domestic business needs at 3.64 riyals per dollar -- within the regulator’s preferred range -- while turning away transactions it didn’t deem “legitimate.” That pushed some transactions offshore, and the country’s currency traded at two different rates.
The divergence forced Qatar to intervene in the thinly traded offshore market. While the cost to prop up the currency is unknown, Qatar says it liquidated assets to bring the two rates together.
The case against FAB and Samba are based on the alleged use of “fraudulent quotes” by the banks, which were intended to “undermine confidence in Qatar’s economy,” the government’s communications office said in a statement. The country said it may bring additional action against other firms and individuals.
--With assistance from Arif Sharif.
To contact the reporters on this story: Mohammed Aly Sergie in Dubai at msergie@bloomberg.net;Erik Larson in New York at elarson4@bloomberg.net
To contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Peter Jeffrey, Steve Stroth
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