Gulf Arabs Agree to Restore Qatar Ties But No Word on OPEC Role

Saudi Arabia and three other Arab states agreed to fully restore ties with neighboring Qatar on Tuesday after a sustained U.S. push for the countries to unite against Iran.

The breakthrough ending a dispute among some of the world’s top oil and gas producers that erupted in 2017 came just two weeks before President-elect Joe Biden takes office after pledging a new start with Tehran.

Saudi Arabia, Bahrain, the United Arab Emirates and Egypt signed an accord with Qatar in a mirrored concert hall in the northwestern Saudi town of Al Ula during a summit of Gulf Cooperation Council leaders, bringing the regional split to an end -- at least on paper.

The same day, Saudi Arabia asserted its primacy over the global oil industry by surprising the market with a large crude production cut that secured its leadership among global producers and sent crude prices soaring.

The Gulf leaders made no mention of whether Qatar would rejoin the Organization of Petroleum Exporting Countries. The nation, which pumps around 650,000 barrels a day of crude in addition to gas, decided to leave the cartel at the start of 2019, in one of the most visible consequences of the fallout.

It was a rare example of the region’s politics spilling over into OPEC, which has mostly remained unified even amid warfare between some of its members.

The reconciliation takes on greater significance given the impending changing of the guard in Washington. While President Donald Trump led an offensive to weaken Iran through sanctions, Biden has pledged to engage diplomatically with the Islamic Republic if it first returns to the terms of the 2015 nuclear deal.

Qatar’s main equities gauge on Wednesday was broadly unchanged after advancing the previous day, while most other Middle Eastern benchmarks dropped. The implications of resolving the dispute had already been priced in before the official reconciliation announcement, according to analysts.

The yield on Saudi Arabia’s $6.5 billion bond maturing in 2046 rose for a sixth day, while Qatar’s $3 billion debt maturing in 2030 yield gained as well.

Saudi Crown Prince Mohammed bin Salman, the kingdom’s de facto ruler, said Tuesday Gulf nations needed to “unify our efforts to advance our region, and face the challenges that surround us -- especially the challenges represented by Iran’s nuclear and ballistic missiles programs.”

Warm embrace

Qatar’s ruler Emir Sheikh Tamim bin Hamad Al Thani landed in Saudi Arabia to a warm embrace from Prince Mohammed on his first visit since the 2017 falling out that cut trade, travel and diplomatic ties.

UAE Minister of State for Foreign Affairs Anwar Gargash wrote on Twitter that a “shining new page” was beginning. Sheikh Tamim tweeted: “We all hope for a better future for the region.”

The accord was a major step, but it’s unclear how far the reconciliation will go or how long it will last. The four boycotting nations accused Doha of meddling in their internal affairs, supporting hardline Islamist groups and building ties with Iran. Qatar denied the charges.

“The fundamental issues that led initially to the dispute were only partially resolved, and the trust deficit between the Gulf leaders will not be healed immediately,” said Ayham Kamel, head of Middle East and North Africa at the Eurasia Group consultancy.

Iran Fears

Qatar had increasingly turned to Iran and Turkey -- another regional rival of Saudi Arabia and the UAE -- for support, relying on Iranian airspace for overflights. That troubled Saudi Arabia and the Trump administration, which had initially backed the boycott, as it sought to expand its offensive to weaken Iran.

Asked whether the incoming U.S. government would be capable of containing Iran, Prince Faisal, the Saudi foreign minister, said all American administrations “are aware of Iran’s threats, even when they sometimes deal with it differently.”

Gulf Arabs Agree to Restore Qatar Ties But No Word on OPEC Role
Gulf Arabs Agree to Restore Qatar Ties But No Word on OPEC Role

Still, although trade relations are expected to make a comeback, economists say trade is unlikely to return to its former levels. In the year before the split, Qatar’s total trade with the kingdom stood at around $1.7 billion, according to Bloomberg data. Qatar’s total trade with the UAE was $3.5 billion.

The GCC comprises Bahrain, Qatar, Oman, Saudi Arabia, Kuwait and the UAE. Oman and Kuwait had remained neutral during the split, with Kuwaiti officials providing mediation.

©2021 Bloomberg L.P.

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