Qatar will probably soften its support for the Muslim Brotherhood to ease tensions with Gulf allies, which drove its credit risk to the highest level in three months.
Qatar’s credit default swaps rose nine basis points yesterday to 65, according to data compiled by Bloomberg, after Saudi Arabia, the United Arab Emirates and Bahrain withdrew their ambassadors to Doha. They accused the Qatari government of undermining regional security. The credit risk of similarly-rated Abu Dhabi, the U.A.E. capital, was little changed at 56 basis points.
“A detente is likely to be agreed rapidly,” as Qatar’s new leadership seeks to maintain relations with neighbors, said Emad Mostaque, London-based strategist at Noah Capital Markets.
The dispute shows how the Arab Spring has divided Gulf monarchies, with the biggest split concerning the Brotherhood. Saudi Arabia, which led opposition to the uprisings of 2011, and the U.A.E. welcomed the Islamist group’s overthrow by Egypt’s army last year, and have poured aid into the country since then. Qatar backed the Brotherhood, and the Qatari television channel Al Jazeera regularly airs programs critical of the army takeover and the Gulf countries that support it.
Qatar said it regrets the withdrawal of ambassadors, and won’t retaliate in kind, according to the official Qatar News Agency. The country’s benchmark stock index tumbled 2.1 percent yesterday, the most since August. Dubai’s DFM General Index (DFMGI) fell 0.5 percent. They have since made up their losses, rising 1.8 percent at 9:53 a.m. in Doha and 1.1 percent in Dubai.
Mostaque said he maintains a “buy” recommendation for Qatari stocks. Pressure from Gulf allies over foreign policy may “increase the pressure on Qatar to focus and spend internally, which is clearly positive” for the market, he said.
Hakim Azaiez, head of investment at GCA Asset Management in London, said this won’t have a significant effect on the market.
“However it can’t go unnoticed and it’s definitely an extra layer to add to the geopolitical risk,” Azaiez said.
The rare show of friction among the six members of the Gulf Cooperation Council threatens to undermine efforts to integrate their $1.6 trillion economies, which supply about a fifth of the world’s oil. The alliance, created in 1981, has already delayed plans to establish a customs union and common currency.
Qatar, where Sheikh Tamim Bin Hamad Al Thani took over as emir from his father last June, is home to Yusuf al-Qaradawi, the Egyptian-born cleric widely viewed as the Brotherhood’s spiritual leader. He has close ties with Qatari royals and frequently appears on Al Jazeera broadcasts. In Egypt, Jazeera journalists are on trial on terrorism-related charges.
Qatar, has failed to honor a pledge to refrain from supporting organizations, individuals or “hostile media” that represent threats to Gulf security and stability, Saudi Arabia, the U.A.E. and Bahrain said yesterday.
Those countries “have made it very clear that the Brotherhood is seen as a threat, and yet Qatar continues to host them, give them funding, and give them access to Al Jazeera,” Sultan Sooud Al-Qassemi, a U.A.E.-based writer on Gulf relations, said by telephone from Chicago.
The U.A.E. has been the most vocal opponent of the Brotherhood among the GCC countries, jailing dozens of the group’s alleged supporters in the past year. Last month the U.A.E. summoned Qatar’s ambassador and issued a letter of protest in response to criticism by Qaradawi.
Even if the current rift is smoothed over, divisions at a deeper level will remain, according to Christopher Davidson, author of “After the Sheikhs: The Coming Collapse of the Gulf Monarchies.” He said Qatar isn’t the only state resisting Saudi Arabia’s drive toward Gulf integration.
“We have a struggle here for Saudi to take the GCC to the next level, with Oman already saying no and Kuwait dragging its heels,” Davidson said. Saudi frustration over regional developments “is now bubbling over onto the surface, even with its close neighbors.”
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