Qatar: End of blockade eases regional tensions and benefits longer-term Qatari development plans

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Three and a half years after it started, a hug between Saudi Crown Prince Mohammed bin Salman and the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, before the start of the GCC summit seems to put an end to the rift between Qatar and Saudi Arabia. The development comes after Kuwait and the USA brokered the deal between both countries and the détente seems to be triggered by the upcoming change in the US government. The three other countries that participated in the boycott are expected to follow suit. Nevertheless, while this step will ease regional tensions, underlying differences between the countries are expected to remain, as Qatar will continue its independent course.


Mid-2017, Saudi Arabia, the UAE, Bahrain and Egypt cut diplomatic ties with Qatar and blocked all land, sea and air links with the country. This happened as they claimed Qatar was sponsoring terrorism and undermining the security of its neighbours. The main trigger was Qatar’s independent foreign policy as it supported the Muslim Brotherhood, Hamas and Hezbollah and had friendly ties with Iran. Now the restoration of ties comes without any significant alteration of Qatar’s foreign policy.

In general, the Qatari economy weathered the boycott well, largely due to the support measures of the government. Among others, the government intervened to support the local banking sector that was facing withdraws from depositors in the boycotting countries and supported the flag carrier that was facing increased costs due to the airspace closure of the boycotting countries. The boycott especially affected commercial risk and was particularly hard at the beginning of the boycott. Indeed, real GDP contracted by 1.5% in 2017 and remained subdued in the following years. This impact, however, is dwarfed by the Covid-19 crisis and the subsequent drop in oil prices that led to a 4.5% contraction of GDP in 2020. Medium- to long-term political risk classification was, however, also impacted by the increase in external borrowing (total external debt to GDP rose to more than 125% of GDP in 2019).

The lifting of the blockade will have an important positive impact on the longer-term development plans of Qatar, as in the years before and during the boycott the country invested heavily in a number of sectors significantly affected by the blockade. Most notably in the local banking sector that was expanding regionally and was suddenly cut off from its clients. Secondly, the country’s ports and airports were expanded to develop the country into a regional transportation hub as Qatari ships were no longer allowed to moor into the ports of the four countries ports and the flag carrier was no longer allowed to use their airspace. This has significantly increased costs. Additionally, almost all sectors relying on imports have been facing increased costs, for example the construction sector and the food sector. Now that the blockade has been lifted, a steady normalisation is expected, which will positively impact the economy.

Analyst: Jan-Pieter Laleman –

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