Last Monday 6, four Middle East countries broke off diplomatic relations with Qatar in an escalation that, despite it is only at a diplomatic level for the moment, it could bring big consequences if it continues moving forward without any agreement. Saudi Arabia, Baréin, Egypt and The Arab Emirates blame Qatar on supporting the “Islamic terrorism”.
Qatar, which is a small Emirate very rich in oil, says that the decision was taken to put them under responsibility in order to strangle them economically. It is interesting to point out what Professor Alberto Rojas, from The Observatory of International Affairs of Finis Terrae University, said when he was interviewed by the Chilean website Publimetro. He states that serious problem of this episode lies on “as far as the events are happening in a key area in terms of its energetic and political importance, even though it is not an isolated fact. Back in 2014, Saudi Arabia, The United Arab Emirates and Baréin, withdrew their ambassadors in Doha unilaterally, a fact that shows that this is a topic from the very past”.
The measures taken by Qatar’s neighbor countries, are not only limited to the breaking of their relations but also to the fact that these countries close their airspaces and the terrestrial and maritime entrances, largely affecting the air traffic of the region, which is a vital connector among Europe, Asia and Africa. Likewise, neither their citizens can travel to Qatar, nor the entry of people form Qatar to their territories will be allowed.
Even though this crisis set off two weeks after Mr. Donald Trump visited Saudi Arabia, it is not believed that the world´s leading power would not help Qatar because the American Air Base there is relevant for the United States and it is the one used to fight against the Islamic State.
At a first glance given to this situation, we find out that the immediate response was to rise the oil prices half a percentage point. Now, in the medium and long terms, there are many possible consequences due to the fact that Qatar has become closer to Iran and has got apart from its strategic and historic partners, such as its neighbors from The Gulf.
This circumstance is being understood as a kind of punishment, by isolating Qatar to be away from Iran, increasing at the same time the tension between Saudi Arabia and Iran, what would result in a war conflict and a disagreement among OPEC country members.
Therefore, there are two very different and important strands: If it is simply a diplomatic dispute, this could break off agreements about production quotas and would bring an increase of the quote in the world, causing a decrease in the prices. If this situation went to a higher level and there were any kind of war conflict in the Middle East, it would result in a shortage of the production and exportation from the area and would turn into a raise in the prices and that is something that the market is not granting at this moment, after having the immediate impact. If this happened, the price of the oil barrel would be something that I do not even want to anticipate.
How important Qatar is for the oil market is immeasurable. It is the country with the highest per capita income in the world, besides, it is the biggest worldwide liquefied natural gas exporter and has a sovereign fund with interests placed in companies such as Volkswagen, Barclays or Tiffany & Co., as it can be seen in this chart done by Bloomberg with some of the global investments of this Qatari fund.
When Tarek Fadlallah, a chief executive officer of Nomura Asset Management Middle East, was asked by Bloomberg, he said “there will be consequences for people, travelers and businesses. Apart from that, it puts the geopolitical risks in proper perspective; it is difficult to predict what will occur”.
Regarding Venezuela, this analysis is relatively simple. It is obvious that an escalation of this conflict in The Middle East would bring consequences not only for the international relations but also for the economic level and the direct result will be reflected in the price of the oil barrel: if oil goes down, the crisis will stand, but if it goes up, Venezuela might get foreign currency incomes which were not planned.