Between Qatar and Yemen, Saudi has its hands full
Let’s for a second lay aside Saudi 2018 budget issues, Aramco IPO, corruption probe, oil production cuts, VAT, and 80% higher fuel prices, just to name a few of the issues coming up in 2018.
Two concurrent events are taking the attention of Saudi on a day to day basis.
On the one hand, Saudi has Qatar to deal with, namely a blockade, then a failed GCC summit, followed by a border road closure, and now legal proceedings into alleged currency manipulation.
On the other hand it has a Yemeni war, rockets fired on Riyadh, a humanitarian crisis, a port opening, and a skyrocketing war budget for 2018.
What’s first going on with Qatar?
Reuters reported that Saudi has permanently closed its only land border with Qatar, as the country continues to be rattled by an 8-month old Arab quartet-led blockade, namely the kingdom, the UAE, Bahrain and Egypt.
“The Salwa border gate had been shut permanently since Monday night,” said a document issued by Saudi Arabia’s customs directorate on Tuesday, following an order by Saudi officials.
It was the second closure of the gate, the first being when ties were cut last June 5 on accusations of financing terror, a claim Qatar has denied.
With this border crossing closed, all means of transport from and to these Arab quartet countries are now severed.
This follows a failed GCC summit that was cut short by one day and where hopes of a truce were dashed when Saudi and the UAE created their own bilateral economic and military pact, and King Salman ignored attending the occasion.
From blockade to legal aid
According to Bloomberg, Qatar’s banking regulator started a legal investigation into the possible manipulation of its currency, securities and derivatives markets.
The central bank hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to lead the probe, according to a statement posted its website, asking a number of financial institutions and individuals to preserve documents in advance of legal proceedings.
“The embargo prompted Qatari banks to provide cash for domestic business, but not for trades deemed speculative, forcing investors to turn to the offshore market,” people familiar with the matter told Bloomberg in July.
Reuters said that Qatar’s investigation into the alleged manipulation of its currency may risk prompting Qatar’s diplomatic enemies to impose more economic sanctions on it, if their banks are targeted in the investigation.
“The risk is if the other Gulf countries, say Saudi and the UAE, react to this campaign by Qatar against currency manipulation by imposing fresh sanctions on Qatar,” said Jason Tuvey, an economist at Capital Economics in London.
What’s happening in Yemen?
Port blockade removed
Saudi Arabia re-opened the key Yemeni port of Hodeidah to allow food aid and commercial fuel for a minimum of 30 days.
The UN had warned that the month-long blockade was cutting off aid to nearly 70% of those desperately in need of humanitarian relief.
The Kingdom has since March 2015 led a coalition into an armed conflict with Houthi rebels in an aim to restore the government of President Abdrabbuh Mansur Hadi
This happened despite a missile fired at Al Yamama Palace in Riyadh on the 1000th anniversary of the war, the rocket being intercepted before it landed.
Massive war budget
Bloomberg says the kingdom intends to spend more on defense than anything else next year.
“The government set aside 210 billion riyals ($56 billion) for military spending in 2018. That’s more than the 192 billion riyals it pledged for education or the 147 billion riyals the kingdom intends to spend on health and social development. It’s only the third year Saudi Arabia has revealed what it spends on defense, but in 2017 and 2016, military spending came in a close second to education,” said Bloomberg.