Dubai: On the morning of June 6, the UAE closed its seaports, as well as its airspace, to all Qatari vessels and aircraft, accusing Doha of supporting extremism.
The same day, both DP World, Dubai’s port operator, and the Port of Fujairah, barred all ships flying Qatari flags from calling on the UAE’s ports.
The ports’ decision to reject Qatari vessels was in line with the UAE government’s move to sever diplomatic ties with Qatar.
The economic impact on Qatar of this closure of seaports is manifold, predominantly affecting the tiny country’s food imports and its liquefied natural gas (LNG) exports.
The vast majority of food imported by sea before the crisis went through Jebel Ali port, in Dubai. Not only local produce from Oman, but food shipments from Europe and Brazil have also had to create new routes that avoid Jebel Ali.
In order to maintain a continuous supply of fresh fruit and vegetables, which have traditionally come from Saudi Arabia, companies have had to air freight produce in, a very expensive method of importing goods.
Without the assistance of the government in subsidising this process, residents of Qatar will see sharp price increases as supply costs are passed on to them by private companies.
There have been reports in the local press of panic buying, with residents of Doha pictured stocking up on water, frozen foods, canned goods and other essential items.
Also affected by the spat is LNG, of which Qatar supplies roughly a third of global consumption. The energy export has made Qatar one of the richest countries in the world.
The closure of the Port of Fujairah to Qatar, one of the most crucial hubs for LNG and oil tankers in the region, may see the cost of shipping LNG from Qatar increase, according to S&P Global Platts, an analysis service.
Any rise in the cost of exports due to supply disruption would damage Qatar’s position as the leading exporter of the gas, with the rift already hurting contract negotiations with Qatar’s key partners in the Far East.
According to Reuters, Japan-based JERA, the world’s largest buyer of LNG, is already using the crisis to push for less rigid contracts with Qatar, and allowing more imports from the US.
If this continues, Qatar will cede ground to other LNG exporters, permanently hurting its position.