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Diplomatic row could harm Qatar maritime interests

13 June 2017 IHS Markit Maritime & Trade Expert

This story originally published on

The most serious crisis to break out in intra-Gulf Cooperation Council (GCC) relations since its establishment in 1981 will mean significant dislocation for Qatari shipping. Qatar shipping companies are known to be reliant on Fujairah in the United Arab Emirates (UAE) for bunkering, while the Qatari peninsula is logistically ill-equipped to deal with a land, sea, and air embargo by GCC neighbours.

Although the measures on this occasion appear to be instigated chiefly by Saudi Arabia, fresh from the visit of US president Donald Trump, GCC allies the UAE and Bahrain are behind the kingdom. Non-GCC members, Egypt, Libya, and Yemen have also joined the boycott.

If true, as many GCC nationals believe, it was the statements attributed to the Emir of Qatar apparently supporting Iran, at a time when relations with the Islamic Republic continue to worsen, that gave most offence.

"Closure of UAE airspace and seaports [is in place] for all Qataris in 24 hours and banning all Qatari means of transportation, coming to or leaving the UAE, from crossing, entering or leaving the UAE territories, and taking all legal measures in collaboration with friendly countries and international companies with regards to Qataris using the UAE airspace and territorial waters, from and to Qatar, for national security considerations," an official statement said on Monday.

While the immediate effect was in aviation, with Etihad Airways, Emirates, and FlyDubai of the UAE all announcing they would will start cancelling flights to or through Doha early Tuesday, the effect on the fledgling New Port Project at Mesaieed will also be near-immediate. Saudi Arabia and the UAE are Qatar's biggest food trading partners, exporting hundreds of millions of dollars a year of livestock and vegetables from Saudi Arabia, although much of it crosses into Qatar by land.

The New Port Project steering committee oversaw the launch of operations at the port on 1 December, as originally scheduled, with the Old Port at Doha closing down completely in March this year. New Port, which is adjacent to Mesaieed Industrial City, has capacity of 2 million teu/year and this is planned to rise to an eventual 6 million.

IHS Markit data show that Qatari vessels operated by Qatar Gas Transport Company, or Nakilat, which carries more than one-quarter of the world's seaborne LNG, and Milaha, which resulted from the merger of Qatar Shipping Company and Halul Offshore, carry out vast quantities of bunkering operations at Fujairah.

Nakilat runs a fleet of more than 60 state-of-the-art LNG carriers, and is understood to own four very large LPG carriers in a joint venture with Milaha. In turn, Milaha's fleet consists of several components.

"Vessels flying the flag of Qatar or vessels destined to or arriving from Qatar ports are not allowed to call on the Port of Fujairah or Fujairah Offshore Anchorage regardless of the nature of their call until further notice," a spokesman for the Port of Fujairah, the world's second-largest bunkering hub, located in the east of the UAE, said.

IHS Markit AIS tracking shows more than 28% of port calls were to the UAE in 2016. Of those 93% were to Fujairah anchorages for bunkering.

One of several arms of the company, Milaha Gas and Petroleum, fully owns and operates a fleet of five product tankers and crude oil carriers, two gas carriers, and two LNG carriers. In addition, the unit also owns partial stakes ranging from 15 to 30% in seven LNG carriers, and a 50% stake in Gulf LPG, which owns and operates four very large gas carriers (VLGCs), its website says.

The developments are being keenly watched by the GCC's other two members, Kuwait and Oman.

"Saudi Ports [Authority] bars any vessel flying [Qatari] flag from its ports," tweeted Kuwaiti analyst, Salah Al Rashdan.

Qatar's approach to regional news via its Al Jazeera news network has always been viewed as controversial by GCC neighbours and seriously angered Egypt over coverage of the coup that unseated democratically elected Islamist leader Mohammed Morsi in 2013.

Tensions have continued to simmer, and Saudi Arabia, the UAE, and Bahrain withdrew their ambassadors from Doha in 2014. GCC members also emain unhappy that Qatar has not sent Hamas leader, Khalid Meshaal, to Indonesia, as it promised last year.

Saudi columnist, Jameel Al Dhiyabi, wrote, "I feel like I am watching a rerun of the same movie. The same situation is repeating itself since 1996 when Qatar established Al Jazeera. We had a serious issue in 2014 and we are having another serious issue in 2017, with the pulling out of the ambassadors of Bahrain, Saudi Arabia, and the UAE from Qatar," he said.

"The statements of Qatar's Emir, Shaikh Tamim Bin Hamad Al Thani … included the claim that Iran was the guarantor of security in the Gulf, [alleged] that neighbours were coveting Qatar and [praised] the groups he is hosting, [which] were categorised as terrorist by Arab countries such as Saudi Arabia, Egypt, and the UAE."

Egypt, which also closed its airspace and seaports to Qatar earlier on Monday denounced Qatar's support for the Muslim Brotherhood, whose political leadership has given to succour to local militant groups there.

"The impact of sanctions, port closures and other means to hamper Qatar's supply chain means that Doha is in serious trouble. The ports in the Gulf region are closed to the Qatari fleet," said Theodore Karasik, senior adviser at Washington, DC-based risk consultancy, Gulf State Analytics.

"The fact that a ship may not have a Qatari flag will not necessarily excuse it from sanctions. Plenty of other traffic going from Qatar could be harassed."

Karasik said the dispute with Qatar had been running since 2004 over Qatari support for the Muslim Brotherhood, and for allowing insurgents from other Islamist groups to reside in the country. "Qatar is in political and economic trouble, and has been put on trial during Ramadan for its behaviour," he said.

In the final analysis, the fact that blood ties across the GCC are a major political feature may be the overriding factor. GCC nationals are used to crises of this sort, and have seen them happen before.

"It's an internal dispute," said one. "It will be resolved in the family."



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