Qatar's defiance may spur Arab quartet to act

Qatar is showing no signs that it is about to bend to the demands of the four Arab countries lined up against it.

That puts the quartet of Saudi Arabia, the United Arab Emirates, Egypt and Bahrain, which have accused Doha of a host of transgressions, including backing extremist groups, in a tough spot.

By refusing to give in to the Arab states' ultimatum, tiny but wealthy Qatar is calling their bluff and forcing them to prove how much leverage they actually have over their wayward neighbour which could spur them to impose more punitive sanctions.

In a statement released late Thursday, the four governments said they willtakenew political, economic and legal steps against Qatar, withoutelaborating on when the new steps would be announced or whatthey would entail.

And Thursday night, the U.S. State Department announced that Secretary of State Rex Tillerson will add a visit toKuwait on Monday to his itinerary and"meet with senior Kuwaiti officials to discuss ongoing efforts to resolve the Gulf dispute."

Thequartet has only limited options. To really hit Qatar where it hurts would involve measures like forcing Gulf banks to pull their deposits out of the country or, even more dramatically, disrupting shipments of its economic lifeblood, natural gas an escalation few analysts believe the countries seriously have an appetite for.

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• Why the sudden split in Middle East relationships? Look to Iran and Sunni vs. Shia

Arab states' 13 demands a hard sell

The 13-point list of demands the four sent to Doha was always going to be a hard sell.

Mixed in with what Western allies like the United States might see as fair demands, such as cracking down on support for extremists and curbing ties with Iran, were tougher-to-swallow calls to shut down the Al-Jazeera television network one of Qatar's best-known brands and kick out troops from NATO member Turkey, which has a base in Qatar.

Many Gulf observers expected Qatar to quickly capitulate when the crisis erupted last month and the four Arab states cut diplomatic ties and moved to isolate it. But the World Cup 2022 host has shown resilience.

The Qataris responded with rare displays of patriotic fervour, holding rallies in support of 37-year-old Emir Tamim bin Hamad Al Thani, who ascended to the throne just four years ago.

The crisis has allowed Al-Jazeera, long an irritant for Mideast strongmen, to again assume the mantle of free-press champion in a region where censorship is rife and expressing unpopular views can lead to prison.

Qatar did not make public its response to the demands. But on Wednesday, envoys from the anti-Qatar quartet ended a meeting in Cairo with a pledge of stepped up measures to counter what they said was Doha's "negative" reply to their 13-point list.

Egyptian Foreign Minister Sameh Shukri said Qatar was failing to appreciate "the gravity of the situation."

What they didn't do is immediately turn up the heat.

No indication of long-term plan

"There's no indication that these states have necessarily a long-term plan of how this conflict is going to play out," said Allison Wood, a Dubai-based analyst at Control Risks who watches Qatar closely.

But the quartet did telegraph that it will soon take some sort of action. Anwar Gargash, the Emirati minister of state for foreign affairs, tweeted that Qatar faces "greater isolation, incremental measures" and "reputational damage" if it doesn't give in.

Sealing Qatar's only land border, with Saudi Arabia, and blocking it from using the four Arab nations' airspace and sea lanes has so far failed to bring Doha to its knees.

Initial runs on supermarkets in the country soon gave way to relative normalcy as authorities quickly found new ways to import food and other necessities. Turkey has helped plug some gaps, as has Iran, Saudi Arabia's regional nemesis. The quartet wants Qatar to end ties with Iran, though that is difficult, given that the two countries share vast undersea gas reserves.

Government largesse helps too. Qatari Foreign Minister Mohammed bin Abdulrahman Al Thani said this week that the state is covering a ten-fold increase in shipping costs for food and medicine.

"The Qataris have, at the domestic level, done a good job of reassuring people ... that there will be no food shortages and that things will continue sort of business as usual," said Noha Aboueldahab, visiting fellow at the Brookings Doha Center.

She cautioned the damage could get worse the longer the standoff lasts, however.

Anti-Qatar quartet could intensify sanctions

The Arab states could put in place more formal sanctions that go beyond their de facto air and sea blockade.

Companies that do business with Qatar could be barred from working in the four Arab states. That is no idle threat since Saudi Arabia and the U.A.E. are the region's two biggest economies, and Egypt is its most populous market.

Even before Wednesday's meeting in Cairo, credit rating agency Moody's cut its credit outlook on Qatar to negative and warned that a speedy resolution to the crisis is unlikely. It made similar moves Thursday on its ratings for government-linked entities, including Qatar Petroleum.

Forcing Gulf banks to pull their deposits out of Qatar or cut ties with Qatari counterparts could have an even more dramatic effect. That would undermine investor confidence in the Qatari banking system and put pressure on Qatar's dollar-pegged currency.

"Despite efforts to absorb the first shock, the impact of potential additional punitive measures against the Qatari economy would be significant," Eurasia Group analysts Ayham Kamel and Hani Sabra recently warned.

Blocking natural gas would be big step

Carrying an even bigger economic punch would be disrupting shipments of its vital export, natural gas. Doing that would require preventing the hulking tanker ships that carry a super-cooled form of the fuel from reaching markets in Asia and elsewhere.

Such a move would likely involve militarily blocking Qatar's ports or preventing its ships from entering the Strait of Hormuz, the key passageway at the mouth of the Persian Gulf. Those measures would be tantamount to a declaration of war a provocation few experts believe any of the countries want.

A military conflict would also pit one group of American allies against another.

Both sides in the feud host vital U.S. military bases in the region. In Qatar, the al-Udeid air base in the desert outside Doha is home to the forward headquarters of the U.S. Central Command charged with overseeing all Middle East operations and bombers, refuelling planes and other aircraft critical to the fight against the Islamic Statein Iraq and Syria. Bahrain hosts the U.S. 5th Fleet.

A more likely scenario could see Qatar frozen out of the Gulf Cooperation Council, a six-member group of hereditarily ruled states dominated by Saudi Arabia that includes the United Arab Emirates and Bahrain. Kuwait, which is mediating the Qatar crisis, and Oman round out the group.

The GCC has over the years pursued greater security and economic integration, but has long struggled to speak with one united voice. That has arguably never been truer than now.