On Monday, June 5th, the nations of Saudi Arabia, Bahrain, Egypt, Yemen, and the United Arab Emirates (UAE), discontinued diplomatic relations with Qatar, because of accusations claiming their support of militant groups. Suspensions of land, air, and sea travel were quickly implemented by the five countries on Monday. While these developments have taken place, the world is awaiting word from shipping companies on how this will influence the movement of cargo bound to Qatar.
Jebel Ali port, in the United Arab Emirates, is essential for the entrance of cargo into Qatar.
The UAE acts as a transshipment location, allowing large vessels to dock before products are brought to Qatar by feeder services. The shallow waters of the country only allow smaller vessels to enter Qatar. Maersk and other shipping lines providing services to the country must find substitutions for cargo delivery until further developments occur. Maersk Line released a statement on June 6th informing they would be searching for alternative routings to comply with the new trade restrictions.
Qatari-owned and flagged vessels are banned from entering the waters of the Arab nations at this time. Vessels coming in and out of Qatar are being closely watched, to determine whether the ban is being loosened. According to Reuters on Wednesday June 7th, Abu Dhabi Petroleum Ports Authority lifted constraints on vessels for those not owned, flagged or operated by the banned nation. Two crude carriers, which had previous departed from Qatar with crude owned by the region, were accepted in Abu Dhabi.
Analysts speculated that the Liquefied Natural Gas (LNG) market would be affected, being they are the world’s largest producer and exporter. In addition, concerns are being voiced for LNG carriers routed to Saudi Arabia and Egypt’s Suez Canal, which may be severely impacted.
Exxon Mobil Corp, which holds long-term contracts with Qatari LNG, released a statement confirming stops on production and export, through the use of a Qatari pipeline to the United Arab Emirates, have not been imposed. Exxon alleviated worries for stakeholders of possible price increases that may have resulted.
The states taking part in the dispute, such as Egypt, rely on Qatari LNG to fuel their electricity. Thomson Reuters Eikon has reported Egypt imported 857,000 cubic meters per month, as of January 2016. The UAE imported 190,000 cubic meters of LNG, on average per month, from Qatar since January 2016.
Other suppliers from different regions are available for Egypt and the UAE, if this rift continues to persist, which will not influence on keeping up with their energy demand. Asia’s largest buyers of Qatari LNG – Japan being the first and India second – have suggested the supply is not expected to be interrupted. The fuel is delivered to them directly from Qatar by sea.
The main concern from the citizens of the state are food imports, dependent on an open land border with Saudi Arabia. People have been scrambling to purchase food in preparation for possible food shortages.