Six months ago, the Gulf Cooperation Council, helmed as always by its de facto leader Saudi Arabia, severed diplomatic ties with Qatar. This move was apparently meant to punish the country for its supposed support of terrorism. Riyadh announced the closure of its shared land border with Qatar. The remaining GCC members denied Qatar use of their airspace and ports. The measures were meant to bring the Qatari economy to its knees by isolating the government in Doha.
Why the Measures Failed
At first, these measures seemed as though they might succeed. They quickly sent a shock through the economy, particularly in banking and trade.
Since the Saudi announcement, an estimated $30 billion has been removed from Qatari banks, interest rates have risen, and deposits have declined. Foreign customers with deposits at Qatari banks have withdrawn and relocated their money. Deposits totaled 184.6 billion riyals ($50.7 billion) at the start of June; they have since declined to 137.7 billion riyals.
Trade initially suffered too.
This post was published at Mauldin Economics on DECEMBER 11, 2017.