by Bill O'Grady, Confluence Investment Management
August 7, 2017
On June 6th, several members of the Gulf Cooperation Council (GCC)1 announced a sweeping blockade of Qatar, also a member of the GCC. The GCC members enforcing the blockade, led by Saudi Arabia, issued a list of 13 demands which Qatar rejected.
1 Member states include Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Oman and Bahrain.
Since the blockade was implemented, Qatar has managed to replenish basic foodstuffs that were initially stripped from store shelves as households rushed to hoard necessities. The emirate state has managed to fly in dairy cows from abroad which are now contentedly supplying milk from air conditioned barns in Qatar.
In the first part of this report, we will offer a short history of Qatar and examine its geopolitical imperatives. Next week, in Part II, we will analyze the events precipitating the blockade, the blockade itself, the GCC’s demands and the impact thus far on Qatar. We will examine how the situation has reached a stalemate and, as always, we will conclude with market ramifications.
A Short History of Qatar
Qatar is a peninsula nation that juts into the Persian Gulf. It shares a land border with the United Arab Emirates (UAE) and Saudi Arabia. As this map shows, it occupies a significant part of the Persian Gulf. It is also close to the island nation of Bahrain.
The area of modern Qatar was part of two early kingdoms of Saudi Arabia. The first Saudi kingdom lasted from 1744 through 1818. The forces of the Ottoman Empire overthrew this first kingdom which was ruled by Muhammad ibn Saud. The al Sauds rose again in 1824 and created the second Saudi kingdom. This kingdom lasted until 1891, when internal conflicts within the al Sauds led to its demise.
Al Saud control on the peninsula was rarely secure. The al Thani tribe was predominant, although this influence was contested by the al Khalifa family. Eventually, the al Thani won and the al Khalifa tribe moved to dominate Bahrain.
Although nominally part of the second Saudi kingdom, the al Thani on Qatar were mostly autonomous. Tribal leaders eventually submitted to Ottoman rule in 1871 to avoid dominance by the al Sauds. However, family leaders chaffed under Turkish rule and stopped paying tribute in 1892. The Ottomans sent troops to force compliance but the al Thani tribe successfully thwarted these efforts and prevented the empire from controlling the peninsula. From 1892 until 1916, Qatar was essentially autonomous. Both the Ottomans and the Saudis nominally considered the peninsula part of their respective holdings, but in reality, the al Thani tribe was independent.
In 1915, during WWI, the al Thani joined the British against the Ottoman Empire and participated in the latter’s defeat. Qatar became a British protectorate in 1916 and remained under nominal British control until the late 1960s. In 1968, Britain, which was struggling with the financial drain from the remaining parts of its empire, informed its protectorates in the Middle East that it was leaving the region.2 Qatar became independent in 1971.
2 British protectorates in the region were Bahrain, Kuwait, Qatar, the UAE and Oman.
3 As we noted last week, if King Salman abdicates soon, his son and current Crown Prince Mohammed bin Salman would be the youngest sovereign.
Since independence, Qatar has had four Emirs, all members of the al Thani family. The first two were deposed and the third abdicated to his fourth son, Tamin bin Hamad al Thani. At 37 years of age, he is currently the youngest sovereign in the world.3