Recently, a leaked document revealed that the government of the United Arab Emirates planned to wage financial war against Qatar. The strategy was aimed at attacking Qatar’s currency using bond and derivatives manipulation. It involved creating an offshore investment fund that was constructed to obscure links to Dubai. This fund would then buy Qatari debt, and initiate a run of fake transactions, driving down the price of bonds, and encouraging bond investors to sell. This would lead to falling debt prices, which signals to the markets that Qatar’s economy is tanking, thus negatively harming the Qatari riyal. Finally, the economic scheme would be followed by a public relations war against Doha’s economy and government.
In isolation, this seems like little more than a diplomatic contestation between two countries. Unfortunately, it is impossible to separate this action from the Saudi bloc’s (Saudi Arabia, the United Arab Emirates and Egypt) blockade of the Qatari economy. The blockade was initially introduced to force a potential regime change in Doha. The past few months have seen Qatar using its vast supply of natural gas, friendly relations with other countries, substantial credit reserves and local banking revenue to sustain its economy throughout the dispute. Yet, without outside intervention, there is no signaling that the blockade will end soon, which is a problem for Qatar.
The UAE’s plan would significantly increase the negative effects of the blockade on Qatar. Further political instability in a country that hosts the largest U.S. military base in the Middle East would be dangerous for Washington. In addition to Doha’s stability, other threats to the United States include a potentially failed joint military exercise between America and the Gulf Cooperation Council (GCC), as well as strengthening relations between Qatar and Iran.
Thus, one would expect the Trump administration to use its relationship with all countries involved in the blockade to resolve the crisis. This is unfortunately not the case. Secretary of State Rex Tillerson has attempted to resolve the situation, however, Trump has undermined him frequently by praising the Saudi regime.
Read full article by Jordan Cohen, The National Interest, November 26, 2017,