The region's politics affect the economy to a large extent, and a quick look at the changing dynamics of Gulf investments in Egypt since the 25 January Revolution is evidence of this. Most Gulf countries moved to the sidelines soon after the deposition of their ally, former president Hosni Mubarak, with Saudi Arabia and the United Arab Emirates withholding billions of dollars of promised aid to Egypt. Qatar's generosity was triggered by the coming of the Muslim Brotherhood to power in the post-revolutionary period, with the rich emirate playing a larger role in the region by feeding the Islamist movements. In addition to lending or giving Egypt $7.5 billion in aid during former president Mohamed Morsi's one year in power, in April 2013 Qatar promised $18 billion in investments to Egypt in addition to sending free gas shipments to ease the country's power shortages. The increasing influence of the Brotherhood raised reservations among the Saudis and in the UAE, however, both of which waited until Morsi was toppled before pouring aid and investment into Egypt. The Qataris, meanwhile, pulled back. Now the diplomatic problem is taking on new dimensions, with the three Gulf countries of Saudi Arabia, Bahrain and the UAE withdrawing their ambassadors from Qatar last week because Doha had failed to implement an agreement among the Gulf countries not to interfere in each other's internal affairs. The move, which stems in the view of many from the three nations' reservations about Doha's support for the Muslim Brotherhood, has left many wondering about its economic cost. In Egypt, one businessman talking to Al-Ahram Weekly on condition of anonymity said that business relations with Qatar had already been affected and that when he had gone to renew his visa for Qatar he had faced many unfamiliar complications. Previously, the visa had been renewed automatically for five years. He noted that Qatar's increased presence and promised investments in the Gulf of Suez and in the Egyptian financial sector had ended with Morsi's toppling. “The pledged Qatari investments were put on ice, and the Egyptian authorities also refused a Qatari request to raise the number of flights between the two states,” he added. According to Reuters, Qatar Petroleum has backed out of talks to buy German utility RWE's oil and gas unit DEA because of the latter's significant presence in Egypt. “The news of Qatari investments in Egypt has now been replaced by headlines on the billions of dollars injected by large UAE heavyweights like the Al-Futtaim Group, Arabtec Holdings and Emaar Properties,” the businessman said. Emaar resolved its disputes with Egypt and pledged U$5 billion of new investments a month ago, and Arabtec is tying the knot with the army in a LE280 billion housing deal. In the wider Gulf region, the diplomatic split is not expected to affect the economies of the Gulf in the short term. As the region's largest natural gas exporter, Qatar can stand alone economically. The government's budget surplus was US$27.3 billion, or a huge 14.2 per cent of gross domestic product, in the fiscal year to last March. Weak internal trade between the concerned countries will limit the effect of any disruption on economic relations. The oil-rich economies of the region operate largely independently of one another, said Farouk Soussa, an economist of Citi Group to Al-Ahram Weekly. Soussa put the non-hydrocarbon trade between Qatar and its Gulf Cooperation Council (GCC) partners at around one per cent of Qatar's total trade by value. However the rifts, if continued, threaten to undermine efforts to integrate the GCC economies, which supply about a fifth of the world's crude oil. Plans to speed up integration among members of the group, created in 1981, have made little progress in recent years. The disagreements relate to the full implementation of a free trade area among the GCC countries. The area, launched in 2003, has removed trade barriers among the six Gulf nations in addition to setting a unified tariff system on trade outside the countries of the bloc. However, the agreement has been delayed by differences on how to share customs revenues. While Soussa does not anticipate any disruption to gas flows, he fears that any escalation, however unlikely, could be harmful if it were to affect the Dolphin Energy Project linking Qatar and the UAE. “Gas exports to the UAE via the pipeline account for around five per cent of Qatar's total export earnings, and the Abu Dhabi Council for Economic Development estimated in 2010 that the emirate was reliant on the Dolphin pipeline for 50 to 60 per cent of its total gas requirements and electricity generation was almost entirely dependent on gas,” he said. Qataris also invest heavily in Dubai's real estate market, with one study issued last year finding that Qatar had the highest per capita investment in Dubai real estate in 2013, worth some Dh6.71 million. A reversal in this trend would leave many real estate companies in the UAE affected. With the citizens of the Gulf countries being active investors in each other's stock markets, these fund flows could now start to pull back. According to a recent Reuters report, non-Qatari GCC nationals may own five to 10 per cent of Qatar's stock market, which has a capitalisation of about $175 billion. As Qatar's only land border is with Saudi Arabia, according to a commentary by the Saudi-US Relations Information Service (SUSRIS)'s Hassan Tarek Al-Hassan, an economist, this means that Qatar's basic imports such as food might be halted if its neighbour decides to isolate it or impose sanctions. Al-Hassan noted that Saudi Arabia in 2004 halted exports of building materials to Bahrain after the latter signed a free trade agreement with the US in spite of Saudi objections. Qatar's organisation of the FIFA World Cup in 2022 might also be undermined, as in its bid to host it the country had presented plans for major road and railway connections to Saudi Arabia and Bahrain as a central component of a project to expand its transportation infrastructure. The proposed bridge with Bahrain, called the Friendship Bridge, has already faced severe delays largely because of political tensions. Late last year, Bahrain's foreign minister announced that due to financial difficulties the bridge was likely to be completed shortly before the 2022 deadline. “That could seem like an optimistic deadline should relations continue to be as strained as they are now,” Al-Hassan said.
