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Qatar Press Release Brief

14 Jun 2017

The Qatari Sanctions and How They Affect W K Webster Clients

The Recent imposition of Sanctions on Qatar by its Middle  East neighbours has increased uncertainty in this volatile region and the full knock on effects remain to be seen but are likely to increase the longer this situation remains.

The extent of the restrictions as they currently stand are briefly as follows:-

By land - Qatar’s only land border with Saudi Arabia has been closed;

By sea - Saudi Arabia, the UAE and Bahrain have already closed their territorial waters but Egypt has yet to announce any decision with regards to vessels transiting the Suez Canal on their way to European and other destinations;

By air - Saudi Arabia, the UAE, Bahrain and Egypt have all closed their air space.  

In addition, a number of other countries in the area have said that they are keeping a close eye on developments and while their relations have not yet been affected the situation is subject to change.

What are the implications of this on the transport and insurance industry?

For now it is unclear what if any consequences will arise from an insurance perspective, but with regional banks talking of cutting relations it should probably be expected that there will be implications for the insurance industry as well. It remains to be seen how these sanctions will affect clients whose risks are currently underwritten by the likes of Doha Insurance and Egyptian National Insurance Company, amongst others. In addition, all insurers underwriting risks in the area are likely to see a rise in claims being submitted as carriers struggle to fulfil their contracts.

For the transport industry, the immediate consequences appear to be issues with bunkering and having to change voyage plans

For the owners and operators of some 600 vessels currently flying the Qatari flag, bunkering could become a problem with many of the Middle East bunkering facilities now being inaccessible although for right now bunkering in Iran remains a possibility.

With regards to actual passage, Qatar flagged vessels are not going to be allowed to call at ports in Saudi Arabia, the UAE, Bahrain and Egypt or even transit their national waters en route to other Gulf States. But the restrictions do not stop there because Saudi Arabia and the UAE have even banned access to vessels whose ownership is Qatari even if they fly another flag.

In addition, many other owners and operators whose vessels transit the Gulf will also be affected by these sanctions. A number of UAE ports have already banned vessels with no link to Qatar other than that they have or will call there on their voyage.  This will especially affect vessels on short voyages focused around the Persian Gulf and those involved mainly in transhipment in the region.

As far as road transporters are concerned, it is unclear what will happen to trucks already at the border crossing waiting to enter Qatar with their deliveries or those returning to Saudi Arabia and any rerouting of vehicles will inevitably be met with considerable delays. Those carrying food imports to Qatar (some 80% of Qatar’s food imports are delivered over land through Saudi Arabia) are likely to experience an increase in claims volumes as they struggle to deliver their perishable cargos.

Air transport is likely to be least affected but expat passengers will find themselves having to go via another country in order to travel to these countries with many passengers in the construction and finance industries likely to be heavily affected.

As carriers alter their voyage plans to avoid Qatar it will find it increasingly difficult to obtain supplies and move its exports.

What are the repercussions for global markets?

A week on and the more far reaching effects are already becoming apparent. 

One of Qatar’s biggest exports is LNG. When the news first broke many analysts were of the opinion that LNG export s would not be affected as vessels would still be able to use the international shipping lanes to access their global markets but already at least two shipments destined for the UK through the Suez Canal have been re-routed with one shipment no longer destined for the UK at all. While this will not immediately cause shortages in the UK supply it has already caused an increase in the gas price. If in the fullness of time vessels intending to transit the Suez Canal cease serving their regular European destinations as they are now forced to take the much longer route around Southern Africa then global markets may begin to feel the pinch as demand increases when the colder weather arrives in a few months time. At any rate, lead times will become much longer and freight costs will go up due to the much longer route.

 So, while the full extent of this decision remains to be seen it is already clear that there will be far reaching consequence for all and not just for Qatar.

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