Rift said to risk Dubai status as financial hub – 3,000 Turkish troops for Doha

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LONDON, Aug 7, (RTRS): The boss of Standard Chartered has warned that Dubai risks damaging its status as a financial centre as a result of the trade boycott of Qatar by a Saudi-led bloc, which includes the United Arab Emirates.

Standard Chartered is a major lender across the Middle East and CEO Bill Winters said it could become increasingly difficult for Dubai to act as a comprehensive regional hub for international companies’ Gulf operations if the tension in the region continued. “There is a lot of benefit we get from having a Dubai hub, we are looking to see what the effect of this will be,” he told Reuters. “There is a risk of turning away from the UAE.” Dubai, the largest city in the UAE, emerged as the region’s main banking hub after the establishment in 2004 of a low-tax, independent zone known as Dubai International Financial Centre.

The zone now is home to over 400 financial services firms including 17 of the world’s top 20 banks, according to its website, with incentives including a 50-year guarantee of zero tax on corporate income and profits. But the diplomatic rift with Qatar could make it harder for global banks to base the vast majority of their coverage of the Gulf out of Dubai. Winters said Standard Chartered itself had no plans to change its Gulf operations, though it is watching the situation closely.

Standard Chartered earns close to 20 percent of total revenue from its Africa and Middle East operations, with much of those being managed out of Dubai. The UAE, Saudi Arabia, Egypt, and Bahrain on June 5 cut ties with the tiny state of Qatar over Saudi allegations that Qatar has been supporting Islamist groups. Doha has denied the allegations.

The rift has prompted some banks from Saudi Arabia, the UAE and Bahrain to reduce their exposure to Qatar in various ways, including by delaying letters of credit and investment deals.

The UAE central bank has ordered local banks to stop dealing with a number of individuals and entities with alleged links to Qatar and to freeze their assets, while advising banks to apply enhanced due diligence for any accounts they hold with six Qatari banks. Standard Chartered employs around 128 staff in Qatar, offering personal and corporate banking in the country.

The bank appointed Abdulla Bukhowa, a Bahraini national, to head its Qatar operations in March this year. He left the country when the tensions began. Winters said his bank does not handle a huge amount of cross-border business directly between Qatar and the United Arab Emirates, but that his staff are mindful of the situation. “Everybody is aware of the situation — what we don’t do is start pitching to UAE companies about deals in Qatar or doing business there, but we are not fundamentally changing the way we do business,” he said.

Since the trade boycott began, Dubai officials have shied away from any suggestion that the rift is having a negative impact on business in the emirate. But companies doing business with Qatar have faced disruptions such as longer travel times and having to find new suppliers. Investment banking fees in the Middle East from merger and corporate fundraising activity totalled $492 million in the first half of this year, Thomson Reuters data showed. This was 13.3 percent lower than in the same period in the previous year.

Milaha eyes Oman shift
Qatar Navigation (Milaha), a top Doha-based shipping and logistics group, said it was shifting its regional trans-shipment hub from Dubai to the Omani port of Sohar after a diplomatic crisis in the region disrupted Qatar’s trade. Milaha is setting up a warehousing and logistics operation at Sohar, on Oman’s northern coast, and is exploring other opportunities to expand in that country, the company said on Monday.

The plan suggests Qatar is making long-term preparations to cope with sanctions imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, which cut diplomatic and transport ties on June 5, accusing Doha of backing terrorism.

The sanctions closed Saudi Arabia’s land border with Qatar and also ended direct shipping links between Doha and Dubai’s Jebel Ali port, the region’s main trans-shipment centre. As a result, Qatar’s imports shrank by more than a third in June and some of its exports, excluding shipments of liquefied natural gas (LNG), were delayed.

In the days after the crisis erupted, shippers including Milaha developed new routes to Qatar via Oman, which has stayed neutral in the dispute, and other countries. Milaha’s statement on Monday indicated it was now making long-term arrangements to handle Qatar’s trade without relying on Jebel Ali.

Qatar denies that it supports terrorism and there has been no clear sign of a resolution to the diplomatic dispute, with one senior UAE official suggesting Doha could remain isolated for years. Milaha’s logistics base in Oman will increase companies’ options to access the Qatari market, the shipping firm said, adding that it currently called at two Omani ports, Sohar and Salalah, and was considering a further expansion of services. Companies can also use three Indian ports served by Milaha — Nhava Sheva, Mundra and Kandla — as transshipment hubs for trade with Qatar, it added.

US envoys to Gulf
Two US envoys arrive in the Gulf region this week to meet with officials there to help resolve a diplomatic crisis between Qatar and four other Arab countries that has lasted for more than two months, a State Department official said on Monday. Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Qatar on June 5, accusing Qatar of backing terrorism. Qatar denies that it supports terrorism and there has been no clear sign of a resolution to the diplomatic dispute. Timothy Lenderking, the US deputy assistant secretary of state for Gulf affairs, and retired US Marine Corps General Anthony Zinni “are in the Gulf region this week to engage with the parties involved and support the Government of Kuwait’s mediation efforts,” a State Department official said on condition of anonymity.

Qatari, Turkish troops hold drill
Qatar held joint military exercises with Turkish troops on Monday, Qatari media reported, showcasing their strategic alliance two months into a boycott by Arab neighbours which accuse Doha of supporting terrorism. The manoeuvres are aimed at preparing Qatar’s armed forces to defend “vital economic, strategic and infrastructure facilities,” state-owned newspaper Al-Sharq reported. Turkey’s parliament fast-tracked legislation on June 7 to allow hundreds of troops to be deployed to a military base in Qatar, set up as part of an agreement signed in 2014, in a show of support for Qatar, which is also home to the biggest US air base in the region. Ankara has said it will deploy 3,000 ground troops at the base to serve as a venue for joint training exercises and to support anti-terrorism efforts.

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