Qatar prepares for another year under blockade
Intra-GCC tensions will continue under the cloud of Saudi-Iran hostility
For the five members of the GCC excluding Saudi Arabia, 2019 will be dominated by the machinations of Riyadh and Tehran, the two giant competitors for regional dominance.
While a war between Saudi Arabia and Iran is unlikely, the possibility cannot be totally excluded. Any conflict would result, at very least, in a sizeable spike in oil prices. About 18mn bl/d of crude oil and almost 4mn bl/d of refined products pass through the Strait of Hormuz. Kuwait, Qatar and Bahrain are entirely dependent on the strait for their exports. The question is how prolonged any spike would prove to be.
As Saudi Arabia and Iran continue to talk tough, Bahrain, Kuwait, Oman, Qatar and the UAE can do little more than hold on to their seats and watch. The populations of these five states are dwarfed by those of Iran and Saudi Arabia. Only the UAE has significant offensive military capability via its air force.
Saudi Arabia in 2019 will go on receiving political support from the UAE and Bahrain for its Iran strategy. But the attitude of other GCC states will remain more nuanced. Oman, for one, will try as ever to stay aloof from the Saudi-Iran spat. Oman is an outlier. Sultan Qaboos has a long history of paying only lip service to the GCC, which he sees as essentially a Saudi vehicle. Moreover, the sultanate sits outside the Strait of Hormuz. In October 2018, Israeli premier Benjamin Netanyahu unexpectedly visited Muscat. This looked like an attempt by Sultan Qaboos to obviate any US penalties or Saudi-UAE pressure resulting from Oman's determination to maintain good relations with Iran, whatever might transpire in the months ahead.
18mn bl/d—crude oil through the Hormuz Strait
Sultan Qaboos himself is ill but has survived for longer than predicted. While the succession will be a momentous event—Qaboos has been in power since 1970—the longer he has held on the more Omanis and others have been able to contemplate a post-Qaboos future. Oil majors seem to be unperturbed. BP has sanctioned the second wave of its enormous Khazzan tight gas project in the sultanate. Oman, in short, will remain stable in 2019.
Oman has also remained aloof from the Saudi-Bahraini-UAE feud with Qatar. The blockade, in place since June 2017, will not come to an end in 2019. Qatar, the world's richest country on a per capita basis, can be said to have won. Its political and military alliance with Turkey and ties to the Muslim Brotherhood are likely to strengthen. Economically, Qatar is cushioned by enormous gas reserves which it is intent on monetising. Doha's ending in 2017 of its self-imposed moratorium on exploration and development work in the North Field, the giant gasfield it shares with Iran, is set to begin yielding further dividends.
In response to Qatar's defiance, Riyadh has invited international companies to bid to construct a 60km (37-mile) canal through its land border with Qatar to turn the latter into an island. As an insurance policy, Qatar has the option of closing the Dolphin pipeline which supplies gas on highly advantageous terms to the UAE. The stand-off will continue.
Kuwait has tried to mediate between Qatar and Saudi Arabia but has failed. It may try again in 2019, aware all the while that its policy of distancing itself from Saudi-Iran hostility and the war in Yemen is not regarded favourably in either Saudi Arabia or the UAE. The coming months may also witness more efforts by Kuwait and Saudi Arabia to settle their differences over management of the jointly-held Neutral Zone, where output is divided equally between the two states. Kuwait needs its share of the shut-in oil a lot more than Saudi Arabia. The Saudis know this and are not in a hurry to turn the taps back on.
Analysts have been concerned by the anachronisms that they see in the Gulf states since at least the days of the Iranian revolution in 1979. But these countries have survived severe shocks in the form of the Iran-Iraq war, Iraq's invasion of Kuwait, the US invasion of Iraq and the Arab Spring. They will survive the latest round of upheavals in the region; but the GCC itself may not.
James Drummond is a Gulf analyst