Qatar’s economy in general and the financial sector in particular, have been hurt by the sanctions imposed on it as part of the blockade. The country had until then depended largely on the import of goods from its neighbours; this is no longer possible. And its banks and corporations had close ties with the region, deriving funding from banks headquartered in the blockading states. The Qatari central bank has had to inject $9 billion into the banking sector to reassure investors.
Still, even as one of the participants in the blockade, rather than its object, Dubai could also be hurt by this unexpected turn in regional relations.
Dubai’s economy was already hurting before the blockade. Over the past five years it has recorded narrow budget surpluses and this year is expected to record a 2.2% budget deficit.
The emirate’s economic ties to Qatar could further hurt its economy. Qataris own large amounts of property in Dubai, buying over $500 million of real estate there last year alone. And Qatari gas is one of Dubai’s main sources of energy. (Qatar has so far chosen to continue selling its gas to Dubai.) Dubai’s ports used to be among the largest purveyors of goods to Qatar, but are now forbidden from doing so as part of the sanctions, thereby losing business to Oman, among others.
But perhaps the biggest impact is to the reputation of Dubai as a business-friendly jurisdiction. In the UAE, showing sympathy for Qatar is now a crime punishable by a fine of Dh500,000 ($136,000) and up to 15 years in prison. As one Qatari businessman puts it: “Dubai has been portraying itself as a modern, global city for years. In buildings there you find clocks showing Hong Kong, Dubai, London and New York times. Now you can’t even express your opinion. It’s medieval.”
Certain banking activities are already hard to perform from Dubai as a result of the blockade: bank analysts find it difficult to access information online about Qatari corporations they cover, due to censorship. They cannot travel easily to Qatar for meetings, having to first stop off in a third-party airport, such as Muscat. When they return to Dubai after a visit to Qatar, they fear questioning from police on arrival. On the phone, they are hesitant to speak freely about Qatari business and regional politics, although it is an essential part of banking in Dubai.
As part of a contingent of Middle Eastern states imposing harsh sanctions on a fellow Gulf country for largely geopolitical reasons, Dubai risks losing its reputation as a safe and stable place to do business.