This week Saudi Arabia hosts the GCC’s 40th summit with the GCC secretary-general Dr Abdulateef bin Rashid Al Zayani noting: “Their Majesties and Highnesses will discuss several important political, defense, economic and social issues to reinforce the progress of the GCC and integration among the GCC members. They will also review regional and international political developments as well as the security situation in the region and its effects on the security and stability of the GCC countries”. The event is of interest as it comes amidst media reports of signs that diplomatic tensions with Qatar may be easing. In 2017 a diplomatic spat between Saudi et al. (UAE, Bahrain and Egypt) and Qatar resulted in diplomatic ties and transport links being severed.
Qatar’s foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani stated at a conference last Friday: “In recent weeks we have moved from a stalemate to some progress. There are some talks that have taken place between us and, specifically, Saudi Arabia,” and “We hope these talks will lead to a progress where we can see an end to the crisis.” King Salman bin Abdulaziz Al Saud also extended an invitation to the Qatari Emir Sheikh Tamin bin Hamad al-Thani to attend the GCC summit. Of late other signs of easing tensions include the Saudi Arabian, the UAE and Bahraini football teams attending the Gulf Cup event recently hosted by Qatar. Plus, the Kuwaiti Deputy Foreign Minister Khalid Al Jarallah is reported as commenting: “There are indications that the chapter of disagreement between brothers will be closed.”
Clearly, any progress to end the diplomatic spat would signify easing geopolitical tensions in the region and be positive from a credit point of view. That said, Qatar’s strong net external asset position has enabled it to weather the lower oil price environment post 2014 and the impact of any capital outflows during the 2017 Saudi Arabia-Qatar spat. The Qatar sovereign remains rated Aa3/AA-/AA- by Moody’s/S&P/Fitch reflecting its asset strength and geopolitical risk. Qatar has been a strong performer: Qatar 6.4% 2040 is trading up over 20 points YTD and trades at a yield of 3.28% with just over 3 notches of credit cushion according to our models.