Just over a year ago, four of America's Arab allies — Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt — severed relations with Qatar, another key U.S. ally. They enacted a land, sea, and air blockade to punish the tiny emirate for what they claimed was Doha's "embrace of various terrorist" entities. Observers widely thought the diplomatic spat would be patched up within a few months. After all, this was hardly the first time Qatar and its Gulf neighbors had squabbled.
But a year later, no end remains in sight. Qatar has adjusted remarkably well to the quartet's punitive measures, while Saudi Arabia and the UAE are happy to let the blockade continue, because it comes at no cost to them. The true losers in this crisis are the traditionally neutral Gulf states of Kuwait and Oman, which have been caught in the middle.
Kuwait and Oman carry less weight economically and geopolitically than their behemoth neighbors. They gain the most from the protective umbrella of the Gulf Cooperation Council, which is now unraveling. It's in their interests to work to save the GCC, but they have been thrust into untenable positions. Kuwait, a bad actor on the terror finance front in its own right, is forced to play the role of mediating neutral party for a crisis in which both sides are unyielding. Cash-strapped Oman is trying to walk a tightrope by remaining officially neutral, but all the while capitalizing on Qatar's isolation to deepen economic links with it — which earns the sultanate the ire of Saudi Arabia and the UAE.
When the blockade broke out, Kuwaiti Emir Sabah al-Sabah — the Gulf's most senior ruler — called Qatar's Emir Tamim Al Thani and asked him to refrain from making an official statement about the crisis to give him time to resolve it. The next day, Sabah went to Saudi Arabia to meet with King Salman. That Sabah became mediator is unsurprising; Kuwait mediated the 2014 GCC crisis between Qatar and its neighbors, which stemmed from Qatari support to the Muslim Brotherhood. But the game is different now. The measures taken in 2017 are far more severe than what Riyadh, Abu Dhabi, and Manama did in 2014. They are more severe, in part, because Qatar signed the Riyadh agreement, a set of principles that ended that round of conflict, but has neglected to abide by it.
With neither side willing to make the first move to solve the crisis, it's unsurprising that Kuwaiti shuttle diplomacy and mediation have failed. This failure is all the more awkward as Kuwait attempts to represent unified Arab interests on the United Nations Security Council. Indeed, Kuwait is juggling these roles and not doing a particularly good job at either.
Kuwait is now feeling mounting pressure to choose a side and abandon its traditional neutrality. If it does refrain from picking a side, it will likely find itself on the receiving end of Saudi and Emirati anger. Privately, some Kuwaiti officials have expressed concerns that Saudi Arabia might interfere with its leadership succession process. With an octogenarian emir and crown prince, as well as a combative and populist parliament, the downside risks for the emirate only multiply the longer the crisis continues.
The sultanate of Oman faces a similar scenario. Unlike Kuwait — which has stood both politically and economically neutral — Oman has maintained only political neutrality while increasing trade with Qatar. Oman's economy has been pounded by weakened oil prices, and Muscat has one of the most vulnerable positions in the GCC, with the difference between its foreign assets and liabilities standing at less than 10 percent of GDP now compared to 55 percent in 2014. Major credit agencies have downgraded Omani debt over the last year; Standard & Poor's downgraded Oman to junk status, while it hovers just above junk on Fitch and Moody's ratings.
Higher trade with Qatar has been an economic boon for Muscat. Omani non-oil exports to Qatar increased by 144 percent in the first nine months of 2017. Oman became Qatar's top non-oil export destination in December 2017, receiving roughly 35 percent of total Qatari exports. In January, the two states signed a memorandum of understanding to deepen economic and trade ties. Oman's position as a logistics hub has improved as well, with many Qatar-based logistics and shipping firms taking advantage of the sultanate's Sohar Port. Similarly, Oman Air has been the prime beneficiary of the airspace ban. With Qatar Airways barred from the quartet's airspace, and the quartet's flagship carriers banned from Qatari airspace, Oman Air has capitalized on Muscat's neutrality, flying all over the Gulf.
Omani officials have privately shared hopes that these booming trade ties with Doha will be sustainable after the GCC spat is resolved. But Oman is also reaping Saudi and Emirati ire along the way. Its neighbors are already grumbling about the sultanate's alleged hand in shipping weapons to Yemen's Houthi rebels. New reports that Bank Muscat was tapped by the Obama administration to help Iran convert $5.7 billion in Omani currency has done little to ease tensions, as well.
Meanwhile, Oman's ailing Sultan Qaboos will turn 78 later this year. Suffering from terminal cancer since at least 2014, the sultan has yet to publicly appoint an heir. Saudi or Emirati meddling in Oman's succession is entirely possible. And Omanis remember clearly what happened during the 2014 Gulf crisis, when the Saudis and Emiratis moved quickly to influence if not weaken the newly minted Emir Tamim.
While Kuwait and Oman are stuck in a no man's land, the rest of the GCC is not. The quartet is not materially affected by the blockade. Sustaining it comes at no cost to them. Economically, the blockade has had some knock-on effects, especially for Dubai, but overall impact is minimal. Domestic political stability is unaffected by the spat. Conversely, taking the first steps to end it would cause them to lose face. Qatar initially suffered economically but has since stabilized, and the tiny emirate is unwilling to make any concessions to the Arab quartet.
Remarkably, Qatar's banking sector has rebounded, thanks to a $26 billion government injection. Doha quickly established new trade links with Iran and Turkey, and the blockade may even have been the kick Qatar needed to finally speed up much-needed economic reforms. Societally, the blockade has fostered a sense of nationalism centered around resilience. A young artist's sketch of the Qatari emir, titled Tamim the Glorious, has become a symbol of this new nationalism. And after a rocky start, the regime in Doha has even managed an about-turn with U.S. President Donald Trump.
For both Qatar and the Arab quartet, maintaining the blockade would be the easiest option. Ending it presents costs to both camps. But the equation is flipped for Kuwait and Oman. The costs go up the longer the conflict persists. As a result, they both do their best to maintain the course, even as Gulf stability erodes around them.
Jonathan Schanzer, a former terrorism-finance analyst for the US Department of the Treasury, is senior vice president at Foundation for Defense of Democracies. Follow Jonathan on Twitter @JSchanzer.
Varsha Koduvayur is a senior research analyst at the Foundation for Defense of Democracies, where she focuses on the Gulf. Follow her on Twitter @varshakoduvayur.
Kuwait and Oman Are Stuck in Arab No Man's Land
by Jonathan Schanzer and Varsha Koduvayur
June 14, 2018