Is Qatar About To Destroy The GCC?

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Is Qatar About To Destroy The GCC?
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Qatar and its relationship with other members of the GCC was discussed in the first part of this series. Now let us look at something which the media seems to be missing.

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As we pointed out, and is known to anyone following the GCC, Shia Iran is the issue which unites the GCC. However, what everyone else is missing is that the Iranian issue might not be enough to hold the six allied countries together, the culprit, Qatar. Qatar’s aggressive action regarding some of the more extreme Sunni groups is frightening other members, and it is hard to imagine that Saudi Arabia will allow this to continue.

One recent example, the Afghani Taliban opened an office in Qatar. But the problems did not begin there. The GCC have become closer as Iran’s agressive posture has increased, but before the ascent of Iran there were disputes. However, we will ignore that time period. In the first article we noted the recent unity against Iran. We will now see what has happened since 2011. The first major dispute among members was about Egypt at the start of the uprising against Hosni Mubarak. This Al Arabia article provides an excellent summary of the Qatar and Saudi dispute over Egypt. Readers can get a sense of the unease between Qatar and Saudi by reading that article. If anything, the tension has only gotten worse since the article’s publication. We will sum up the main points below:

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Saudi Arabia, despite practising Wahhabism, is scared to the Muslim Brotherhood. Saudi limits the activity of the Muslim Brotherhood in the country (we are not sure that the Brotherhood is officially banned as the Times states). According to public statements and amplified by sources close to the royal family as well as the SCAF, Saudi was furious with the US over their betrayal of Hosni Mubarak. Saudi knew (like we did) that if Mubarak fell and the army was weakened, the Muslim Brotherhood would take over. That is exactly what has happened. Saudi Arabia’s royal family is opportunist and does not want the Muslim Brotherhood or other extremist groups causing problems in the gulf area. Furthermore, Mubarak was a very strong opponent of Iran, which made the Saudi-Egyptian relationship even closer. As I have stated in the past, when even Saudi Arabia considers a group extremist, watch out.

However, Qatar did not have great relations with Mubarak and is happy to be on good terms with the Muslim Brotherhood. Qatar is not only gaining influence across the Arab world, but also making money, by signing eonomic deals with the new Egyptian Government.

The other gulf members are not happy either with Qatar’s foreign policy. Egypt with its large population and army is one of the regional powers. The gulf states preferred a reliable leader who would also attempt to curb Iranian influence in arab countries. Although, the Muslim Brotherhood is anti Shia, and therefore ideologically opposed to Iran, relations between the two countries are much warmer under Muslim Brotherhood rule.

The gulf member which is likely the most frightened right now is the United Arab Emirates (UAE). There has been a  heated exchange between the UAE and Muslim Brotherhood recently. The issue was about a Brotherhood cell arrested by the UAE. The Brotherhood is banned in the gulf state, and has been accused of attempting to overthrow the Government (we will discuss the UAE- Qatar dispute in depth).

Interestingly, now a situation exists in the Gulf where the Governments fear both Iranian and Brotherhood influence. So why is Qatar doing this?

The question is better than the answer. The truth is that it is hard to know why Qatar is risking its alliance with its rich neighbors for the likes of the Taliban and Muslim Brotherhood. One factor is obvious, Qatar wants to be a regional power despite its small size. This is seen through the expansion of Al-Jazeera, which is the most watched channel in Saudi Arabia. The competitor Al Arabiya, is second place in the station’s home country. Qatar has played a role in Syria, Libya and is becoming Egypt’s closest ally. Pride is clearly one factor in Qatari foreign policy.

Another factor could be to create a genuine religious Sunni, anti-Shia, anti-Iranian front. As mentioned, the Muslim Brotherhood is extremely anti Shia. Mohammed Mursi called Jews the ‘descendants of Apes and Pigs’ in a 2010 interview. In another interview, Muhammad Hussain Yaqub said that Mursi agrees that ‘the shias are more dangerous than the Jews.’ We asked the Muslim Brotherhood where Shias come from exactly, but they did not respond to requests for comments (we really did ask them that question). The Taliban is a fanatic Sunni group, so are many of the groups fighting Assad in Syria; therefore it is possible that ideology could be a factor.

Finally, money is at play. Egypt even with its economy on the verge of collapse, will always be a regional power due to its control of the Suez Canal, a large army, and a large population. Approximately 30% of Arabs live in Egypt, it has a population over 40 times larger than Qatar. Qatar did not get along with Mubarak, so now is the time to cut deals as Egypt really needs the money, Qatar has already made a decent ROI on some of those investments.

However, eventually the fun has to stop. It is not hard to imagine that Saudi, the UAE, Kuwait and the other nations, view the Brotherhood as much of a threat to their rule as Iran. Qatar may be overplaying its hand. It is hard to imagine that the other GCC members will continue to allow Qatar’s courting of radicals to continue. Although, this has not gotten any media attention, we think that the GCC is for the first time in many years on the verge of collapse. However, its probable that Qatar would scale back if enough pressure was applied by its neighbors. Qatar would not want to completely allienate its allies in the region.  Finally, it seems only a matter of time until the largest GCC country, Saudi Arabia steps in and quietly or publicly demands Qatar to cease its actions. If Saudi does not act soon, the GCC could very well break apart.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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