Credit FAQ Discusses Potential Implications Of Qatar Boycott For Gulf Cooperation Council Sovereigns

LONDON (S&P Global Ratings) Aug. 9, 2017:  In a Credit FAQ titled "Potential Implications Of Qatar Boycott For Gulf Cooperation Council Sovereigns," published today, S&P Global Ratings responds to questions that have surfaced in recent discussions with issuers and investors about the implications of the Qatar boycott by a group of states for the Gulf Cooperation Council (GCC) sovereigns.

S&P Global Ratings believes that the impact of a group of states cutting diplomatic ties, as well as trade and transport links, with Qatar on June 5, 2017, may not be confined to within Qatar's borders. We expect that political tensions within the GCC will persist over the next few years, and believe that the boycott of Qatar has illustrated deeper fissures within the group than were previously evident.

For the most part, we have viewed the GCC as a stable political alliance in the Arab region. The GCC broadly maintained this stability through the global
financial crisis and the Arab Spring. Numerous regional economic initiatives, suggestive of a cohesive vision, have been launched, such as financial support packages for Oman and Bahrain, and the planned introduction of VAT across the region in 2018. In our view, these initiatives indicated a desire to ensure the political and financial stability of the GCC and its individual member states. While we do not think that this desire has changed significantly, in our view, the current tensions weaken the cohesiveness of the GCC and complicate policy predictability.

The boycott of Qatar comes at a time when regional sovereign financing requirements are at a historic high in the GCC. The boycott creates the potential for financial flows to be disrupted, and for the reversal of prior investment decisions and financing lines, including those to financial institutions. However, absent a material further escalation in the boycott, we do not expect these risks to materialize to a significant extent.

The group of states boycotting Qatar includes Saudi Arabia, United Arab Emirates, Bahrain, Egypt, Libya, and Yemen.

Only a rating committee may determine a rating action and this report does not constitute a rating action.