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Qatar crisis strains Saudi-led Arab alliance in Yemen war

Soldiers and members of the Popular Resistance militiamen backing Yemen's President Abd-Rabbu Mansour Hadi walk as they head to the frontline of fighting against forces of Houthi rebels in Makhdara area of Marib province, Yemen June 28, 2017. Picture taken June 28, 2017. REUTERS/Ali Owidha

By Aziz El Yaakoubi

DUBAI (Reuters) – A crisis between Qatar and four Arab countries is straining a Saudi-led coalition backing Yemen’s government in a two-year war against Iranian-aligned Houthis and slowing the alliance’s military advances.

At the heart of the crisis is the accusation that Qatar supports the Muslim Brotherhood, an Islamist movement that coalition mainstays Saudi Arabia and the United Arab Emirates have designated a terrorist group.

But Yemen’s government is packed with supporters of the Islah party, an affiliate of the Muslim Brotherhood, threatening the unity of the alliance which has already been weakened by the withdrawal of Qatar’s forces after the row erupted on June 5.

“The Gulf rift has cast a shadow on the government and could split it as ministers linked to Islah sympathize with Qatar,” a senior official in the Yemeni government, who asked not to be named, told Reuters.

The coalition is seeking to restore the internationally-recognized government of President Abd-Rabbu Mansour Hadi and backs forces fighting Houthi rebels and troops loyal to former President Ali Abdullah Saleh.

Fighting near the Red Sea port city of al-Mokha, where a UAE-backed offensive was being prepared on the port of Hodeidah which handles most of Yemeni food imports, has slowed.

“The fighting has been frozen since the start of the dispute with Qatar, which reflects the extent of the UAE concerns over the strength of Islah in the province,” a local official told Reuters. UAE officials did not respond to requests for comment.

Saudi Arabia currently hosts the exiled Yemeni government which includes five cabinet ministers from the Islah party. The chief of staff also belongs to Islah and Vice President Ali Mohsen al-Ahmar is a close Islah ally.

TRIBESMEN, SOLDIERS CRITICAL

The party also has thousands of followers fighting against the Houthi forces who control the capital Sanaa with Saleh loyalists. Unusually in Yemen’s fractured political landscape, Islah has supporters in the north and south of the country.

Since the Saudi-led coalition intervened in Yemen in 2015, Islah has tried to distance itself from the Brotherhood, in deference to the government-in-exile’s Saudi hosts. The coalition depends heavily on Islah fighters on the ground.

“Whatever Saudi Arabia’s current view of the Muslim Brotherhood in other countries, in Yemen they are natural allies against the Houthi-Saleh alliance,” April Longley Alley, a senior Arabian Peninsula analyst for the International Crisis Group (ICG) said.

“In many fighting fronts in the north, tribesmen or soldiers associated with Islah are a critical, if not the most important, part of the anti-Houthi fighting force.”

Saudi officials were not immediately available for comment.

The Brotherhood has posed a big challenge to Arab rulers in the Middle East, where it has built a strong base opposed to the principle of dynastic rule.

While Qatar has supported the movement, Gulf monarchies and emirates, including Saudi Arabia and the UAE, have spent billions trying to prevent the Brotherhood holding power in the Arab world since 2011 uprisings swept the region.

UAE UNCOMFORTABLE

The UAE, a crucial member of the coalition and which is more hostile to the Brotherhood than other members, appears to have been the most uncomfortable about its military fighting alongside Brotherhood-linked Islah forces.

The UAE has also built a southern army that remains under the influence of southern Yemeni politicians who are hostile to the Brotherhood’s ideology and want to break with the north.

On the frontlines in the south, the offensive against the Houthis and Saleh forces has slowed down because of the UAE position on Islah, local officials said. UAE officials were not available to comment.

Fighting in the two strategic provinces of Taiz and Marib has halted for more than a month, except for occasional air strikes and naval shelling on the rebels.

Cracks in the Yemeni government on the Qatar crisis were highlighted when the quarrel broke out with Egypt, Saudi Arabia, Bahrain and the United Arab Emirates imposing travel and diplomatic sanctions on Qatar.

Yemen’s government rushed to express solidarity with Qatar on the state news agency website. Within two hours that message of support was wiped off. The next day the government cut ties with Doha, falling into line with Saudi and the others.

(Reporting By Aziz El Yaakoubi; editing by Sami Aboudi)

Tillerson leaves Gulf after making proposals to end crisis

Saudi Arabia's King Salman bin Abdulaziz Al Saud meets with U.S. Secretary of State Rex Tillerson in Jeddah, Saudi Arabia.

DOHA (Reuters) – U.S. Secretary of State Rex Tillerson left Qatar on Thursday after a tour of Gulf Arab countries aimed at easing the worst regional dispute in years, saying he made proposals that would help in resolving the month-long crisis.

Tillerson met Qatar’s emir, Sheikh Tamim bin Hamad al-Thani, to discuss Doha’s feud with four Arab states that cut ties with Qatar on June 5 over allegations it funds extremist groups and is allying with their arch-foe Iran. Qatar denies this.

“Well I think it was helpful for me to be here and actually talk to them about a way forward, first to listen and get a sense of how serious the situation is, how emotional some of these issues are,” Tillerson told reporters after leaving Doha.

“But we tabled some documents with both sides while we were here which lays out some ways that we might move this forward,” he added.

Tillerson had been flying between the two sides and Kuwait, which has been acting as the mediator between the feuding Gulf countries, in the last two days in an effort to ease a crisis that put the whole region on edge.

On Thursday he flew back to Doha where he met Qatari rulers for the second time in two days. He also met with Kuwaiti and Saudi officials.

Tillerson said he was not a direct mediator but supporting the emir of Kuwait’s role in building bridges to end the crisis.

“In my view there’s a changed sense of willingness to at least be open to talking to one another and that was not the case before I came,” he said.

Saudi Arabia, the United Arab Emirates, Egypt and Bahrain accused Qatar of supporting the Muslim Brotherhood, an Islamist movement that has been the greatest challenge to Arab autocrats. The Brotherhood was a major player in the Arab spring revolts across the Middle East and North Africa.

Qatar hosts some of the movement’s prominent figures, including the spiritual leader and Egypt-born Yusuf al-Qaradawi.

“As to the Muslim Brotherhood, we’ve had sticking points with these parties ourselves, the U.S., in terms of how we view the Muslim Brotherhood’s activities,” Tillerson said. “And there’s a difference of view among these parties over the Muslim Brotherhood, and again in many ways it’s not much different than the differences we have.”

On Wednesday, Tillerson left the Saudi Red Sea city of Jeddah after talks with ministers from Saudi Arabia, Bahrain, the United Arab Emirates and Egypt, the four countries which have imposed travel and commercial sanctions on Qatar.

He earlier signed a U.S.-Qatari accord on terrorism financing in an effort to help ease the crisis, but Qatar’s opponents said it fell short of allaying their concerns.

“No wavering on the 13 demands” the headline of the Abu Dhabi government-linked al-Ittihad newspaper read on Thursday, referring to a list of demands the Arab states had put to Qatar.

(Writing by Aziz El Yaakoubi and Sylvia Westall; Editing by Janet Lawrence and Leslie Adler)

Top U.S. diplomat begins tough Gulf talks on easing Qatar row

Qatar's foreign minister Sheikh Mohammed bin Abdulrahman al-Thani (R) shakes hands with U.S. Secretary of State Rex Tillerson following a joint news conference in Doha, Qatar, July 11, 2017. REUTERS/Naseem Zeitoon

JEDDAH, Saudi Arabia (Reuters) – U.S. Secretary of State Rex Tillerson began talks with four Arab states on Wednesday in efforts to ease a boycott of Qatar after the countries labeled a U.S.-Qatar terrorism financing accord an inadequate response to their concerns.

Any resolution of the dispute must address all the key issues for Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, including Doha’s undermining of regional stability, a senior UAE official said ahead of the talks in Saudi Arabia. His comments shed light on Tillerson’s uphill challenge.

The four countries imposed sanctions on Qatar on June 5, accusing it of financing extremist groups and allying with the Gulf Arab states’ arch-foe Iran. Doha denies those accusations. The four states and Qatar are all U.S. allies.

Tillerson arrived in the Red Sea port city of Jeddah where he met ministers from the four nations to seek an end to the worst dispute among Gulf Arab states since the formation of their Gulf Cooperation Council regional body in 1981. Kuwait, which is mediating in the dispute and not boycotting Qatar, also sent an envoy.

Tillerson also met Saudi King Salman and they discussed regional developments, especially efforts to combat terrorism and its financing, the Saudi state news agency SPA said.

On Tuesday, shortly after Tillerson signed a memorandum of understanding in Doha on combating the funding of terrorism, the four countries issued a statement labeling it as inadequate.

They also reinstated 13 wide-ranging demands they had originally submitted to Qatar, the world’s biggest producer of liquefied natural gas, but had later said were void.

The demands include curbing relations with Iran, closing the widely watched Al Jazeera TV channel, closing a Turkish military base in Qatar and handing over all designated terrorists on its territory.

The crisis goes beyond the financing of terrorism, said Jean-Marc Rickli, a risk analyst at the Geneva Centre for Security Policy, pointing to Gulf fears about the role of Iran, internal instability and the regional influence of the Muslim Brotherhood as well as competition for regional leadership.

“Whatever the outcome is, one of the two sides will lose face and losing face in the Arab world is something important. The consequences for the future will be negative for at least one camp or the other.”

ABSENCE OF TRUST

The four boycotting states said in a joint statement on Tuesday they appreciated U.S. efforts in fighting terrorism.

“… (But) such a step is not enough and they will closely monitor the seriousness of Qatar in combating all forms of funding, supporting and fostering of terrorism,” the statement said, according to the UAE state news agency WAM.

Anwar Gargash, UAE Minister of State for Foreign Affairs, said the dispute was rooted in an absence of trust and that any solution must address the four states’ grievances.

“Diplomacy must address Qatar’s support for extremism and terrorism and undermining regional stability. A temporary solution is not a wise one,” he wrote on Twitter overnight.

The United States worries the crisis could affect its military and counter-terrorism operations and increase the regional influence of Iran, which has been supporting Qatar by allowing it to use air and sea links through its territory.

Qatar hosts Udeid Air Base, the largest U.S. military facility in the Middle East, from which U.S.-led coalition aircraft stage sorties against Islamic State in Syria and Iraq.

Some Gulf Arab media took a critical stance toward Tillerson ahead of his visit to Jeddah.

“What makes Wednesday’s meeting in Jeddah difficult is that Tillerson has, since the beginning of the crisis, appeared to be taking the Qatari side,” a commentary published in Saudi-owned Asharq al-Awsat and Arab News newspapers said on Wednesday.

“Tillerson cannot impose reconciliation, but he could reduce the distance between the parties in the diplomatic rift — all of which are his allies — rather than taking the side of one against the other,” wrote columnist Abdulrahman al-Rashed, the former general manager of the Saudi-owned al-Arabiya channel.

(Writing by Sylvia Westall; Editing by Mark Heinrich)

Arab states seek to step up pressure on Qatar over 2013 accord

FILE PHOTO: An aerial view of Doha's diplomatic area March 21, 2013. REUTERS/Fadi Al-Assaad/File Photo

DUBAI (Reuters) – Four Arab states sought on Monday to pile pressure on Qatar over charges it backs terrorism, saying the publication of a previously secret accord between Riyadh and Doha showed Qatar broke a promise not to meddle in the affairs of Gulf countries.

The text of the 2013 accord, whose existence was known but whose contents have never before been made public, was first published by CNN on Monday and later released on social media by Saudi officials.

In a joint statement, Bahrain, Egypt, Saudi Arabia and the United Arab Emirates said the publication of the accord, meant to settle a dispute between Qatar and its Gulf neighbors, “confirms beyond any doubt Qatar’s failure to meet its commitments and its full violation of its pledges”.

Amid fresh tension with Qatar, the four slapped sanctions on Doha on June 5, accusing it of supporting terrorism, cozying up to Iran, backing the Muslim Brotherhood – the world’s oldest Islamist organization – and interference in their affairs.

The four say Qatar pledged to desist from interfering in its neighbors’ politics in the 2013 agreement.

Qatar has rejected the charges and said the four countries are trying to impose their own views on its foreign policies.

The document surfaced as U.S. Secretary of State Rex Tillerson arrived in the region to help Washington’s allies hammer out a way out of the crisis.

In response, Qatar accused Saudi Arabia and the UAE of breaking the spirit of the Riyadh agreement and engaging in an “unwarranted and unprecedented attack on Qatar’s sovereignty”.

The Riyadh accord aimed to enhance cooperation between sovereign Gulf Arab states and avoid interference in their internal affairs, the official Qatar News Agency (QNA) said.

Kuwaiti mediation efforts hit a snag last week when the four Arab states said they were disappointed with Qatar’s response to their list of 13 demands.

MUSLIM BROTHERHOOD

Qatar said the demands, which included ending support for militant groups, the closure of the Al Jazeera TV channel, shutting down a Turkish military base in Qatar and downgrading ties with Iran, were an infringement of its sovereignty.

QNA reported Sheikh Saif Bin Ahmed Al-Thani, director of Qatar’s government communications, as saying the 13 demands bore no relation to the Riyadh accord and the latest crisis was the result of a coordinated media campaign against Qatar.

“Some of the allegations and demands of the siege countries have no basis, while others were an unwarranted and unprecedented attack on the sovereignty of the state of Qatar in violation to all international and regional agreements.”

The 2013 agreement, reached at a meeting in Riyadh hosted by the then Saudi King Abdullah bin Abdulaziz, was signed by the Emir of Qatar Sheikh Tamim bin Hamad al-Thani and Kuwaiti Emir Sheikh Sabah al-Ahmad al-Jaber al-Sabah, while an implementation mechanism was signed by the six GCC foreign ministers.

In the document, the parties agreed to refrain from backing any “political currents that pose a threat to any member country of the (Gulf Cooperation) Council”, and provided for Muslim Brotherhood leaders who are non-GCC citizens to leave the area.

(Reporting by Sami Aboudi; Editing by James Dalgleish and Clarence Fernandez)

U.S. foreign chief Tillerson arrives in Gulf for talks on Qatar crisis

U.S. Secretary of State Rex Tillerson makes a speech during the opening ceremony of the 22nd World Petroleum Congress in Istanbul, Turkey, July 9,

By Jonathan Landay and Tom Finn

ISTANBUL/DOHA (Reuters) – U.S. Secretary of State Rex Tillerson arrived in Kuwait on Monday for talks aimed at resolving the crisis triggered by the the cutoff of links with Qatar by Saudi Arabia and Arab allies allies.

In Doha, a Western diplomat said creation of a “terror finance monitoring mechanism” would feature in the talks, but declined to elaborate. Saudi Arabia, Bahrain, UAE and Egypt imposed sanctions last month, accusing Doha of aiding terrorism, something it denies.

The State Department said Tillerson, who forged extensive ties in the Gulf as CEO of ExxonMobil, would hold talks with leaders in Kuwait, Qatar and Saudi Arabia.

He was flying from Istanbul where he attended an international petroleum conference.

R.C. Hammond, a senior adviser to Tillerson, said he would explore ways to end a stalemate following Qatar’s rejection of 13 demands issued as condition for ending sanctions.

“The trips to Saudi Arabia and Qatar are about the art of the possible,” said Hammond, who added that the 13 demands “are done” and “are not worth revisiting as a package. Individually there are things in there that could work”.

The demands included the closing of Al Jazeera, the Qatar-based pan-Arab television network, and a Turkish military base in Qatar. Saudi Arabia and its backers, which accuse Al Jazeera of being a platform for extremists and an agent of interference in their affairs, have threatened further sanctions against the emirate. Al Jazeera denies the allegations.

Riyadh and its allies accuse Qatar of financing extremist groups and allying with Iran, the Gulf Arab states’ regional rival. Qatar denies that it supports militant organizations, and many experts see the blockade as an attempt by Saudi Arabia to rein in Qatar’s increasingly independent foreign policy.

TWO-WAY STREET

The crisis has hit travel, food imports to Qatar, ratcheted up tensions in the Gulf and sown confusion among businesses, while pushing Qatar closer to Iran and Turkey which have offered support.

The United States worries the crisis could affect its military and counter-terrorism operations and increase the regional influence of Tehran, which has been supporting Qatar by allowing it to use air and sea links through its territory.

Qatar hosts Udeid Air Base, the largest U.S. military facility in the Middle East, from which U.S.-led coalition aircraft stage sorties against Islamic State in Syria and Iraq.

U.S. President Donald Trump has expressed support for Saudi Arabia in the dispute.

Hammond said it was critical that not only Qatar, but Riyadh and its allies take steps to halt any financial support flowing to extremists groups, especially following the defeat of Islamic State in the northern Iraqi city of Mosul.

“It’s a two-way street,” he said. “There are no clean hands here.”

“We want progress on terrorism financing. The president strongly believes that if you cut off financing, you cut off the ability of terror to take hold in new areas,” Hammond said.

Moreover, he said, “the longer that this struggle is in place, the more opportunity there is for Iran.”

(Editing by Jeremy Gaunt)

Qatar again rejects four Arab states’ accusations

A painting depicting Qatar’s Emir Sheikh Tamim Bin Hamad Al-Thani is seen as people gather to watch players from Spain's national team in Mall of Qatar in Doha, Qatar July 5, 2017. Picture taken July 5, 2017. REUTERS/Naseem Zeitoon

CAIRO (Reuters) – Qatar dismissed as “baseless” on Friday renewed accusations that it meddles in other countries’ affairs and finances terrorism, in its first public response to a statement from four Arab states locked in a diplomatic dispute with the tiny emirate.

In the joint statement issued late on Thursday, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt said Doha’s refusal to accept their demands to end the diplomatic standoff was proof of its links to terrorist groups.

The four also said their 13 demands were now void and that they would enact new measures against Qatar, without specifying what these would be.

“The State of Qatar’s position on terrorism is consistent and known for its rejection and condemnation of all forms of terrorism, whatever the causes and motives,” the state news agency said, quoting a senior foreign ministry source.

Qatar remains ready to “cooperate and review all claims that do not contradict the sovereignty of the State of Qatar,” it added.

The four Arab states have cut diplomatic and transport ties with Qatar, which they also accuse of allying with their regional arch-foe Iran. Doha also denies that accusation.

Their original 13 demands presented to Qatar included shutting down the pan-Arab al-Jazeera TV channel and closing a Turkish military base in Doha.

Qatari officials have repeatedly said the demands were so strict that they suspected the four countries never seriously intended to negotiate them, and were instead seeing to hobble Doha’s sovereignty.

(Reporting by Ali Abdelaty, writing by Reem Shamseddine; Editing by Gareth Jones)

Arab states to deliver verdict on Qatar as compromise elusive

An aerial view shows Doha's diplomatic area March 21, 2013. REUTERS/Fadi Al-Assaad

By Sami Aboudi

DUBAI (Reuters) – Arab states that have imposed sanctions on Qatar, accusing it of links to terrorism, were due to meet in Cairo on Wednesday to consider Doha’s response to a stiff ultimatum, but settlement of the dispute seemed far off.

The editor of the Abu Dhabi government linked al-Ittihad newspaper wrote in an editorial that Qatar was “walking alone in its dreams and illusions, far away from its Gulf Arab brothers”.

Foreign ministers of Saudi Arabia, the United Arab Emirates, Egypt and Bahrain will consider whether to escalate, or less likely abandon, the boycott imposed on Qatar last month that has rattled a key oil-producing region and unnerved strategic Western allies.

Qatar faces further isolation and possible expulsion from the Gulf Cooperation Council (GCC) if its response to a list of demands made nearly two weeks ago is not deemed satisfactory.

The Arab countries have demanded Qatar curtail its support for the Muslim Brotherhood, shut down the pan-Arab al Jazeera TV channel, close down a Turkish base and downgrade its ties with regional arch-rival Iran.

They view Qatar’s independent diplomatic stances and support for 2011 “Arab Spring” uprisings as support for terrorism and a dangerous breaking of ranks – charges Doha vigorously denies.

Qatar has countered that the Arab countries want to curb free speech and take over its foreign policy, saying their 13 demands are so harsh they were made to be rejected.

The gas-rich state had raised its international profile dramatically in recent years, drawing on huge gas revenues, and developed its economy with ambitious infrastructure projects. It is due to host the soccer world cup in 2022.

Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani said at a joint news conference with his German counterpart on Tuesday that its response was “given in goodwill and good initiative for a constructive solution”, but insisted that Doha would not compromise on its sovereignty.

Gulf officials have said the demands are not negotiable, signaling more sanctions are possible, including “parting ways” with Doha – a suggestion it may be ejected from the GCC, a regional economic and security cooperation body founded in 1981.

“A Gulf national may be obliged to prepare psychologically for his Gulf to be without Qatar,” the editor of the Abu Dhabi al-Ittihad newspaper said.

Some newspapers said remarks by Sheikh Mohammed in which he stressed his country would not compromise on its sovereignty suggests that Doha would not change its policies.

Qatari officials have repeatedly said the demands are so draconian that they suspect the four countries never seriously intended to negotiate them, and were instead seeing to hobble Doha’s sovereignty.

At the same time, they have said Qatar is interested in negotiating a fair and just solution to issues they view as a legitimate concern to fellow GCC member states.

(Reporting by Sami Aboudi; Writing By Noah Browning; editing by Ralph Boulton)

Turkey’s Erdogan says Arab demands on Qatar unlawful

Turkey's President Tayyip Erdogan greets his supporters as he leaves a mosque after the Eid al-Fitr prayers in Istanbul, Turkey, June 25, 2017. REUTERS/Murad Sezer

By Mehmet Caliskan

ISTANBUL (Reuters) – President Tayyip Erdogan on Sunday dismissed calls for Turkey to close a military base in Qatar and said a wider list of demands issued by four Arab states was an unlawful intervention against the Gulf state’s sovereignty.

In his strongest statement of support for Qatar in the nearly three-week-old crisis centered on the Gulf state, Erdogan said the call to withdraw Turkish forces was disrespectful and that Doha – which described the demands as unreasonable – was taking the right approach.

Saudi Arabia, the United Arab Emirates, Egypt and Bahrain imposed a boycott on June 5 on Qatar and issued 13 demands including closing Al Jazeera television, curbing relations with Iran, shutting the Turkish base and paying reparations.

Doha said it was reviewing the list, but said it was not reasonable or actionable.

“We approve and appreciate the attitude of Qatar against the list of 13 demands,” Erdogan, speaking outside a mosque in Istanbul, said. “…This approach of 13 demands is against international law because you cannot attack or intervene in the sovereignty of a country.”

Bahrain’s foreign minister said on Sunday that outside interference would not solve the problem.

“It is in the interest of these powers to respect the existing regional order which is capable of solving any issue that may arise,” Sheikh Khalid bin Ahmed al-Khalifa said in a message on Twitter, without naming Turkey.

The 13 demands are apparently aimed at dismantling Qatar’s interventionist foreign policy which has incensed conservative Arab peers over its alleged support for Islamists they regard as threats to their dynastic rule.

Qatar along with Turkey, whose ruling AK Party has its roots in Islamist politics, backed a Muslim Brotherhood government in Egypt before it was overthrown in 2013. The Arab states have demanded Qatar cut any links to the Brotherhood and other groups they deem to be terrorist, ideological or sectarian.

“NO PULLOUT”

Turkey, the most powerful regional country to stand by Qatar, has sent 100 cargo planes with supplies since its neighbors cut air and sea links. It has also rushed through legislation to send more troops to its base in Doha.

Two contingents of Turkish troops with columns of armored vehicles have arrived since the crisis erupted on June 5, and Defence Minister Fikri Isik said on Friday that further reinforcements would be beneficial.

“The strengthening of the Turkish base would be a positive step in terms of the Gulf’s security,” he said. “Re-evaluating the base agreement with Qatar is not on our agenda.”

Hurriyet newspaper said last week a joint exercise by Turkish and Qatari forces was expected following the Islamic Eid al-Fitr holiday which started on Sunday, and the number of Turkish soldiers sent to the Gulf state could eventually reach 1,000. An air force contingent was also envisaged, it said.

Erdogan said Turkey had also offered to establish a military base in Saudi Arabia, but never received a clear answer.

“If Saudi Arabia wants us to have base there, a step towards this also can be taken,” he told reporters. “I made this offer to the king himself and they said they will consider this.”

“They did not come back to us since that day and even though they still didn’t come back to us on this, asking Turkey to pull back its troops (from Qatar) is disrespectful against Turkey.”

Speaking outside the Istanbul mosque after prayers marking the Muslim Eid al-Fitr holiday, Erdogan said he would continue his planned program despite feeling briefly unwell.

“I had a little condition about my blood pressure, related to my diabetes,” he said.

(Additional reporting by Mohammed el Sherif in Cairo and Sami Aboudi in Dubai,; Writing by Dominic Evans; Editing by Robert Birsel, Jane Merriman and Susan Thomas)

Arab states demand Qatar closes Jazeera, cuts back ties to Iran

By William Maclean and Rania El Gamal

DUBAI (Reuters) – Four Arab states boycotting Qatar over alleged support for terrorism have sent Doha a list of 13 demands including closing Al Jazeera television and reducing ties to their regional adversary Iran, an official of one of the four countries said.

The demands aimed at ending the worst Gulf Arab crisis in years appear designed to quash a two decade-old foreign policy in which Qatar has punched well above its weight, striding the stage as a peace broker, often in conflicts in Muslim lands.

Doha’s independent-minded approach, including a dovish line on Iran and support for Islamist groups, in particular the Muslim Brotherhood, has incensed some of its neighbors who see political Islamism as a threat to their dynastic rule.

The list, compiled by Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain, which cut economic, diplomatic and travel ties to Doha on June 5, also demands the closing of a Turkish military base in Qatar, the official told Reuters.

Turkey’s Defense Minister Fikri Isik rejected the demand, saying any call for the base to be shut would represent interference in Ankara’s relations with Doha. He suggested instead that Turkey might bolster its presence.

“Strengthening the Turkish base would be a positive step in terms of the Gulf’s security,” he said. “Re-evaluating the base agreement with Qatar is not on our agenda.”

Qatar must also announce it is severing ties with terrorist, ideological and sectarian organizations including the Muslim Brotherhood, Islamic State, al Qaeda, Hezbollah, and Jabhat Fateh al Sham, formerly al Qaeda’s branch in Syria, the Arab official said, and surrender all designated terrorists on its territory.

QATAR WON’T NEGOTIATE UNDER BOYCOTT

The four Arab countries accuse Qatar of funding terrorism, fomenting regional instability and cozying up to revolutionary theocracy Iran. Qatar has denied the accusations.

Qatari officials did not reply immediately to requests for comment. But on Monday, Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani said Qatar would not negotiate with the four states unless they lifted their measures against Doha.

The countries give Doha 10 days to comply, failing which the list becomes “void”, the official said without elaborating, suggesting the offer to end the dispute in return for the 13 steps would no longer be on the table.

“The demands are so aggressive that it makes it close to impossible to currently see a resolution of that conflict,” said Olivier Jakob, a strategist at Switzerland-based oil consultancy Petromatrix.

Several Qataris who spoke to Reuters described the demands as unreasonable. “Imagine another country demanding that CNN be closed,” said 40-year-old Haseeb Mansour, who works for telecom operator Ooredoo.

Abdullah al-Muhanadi, a retired public sector shopping for groceries in Doha on Friday morning, said the boycott must be lifted before negotiations to resolve the dispute could start.

“There’s a lot on the list that is simply not true or unreasonable, so how can we comply?” he said. “There are no IRGC (Iranian Revolutionary Guard Corps) elements in Qatar and the agreement with Turkey is a long-standing diplomatic agreement so we cannot ask them to leave.”

The demands, handed to Qatar by mediator Kuwait also require that Qatar stop interfering in the four countries’ domestic and foreign affairs and stop a practice of giving Qatari nationality to citizens of the four countries, said the official, who spoke on condition of anonymity.

Qatar must pay reparations to these countries for any damage or costs incurred over the past few years because of Qatari policies, he added. Any resulting agreement to comply with the demands will be monitored, with monthly reports in the first year, then every three months the next year, then annually for 10 years, the official said without elaborating.

U.S. President Donald Trump has taken a tough stance on Qatar, accusing it of being a “high level” sponsor of terrorism, but he has also offered help to the parties in the dispute to resolve their differences.

Turkey has backed Qatar during the three-week-old crisis. It sent its first ship carrying food aid to Qatar and dispatched a small contingent of soldiers and armored vehicles there on Thursday, while President Tayyip Erdogan spoke with Saudi Arabia’s leaders on calming tension in the region.

(Additional reporting by Tom Finn and Tom Arnold in Doha, and Daren Butler in Istanbul; Editing by Rania El Gamal, Paul Tait and Richard Balmforth)

Qatar rift risks raising cost for Gulf debt issuers and slowing Saudi reforms

FILE PHOTO: Cars drive past the King Abdullah Financial District, north of Riyadh, Saudi Arabia, March 1, 2017. REUTERS/Faisal Al Nasser/File Photo

By Saeed Azhar, Davide Barbuscia and Katie Paul

DUBAI/RIYADH (Reuters) – Qatar’s rift with its Arab neighbors is threatening to puncture investor appetite for the Gulf region as a whole, translating into potentially higher debt costs for governments and possibly slowing the pace of Saudi Arabia’s economic reforms.

Saudi, United Arab Emirates, Bahrain and Egypt broke relations and transport ties with Qatar on June 5, alleging it finances terrorism, something Doha vehemently denies.

The move has thrown the region — which has been relatively stable, if troubled by Sunni and Shi’ite Muslim rivalry — into diplomatic turmoil that is now putting off investors.

“We were used to a relatively peaceful region and now the landscape has changed,” said Brigitte Le Bris, head of emerging debt and currencies at Paris-based Natixis Asset Management, which manages about 350 billion euros ($392 billion) in assets.

“We are not yet ready to increase our exposure to the region. We need to know whether this crisis is isolated to Qatar or it can spread and affect other countries or the crisis can worsen.”

One obvious area is sovereign debt, where the crisis has the potential of raising borrowing costs.

Following the sanctions, rating agency Standard & Poor’s downgraded Qatar while Fitch put it on its watchlist for a potential downgrade.

To date, foreign investors still appear to be comfortable holding Qatar paper due to the size of the country’s reserves and assets held by its sovereign wealth fund, Qatar Investment Authority.

Yields on Qatar’s sovereign dollar bonds maturing in 2026 spiked over 40 basis points after the sanctions were announced on June 5 but have now recovered nearly 20 bps.

Other Gulf Cooperation Council countries’ sovereign bonds saw some weakness in the immediate aftermath of the diplomatic crisis, but again have largely gone back to their pre-crisis levels.

How long this lasts, however, may depend on how long the crisis goes on, which may be “for years” according to one UAE minister..

The market’s take, however, is that the diplomatic crisis will be resolved via political mediation, said Max Wolman, senior portfolio manager at Aberdeen Asset Management in London.

“But if the likes of Bahrain, Oman or even Saudi Arabia were to issue these days, I think there would be a slight risk premium of 10 to 15 basis points in the primary to the secondary market because of current political uncertainty,” he said.

SAUDI REFORMS

Another risk could be to Saudi Arabia’s economic reforms, many of which depend on investor cash flowing in.

“Investors may become concerned about Saudi over-extending itself, as the war in Yemen continues and domestically reforms have adversely impacted consumer sentiment,” Asha Mehta, portfolio manager at Acadian Asset Management.

A senior banker, who has done extensive investment banking work in the Middle East, pointed to the high-profile listing of oil company Aramco as a potential issue.

“If the situation continues like this and they planned their IPO, they would be bombarded with questions on this (political upheaval),” he told Reuters, asking not to be named.

Even though the Aramco IPO is not expected until 2018, Saudi Arabia was preparing the sale of government stakes in airports, healthcare and educational firms, aiming to raise $200 billion.

The privatization is part of the reforms to reduce Saudi Arabia’s dependence on oil, after its price plunge hurt the kingdom’s economy and stretched its finances.

Bank of America Merrill Lynch in a recent note said geopolitics may delay the reforms, although not derail them.

Saudi’s reform process could get some impetus, however, from the announcement on Wednesday that Mohammed bin Salman will become the crown prince, replacing his cousin in a sudden announcement that confirms Saudi Arabia King Salman’s 31-year-old son as next ruler of the kingdom.

MBS, as he is known, was behind the sweeping economic reforms aimed at ending the kingdom’s “addiction” to oil, part of his campaign.

Brent was unchanged at $46.02 barrel at 0651 GMT on Wednesday at multi-month lows after falling nearly 2 percent in the previous session to its lowest settlement since November as investors discounted evidence of strong compliance to a deal to cut a global output.

(additional reporting by Marc Jones in London, and Tom Arnold in Dubai Editing by Jeremy Gaunt)

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