#Saudi gets a partial brand detox with #Qatar thaw – Breakingviews

Saudi gets a partial brand detox with Qatar thaw – Breakingviews

Mohammed bin Salman has done himself a favour. Nearly four years after Saudi Arabia’s crown prince led the United Arab Emirates, Bahrain and Egypt to blockade Qatar, the two sides have buried the hatchet. It pushes the kingdom towards a timely brand detox.

The quartet’s June 2017 gambit was certainly aggressive. Emboldened by U.S. President Donald Trump’s support, MbS and friends cut Qatar’s air and trade routes. Doha’s imports promptly shrank 40% year-on-year, and a short flight across the Gulf from Dubai became a lengthy round-trip via neutral Oman. The idea was to make Qataris re-examine their assumed support for Saudi bugbears like the Muslim Brotherhood.

The immediate reason to end the blockade is that it didn’t really work. Qatar, one of the world’s richest states, rerouted its trade via Turkey and Iran, and backstopped its banks. Doha has hardly been forced to the negotiating table. A 13-strong list of Saudi demands including muzzling Al Jazeera, Qatar’s state-funded TV station, is not part of the new deal.

Trump’s exit is another driver. Without the outgoing president’s protection in November 2018, MbS could have faced American sanctions for allowing dissident journalist Jamal Khashoggi to be killed by Saudi agents. Biden may take a less confrontational approach than Trump and MbS on Iran, and he is more likely to criticise Saudi human rights abuses and other Riyadh forays like the war in Yemen.

Finally, the Saudi economy faces bigger challenges than three years ago. Oil prices remain far below the $68 a barrel at which the International Monetary Fund reckons the domestic budget will balance this year. Riyadh is sufficiently desperate to support crude prices that it pledged on Tuesday to pump less in order to let fellow producers like Russia hike output. It may lack the cash to realise MbS’s vision of pivoting the economy away from fossil fuels.

The best workaround is to entice a wagonload of foreign investment. But the reputational risks of investing in the kingdom mean foreign inflows are below 1% of GDP, way off the 2% economists see as a reasonable target. Foreign investors who gave Saudi Aramco’s initial stock offering a wide berth in 2018 won’t automatically come running because its spat with Qatar is over. But it’s one less reason for them to stay away.