End of feud between Arab countries and Qatar may restore NZ’s hopes for trade deal

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Opinion – A surprise breakthrough in a long-running feud between Qatar and its Gulf neighbours could revive New Zealand’s hopes for a long sought-after free trade deal – but may also present New Zealand with a stark strategic choice in its future relations with the Middle East.

Crown Prince Mohammed bin Salman (right) welcoming Emir of Qatar Tamim bin Hamad Al-Thani (left) upon his arrival in al-Ula, Saudi Arabia, for the 41st Gulf Cooperation Council (GCC) summit on January 5, 2021.

Crown Prince Mohammed bin Salman (right) welcoming Emir of Qatar Tamim bin Hamad Al-Thani (left) upon his arrival in al-Ula, Saudi Arabia, for the 41st Gulf Cooperation Council (GCC) summit. Photo: AFP / Saudi Royal Palace / Bandar Al-Jaloud

Saudi Arabian crown prince Mohammed bin Salman publicly embraced the Emir of Qatar Sheikh Tamim bin Hamad Al-Thani at a Gulf Cooperation Council (GCC) summit held in Saudi Arabia on Tuesday (Wednesday morning NZT).

The symbolic gesture marked the end of a bloodless yet painful dispute between Qatar and some of its most powerful Arab neighbours.

The crisis began during the Muslim holy month of Ramadan in 2017, when Saudi Arabia and three of its allies – Bahrain, the United Arab Emirates (UAE) and Egypt – suddenly cut all diplomatic and trade ties with Qatar overnight.

The immediate implications of the unprecedented rift between former close friends – driven by disquiet over what they perceived as Qatar’s interventionist foreign policy – were severe.

Qatari citizens living in the affected countries were immediately expelled. Food supplies from Saudi Arabia and the UAE that Qatar had heavily relied upon were cut off overnight. And Qatar’s national carrier, Qatar Airways, was banned from flying to the boycotting countries – and even from using their airspace.

The moves were soon reciprocated from the Qatari side, with a stalemate ensuing – until now.

The immediate consequences Qatar faced as a result of the blockade in 2017 – such as panic buying in supermarkets and the sudden border closures, cutting off seamless international travel – in some ways mirror New Zealand’s own collective experience of national isolation under Covid-19.

But just as New Zealand adapted to the restrictions in 2020, so did Qatar three years earlier. Alternative food sources were found; Qatar Airways re-routed flights to avoid the closed airspace; a dedicated dairy farm was even established in Qatar to replace fresh milk that had previously been sourced mainly from neighbouring Saudi Arabia.

So why come to a truce now?

In part, it is about the Trump administration – and in particular Trump’s son-in-law, Jared Kushner, who brokered the reconciliation – seeking a legacy. But the parties involved may have also simply decided the long-running crisis has brought no real winners and that it was time to move on.

Nevertheless, the unexpected truce also has much to do with underlying regional tensions with Iran. Traditionally, Qatar (along with Kuwait and Oman) has had better relations with Tehran than other GCC members, and Doha even sourced much of its food from Iran during the blockade. But the Iran calculation may have begun to change for Doha, in the face of an increasingly united front against Tehran across the Middle East.

Indeed, last year’s surprise peace deals that were signed between Israel and the UAE and Bahrain, both GCC members, can largely be explained by the trio’s common anti-Iranian cause. The Trump administration’s own hardline approach to Iran – symbolised by the cancellation of the Iranian nuclear deal in 2018 – has been warmly received and encouraged by Israel, Saudi Arabia and their allies.

However, with Joe Biden soon taking over the White House, the expectation is that his administration will take a more sympathetic position towards Iran and will work towards the restoration of the nuclear deal that the Obama administration signed back in 2015.

Helping NZ trade

For New Zealand, the new-found Gulf unity may be very useful, particularly in trade. The six member countries that make up the GCC – particularly the UAE and Saudi Arabia – are major trading partners for New Zealand. The region’s rising wealth and largely complementary, desert-based climate underpin strong demand for New Zealand’s food exports.

And interest from the Gulf states in New Zealand is undoubtedly growing: no fewer than three GCC countries – the UAE, Kuwait and Saudi Arabia – have opened embassies in Wellington since 2015.

The main prize for New Zealand would be the final ratification of a free trade agreement (FTA) with the GCC, which was agreed upon in-principle in 2009. Ratification has proven elusive since then, despite a major push by the John Key government – which included then foreign minister Murray McCully’s ill-fated ‘Saudi sheep’ arrangement.

The GCC’s inward focus caused by the dispute with Qatar from 2017 onwards made any progress on the FTA virtually impossible. This week’s breakthrough could lead to a fresh start. Foreign Minister Nanaia Mahuta and Trade Minister Damien O’Connor should publicly congratulate the GCC on their reconciliation and undertake to visit the region when the coronavirus situation allows.

However, New Zealand’s own relationship with Iran could yet prove to be an obstacle to any deal.

Tehran is one of Wellington’s oldest diplomatic and trading partners in the Middle East: New Zealand has maintained an embassy in Tehran since 1975.

And for decades, Iran has proven to be a particularly lucrative market for New Zealand’s meat exports. When sanctions were lifted briefly between 2016 and 2018, New Zealand’s exports immediately surged from a near-zero level to some $200 million annually.

With their own geopolitical considerations in mind, the GCC might well demand New Zealand downgrade its relationship with Iran as the price for securing a free-trade deal. If this happens, New Zealand could face a challenging strategic dilemma.

The Biden administration in Washington and European Union countries are likely to be moving in the other direction. And in their quest for a new nuclear deal and better ties with Tehran, they might call on New Zealand to pledge its support. All of which will make 2021 an interesting year.

*Geoffrey Miller

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