The central bank of Qatar has launched an investigation into what it says are attempts to harm the Qatari economy through the manipulation of its currency, securities and derivatives markets.
Sheikh Abdulla bin Saud Al Thani, the governor of Qatar’s central bank, blamed the effort on a Saudi-led group of countries that imposed an economic boycott on Qatar in June.
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“We know blockading countries and their agents are attempting to manipulate and undermine our currency, securities and derivatives, as part of a coordinated strategy to damage Qatar’s economy,” Sheikh Abdulla said in a statement on Tuesday.
The central bank has hired New York-based law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to lead the investigation, he said, adding: “We will not stand by while our country is attacked in this manner.”
Saudi Arabia, the United Arab Emirates (UAE), Bahrain and Egypt severed ties with Qatar and cut trade links with it after accusing their fellow Arab country of supporting “terrorism”. Qatar vigorously rejected all the accusation.
Vast financial reserves
The blockade disrupted business and financial activities in Qatar and the Gulf and caused the withdrawal of billions of dollars in deposits from Qatari banks.
However, Qatar’s exports of liquefied natural gas – the key to its financial health – were not hurt, and the country was able to weather the crisis by deploying its vast financial reserves.
Rating agency Moody’s estimated that while $30bn was taken out from Qatar’s banking system between June and July, Qatar used $38.5bn of its reserve to support the economy and the financial sector.
Khalid Alkhater, a Doha-based financial analyst, says part of the strategy to undermine Qatar’s economy involved trading the Qatari riyal at “artificial prices” lower than its official peg of 3.64 to the US dollar.
This was “intended to trigger panic among investors and the public, and cause them to dump the Qatari riyal”, he told Al Jazeera on Tuesday.
If that happens, a capital outflow would ensue and in turn put pressure on the value of the currency, making it difficult for Qatar to borrow from international markets, he said.
“The aim is to drain the Qatari sovereign fund in order to harm the economy and the financial sector … and weaken the economy to show that Qatar cannot provide the infrastructure for the World Cup.”
In November, US-based investigative news website, the Intercept, revealed an alleged plot by the UAE to weaken Qatar’s currency and strip the country of its role as host of the World Football Cup in 2022.
Citing documents found in an email account belonging to UAE’s ambassador to the US, Yousef al-Otaiba, the Intercept said a Luxembourg-based private bank drew up a scheme to “drive down the value of Qatar’s bonds and increase the cost of insuring them, with the ultimate goal of creating a currency crisis that would drain the country’s cash reserves”.
There was no conclusive evidence that the plan was executed, the Intercept reported.
The International Monetary Fund has warned that longer-term economic growth could weaken in the Arab Gulf region if the diplomatic crisis remains unresolved.