Qatar Is Running Out Of Dollars

Tyler Durden's picture

While the Saudi-led campaign to starve Qatar's citizens may end up short of the target, with both Turkey and Iran volunteering to provide needed staples to the isolated Gulf nation while local entrepreneurs have started a cow paradropping campaign to offset the decline in milk imports, a more pressing problem has emerged: Qatar's financial system is running out of dollars. As Bloomberg reports, several Qatari banks have boosted interest rates on dollar deposits to shore up liquidity as the Saudi-led campaign to isolate the gas-rich Arab state intensifies.

To boost their hard currency reserves, Qatar banks are now offering a premium of as much as 100 basis points over LIBOR to attract dollars from regional banks, some 80 bps higher compared to the rate they offered prior to last week's crisis. A similar picture is visible on the 3-Month QIBOR, or Qatar Interbank Rate, which has surged to 2.3% as of Tuesday.

According to the central bank, at the end of April, Qatar's banks held 21.4% of their customer deposits in foreign currency. Non-resident deposits made up 24% of the overall deposits of 781 billion riyals ($213 billion). A separate estimate from SICO Bahrain, Qatari banks have around 60 billion riyals ($16.5 billion) in funding in the form of customer and interbank deposits from other Gulf states. Most of this could eventually be withdrawn if the crisis continues.

Adding to concerns of a monetary blockade, Bloomberg also reports that some banks in neighboring countries have been cutting their exposure to Qatar amid concerns of a widening of the blockade.

In a Tuesday report, Capital Economics' Jason Tuvey wrote that while banks are unlikely “to be thrust into a crisis,” borrowing costs “look set to rise and banks are likely to become more cautious with their lending,”  “If local banks struggle to rollover their external debts, they could be forced to shrink their balance sheets and tighten credit conditions." For now the local central bank has said that Qatar's banking system is functioning without disruption, although market indicators suggest liquidity stress is rising. Likewise, Qatar National Bank, the biggest lender in the Middle East, said it didn’t see any “significant” rate increases since the standoff began, according to statement emailed to Bloomberg on Tuesday.

The good news for Qatar - the world's wealthiest nation on a GDP/capita basis - is that it has enough financial firepower to withstand a prolonged financial siege, and defend its currency and economy, Finance Minister Ali Shareef Al Emadi told CNBC in an interview broadcast Monday. Al Emadi played down the impact of the crisis on the country, saying the plunge in Qatari assets last week was a “normal” reaction to the standoff.

While so far there has been no suggestion that Qatar would commence liquidating its reserves, investors have already begun selling Qatari assets and speculating against the riyal, concerned how long Qatar can weather the crisis without having to devalue its currency or sell any of its global holdings. Qatar’s 12-month riyal forwards closed at 588 basis points against the dollar on Monday, the highest level since at least 2001, according to data compiled by Bloomberg. Rates eased slightly to about 500 basis points on Tuesday.

Despite the spike in interbank rates, S&P is confident that Qatari banks are strong enough to survive the pullout of all Gulf money and then some. The ratings agency ran two hypothetical scenarios of capital flight, and concluded that Qatar’s lenders could survive the withdrawal of all Gulf deposits plus a quarter of the remaining foreign funds the banks keep. Still, that did not prevent S&P from lowering Qatar’s long-term rating by one level to AA- last week.

Separately, Reuters reports, that the dollar shortage has also spread over to money exchange houses in Qatar on Sunday, making it harder for worried foreign workers to send money home.  

"We have no dollars because there is no shipment or transportation from the United Arab Emirates. There is no stock," said a dealer at the Qatar-UAE Exchange House in Doha's City Center mall. "The shipment is blocked from the UAE" the dealer added, although it was not quite clear if it was physical cash that was being transported.

Other exchange houses in Doha also told Reuters they had no supplies of dollars. At Qatar-UAE Exchange, dozens of people - some of the foreigners who comprise nearly 90 percent of the population of 2.6 million - waited quietly in line to change money or make remittances to their home countries.

"I spoke with my wife this morning. She said, 'Send your savings to me now.' I am not panicked but my family are scared," said John Vincent, an air-conditioning repairman from the Philippines.

"I sent 2,000 riyals ($550) home but I have some more savings left here in Qatar. I will see what the situation is in coming days before I decide what to do."

Sudhir Kumar Shetty, president of UAE Exchange, which has eight branches in Qatar, said his firm was continuing to handle remittances and currency buying as usual in that country. He said the firm hadn't seen any major change in remittance volumes due to the diplomatic tension.

 

But he added that dollar supply was not meeting demand in Qatar and attributed this partly to flows of the U.S. currency from other Gulf countries being disrupted.

 

"Everywhere, all the banks and exchange houses, there are no dollars. All the exchange houses are trying to get currencies from other countries," the dealer at Qatar-UAE Exchange said, adding that his firm was hoping for a shipment from Hong Kong.

For now most Western banks with a presence in Qatar have continued business as normal, partly because they did not want to lose out on billions of dollars of building projects which Qatar plans before it hosts the soccer World Cup in 2022.  But other Western banks have halted new Qatar business including interbank and syndicated lending, while continuing to service existing business, banking sources said, declining to be named because of political sensitivities.

"Everybody is shocked - they're not worried about Qatar's credit, they're worried about compliance and the risk that the local sanctions could be escalated to an international level," said one foreign banker in the region.

In a worst case scenario, bankers expect Qatari banks to borrow from the central bank's repo facility if they become short of funds. However, central bank rules limit the size of the repos to 2% of each bank's private sector deposits. Bankers speculate the central bank may lift this cap although the central bank did not respond to Reuters requests for comment.

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Thought Processor's picture

 

 

Maybe ask Hillary if she can wire some more.   

 

 

The Clinton Foundation misdeads tie in Qatar.  Follow the money.  As usual.

Dame Ednas Possum's picture

Email received from a lawyer here in Dubai today: 

 

  • Qatari diplomats were given 48 hours and Qatari citizens 14 days in which to leave the UAE (from 5th June 2017), although recent exemptions have been introduced on humanitarian grounds where Qatari citizens are married to UAE citizens.
  • Ex-patriate residents of Qatar are no longer eligible for UAE visit visas for GCC residents and are banned from international flights passing through the UAE. 
  • UAE has banned its citizens from travelling to, through or staying in Qatar, although recent exemptions have been introduced on humanitarian grounds where Qatari citizens are married to UAE citizens.
  • Qatar has now banned UAE, Saudi Arabian and Bahraini citizens from visiting or travelling through Qatar, although Qatar is not currently taking measures against residents of Qatar who are citizens of countries that have severed diplomatic ties with them.
  • UAE/Bahrain/Saudi airspaces are closed for aircrafts whose journey originates in Qatar.
  • Emirates, Etihad, Air Arabia, Flydubai, Gulf Air and Saudi Airlines have all suspended flights to and from Qatar. Qatar has stopped flights to destinations in Saudi Arabia, UAE and Bahrain.
  • In line with the UAE Federal Transport Authority – Land & Maritime Circular No.2/2/1023 dated 11th June 2017, all UAE ports must implement the following:
  1. Not to receive any vessels carrying the Qatari flag, or owned by Qatari companies, or Qatari individuals;
  2. Not to load/unload any cargo of Qatari origin in any port or water of the UAE; anD
  3. Not to allow ships to load any cargo of UAE origin to the State of Qatar.

 

  • Emirates Postal services to Qatar have been suspended, along with some courier services. Other courier services are re-routing their carriers to avoid Qatar.
  • Al Jazeera and beIN Sports have been banned in the UAE.
  • Consular services in the UAE and Qatar have been affected for anyone who wants to use documents originating from the UAE in Qatar and vice versa. Although there is a diplomatic cooperation treaty between the UAE and Kuwait (subject to a special authorisation being issued) which authorises each to perform consular services for the other, potentially meaning that Qatar documents can be attested by the Kuwaiti Embassy in Qatar. However, it is unlikely that the Ministry of Foreign Affairs in the UAE will attest documents originating from Qatar.
  • The UAE Central Bank has asked its banks to report to it their exposure to Qatari banks (including treasury investments, loans, letters of credit, trade finance facilities, equities, bonds, and interbank funds) and to undergo enhanced customer due diligence on any accounts they hold belonging to six Qatari banks; Qatar Islamic Bank, Qatar International Islamic Bank, Barwa Bank, Masraf Al Rayan, Qatar National Bank and Doha Bank.

 

  • Qatar's Central Bank has asked commercial banks to provide information on their foreign exchange trading on a daily basis. They have also been asked to provide a daily statement of withdrawals and transfers from deposits worth in excess of 10 million Saudi Riyals and for information on cash withdrawals and deposits on a daily basis (previously this information was only required on a monthly basis).
  • Parties to contracts governed by Qatari or UAE law may find that due to the severing of diplomatic ties between the two States, one or both parties may give/receive notification of a force majeure event, under the terms of the contract or under the prevailing law. Anyone considering/receiving such notification is advised to seek professional legal advice as soon as possible.
  • Both the UAE and Qatar are party to a number of treaties, including reciprocal recognition of court judgments. Anyone considering litigation, or attempting to enforce a judgement from the UAE in Qatar (and vice versa) may face difficulties in doing so.

 

  • The UAE Attorney-General announced that the UAE has taken a firm stance against Qatar's hostile and irresponsible policies. “Strict and firm action will be taken against anyone who shows sympathy or any form of bias towards Qatar, or against anyone who objects to the position of the United Arab Emirates, whether it be through the means of social media, or any type of written, visual or verbal form.”  The UAE Federal Public Prosecution has warned that according to the Federal Penal Code and the Federal Law Decree on Combating Information Technology Crimes, anyone who threatens the interests, national unity and stability of the UAE will face a jail term from 3 to 15 years, and a fine of not less than Dhs 500,000.

Although care has been taken to ensure that the above information is currently correct, the position is changing on a daily, if not hourly, basis. Therefore, we intend to issue regular reviews of this Blog to keep our clients as up to date as possible on the current status, and how it affects you and your company.

[1] Other countries which have also recently severed diplomatic ties with Qatar are: Bahrain, Saudi Arabia, the Comoros, Djibouti, Egypt, Libya, Jordan, Maldives, Mauritius, Mauritania, Senegal and Yemen.

Jim Sampson's picture

Amazing how fragile everything is.

Raffie's picture

they have printers, ink and paper.. PRINT IT like the the fed does.

 

Looney's picture

 

Also, according to Reuters, Qatar, the world's second largest helium producer, has closed its two helium production plants because of the economic boycott imposed on it by other Arab states, industry sources told Reuters on Tuesday.

The two plants have a combined annual production capacity of approximately 2 billion standard cubic feet of liquid helium and can meet about 25 percent of total world demand for the gas.

Among its uses, helium is used to cool superconducting magnets in medical magnetic resonance imaging (MRI) scanners, as a lifting gas in balloons and airships, as a gas to breathe in deep-sea diving and to keep satellite instruments cool. It is derived from natural gas during processing.

Looney

jaxville's picture

  That can do some real damage to many economies.  Helium supply has always been tight and a consideration in development of some advanced tech projects.  Can't recall where I read of it's importance.

Looney's picture

 

Can't recall where I read of it's importance

Lemme guess… umm… on Zero Hedge?  ;-)

Looney

jaxville's picture

  It could have been since I have been coming here for a few years now.  It sure wasn't from a mainstain site.

Stuck on Zero's picture

Future Wikipedia entry on Qatar. A once independent state that was absorbed into the Saudi Arabia whic was absorbed into the New Ottoman Empire.

Jubal Early's picture

A once independent state that was absorbed into the Saudi Arabia whic was absorbed into Greater Israel.

Fixed it for you.

jaxville's picture

  The article also mentioned that helium could be collected on the moon.  Considering the cost of doing so, He has to be pretty scarce.

open calender's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

Raffie's picture

Lets not forget helium beer.

So you are saying the price of helium is going up?

yrad's picture

"Now, what did we learn....?"

Antifaschistische's picture

Perhaps, the Qatari's should have watched at least one episode of "Doomsday Preppers".

Maybe they should have had their own dairy, and their own potato fields....any fresh water?

It would be nice if they could just say "hey, we'll just stop producing for a few months and see what the world thinks of that"

a Smudge by any other name's picture

Gee maybe they should look at digital currency. Just steer them clear of Coinbase.

Raffie's picture

More like Kornbase. As in Korn ya good when you need to use the exchange.

I Feel a little Qeasy's picture

Why not just use the soon to be 'gold backed' yuan?

BaBaBouy's picture

Hmmmm... I guess they could be using those Bitcoinz about now...

shamus001's picture

Time to deal in Gold and Silver and bitcoin. Iran, and Russia survive without 100% dependance on the dollar, hell, you can too.

As for that guy who sent his savings to his Phillipino wife... your money would have been safer in a collapsing bank during a run...that money is off to the casino as I type this!

Yog Soggoth's picture

I just loaded up my 35 ft. sailboat to the gills with petrodollars planning to sail around the horn of Ethiopia and you give me more troubles? Screw it, I already loaded the boat, I'll dump them somewhere.

Salsa Verde's picture

Just print whatever you need; we do.

dasein211's picture

You don't need to print. That's why we now have cryptos.

nuubee's picture

They could just mine some Ether, it's hot right now.

SpanishGoop's picture

Clintons money used to fligh in cows ?

The she devil won't like that.

 

83_vf_1100_c's picture

In Texas cows eat grass, a lot of grass.  In Qatar they will eat sand? Last map I checked the Gulf nations were desert. Air dropping cows is good for bruised steak.

Yog Soggoth's picture

In the ME de-salinization plants are a reality. Not sure if they got them though. They could get water from the Volga with the raw cash available, much less credit.

shizzledizzle's picture

Pile into crypto... It's what all the cool kids are doing.

Nobodys Home's picture

Oh come on! Hilliary sent you 18 beelion dollars just a little while ago. Tighten your belts...or ropes...whatever you hold your pants up with! Oh yah. You guys don't wear pants.

directaction's picture

Switch to Russian Rubles. 

They have more long-term stability.  

Haus-Targaryen's picture

They'd get invaded by the next morning if they did that ... and they know it. 

7thGenMO's picture

With crude prices down, Qatar has already had discussions about squeezing more profit by forming an OGEC - Org. of Gas Export Countries - with Iran and Russia.

This is all about the petrodollar system - and its hind-tit sucking cousins - the GBP and Euro.

TalkToLind's picture

Why don't they trade their oil and natural gas for gold instead?

TePikoElPozo's picture

cough *SADDAMHUSSEIN* cough

directaction's picture

Ah ... ah ... ahhhh <Moamar Qadaffi> chew!! 

TePikoElPozo's picture

What? Printer low on ink ??

Budnacho's picture

Iran can strip some off the Pallet Obama sent.....

falak pema's picture

Wow, so much fiat printed and digitalized money floating around and not a drop to drink in Qatar...

Fasting is now a dangerous game!

SmittyinLA's picture

It's not floating around, fiat currency can disappear as fast as its printed especially if they're always playing "catch up" with the printing while they lose it hand over fist as fast as possible.

Anybody tracking vaporized fiat? We track printed fiat but what about vaporized fiat?

jaxville's picture

  Isn't that what they mean by "money heaven"?

Yog Soggoth's picture

Counterfiat? You know what your problem is? You think to much. We have all kinds of laws, and such, that handle things with the contracts that bind them. Yeah sure, the central bankers of the World might not be related to you, share your common interests, be from your homeland, and you did not even elect them, but those guys are out there every day fighting stuff for the spirit of really important magnitudes of numbers in a digital realm that most cannot even imagine.     That was from my Earlier job resume. I almost got the job.

dearth vader's picture

There'll be fresh milk to drink, shortly. Wait for the cows to come home – by air lift.

bluskyes's picture

How will they feed the cows? Or do they just milk them once before butchering them? Or fly them for their twice a day milking from the pasture?

robertocarlos's picture

Never give your wife your total savings.