Six months ago, the Gulf Cooperation Council, helmed as always by its de facto leader Saudi Arabia, severed diplomatic ties with Qatar. This move was apparently meant to punish the country for its supposed support of terrorism. Riyadh announced the closure of its shared land border with Qatar. The remaining GCC members denied Qatar use of their airspace and ports. The measures were meant to bring the Qatari economy to its knees by isolating the government in Doha.

Why the Measures Failed

At first, these measures seemed as though they might succeed. They quickly sent a shock through the economy, particularly in banking and trade.

Since the Saudi announcement, an estimated $30 billion has been removed from Qatari banks, interest rates have risen, and deposits have declined. Foreign customers with deposits at Qatari banks have withdrawn and relocated their money. Deposits totaled 184.6 billion riyals ($50.7 billion) at the start of June; they have since declined to 137.7 billion riyals.

Trade initially suffered too. Large container ships are unable to dock in Qatar’s shallow waters, so shipping lines must use intermediary hubs in deeper seas known as feeder ports to take and deliver goods and services. Before the diplomatic row, the Emirati port of Jebel Ali served as Qatar’s feeder port. After the row, Qatar could no longer import or export from Jebel Ali—a particularly severe problem for a country that imports the vast majority of its consumable goods.   

Ultimately, though, the plan to cripple Qatar failed. Large government funds and reserves enabled the government in Doha to support its economy while it absorbed the initial shock. In fact, the Qatari government spent approximately $38.5 billion to support the economy. The central bank’s reserves and liquidity totaled $45.8 billion in May and took a nose dive in June and July. They have since started to recover and now total $36.1 billion.

Also vital to the country’s economic survival has been its sovereign wealth fund, which is worth $300 billion (of which $180 billion is liquid). In mid-October, the government also announced that an additional $20 billion was being brought back into the country from the sovereign wealth fund’s foreign investments.