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World-beating wealth props up Qatar against Arab sanctions Featured

A month after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic, trade and transport ties with Qatar, accusing it of backing terrorism, it is suffering from isolation but is nowhere near an economic crisis.

The alliance against it, meanwhile, may not have options to inflict further damage.

As the world's top liquefied natural gas exporter, Qatar is so rich -- at $127,660, its gross domestic product per capita in purchasing power terms is the highest of any country, according to the International Monetary Fund -- it can deploy money to counter almost any type of sanction.

In the past month it has arranged new shipping routes to offset the closure of its border with Saudi Arabia, deposited billions of dollars of state money in local banks to shore them up, and drawn the interest of some of the West's biggest energy firms by announcing a plan to raise its LNG output 30 percent.

The success of these initiatives suggests Qatar could weather months or years of the current sanctions if it has the political will to do so -- and that further sanctions being contemplated by the alliance may not prove decisive.

On Wednesday, the alliance said Qatar, which denies any support for terrorism, had missed a deadline to comply with its demands. Further steps against Doha will be taken in line with international law "at the appropriate time”, Saudi Foreign Minister Adel al-Jubeir said.

Saudi media reported this week that the new sanctions would include a pull-out of deposits and loans from Qatar by banks in alliance states, and a "secondary boycott" in which the alliance would refuse to do business with firms that traded with Qatar.

Those steps would cause further pain for Qatar, but not to the point of destabilizing its financial system or breaking the peg of its riyal currency to the U.S. dollar, senior Qatari businessmen and foreign economists said.

"As long as we can sell our products we can withstand this for a very, very long time. The only thing that can really hurt us is if they block the gas exports, but then you provoke a crisis in the world," said a top Qatari banker.

"The economy will suffer but not to the point that we Qataris will suffer," he added, declining to be named because his bank still does some business in other Gulf Arab states. "Instead of having five maids at home, we'll have three."

Qatar does face higher import costs as it is forced to use less convenient shipping routes through ports in countries such as Oman, but probably not to the point of having to cancel big state-led economic projects.

"An outright recession looks very unlikely to us, even if the sanctions continue into next year," Jason Tuvey, Middle East economist at London-based Capital Economic said.

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