Several international banks are serving Qatar from London and New York instead of Dubai’s financial center, as the ongoing standoff makes it harder to do business with clients in the gas-rich Persian Gulf state, according to people familiar with the matter.
Lenders that handled clients such as the Qatar Investment Authority and wealthy family offices out of the Dubai International Financial Centre (DIFC) are shifting coverage to other global financial hubs to avoid damaging relations with the United Arab Emirates (UAE) and Saudi Arabia, said the people, asking not to be identified because the matter is private.
Saudi Arabia, the Emirates, Bahrain and Egypt severed diplomatic and transport links with Qatar last month, accusing it of supporting extremist groups, which Qatar denies.
As part of the restrictions, Emirates, Etihad Airways PJSC and FlyDubai suspended flights to and from Qatar, so that Dubai-based bankers have to fly via Oman or Kuwait, adding hours to a flight that used to take less than 60 minutes.
Dubai became the Gulf region’s main banking hub after opening the DIFC in 2004 to attract international banks, asset managers and insurers with promises of zero taxes for 50 years. Many bankers commute daily or weekly between the emirate and neighboring Gulf states such as Qatar and Saudi Arabia to do business with local clients.
A number of Qatari clients are also saying they would prefer to work with bankers outside of the Gulf region rather than with bankers based in the DIFC, the people said.
Regional banking operations are also being impacted amid the crisis. Some lenders in the Emirates, Saudi Arabia and Bahrain are said to have cut their exposure to Qatar amid concern of a widening of the blockade, while Qatari lenders are boosting interest rates on dollar deposits to shore up liquidity.
Central bank data released last week showed that foreign deposits at Qatar’s banks fell the most in almost two years last month as customers withdrew funds, pressuring liquidity available locally for businesses and the government.
Yesterday, foreign ministers from Saudi Arabia, the UAE, Bahrain and Egypt held talks to discuss the crisis with Qatar, with little sign the eight-week standoff was nearing its end.
The Saudi-owned Al-Hayat daily yesterday reported that the meeting in Manama, Bahrain’s capital, would likely study imposing more sanctions, including measures that would gradually harm the Qatari economy.
US Secretary of State Rex Tillerson visited the region this month, but failed to secure a breakthrough.
“The dispute is at a standstill,” US Department of State spokeswoman Heather Nauert told reporters in Washington on Thursday.
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