By Nicolas Parasie
DUBAI -- Bankers have tried to stay neutral in the diplomatic
fight between Qatar and its neighbors, Saudi Arabia and the United
Arab Emirates. Now, they are being forced to choose sides.
In early April, JPMorgan and HSBC executives informally told
Qatar officials that their banks couldn't work on the emirate's
upcoming bond issuance, according to two people familiar with the
matter. The reason: It could jeopardize their relationship with the
Saudi Arabian government, which was arranging its own bond sale,
the people said.
In turn, Qatar has refused to do business with some bankers and
consultants in Dubai, the U.A.E.'s largest city and the region's
financial hub, forcing some Western institutions to do business
with Doha through their London offices, bankers say. J.P. Morgan,
one of the most active banks in the region, relocated Ghali Laraki,
an executive director focusing on Qatari clients, to London, say
two people familiar with the matter. Mr. Laraki didn't respond to a
request for comment.
Most of the international banks continue to have operations in
Qatar, Saudi Arabia and the United Arab Emirates, but they have
tended to move more heavily into one country or the other.
The spillover into financial services adds a new layer of
complexity to one of the world's most perplexing diplomatic
feuds.
Saudi Arabia, the United Arab Emirates, Egypt and Bahrain
abruptly cut off ties last June with Qatar, accusing their former
ally of supporting Islamic extremism, cultivating close ties to
Iran and meddling in its neighbors' affairs. Qatar has denied the
allegations and lobbied in Washington and London to keep the West
on its side.
Many financiers have found it impossible to stay on the
sidelines in a fight that until recently focused on trade in goods,
squabbles over airspace and ports, and diplomatic barbs.
At least one financial-services executive and an investment
banker in two separate incidents were detained for hours in Abu
Dhabi's airport for having a Qatari visa in their passport, say
people who worked with them.
Asked about the incidents, a government spokeswoman said: "This
is not in line with our procedures."
"The financial sector as a whole is being affected," said May
Nasrallah, a former Morgan Stanley executive in the Middle East who
founded and leads Dubai-based advisory firm deNovo Corporate
Advisors since 2010.
"The cause may be political, but the resulting day-to-day impact
has certainly been economic," she said.
The U.S. is trying to resolve the broader impasse. Secretary of
State Mike Pompeo used his first official foreign trip last weekend
to press Saudi Arabia to patch things up with Qatar and focus on
deterring Iran.
"They're gonna figure this out," Mr. Pompeo told reporters. "I
think they would all agree that it's in everyone's best interests
that the Gulf States all figure out how to be together."
A spokesman for Qatar's finance ministry said his country hasn't
shunned international entities that may be based in the U.A.E.
"While blockading countries have gone to extremes in their
isolation efforts, we continue to welcome their citizens and
businesses," the spokesman said.
U.A.E. officials and Saudi Arabia's ministry of finance didn't
respond to questions about the effect of the diplomatic rift on
financial services.
To be sure, the direct economic impact of the standoff has begun
to fade. Qatar had to pump about $40 billion into the domestic
economy and banking system to offset the outflow of deposits in the
early months of the dispute, but by March, the International
Monetary Fund said the economy had begun to stabilize. More
broadly, banks in the region face bigger pressures than the Qatar
feud, including new technology, regulation and oil prices that
haven't recovered to $100 a barrel.
Still, bankers say the pressure is real to choose between
business with oil-rich Saudi Arabia and the U.A.E., which are
strong political allies, and Qatar, a tiny emirate with natural-gas
resources that make it one of the world's wealthiest countries.
The most dramatic example was dueling bond offerings by Saudi
Arabia and Qatar in early April. The Saudis went ahead with their
own bond issuance on April 10 just as the Qataris were drumming up
interest in their own bonds, complicating Doha's plans to raise
money from foreign investors.
Banks that help raise sovereign debt fell into two camps.
Deutsche Bank, Barclays and Credit Suisse -- which have large
Qatari shareholders -- helped arrange Doha's $12 billion bond
issuance. HSBC and J.P.Morgan -- which are investing heavily in
Saudi Arabia -- were absent from Qatar's bond and worked instead on
the Saudis' $11 billion bond.
HSBC and J.P.Morgan helped arrange Qatar's $9 billion bond sale
in 2016, the last time the country tapped international markets
before the diplomatic spat with its neighbors began. Both banks
have a strong presence in Saudi Arabia where they are involved
among other things in the listing preparations of state-owned oil
giant Aramco.
Japan's Mizuho, a relative newcomer to the Middle East, lost out
on both after trying to remain neutral in the regional spat,
bankers said. A Mizuho spokeswoman said the bank was initially
working on Qatar's transaction but decided to withdraw, without
elaborating.
Bankers involved in the bond sales sought to play down the
impact of the Qatar rift, saying banks didn't have the bandwidth to
work on two deals in the same week.
Write to Nicolas Parasie at nicolas.parasie@wsj.com
(END) Dow Jones Newswires
May 02, 2018 05:44 ET (09:44 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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