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TRADE The key purpose of this chapter is to introduce of the research methodology for this quantitative research study. In using this methodology, the aim is to facilitate the gaining of insight into the theoretical underpinnings which guided the manner in which Qatar dealt with the blockade which had been imposed on it by other GCC countries. In doing so, the study relies on the work of various scholars and commentators as well as the experiences of other countries facing similar challenges to develop a working theory of how countries often deal with economic blockades. The applicability of the theories submitted by various author will lead to an in-depth understanding of the presentations made in this chapter.

Research Questions In this study, the aim is to build a working theory which will provide an answer to the following research questions: 1. To what extent can the policies used by Qatar to respond to the GCC economic blockade be said to have been successful in tackling the economic issues which arose during the blockade?

2. What were some of the theoretical underpinnings which informed, justified, and rationalized Qatar’s strategy of using exchange rates and trade routes as a way of successfully navigating the economic difficulties brought about by the blockade?

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Background of the Research Process On 5th June 2017, Saudi Arabia, the UAE, Egypt, and Bahrain (GCC countries) cut off diplomatic ties and also decided to close off their land borders with Qatar. The cause of this action was the accusation leveled against Qatar with respect to their supposed acts of supporting terrorism. Therefore, in order for them to ease the restrictions to which they had subjected Qatar, the GCC countries demanded that Qatar stop funding for their terrorist activities, downgrade the nature of diplomatic ties that the country had with Iran and Turkey, and close down certain news agencies, including Al-Jazeera (Almutawa, 2020). It is worth noting that Qatar refused to fulfill these demands, arguing that, ultimately, what the rest of the GCC countries were doing is infringing on the country’s sovereignty.

Due to the economic blockade, Qatar faced significant challenges in the country. As the work of authors like Katzman (2016) has demonstrated, most of these challenges were economic in nature. One of the most significant effects of the blockade is that blockading countries withdrew their capital from the Qatar Central Bank, therefore leading to a decrease of about 12.8 billion dollars in the year 2017.

As a way of responding to this crisis, Qatar resorted to pulling from some of its sovereign wealth fund (the Qatar Investment Authority) so as to increase the liquidity of the banks.

Furthermore, Qatar resorted to establishing new routes in Asian markets as a way of responding to the fact that the routes of the blockading countries had been closed (Katzman, 2016). In the end, this strategy resulted in an increase in costs as well as significant cost increases in food supply.

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It is worth noting that, in general, Qatar utilized two key strategies as a way of responding to the economic crisis brought about by the blockade. The first strategy was the reshaping of exchange rates. Here, the measure used was currency shock, where Qatari Riyals were not only targeted, but also sold at low rates by the blockade countries. The consequence was a devaluation of US dollars (Katzman, 2016).

The second strategy was the strengthening of the trade market. Under this strategy, there was the recognition that the route interruption of land and sea caused by the GCC countries led to a massive shock in so far as supply change was concerned. Thus, Qatar resorted to the resuscitation of air routes, thereby raising the costs of commodities and services in the country (Pradhan, 2018). In the following sections, the rationale for the use - and success - of these justifications shall be considered through several theoretical frameworks. However, before that, there shall be a consideration of the body of thought which currently exists in so far as the overall question of economic sanctions is concerned.

The Theoretical Underpinnings of Economic Sanctions In their text, Afesorgbor and Mahadevan (2016) argue that one of the difficulties which exists in the body of work on economic sanctions is that of definition. According to these authors, this challenge of definition is a proper entry point because it informs the types of strategies which are put into use by the states which find themselves subjected to economic sanctions. Afesorgbor and Mahadevan (2016) note that one of the recurring problems for research on economic sanctions is that there is no consensus in the field in so far as definitions are concerned. Indeed, these authors note that, in some cases, definitions are broad and encompassing while, in others, there is a calculated narrowness in the definitions which are used.

However, they also argue that a useful definition of economic sanctions could be a threatened or

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actual denial of economic relations by one or more states. In the typical case, this threat or actual denial of economic relations is intended to force or influence the behavior of another state.

From the definition above, a few issues become clear. First, there is the fact that economic sanctions are, by nature, coercive. In certain cases, economic sanctions may even have the effect of undermining the sovereignty of a particular state. The other feature of economic sanctions is that they are chiefly economic (Afesorgbor and Mahadevan, 2016). In other words, their impact is meant to affect the manner in which monetary relations, foreign aid, trade, credit structures, and even investments are carried out. Finally, economic sanctions often have the objective of impacting the manner in which foreign policy behavior is carried out.

The question of definition is theoretically important because it allows one to get an understanding of why Qatar chose to take the measures it did in so far as the navigation of the GCC economic blockade was concerned. By viewing the blockade as an infringement on state sovereignty as well as a coercive measures, the country could then justify its strategies on the fact that it had a duty not to let other foreign actors affect the manner in which it chose to run its affairs. It is within this context that the strengthening of trade markets and the reshaping of exchange rates has to be understood (Veebel, and Markus, 2016).

The Strengthening of Trade Markets Using the example of Russia, Connolly (2018) argues that the strengthening of trade relations with other foreign partners is what led a country like Russia to survive the sanctions which had been imposed on it by several actors. This author notes that, in its attempt to mitigate the costs of sanctions, the country found other partners who would replace the Western countries which had placed sanctions on it. This strategy was used particularly in the field of corporate finance, foreign direct investment, and other military technologies which had been expressly

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prohibited by the sanctioning countries. Connolly (2018) argues that this act of expanding one’s trading partners decommissioned the sanctioning countries as the only ones with whom a country like Russia could have trading and economic relations.

The use of this strategy by Russia could be said to be similar to Qatar’s strategy of looking elsewhere in order to ensure that the country has access to the relevant amenities which would ensure that its population did not suffer from the fact that there had an imposition of land borders by the GCC countries. In his work, Connolly (2018) argues that, in the typical case, sanctions impair the coercive capacity that a state has, particularly when it comes to the question of maintaining the status quo. The imposition of trade embargoes and other related restrictions severely the sources from which a government can obtain and utilize its revenue. Therefore, in finding new partners with whom to form relations, a state is essentially communicating that it still has the ability to capitalize on its resources to ensure that it can withstand the pressure.

Therefore, for a country like Russia, looking to non-Western states for trading relationships functions as a strategic way of deplatforming the Western hegemony, protecting the country’s sovereignty, and also forming the kind of relationships which could perhaps participate in a quid-pro-quo arrangement Connolly (2018). The other rationale for the use of this strategy is that it results in a spreading of risk. If a state develops relationships with other trading partners, then it increases the chance that it will not be subject to coercive practices in so far as sanctions are concerned. Furthermore, in its future, the country may be able to resist the effects of economic blockades by relying on the strategic resources of its other partners (Wang, 2015).

The Reshaping of Exchange Rates When it comes to the reshaping of foreign markets as a strategy, the research work conducted by Tyll et al. (2018) is instructive. In their work, the authors contend that, in the

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current global economic landscape, one of the ways in which countries run their economies is through their reliance on export income. Thus, in the case that measures such as economic blockades are used in an effective manner, then the status of exchange rates should be able to reflect the said success. This success typically comes as a result of a country’s inability to take advantage of the new incentives which account for changes in exchange rates. To this extent, then, the strategy of reshaping a country’s exchange rate may eventually lead the said country towards economic effectiveness. Furthermore, the strategy demonstrates that, even though sanctions usually have initial effects on exchanges rates because of economic damage, the changes in exchange rates which come later have the ability to stabilize an economy which has been affected adversely by economic sanctions and blockades.

In their text, Hatipoglu and Peksen (2018) imply that an increase in the demand for exchange inside a particular country could have the effect not only of increasing the exchange price, but also having a negative effect on the economy. This is because a reduction in the value of a country’s national exchange usually has the effect of increasing the inflation levels of the country in question.

Even so, in the case of a country that is in the precarious economic position in which Qatar finds itself, there may have been an argument for the reshaping of the exchange rate. Here, as Hatipoglu and Peksen (2018) in their work, it is worth noting that the implementation of such a policy is often difficult unless there are strategies which have been put in place to ensure that there is a predictable outline of the sanctions. It will be necessary for a country facing sanctions to do this because the act of advocating for any exchange rates which are acceptable would ultimately lead to a loss in the resources to which a central bank has access. In the case of Qatar, then, the reshaping of exchange rates would be justified by the fact that the central bank would

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be unable to access its deposits in foreign banks if the sanctions placed against the country by other GCC countries persist (Riggs, 2020).

Summary The goal of this chapter was to lay out the methodology used in the course of the research as well as an overview of the main arguments that were submitted by the authors whose work was considered. The research studies which were considered have been included because of their contribution towards the strategies which were utilized by Qatar in so far as mitigating the effects of the economic blockade were concerned.

Trade References Afesorgbor, S.K. and Mahadevan, R., (2016). The impact of economic sanctions on income inequality of target states. World Development, 83, pp.1-11.

Almutawa, A., (2020). The Qatar crisis, legitimacy, and the use of sanctions against terrorist financing. In Assets, Crimes and the State (pp. 244-256). Routledge.

Connolly, R., (2018). Russia's response to sanctions: how western economic statecraft is reshaping political economy in Russia. Cambridge University Press.

Hatipoglu, E. and Peksen, D., (2018). Economic sanctions and banking crises in target economies. Defence and Peace Economics, 29(2), pp.171-189.

Katzman, K., (2016). Qatar: Governance, security, and US policy (No. CRS-7-5700, R44533).

Congressional Research Service Washington United States.

Pradhan, P.K., (2018). Qatar Crisis and the Deepening Regional Faultlines. Strategic Analysis, 42(4), pp.437-442.

Riggs, R.J., (2020). The Qatar–Iran–Turkey Nexus: Shifts in Political Alliances and Economic Diversification in the Gulf Crisis. In The 2017 Gulf Crisis (pp. 181-191). Springer, Singapore.

Tyll, L., Pernica, K. and Arltová, M., (2018). The impact of economic sanctions on Russian economy and the RUB/USD exchange rate. Journal of International Studies, 11(1).

Veebel, V., and Markus, R. (2016). Will sanctions against Russia be successful: will Russia fall before Ukraine? Journal of Security and Sustainability Issues, 5(4), 465-480. http://dx.doi.org/10.9770/jssi.2016.5.4 (2).

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Wang, W. (2015). Impact of western sanctions on Russia in the Ukraine crisis. J. Pol. & L., 8, 1. http://dx.doi.org/10.9770/jssi.2016.5.4 (2).