* Many banks have suspended new business with Qatar
* Still no guidance whether they have to unwind existing
* That could be much more difficult, costly
* Bankers and businessmen in limbo
* Transport curbs, political fears also threaten business
* UAE says more curbs possible
By Andrew Torchia, Tom Arnold and Tom Finn
DUBAI/DOHA, June 7 Banks and firms across Gulf
Arab nations sought to keep business links to Qatar open and
avoid a costly firesale of assets on Wednesday as a political
freeze descended on the region.
Many banks in Saudi Arabia, the United Arab Emirates and
Bahrain suspended new business with Qatar soon after their
governments cut diplomatic and transport ties with Doha on
Monday, accusing it of supporting terrorism.
But it was still unclear on Wednesday whether tens of
billions of dollars of existing deals - from loans to bank
deposits and cross-border shareholdings, as well as merchandise
trade contracts - would have to be unwound, and if so how fast.
That left bankers and businessmen in limbo as they
continued to insist to clients that commercial links had not
been severed, even though their ability to service these links
was in doubt.
"Customers keep asking the bank whether it is still
operating in UAE and the bank’s response is, it's business as
usual," said an executive at a Qatari bank in the UAE.
He added that the UAE business did not do interbank deals
locally and obtained funding from its head office in Doha, so it
was able for now to continue corporate and retail banking.
Like most other businessmen, he declined to be named when
talking about Qatar because of political sensitivities. The UAE
has threatened anyone publishing expressions of sympathy towards
Qatar with up to 15 years in prison.
The UAE central bank issued a statement saying payments and
remittances in the UAE financial system were occurring normally
after the diplomatic split, but it did not specify whether UAE
banks would be required to close out their exposure to Qatar.
UAE Minister of State for Foreign Affairs Anwar Gargash told
Reuters that the UAE could not rule out more curbs on bilateral
business. He did not give details of banking policy.
Bankers in Riyadh said they had received informal guidance
from the central bank which essentially banned new transactions
with any Qatari institution.
The guidance was ambiguous about whether existing deals,
such as syndicated loans involving Saudi and Qatari banks, could
remain in place. The bankers said they hoped to clarify the new
policy in coming days.
The Saudi, UAE, Bahraini and Qatari central banks did not
respond to requests for comment. Some bankers believe the lack
of official guidance is deliberate - if the diplomatic crisis
can be resolved within days or weeks, all sides could save money
by avoiding a forced sale of assets in each other's countries.
"There is still a feeling that this will be resolved," said
a banker at a major international institution which does a lot
of business with Qatar.
But the head of Middle Eastern debt capital markets at a
European bank in Dubai said his institution had put all new
Qatari business on hold while it awaited guidance from the UAE
central bank, which was expected to imitate Riyadh's policy.
The chief executive of an Abu Dhabi bank said he was bracing
for the possibility that he would have to close out his Qatar
exposure by boosting his access to ready funds.
"Stopping new business was relatively easy - the difficulty
would be unwinding existing business," he said.
Trade and investment between Qatar and other Gulf countries
is small compared to the size of their economies. Countries rely
heavily on oil and gas exports and obtain most imports from
outside the region; the UAE is Qatar's biggest trading partner
among Gulf Arab states but only its fifth largest globally.
Nevertheless, there is significant banking exposure.
Chiradeep Ghosh, banking analyst at SICO Bahrain, estimated the
Saudi banking sector’s total exposure to Qatar, including loans
and customer and interbank deposits, totalled up to $30 billion.
The exposure of UAE banks is believed to be in the same area.
Individual companies have big cross-border physical assets.
Dubai's DAMAC Properties last month launched a
31-storey residential tower project at Lusail in Doha; UAE-based
retail conglomerate Majid Al Futtaim has Qatari outlets.
Shares in QG Medical Devices, a Doha-based maker
of medical equipment that has done considerable business in
Saudi Arabia, have plunged 18 percent since Monday.
Even where doing business with Qatar is still technically
possible, it is becoming harder in practice. Saudi Arabia and
the UAE are expelling all Qatari citizens; foreigners who live
in Qatar and have Qatari residence visas are not eligible for
visas on arrival in the UAE, Abu Dhabi's Etihad Airways said.
This makes moving staff around the region more difficult for
multinational companies which in the past have saved money by
treating Gulf Arab countries as a single market.
One Western multinational, citing the political tensions,
asked its staff in the Middle East on Wednesday not to
communicate with clients about Qatar at all.
The chief executive of a regional private equity firm said
some foreign banks might ultimately be forced out of Qatar. "If
the rift continues, international banks will be told by Saudi to
choose between the two camps."
(Additional reporting by William Maclean, Saeed Azhar and
Davide Barbuscia, editing by Peter Millership)