UAE threatens to force sanctions on Qatar: report
28 Jun 2017
The United Arab Emirates (UAE), a partner in the Saudi Arabia-led `siege countries' that have cut ties with Qatar, has now threatened a trade embargo on Qatar by forcing its trading partners to choose between working with them and working with Doha, says an Al Jazeera report.
The UAE move follows Qatar's rejection of the `siege group's' demand tabled by Saudi Arabia, which was widely seen as unreasonable and as an attack on Qatar's sovereignty.
The US has called on the Gulf bloc to issue a ''reasonable and actionable'' list of demands.
The Gulf crisis has created chaos in the foreign exchange market for Qatari riyals, with the currency trading far below its peg to the US dollar this week.
The Qatari riyal has seen wide fluctuations with banks very pegging it at 3.64 to the dollar and at times quoting it much lower at 3.81, more than 4 percent below its peg - the lowest level this decade, says the report.
The report says the diplomatic crisis has left the foreign exchange market in disarray even without the central bank abandoning the peg and allowing the currency to depreciate.
Many Gulf banks have suspended or reduced dealings in Qatari riyals, causing funds in the market to flow more slowly and inefficiently between onshore and offshore banks.
This has opened a chasm between onshore trade, where the Qatari central bank has continued to provide ample supplies of dollars at a rate of up to 3.6415 under its peg mechanism, and offshore trade, where jittery foreign banks are demanding a premium for buying riyals, pushing the currency lower.
"There's definitely an arbitrage between offshore and onshore rates because of the uncertainty and traders are taking advantage of the volatility," the Al Jazeera report quoted a senior treasury official at a bank in Abu Dhabi as saying.
But it made no case for Qatar's central bank to take the risky and destabilising step of abandoning its dollar peg.
