Balance of Power: Saudi Arabia's Shock Move

EghtesadOnline: The Middle East's balance of power has just been disrupted by one of the biggest diplomatic shocks in years.

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05 June 2017

Overnight, an alliance led by Saudi Arabia severed commercial and diplomatic ties with Qatar. It was an unprecedented move designed to punish the Gulf state for its ties with Iran, the Muslim Brotherhood and other Islamist groups, according to Bloomberg.

Qatar may be tiny -- about half the size of New Jersey -- but it's a financial superpower. The country is the world's biggest producer of liquefied gas and, through its $335 billion sovereign wealth fund, owns stakes in companies from Barclays to Russian oil giant Rosneft.

The move also poses a dilemma for the Trump administration. Qatar and Saudi Arabia are both American allies, as are Saudi's partners -- Egypt, Bahrain and the UAE. Qatar is also home to the U.S. military’s Mideast command center. Secretary of State Rex Tillerson urged all parties to resolve their differences.

It's not entirely clear what Saudi wants. But it's a fair bet that it expects Qatar to come to heel over Iran and join its campaign to isolate the Islamic Republic. If Qatar resists, it will only add to the region's instability.

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And finally... A primer on Qatar. The tiny Gulf state is one of the richest countries on the planet, sharing the world's biggest natural gas field and buying up some of the globe's most prized trophy assets, including `The Shard,' the most iconic London skyscraper of modern times. It also has holdings in everything from Hollywood to Italian fashion and is even bankrolling soccer's 2022 World Cup. The problem, its critics say, is that its money also foments unrest across the region, funding the Muslim Brotherhood as well as Hamas.