Qatari Projects Downgraded by Moody's

Ratings agency Moody's has downgraded the outlook of several Qatari state-run entities including wholly-owned Qatar Petroleum, the LNG joint venture producer RasGas 2 & 3, and state shipowner and operator Nakilat from stable to negative, it said July 6.

The move arose from the ongoing dispute between Qatar and a group of countries, including its fellow Gulf Cooperation Council (GCC) neighbours Bahrain (Ba2 negative), Saudi Arabia (A1 stable), the United Arab Emirates (UAE, Aa2 stable) as well as Egypt, it said.

Qatar refused to act on the list demands the three countries presented in late June, which included closing down broadcaster Al Jazeera; ending support for the Muslim Brotherhood; and closing Turkey's military base.

In response, the states said July 5 they would continue the blockade  but without escalating it or saying for how long they would keep it in place. Qatar's foreign minister Mohammed bin Abdulrahman Al-Thani reportedly told the Chatham House think tank in London July 5 that it continued "to call for dialogue despite the violation of the international law... and despite the siege that is a clear aggression and an insult to all international treaties." 

In Moody's view, the likelihood of a prolonged period of uncertainty extending into 2018 has increased and a quick resolution of the conflict is unlikely over the next few months, which carries the risk that Qatar's sovereign credit fundamentals could be negatively affected. The rating actions on RasGas II, RasGas 3 and Nakilat – which Moody's judges have compelling commercial and industrial rationale – are higher than they would otherwise be without the assumption of government support. Moody's did however affirm its Aa3 rating for Qatar Petroleum.

On July 4, Moody's affirmed Qatar's sovereign debt rating at Aa3 but also changed its outlook from stable to negative.

The diplomatic dispute has not materially impacted RasGas's ability to deliver LNG to their customers, and Moody's does not foresee any disruption of Qatari LNG vessels' ability to transit the Strait of Hormuz as they can avoid UAE and Saudi Arabia territorial waters, it said. Even if Oman were to join the Saudi-led action, it is expected that Qatar's LNG vessels would be able to transit the Strait via Iranian waters. However, costs could be adversely impacted by a protraction or escalation of the dispute, Moody's said.

Local reports indicate that cargo planes are flying tons of fresh vegetables and other produce into Qatar almost daily from India, Iran and Turkey.

William Powell