Saudi border closure threatens construction supply chain
UK contractors operating in Qatar are keeping a close eye on Doha’s diplomatic crisis, with concerns growing about its impact on the country’s vast construction programme.
Bahrain, Egypt, Saudi Arabia, the United Arab Emirates, Yemen and the Maldives cut diplomatic ties with Qatar on Monday this week over its alleged support of Islamist groups and its relations with Iran. Saudi Arabia has closed Qatar’s only land border, a vital supply route for building materials and other key imports. Major construction projects underway include the Doha Metro and venues for the 2022 World Cup.
Interserve operates through seven associate and subsidiary companies in Qatar, and a spokesperson said: “It is too early to predict the implications of the restrictions that have been put into place. However, we are monitoring the situation closely and will take any mitigation measures if and when they are required.”
Carillion has worked in the Gulf country since 2009, and a spokesperson said: “We are continuing to monitor the situation and keeping in touch with our people in Qatar on a regular basis.”
A senior industry professional who has worked in Qatar for the past five years told Building that any extended border closure would “almost certainly” have an impact on construction projects.
“The biggest problem may be feeding the workforce,” he said. “Some 40% of food products come across the Saudi border, and a food shortage could have a massive impact on construction labour – there are over 40,000 workers on the Doha Metro scheme alone. The situation is exacerbated during Ramadan when there are restrictions on foods that can be eaten.”
The source said that “a high proportion of key materials like cement and aggregates” used in Qatar comes across the Saudi border.
“On the Doha Metro, subcontractors were required to stockpile materials like sand and cement for six months,” he explained. “So contractors will not worry about materials if it’s a short dispute, but if it drags on for three to six months, they’ve got serious problems.
“Their alternatives include bringing in materials by sea, though that has major cost implications. Oman, which has not broken diplomatic ties, has major gypsum and cement resources. Qatar may even turn to Iran, with whom it maintains a close relationship – which of course is part of the reason for this crisis.”
Contractors may be covered for any delays by ‘force majeure’ clauses in their contracts, the source added. “Most standard contracts in the Middle East region will have clauses to cover wars or borders disputes,” he said. “They may not be compensated for delays but programmes can be extended without penalty.”
In 2014, another diplomatic dispute blew up over Qatar’s support of an Islamist group, the Muslim Brotherhood, with Bahrain, Saudi Arabia and the United Arab Emirates withdrawing their ambassadors. The situation was resolved nine months later.
“That row was less serious, and no borders were closed,” said the source. “This dispute looks much more worrying.”
The Doha Metro is currently on schedule for completion in summer 2019. Main civil contracts will be completed June 2018 with first trains on running tests by early 2019. With tunnels complete and most heavy civil works nearing completion potential impact is on materials for station fit-out.
The first of the World Cup stadiums was completed last month.
FIFA issued a brief statement shortly after the diplomatic storm broke, saying it was “in regular contact with the Qatar 2022 Local Organising Committee and the Supreme Committee for Delivery and Legacy handling matters relating to the 2022 FIFA World Cup”, adding that it had “no further comments for the time being”.