Qatar's financial markets stabilised on Monday after a week of losses as the government showed it could keep the economy running in the face of sanctions by its neighbours.
Saudi Arabia, the United Arab Emirates (UAE) and several other Sunni-majority countries have severed relations with Qatar since June 5, accusing the Gulf state of supporting terrorism based on its ties with the Muslim Brotherhood, Hamas and the Taliban.
Finance Minister Ali Sherif al Emadi downplayed the economic toll of the confrontation and said the government was "extremely comfortable" with its financial position, with the resources to endure the pressure.
On Monday, it became clear that Qatar was managing to keep an economic crisis at bay for the time being. Some of its food factories were working extra shifts to process imports from nations outside the Gulf, such as Brazil.
Shipping lines have re-routed container traffic via Oman instead of the UAE.
Situation under control
Some people have even joked about being "blockaded" inside the world's richest country: a Twitter page called Doha under siege pokes fun at the prospect of readying "escape yachts," stocking up on caviar and trading Rolex watches for espresso.
In an interview with CNBC television, Ali Sherif said the government was "extremely comfortable with our positions, our investments and liquidity in our systems."
He said, "Our reserves and investment funds are more than 250 percent of the gross domestic product, so I don't think there is any reason that people need to be concerned about what's happening or any speculation on the Qatari riyal."
Qatar, like other Gulf states, has tried to diversify from oil and gas. The sanctions have hurt one of its highest-profile enterprises, the fast-growing airline Qatar Airways, which says it has been cut off from 18 of its destinations.
"It is actually a travesty of civilised behaviour to close airline offices. Airlines offices are not political arms," CEO Akbar al Baker told CNN. "We were sealed as if it was a criminal organisation. We were not allowed to give refunds to our passengers."
The Qatar Airways CEO added that he was "extremely disappointed" in Trump. Washington "should be the leader trying to break this blockade and not sitting and watching what's going on and adding fuel to the fire."
Underpinned by wealth fund
Qatar's riyal, pegged at 3.64 to the US dollar, was under pressure last week as banks reacted nervously to the diplomatic rift. On Monday, the currency came off last week's lows in the spot and offshore forwards markets.
Bankers said the central bank, which has $34.5 billion of net foreign reserves backed by an estimated hundreds of billions of dollars of assets in Doha's sovereign wealth fund, was supplying enough dollars to keep exchange rates under control.
Jason Tuvey, a Middle East economist at London-based Capital Economics, said the main threat to the economy was that Qatari banks could find it much harder to obtain wholesale funding from other banks to sustain growth in their loan portfolios.
If the situation becomes critical, the Qatari government can liquidate some of its overseas assets to fund its banks, as Saudi Arabia did last year when its banks faced a squeeze.
Asked by CNBC whether it might now sell some of those stakes to raise money, Emadi indicated this was not in the cards for now.