DUBAI/DOHA (Reuters) - A month after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic, trade and transport ties with Qatar, accusing it of backing terrorism, it is suffering from isolation but is nowhere near an economic crisis.
The alliance against it, meanwhile, may not have options to inflict further damage.
As the world's top liquefied natural gas exporter, Qatar is so rich - at US$127,660, its gross domestic product per capita in purchasing power terms is the highest of any country, according to the International Monetary Fund - it can deploy money to counter almost any type of sanction.
In the past month it has arranged new shipping routes to offset the closure of its border with Saudi Arabia, deposited billions of dollars of state money in local banks to shore them up, and drawn the interest of some of the West's biggest energy firms by announcing a plan to raise its LNG output 30 per cent.
The success of these initiatives suggests Qatar could weather months or years of the current sanctions if it has the political will to do so - and that further sanctions being contemplated by the alliance may not prove decisive.
On Wednesday, the alliance said Qatar, which denies any support for terrorism, had missed a deadline to comply with its demands. Further steps against Doha will be taken in line with international law "at the appropriate time", Saudi Foreign Minister Adel al-Jubeir said.
Saudi media reported this week that the new sanctions would include a pull-out of deposits and loans from Qatar by banks in alliance states, and a "secondary boycott" in which the alliance would refuse to do business with firms that traded with Qatar.
Those steps would cause further pain for Qatar, but not to the point of destabilising its financial system or breaking the peg of its riyal currency to the U.S. dollar, senior Qatari businessmen and foreign economists said.
"As long as we can sell our products we can withstand this for a very, very long time. The only thing that can really hurt us is if they block the gas exports, but then you provoke a crisis in the world," said a top Qatari banker.
"The economy will suffer but not to the point that we Qataris will suffer," he added, declining to be named because his bank still does some business in other Gulf Arab states.
"Instead of having five maids at home, we'll have three."
Qatar does face higher import costs as it is forced to use less convenient shipping routes through ports in countries such as Oman, but probably not to the point of having to cancel big state-led economic projects.
"An outright recession looks very unlikely to us, even if the sanctions continue into next year," Jason Tuvey, Middle East economist at London-based Capital Economic said.
Qatar's most vulnerable point is probably its banks'dependence on foreign funding. Thirty-six percent of commercial banks' total liabilities in May were to foreigners, including other in the six-nation Gulf Cooperation Council (GCC).
Saudi, UAE and Bahraini banks have already largely frozen new business with Qatar because of guidance from their central banks; some jittery foreign banks have followed suit. A further tightening of sanctions could mean a mass pull-out of money.
A senior Qatari financial official estimated institutions from Saudi Arabia, the UAE and Bahrain had US$18 billion of deposits in Qatari banks that would mature in two months and which may not be renewed. Bank of America predicts US$35 billion of outflows from Qatar's banking system within one year if the GCC severs financial ties completely.
This could force Qatari banks to liquidate overseas assets and hurt their profitability. But Doha could prevent any funding squeeze by mobilising its foreign assets.
The central bank had US$34.8 billion of reserves in May and Qatar's sovereign wealth fund is estimated to have around US$320 billion of assets, of which over US$200 billion may be liquid foreign assets.
A secondary boycott against Qatar might prove less effective than pulling money from its banks. It is not clear the alliance could maintain such a measure for long because it might break World Trade Organization rules specifying equal treatment of countries.
A "national security exception" might be invoked to justify a boycott, but foreign firms and governments - including Qatar's big LNG customers in Asia - could oppose it strongly, fearing a precedent might be sent. In the mid-1990s, GCC states abandoned an attempt to maintain a secondary boycott against Israel.
Capital Economic's Tuvey said any interruption to Qatar's LNG exports could be devastating, but there appeared to be little prospect of it.
"For one thing, it could be damaging to all the oil exporters in the Gulf," he said.