Saudi Arabia and its Persian Gulf allies have signed a landmark agreement on regional solidarity and stability, aimed at ending a three-year old blockade on Qatar that had isolated the nation and shattered peace efforts in the region.

Saudi Crown Prince Mohammed Bin Salman made the announcement on Tuesday from the desert city of Al-Ula, where the regional leaders have gathered for the annual summit of the Gulf Cooperation Council (GCC).

"We consider with great thanks and appreciation the efforts to heal the rift," the Saudi crown prince said.

The leaders of the six-member GCC signed the Al-Ula declaration on Tuesday but the fine print outlining the details of the agreement has not yet been released by the Persian Gulf countries.

The GCC consists of key Persian Gulf nations Saudi Arabia, Qatar, United Arab Emirates, Bahrain, Kuwait and Oman.

Mutual benefits

The easing of tensions is likely to benefit the economies of Persian Gulf countries that have been crippled by the coronavirus pandemic and the regional blockade.

One industry watcher pointed out that resumption of relations with Qatar would mean that the Persian Gulf neighbours would have access to cheaper gas imports from Qatar, which could change the regional dynamics of the gas market.

Qatar is spending billions of dollars to increase the production capacity of its giant North Field.

The UAE presently imports significant volumes of gas from Qatar via the Dolphin pipeline, but the long-term viability of such imports has been questioned in the wake of the diplomatic stand-off.

As normal ties kick-in, gas imports from Qatar could be ramped up in the region, leading to mutual benefits.

“Qatar could have increased access to a much wider market, where supplies would be relatively easier,” one person from a local Qatari service company told Upstream.

Real impact

However, another person said that, while diplomatic relations could be restored in the short term, any real impact on regional businesses could still take some time, until sentiments improve in the region.

Qatar’s stock markets gave a thumbs up to the historic deal, with its benchmark stock index rising on the positive sign of easing disputes in the region.

The main stock index in Doha closed 1.4% higher on Tuesday, with most of the 20 members gaining, Bloomberg reported.

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Improved Persian Gulf relations could also mean improved opportunities and market fundamentals for regional engineering, procurement and construction giants and other oil and gas service companies that had previously scaled down operations due to the Qatar blockade.

Open borders

Saudi Arabia on Monday opened its land, maritime and airspace borders for Qatar, ending the three-and-half year old diplomatic stand-off that had left several citizens stranded and businesses crippled in the region.

The crown prince said there was a desperate need for the Gulf nations to unite efforts to promote the region and to confront challenges that surround the countries.

The quartet comprising of Saudi Arabia, UAE, Bahrain and Egypt have been involved in the diplomatic stand-off since 2017, alleging Qatar's support for terrorism and its growing proximity with Iran.

In addition to Saudi Arabia, the other Persian Gulf members are also expected to soon normalise relations with Qatar, opening up their borders.

Qatar's Emir, Sheikh Tamim bin Hamad Al Thani also attended the historic Al Ula summit and was received by the Saudi crown prince, indicating a thaw in relations.

Al Thani later said in a social media post that he has hopes for a “better future of the region”.

“I thank my brothers in Saudi for their hospitality and generous welcome and I thank the brotherly state of Kuwait for their esteemed efforts,” he said.

US mediation

The landmark deal was brokered by US President Donald Trump's administration and Kuwait, which played a key role in the mediation process.

Jared Kushner, a senior advisor and son-in-law to Trump, and the Kuwaiti Emir Nawaf al-Ahmad al-Jaber al-Sabah have been brokering the peace deal between the rival Persian Gulf nations.

Kushner was also a part of the signing during the Persian Gulf summit, which is likely to go down as a key achievement by Trump during his final days as the US president.