(reuters) -- Khalid Alkhater, currently in Britain on leave from the central bank, was commenting on moves by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to isolate Qatar. Doha's rivals say it supports terrorism, which it denies.

"It's deliberate economic warfare, a strategy to cause fear or panic among the public and investors to destabilise the economy," Alkhater told Reuters in a telephone interview, saying he was giving his personal views.

Saudi Arabia, the United Emirates, Bahrain and Egypt cut diplomatic and trade ties with Qatar in June. Most independent analysts think its economy, with huge gas and financial reserves, can weather the storm and do not see any serious risk of a devaluation of the riyal, whose dollar peg of 3.64 riyals has been enshrined in law since 2001.

Alkhater, architect of Qatar's monetary policy in the 2008 global financial crisis, said part of the strategy to undermine the riyal involved trading Qatar government bonds at artificially low prices to suggest the economy was in trouble.

This failed because the market in Qatari bonds was illiquid so trading in high volumes was difficult and because Qatar had taken precautionary steps, said Alkhater, on sabbatical leave doing research at Britain's University of Cambridge. He did not identify the measures.

Alkhater blamed low quotes for Qatar's riyal in the offshore market on some banks - which he said were from nations boycotting Qatar, without naming the institutions - seeking to manipulate the market by exchanging the currency at weaker levels than on the onshore market. He did not provide evidence.

The riyal changed hands onshore last week very close to its official peg of 3.64 to the U.S. dollar, but it traded as low as 3.8950 offshore on the Reuters conversational dealing platform.

Equity index compiler MSCI cited this gap last week when it said it might use offshore foreign exchange rates to value Qatar's stock market, potentially changing the weighting of Qatari equities in MSCI's emerging market index.

Qatar's central bank responded by saying it would provide currency needs to all investors and was working with banks to ensure transactions could be conducted normally.

Central bank governor Sheikh Abdullah bin Saud al-Thani, in office since 2006, said last month that the government and the central bank could support the banking system with both state reserves and the holdings of Qatar's sovereign wealth fund.

Alkhater said Qatar, the world's top liquefied natural gas (LNG) exporter, could in future consider other steps to bolster the riyal if needed, such as taking payments for LNG exports in riyals rather than dollars, which would create global demand for its currency.

But he said there was a risk that efforts to undermine the riyal could shake confidence in dollar-linked currencies of other oil-reliant [Persian] Gulf Arab states.

"It could spark contagion across a region which is tied to the U.S. through dollar pegs, and which is already suffering from financial distress and economic difficulties due to low oil prices," he said, calling attacks on Qatar's riyal "a weapon of mutual destruction".

Any increase of pressure on the currency of Bahrain, whose debt is rated junk, could cause Manama to seek support from Saudi Arabia, whose own economy is battling a big state budget deficit due to three years of weak oil prices, Alkhater said.

He added that the boycott was forcing Qatar to be more self-sufficient in agriculture, food processing and light manufacturing, accelerating a long-term goal to diversify the economy. "Now Qatar has to expedite it out of necessity."

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