(Repeats story sent on Friday, text unchanged)

* Extended diplomatic crisis could force major capital outflows

* Banks have large foreign liabilities

* Current account might stay in red

* But liquid external assets can easily cover this

* Saudis may not want Qatar's peg to break

By Andrew Torchia and Sujata Rao

DUBAI/LONDON, June 9 (Reuters) - Qatar could defend its currency for years in the face of economic sanctions by other Gulf states, the country's balance sheet suggests, so the riyal's peg to the U.S. dollar is unlikely to fall victim to the region’s diplomatic crisis.

The decision by Saudi Arabia, the United Arab Emirates, Baharain and Egypt to cut diplomatic and transport ties this week threatens to hurt Qatar's trade balance, suck deposits from its banks and push out foreign investment.

Reflecting this threat, the riyal fell on Friday in the offshore forwards market to its lowest level against the dollar since December 2015, when low oil and gas prices raised concern about all the Gulf economies.

But the world's top liquefied natural gas exporter is so rich that it could offset the threatened capital outflows by liquidating just a portion of its financial reserves. And as long as it can keep exporting gas, its current account balance is unlikely to go deep into the red.

That means the riyal's spot market peg of 3.64 to the dollar is probably safe for the foreseeable future. Any decision to change the peg would essentially be political rather than economic.

At their lowest on Friday, forwards prices implied riyal depreciation of under 2 percent over the next 12 months.

Many economists at financial institutions in the Gulf decline to discuss Qatar publicly because of the political tensions, but privately they say they expect Qatar to defend its currency successfully.

"We are not looking for the Qatari peg to break," wrote Chris Turner, global head of strategy at Europe's ING, though he called the pressure on the riyal unprecedented and said other countries' experience in the past 25 years indicated that if the peg did break, the riyal could fall at least 20 percent.

ASSETS

Cutting Qatar's credit rating to AA- this week, Standard & Poor's put the government's liquid external assets at 170 percent of gross domestic product, or about $295 billion, based on the International Monetary Fund's estimate of Qatari GDP.

Capital outflows could come in several forms. Foreign investors have already started to sell Qatari equities; a complete pull-out could mean an outflow of nearly 10 percent of the stock market, or about $15 billion.