New secretary of state Michael Pompeo is a noted opponent of the Iran nuclear deal, signed in 2015. Manuel Balce Ceneta / AP
New secretary of state Michael Pompeo is a noted opponent of the Iran nuclear deal, signed in 2015. Manuel Balce Ceneta / AP

State Department upheaval threatens bumpy ride for global energy markets



Geopolitical risks to energy markets used to emanate mainly from Moscow, Baghdad, Tehran or Caracas. The latest upheaval in the US administration, with Rex Tillerson’s departure as Secretary of State, threatens to add Washington to that list of capitals. And major energy producers are in the firing line.

The State Department’s new head Mike Pompeo, previously of the CIA, has, like Donald Trump, been notably hostile towards the Iran nuclear deal, and conspiratorial on Russia. Rumours continue to swirl over the possible replacement of National Security Advisor H.R. McMaster, potentially by the uber-hawkish John Bolton, a prominent promoter of the 2003 invasion of Iraq.

Mr Tillerson’s tenure as Secretary of State was an odd contrast to his time at ExxonMobil. Cocooned in the “God pod” at the oil company’s headquarters outside Dallas, its senior executives can sometimes be aloof. His ability to manage a large organisation should not have been in doubt, but he leaves behind a legacy of organisational chaos, downsizing and plummeting morale at the State Department.

But while he made some major strategic missteps as ExxonMobil’s chief executive – in Russia, Iraq and buying the US shale company XTO – his attempted policies as Secretary of State were, in comparison, generally sound and conventional. Mr Pompeo promises a much more volatile ride.

There are four clear global trouble spots which might significantly affect oil and gas markets, and will test the mettle of Mr Pompeo.

First up, Venezuela’s slow-motion collapse is now accelerating, with production down more than 50,000 barrels per day from January to February, according to independent observers. Tougher sanctions on Caracas to prevent it sending crude to the US, the refinancing of its debts, or a renewed push for a change of government could cut current exports of crude from about 1 million barrels per day to near-zero.

Russia and China, which have lent the Maduro regime huge sums, may then get involved in a phenomenally messy default, while attempting to preserve a foothold in the western hemisphere.

Second, Russia itself is still under western sanctions that hamper its development of Arctic and shale resources. After Mr Tillerson’s condemnation of Russia’s alleged chemical weapons attack in the UK, the White House’s support for its British ally has been muddled. Disputes over Ukrainian gas transit add further risk.

Thirdly, a Russian state company, Zarubezhneft, has just signed the second post-sanctions petroleum development contract with Iran, after July’s agreement with Total of France and the China National Petroleum Corporation.

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Meanwhile, European attempts to find an acceptable “fix” for Iran’s nuclear deal seem doomed. New proposals from the deal’s opponents are clearly intended to be an ultimatum beyond anything Iran could accept, especially as Tehran feels it is already not receiving the promised economic benefits from the 2015 accord.

Despite suggestions that reimposed US sanctions could again cut Iranian oil exports by 1 million barrels per day, the actual immediate impact is likely to be minimal. The EU, and even more China and Russia, the other deal signatories, still consider Iran to be in compliance, and will try to shield their companies from American interference.

Nevertheless, future investment in the Iranian energy sector would be severely constrained. More seriously, Messrs Pompeo and Bolton might push for a military end to Iran’s nuclear activities, which could suck in neighbouring petroleum producers and lead to unpredictable wider damage.

The final venue of threat, North Korea, again draws in China and to an extent Russia in opposition to the US. Not a notable energy consumer or producer itself, Pyongyang’s nuclear weapons raise the spectre of a wider conflict that could devastate South Korea, draw in Japan and disrupt oil and gas transit and demand across north-east Asia.

Even if Mr Trump’s reshaped team identifies the right policies, it is doubtful that the State Department’s eviscerated diplomatic corps can deliver the complex manoeuvres required for a deal in Korea, a consensus with the Europeans on a modified Iran deal, a Latin American push for peaceful political change in Venezuela, or a united western front against Russia.

But energy producers and investors should not treat the Washington reshuffle as a one-way ticket to higher revenues. A loss of Venezuelan or Iranian oil exports would presumably be made up by spare capacity from other Opec producers, who would suspend or greatly revise the ongoing production cut agreement. A sharp spike in prices followed by a global recession would be inadvisable. Similarly, a west-Russia showdown would cast doubt on Moscow’s continuing adherence to its pact with Opec.

The critical mass of great power rivalry, massive conventional arms and nuclear weapons makes the Korean situation the most critical. It may be far from the Arabian Gulf, but even a contained conflict here would severely hit demand for oil and, even more, liquefied natural gas.

While our eyes are on the obvious hotspots, it is possible the next shock may emerge from an entirely unexpected area – a tariff-triggered trade war, China, a new economic crisis, a massive cyberattack - testing an understaffed and chaotic US administration. With old alliances under strain and new ones nascent or paradoxical, energy producers are set for another testing year.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

FIXTURES

All kick-off times UAE ( 4 GMT)

Friday
Sevilla v Levante (midnight)

Saturday
Athletic Bilbao v Real Sociedad (7.15pm)
Eibar v Valencia (9.30pm)
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Sunday
Girona v Getafe (3pm)
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Monday
Malaga v Real Betis (midnight)

The specs
Engine: 4.0-litre flat-six
Power: 510hp at 9,000rpm
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Price: From Dh801,800
Specs

Engine: Dual-motor all-wheel-drive electric

Range: Up to 610km

Power: 905hp

Torque: 985Nm

Price: From Dh439,000

Available: Now

COMPANY PROFILE
Name: Kumulus Water
 
Started: 2021
 
Founders: Iheb Triki and Mohamed Ali Abid
 
Based: Tunisia 
 
Sector: Water technology 
 
Number of staff: 22 
 
Investment raised: $4 million 
The White Lotus: Season three

Creator: Mike White

Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell

Rating: 4.5/5

THE DETAILS

Kaala

Dir: Pa. Ranjith

Starring: Rajinikanth, Huma Qureshi, Easwari Rao, Nana Patekar  

Rating: 1.5/5 

'HIJRAH%3A%20IN%20THE%20FOOTSTEPS%20OF%20THE%20PROPHET'
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UAE tour of the Netherlands

UAE squad: Rohan Mustafa (captain), Shaiman Anwar, Ghulam Shabber, Mohammed Qasim, Rameez Shahzad, Mohammed Usman, Adnan Mufti, Chirag Suri, Ahmed Raza, Imran Haider, Mohammed Naveed, Amjad Javed, Zahoor Khan, Qadeer Ahmed

Fixtures: Monday, first 50-over match; Wednesday, second 50-over match; Thursday, third 50-over match

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At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

 

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

 

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

 

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30 

 

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

 

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

 

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

Real estate tokenisation project

Dubai launched the pilot phase of its real estate tokenisation project last month.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

The specs

Engine: 2.0-litre 4-cyl turbo

Power: 247hp at 6,500rpm

Torque: 370Nm from 1,500-3,500rpm

Transmission: 10-speed auto

Fuel consumption: 7.8L/100km

Price: from Dh94,900

On sale: now

Test

Director: S Sashikanth

Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan

Star rating: 2/5

Countries offering golden visas

UK
Innovator Founder Visa is aimed at those who can demonstrate relevant experience in business and sufficient investment funds to set up and scale up a new business in the UK. It offers permanent residence after three years.

Germany
Investing or establishing a business in Germany offers you a residence permit, which eventually leads to citizenship. The investment must meet an economic need and you have to have lived in Germany for five years to become a citizen.

Italy
The scheme is designed for foreign investors committed to making a significant contribution to the economy. Requires a minimum investment of €250,000 which can rise to €2 million.

Switzerland
Residence Programme offers residence to applicants and their families through economic contributions. The applicant must agree to pay an annual lump sum in tax.

Canada
Start-Up Visa Programme allows foreign entrepreneurs the opportunity to create a business in Canada and apply for permanent residence. 

COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%3A%3C%2Fstrong%3E%20Eco%20Way%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%20December%202023%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Ivan%20Kroshnyi%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Electric%20vehicles%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Bootstrapped%20with%20undisclosed%20funding.%20Looking%20to%20raise%20funds%20from%20outside%3Cbr%3E%3C%2Fp%3E%0A
Company profile

Date started: December 24, 2018

Founders: Omer Gurel, chief executive and co-founder and Edebali Sener, co-founder and chief technology officer

Based: Dubai Media City

Number of employees: 42 (34 in Dubai and a tech team of eight in Ankara, Turkey)

Sector: ConsumerTech and FinTech

Cashflow: Almost $1 million a year

Funding: Series A funding of $2.5m with Series B plans for May 2020

Key facilities
  • Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
  • Premier League-standard football pitch
  • 400m Olympic running track
  • NBA-spec basketball court with auditorium
  • 600-seat auditorium
  • Spaces for historical and cultural exploration
  • An elevated football field that doubles as a helipad
  • Specialist robotics and science laboratories
  • AR and VR-enabled learning centres
  • Disruption Lab and Research Centre for developing entrepreneurial skills
What are NFTs?

Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.

You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”

However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.

This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”

This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.