Iran's crude oil sales will still be limited to about 1 million barrels a day under international sanctions that remain in force as part of the nuclear accord reached in Geneva today, according to the White House.
Iran’s crude exports have fallen 60 per cent since the beginning of 2012, depriving the country of more than US$80 billion in revenue, the Obama administration said in a statement after the deal was announced. The agreement means buyers that have significantly reduced purchases won’t be required to make further cuts and includes the removal of a European Union ban on insuring tankers transporting Iranian oil. An EU embargo on crude imports from the country remains in place.
The six-month accord, which offers about $7bn in relief from sanctions in return for curbs on Iran’s nuclear programme, leaves in place banking and financial measures that have constrained crude exports. Restrictions on sales of refined products will remain in effect, the White House said.
“It’s a step, but it’s not like the end of a sanctions regime, not like it’s going to have a significant impact on the real balances of supply and demand for oil,” Ed Morse, the New York-based head of commodities research at Citigroup, said in a phone interview. “On the other hand, it should take off whatever risk there might be in the market for the moment in terms of additional sanctions.”
Under the agreement, Iran will be allowed limited petrochemical exports, and some curbs on gold trading will be removed. Those measures, together with an easing of sanctions on the automotive industry, will potentially provide Iran with $1.5bn in revenue, the White House said. The accord also eases constraints on safety-related repairs for some Iranian airlines.
The initial deal is intended as a first step toward a comprehensive accord that Iran and world powers are seeking in six months to ensure the nuclear programme is for peaceful purposes. In exchange, the nation would expect a lifting of all sanctions related to its nuclear work.
In June 2012, there were 23 importers of Iranian crude; today, only six remain - China, India, South Korea, Japan, Turkey and Taiwan, according to US officials. Since July 2012, the EU has also banned oil imports, and until today’s deal had restricted insurance for ships carrying crude from the country.
“In the next six months, Iran’s crude oil sales cannot increase,” the Obama administration said in the statement. “Under this first step, the European Union crude oil ban will remain in effect and Iran will be held to approximately 1 million barrels per day in sales.”
Iran is the sixth-biggest producer in the Opec, down from the second-place rank it held until last year.
Crude exports fell to a 21-month low of 715,000 barrels a day in October, compared with an average 1.1 million for the first nine months of the year, according to the International Energy Agency. The volume of Iran’s unsold oil being stored on tankers rose to about 37 million barrels in October, the IEA estimated.
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
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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.”
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MATCH INFO
Uefa Champions League final:
Who: Real Madrid v Liverpool
Where: NSC Olimpiyskiy Stadium, Kiev, Ukraine
When: Saturday, May 26, 10.45pm (UAE)
TV: Match on BeIN Sports
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.