Guided-missile cruiser USS Monterey and guided-missile destroyer USS Thomas Hudner during a Suez Canal transit in 2021. Reuters
Guided-missile cruiser USS Monterey and guided-missile destroyer USS Thomas Hudner during a Suez Canal transit in 2021. Reuters
Guided-missile cruiser USS Monterey and guided-missile destroyer USS Thomas Hudner during a Suez Canal transit in 2021. Reuters
Guided-missile cruiser USS Monterey and guided-missile destroyer USS Thomas Hudner during a Suez Canal transit in 2021. Reuters

US sends guided-missile destroyer to Gulf to boost 'regional maritime security'


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The US Navy has deployed a guided missile destroyer to the Gulf amid heightened tension with Iran.

Earlier this month, the US navy said it had prevented Iran from seizing two oil tankers, and released footage from a drone purporting to show an Iranian warship firing on one of the vessels.

One of the tankers, the Richmond Voyager, sustained minor damage to its hull.

The US Navy said another tanker, the Marshall Islands-flagged oil tanker TRF Moss, was being harassed by an Iranian warship until a US guided missile destroyer, the USS McFaul approached both vessels.

Both incidents occurred in the Gulf of Oman.

There has been a spate of military seizures and attacks on commercial shipping in the waterways of the Gulf this year, including the seizure of two tankers, one of them bound for Texas, in the space of a week in May.

The US navy said the latest deployment of a warship was intended “to help ensure regional maritime security and stability”.

Last month, the US sent F-16 fighter jets to reinforce its military presence in the region.

The USS Thomas Hudner is equipped with 96 missiles of various types, including powerful Tomahawk cruise missiles, as well as anti-ship and anti-aircraft missiles.

In April, the US made the rare announcement that one of its most formidable submarines, the USS Florida, a nuclear-powered Ohio class submarine that can carry 154 cruise missiles, would be deployed to the region.

That followed the extension of a tour of the aircraft carrier USS George H.W. Bush, one of ten Nimitz class aircraft carriers, the largest warships ever constructed.

Nimitz class aircraft carries have nuclear-powered propulsion, can carry up to 90 aircraft and cost about $10 billion a vessel.

While occurring with relative frequency this year, attacks on ships in the region were more aggressive last year, with two incidents using one-way attack drones, the first hitting oil tanker Mercer Street last July, killing two sailors when the explosive drone flew into a crew compartment.

In November, the Singapore-flagged M/T Pacific Zircon sustained light damage when it was also hit by a drone. Both tankers were linked to Israel-owned companies.

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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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Updated: July 17, 2023, 8:15 PM