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A top Iraqi security official has told The National that Iran's unprecedented direct attack on Israel at the weekend created a “new deterrent policy” in the region.
However, national security adviser Qasim Al Araji warned that further escalation of the conflict would undermine stability in the Middle East.
In an exclusive interview on Wednesday, Mr Al Araji said Baghdad was working with other “influential” countries in efforts to de-escalate tensions against the backdrop of the Israel-Gaza war, which has now entered its seventh month.
Iran attacked Israel overnight on Saturday in retaliation for an Israeli strike on the Iranian consulate in Damascus on April 1. It was Tehran's first known direct attack against its regional foe and marked the start of a new chapter in the confrontation between the two countries.
“A new map and a policy of deterrence in the region” has been established by the attack, Mr Al Araji said, while attending the two-day Sulaimani Forum for policymakers and experts in the northern Iraqi city of Sulaymaniyah.
Israel said 99 per cent of the more than 300 missiles and drones were intercepted.
Mr Al Araji hailed the Iranian response as “unprecedented and historic and at the same time disciplined because it didn’t target economic or civilian institutions that may escalate the situation”.
“Iran wanted to send a message that it has the capability to respond and I think Israel got the message,” he stressed.
On Tuesday, sources close to Tehran said that Iran was gearing up to counter an Israeli retaliation, possibly within its borders, after Israel said it had decided to respond to the Iranian attack. Iranian military and political leaders have determined a specific level of Israeli response that could be tolerable, even if on Iranian soil, without provoking severe retaliation from Tehran, the sources added.
Mr Al Araji said that based on intelligence and analysis, Israel is expected to target locations in the region rather than inside Iran.
Undermining regional stability
But for the Iraqi official, “the new escalation will undermine the stability in the entire region”.
His warning echoes growing international concern over the escalating tensions between Iran and Israel. The spectre of a wider conflict looms large over the region, with the potential for devastating consequences for millions of people caught in the crossfire.
In addition to the immediate humanitarian toll, a new escalation could have far-reaching implications for global energy markets and the ongoing fight against extremism.
“The Iranian-Israeli conflict has continued and there have been many attacks by Israel against Iranian sites that led to the martyrdom of senior military figures,” said Mr Al Araji.
“But the latest attack against the Iranian consulate in Syria has for sure crossed red lines and led to the response … [Iran] has the right to respond as self-defence.”
Following the outbreak of the Israel-Gaza war on October 7, militant groups in Iraq and Syria began attacking US troops as part of a co-ordinated front, demanding an immediate ceasefire in the Palestinian territory run by their ally Hamas.
However, the last strike by those militias was on February 4. The cessation of attacks against US forces was part of an “unannounced truce” that included Tehran and the Iraqi government, sources in Beirut and Baghdad told The National last month.
The shift happened after an attack that killed three US soldiers at the Jordanian-Syrian border at the end of January and subsequent US retaliation against militias.
Mr Al Araji said Iraqi Prime Minister Mohammed Shia Al Sudani, on a week-long visit to Washington, is holding talks with “influential” countries in the region, including Saudi Arabia and Iran, for de-escalation.
On Tuesday in Washington, Mr Al Sudani said he did not want Iraq to be involved in any escalation of the conflict in the Middle East after Iran used Iraqi air space to launch its attack against Israel.
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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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