Iran's Foreign Minister Abbas Araghchi spoke to Egyptian Foreign Minister Badr Abdelatty. AFP
Iran's Foreign Minister Abbas Araghchi spoke to Egyptian Foreign Minister Badr Abdelatty. AFP
Iran's Foreign Minister Abbas Araghchi spoke to Egyptian Foreign Minister Badr Abdelatty. AFP
Iran's Foreign Minister Abbas Araghchi spoke to Egyptian Foreign Minister Badr Abdelatty. AFP

Egypt urges Iran to protect Red Sea trade after Houthi attacks


Kamal Tabikha
  • English
  • Arabic

Egypt has urged Iran to avoid actions that could further destabilise the Middle East, with Cairo pressing the need to restore security to the Red Sea after attacks on shipping by the Tehran-backed Houthis.

According to a statement from the Egyptian foreign ministry, Foreign Minister Badr Abdelatty told Iranian counterpart Abbas Araghchi in a phone call on Wednesday night that securing the waterway is crucial for Egypt’s economy and regional stability.

Mr Abdelatty underlined "the importance of self-restraint during this delicate stage in the region” and urged Iran "to avoid taking any step that would increase tension", said the statement.

“The call also took up the developments in the Red Sea, asserting the necessity of protecting freedom of navigation in the Red Sea and restoring calmness in the region.”

Iran has been accused of supporting a range of armed groups across the Middle East in its proxy war for influence with Saudi Arabia and its allies.

Houthi attacks on shipping in the Red Sea reportedly cost Egypt $7 billion in lost shipping tolls in 2024, according to a recent speech by President Abdel Fattah El Sisi. The Yemeni rebels have repeatedly said they are acting in solidarity with Gaza in the war with Israel.

The instability in the waterway has forced many shipping companies to reroute vessels around the African continent, significantly increasing costs and delivery times.

Egypt’s call for restraint came two days before landmark US-Iran nuclear talks are scheduled to begin in Oman. The discussions, the first between the two countries in years, are expected to focus on Iran’s nuclear programme.

The stakes for the talks are high. The International Atomic Energy Agency recently reported that Iran possesses enough 60 per cent-enriched uranium to potentially produce six nuclear warheads if further enriched to weapons-grade levels.

A Greek-registered ship is towed after being attacked by the Houthis in the Red Sea last year. Reuters
A Greek-registered ship is towed after being attacked by the Houthis in the Red Sea last year. Reuters

Washington seeks the full dismantling of Iran’s nuclear programme and an end to its support for regional militias such as the Houthis and Hezbollah. These demands may prove too much for Tehran, which has long insisted on retaining some level of uranium enrichment for civilian purposes.

The talks will take place against the backdrop of a deteriorating regional situation. Iran’s economy is under immense strain due to US sanctions, with soaring inflation and a plunging currency.

Meanwhile, the influence of Tehran's allies like Hamas and Hezbollah has waned after 18 months of war between Israel and Hamas in Gaza.

Egypt’s plea for de-escalation reflects its concerns about the broader implications of the talks. Failure to reach a deal could lead to further instability in the Red Sea and beyond, while success could pave the way for greater regional co-operation and an economic recovery.

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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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