What Labour's victory in UK election means for the Middle East


Thomas Harding
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Keir Starmer’s first official briefing as Prime Minister after a landslide election victory is set to be held in a secure room with intelligence chiefs on the security threats facing the UK, one that could define Labour’s return to government.

The Middle East will play a significant role in that closed-door meeting, analysts and diplomats have told The National, with both opportunities and threats to be discussed, including growing fears of war between Hezbollah and Israel.

Gaza will clearly be a key issue but also one in which the new government could provide impetus for a deal, experts have said.

Iran will continue to prove a challenge, potentially an ever-increasing one with its developing nuclear weapons programme, as well as the possibility of a Donald Trump presidency that could release “trigger happy” Republicans on to the Middle East.

Foreign reshuffle

Mr Starmer's first major foreign policy act may well be to replace Foreign Secretary David Lammy with a more experienced hand, a Labour insider told The National.

“Many people in and around government think that it would be pretty unwise to keep him in post and Labour should really think about shifting it to someone who has a more nuanced view of the Gaza conflict, not a view that's going to lead to anything disastrous,” the former adviser said.

From left, Labour's Ed Miliband, Keir Starmer and David Lammy at the Cop28 climate conference in Dubai. Getty Images
From left, Labour's Ed Miliband, Keir Starmer and David Lammy at the Cop28 climate conference in Dubai. Getty Images

That someone may well be former international development secretary Douglas Alexander, although this is strongly denied by Labour.

“The question is what talents Starmer chooses to draw on, as Labour have been out of power for so long that it's front benches are a little bit short of real-world experience,” said former ambassador to Yemen, Edmund Fitton-Brown.

“You've got people like Douglas Alexander who could be used that way, especially if Starmer anticipates that the UK is going to face a number of difficult decisions in the foreign policy arena and face them fairly quickly.”

Lebanon looms

The speed at which world events develop could be lightning fast.

“Unless we're extraordinarily lucky, we're going to face some kind of blow up between Israel and Hezbollah and it's not going to be pretty,” said Mr Fitton-Brown.

If that happens, then the Yemeni Houthis will step up their Red Sea attacks, as will Iran via its proxies.

But more challenging will be whether Mr Starmer unequivocally backs Israel and the repercussions that might result from that among his pro-Palestinian MPs. In its manifesto, Labour said it would work to recognise Palestine a part of a renewed peace process.

Despite an outstanding majority, Labour was dented in its heartlands with independent candidates standing on a Gaza platform making inroads.

A destroyed car and houses in the heavily damaged Hezbollah stronghold town of Aita al Chaab, southern Lebanon. Getty Images
A destroyed car and houses in the heavily damaged Hezbollah stronghold town of Aita al Chaab, southern Lebanon. Getty Images

Gaza outcomes

If the Gaza conflict is resolved then the war with Lebanon will probably recede, yet current hopes of a ceasefire are distant.

But the new Labour administration has the opportunity to seize the initiative on an issue that has witnessed a “vacuum of western leadership” since the Hamas October 7 attacks, said Dr Sanam Vakil, of the Chatham House think tank.

A “dedicated envoy” with the clout that former foreign secretary David Cameron brought to the job, such as David Miliband, another former foreign secretary, could be one appointment.

“Britain certainly has an opportunity to lead the way, bringing together western partners working with countries across the region on Palestinian statehood and Israeli security,” said Dr Vakil. “And there's some great ideas but there should be some greater co-ordination and alignment between Washington, Whitehall and Europe on how they're going to move things forward.”

The potential return of Donald Trump should provide the incentive for the UK government to be “more robust and engaged” in finding a rapid solution, he added.

Michael Stevens, of the Rusi think tank, believes the first six months of a Starmer premiership “are going to be defined in the Middle East” in finding a solution to Gaza.

A man sits at a ruined building following Israeli strikes in Nuseirat refugee camp, central Gaza Strip. Reuters
A man sits at a ruined building following Israeli strikes in Nuseirat refugee camp, central Gaza Strip. Reuters

One pitfall would be that if he is “not seen to be on the right side” by his large grouping of pro-Palestinian back benchers, he will feel increasing political pressure.

While there would be pressure for Labour to follow through on its commitment to recognise a Palestinian state, Mr Fitton-Brown argued that Mr Starmer was unlikely to follow the “gesture politics” of other European states.

Two-state principle

Dr Michael Milshtein, head of Palestinian studies at Tel Aviv University, urged the new Labour government to understand that a two-state solution cannot “really be implemented today”.

“It should be a ‘two-state principle’, which is actually separation, and that is the thing London should demand from Israel.”

He added that Mr Starmer assistance in the normalisation of relations between Israel and the Arab world “could be very helpful”.

Trump card

All Labour’s foreign policies could be turned on their heads with the possible return of Trump to the White House.

Republican hardliners within that administration will be “much more trigger happy” than previously, said Mr Fitton-Brown, speaking from New York.

Former US president Donald Trump could return to power. Reuters
Former US president Donald Trump could return to power. Reuters

“They will look at the Middle East and say, ‘we're going to start showing people who’s boss' and with Trump that's going to include things like assassinating the new equivalent target of people like Qassem Suleimani [former IRGC commander].”

Mr Stevens suggested a Trump administration’s policy on Iran will “turn very hawkish, very fast”, especially with Iran continuing with their uranium enrichment capabilities to “pretty threatening levels”.

There was little chance of a nuclear deal, in part because the Iranians did not trust the US system to honour one, given that Mr Trump dumped the previous agreement.

From Labour’s perspective, it was a question of would they contain Iran with sanctions or engage with it with an economic relationship, which he deemed unlikely.

Dr Vakil said for Labour to have “a greater portfolio of engagement” across the region “because there are a number of interconnected conflicts that haven't really been resolved”.

Instead these had been “contained” but unless areas such as Sudan, Syria and Libya were addressed they could significantly worsen.

Gulf economy

Dr Vakil said the Conservative government had been too focused on a “very commercially based relationships” with the Gulf that reflected its “inward facing outlook” post-Brexit.

“The Gulf remains our biggest economic focus, and probably the largest focus of diplomatic activity, whether that's through sending ministers or prioritising a free-trade agreement,” she said.

Britain should also be working with the Gulf states “to support their security concerns” and play a “bridging role” in the Iran relationship, she added.

But more importantly it could play a broader role in supporting Gulf security as “what's ultimately missing is a regional security framework and architecture” which was the “space that Labour could step up and into”.

Another quick win for Labour would be to reinstate the Middle East and North Africa ministerial post that was axed without explanation by Boris Johnson when he was prime minister in 2022.

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Who's who in Yemen conflict

Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government

Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council

Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south

Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory

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Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.

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Group D: Flamengo, ES Tunis, Chelsea, Leon.

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If you go...

Fly from Dubai or Abu Dhabi to Chiang Mai in Thailand, via Bangkok, before taking a five-hour bus ride across the Laos border to Huay Xai. The land border crossing at Huay Xai is a well-trodden route, meaning entry is swift, though travellers should be aware of visa requirements for both countries.

Flights from Dubai start at Dh4,000 return with Emirates, while Etihad flights from Abu Dhabi start at Dh2,000. Local buses can be booked in Chiang Mai from around Dh50

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Started: 2016

Founders: Hussein Nasser Eddin, Laila Akel, Tayeb Akel 

Based: Ramallah, Palestine

Sector: Technology, Security

# of staff: 13

Investment: $745,000

Investors: Palestine’s Ibtikar Fund, Abu Dhabi’s Gothams and angel investors

The specs

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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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TEACHERS' PAY - WHAT YOU NEED TO KNOW

Pay varies significantly depending on the school, its rating and the curriculum. Here's a rough guide as of January 2021:

- top end schools tend to pay Dh16,000-17,000 a month - plus a monthly housing allowance of up to Dh6,000. These tend to be British curriculum schools rated 'outstanding' or 'very good', followed by American schools

- average salary across curriculums and skill levels is about Dh10,000, recruiters say

- it is becoming more common for schools to provide accommodation, sometimes in an apartment block with other teachers, rather than hand teachers a cash housing allowance

- some strong performing schools have cut back on salaries since the pandemic began, sometimes offering Dh16,000 including the housing allowance, which reflects the slump in rental costs, and sheer demand for jobs

- maths and science teachers are most in demand and some schools will pay up to Dh3,000 more than other teachers in recognition of their technical skills

- at the other end of the market, teachers in some Indian schools, where fees are lower and competition among applicants is intense, can be paid as low as Dh3,000 per month

- in Indian schools, it has also become common for teachers to share residential accommodation, living in a block with colleagues

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Tips for newlyweds to better manage finances

All couples are unique and have to create a financial blueprint that is most suitable for their relationship, says Vijay Valecha, chief investment officer at Century Financial. He offers his top five tips for couples to better manage their finances.

Discuss your assets and debts: When married, it’s important to understand each other’s personal financial situation. It’s necessary to know upfront what each party brings to the table, as debts and assets affect spending habits and joint loan qualifications. Discussing all aspects of their finances as a couple prevents anyone from being blindsided later.

Decide on the financial/saving goals: Spouses should independently list their top goals and share their lists with one another to shape a joint plan. Writing down clear goals will help them determine how much to save each month, how much to put aside for short-term goals, and how they will reach their long-term financial goals.

Set a budget: A budget can keep the couple be mindful of their income and expenses. With a monthly budget, couples will know exactly how much they can spend in a category each month, how much they have to work with and what spending areas need to be evaluated.

Decide who manages what: When it comes to handling finances, it’s a good idea to decide who manages what. For example, one person might take on the day-to-day bills, while the other tackles long-term investments and retirement plans.

Money date nights: Talking about money should be a healthy, ongoing conversation and couples should not wait for something to go wrong. They should set time aside every month to talk about future financial decisions and see the progress they’ve made together towards accomplishing their goals.

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Updated: July 07, 2024, 9:38 AM