The Middle East has endured profoundly disruptive and traumatic geopolitical forces over the last century, from the collapse of the Ottoman Empire to the ascent and decline of western empires. The destruction wrought by the unjustified and disastrously-managed United States occupation of Iraq has also inflicted tragic suffering on the region.
The US has been blamed – and blames itself – both for intervening and not intervening in the region.
As it seeks to shift greater security responsibilities to the states of the region, what must change in practical terms?
On Syria, the first priority ought to be elimination of the most extreme Islamist groups. That should not mean partnering with Bashar Al Assad or his allies, as it is unjustifiable to fight one evil with an equally diabolical one.
It is also questionable whether ostensibly moderate rebels operating in coalition with the Islamist extremists should be supported, considering that they are effectively furthering the extremists’ cause.
A better option would be for a condition of continued military aid to require the moderates to disengage and reform as a viable fighting force independent of the extremists. Let the Syrian military and the extremists wear each other down in the meantime.
Parallel to this, the US will probably have to engage with Iran on the Israeli-Palestinian issue as this is the primary reason why Iran is so vested in Mr Al Assad’s survival.
It is also one of the reasons why Syria probably would not remain stable for long even if Mr Al Assad did manage to take back most of the country: eventually but inevitably, Iran would resume its proxy campaign against Israel.
Therefore, unless the US wishes to gamble on forcible regime change in Tehran, which it does not, engagement on the Israeli-Palestinian issue is inevitable – however vociferously the Israeli lobby in the US will protest against it.
Progress on this issue is doubtful, however. The US will first have to reinvigorate its own resolve on the two-state solution before seeking to convince others.
On Iraq, although progress continues against ISIL, the political situation in Baghdad will remain up to Iraqis to solve, perhaps led by Muqtada Al Sadr if the Iraqi parliament remains unwilling to hold itself accountable to the Iraqi public.
A degree of rapprochement between the US and Iran – again, dependent in part on deeper dialogue on issues of mutual importance – could improve the chances of Iraqi reunification.
On Yemen, western observers vary on the degree of Houthi ideological alignment with Iran, versus payment of lip service to Iranian rhetoric as a means of attracting military aid.
The GCC should continue to communicate its willingness to talk with the Houthis on condition that they cease propagating their toxic rhetoric and terminate their alliance with former president Ali Abdullah Saleh, who proved to be hopelessly corrupt and a serious obstacle to the counterterrorism campaign against Al Qaeda in the Arabian Peninsula.
As the US cautiously but deliberately steps back from a region it is attempting to guide towards positive-sum solutions, it is up to the leaders and people of the region to pursue a vision of peace and prosperity over dominance and devastation.
Thomas Buonomo is a geopolitical risk analyst with Stratas Advisors
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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.”
