As Nato leaders gathered in Madrid last week, Russian President Vladimir Putin embarked on a crucial diplomatic mission of his own. His first trip abroad since his country’s late February invasion of Ukraine was not to either of the two regional powers, India and China, that have with their increased gas imports provided Moscow an economic lifeline.
Mr Putin instead sought to reassert Russian influence in Central Asia, visiting Tajikistan, where its leader embraced him on the tarmac, then Turkmenistan for a summit of Caspian Sea leaders, including those from Azerbaijan, Kazakhstan and Iran.
“An atmosphere of friendship and co-operation reigns in the Caspian,” Mr Putin’s foreign policy adviser, Yuri Ushakov, asserted. Yet, Russian influence in the Caucasus and Central Asia was widely seen as receding even before the conflict with Ukraine. Now, with significant western sanctions disrupting trade routes, Russian ties across Eurasia – and with regional heavy hitter China – may soon be critical to its economic survival.
This is not news to Turkey, which has been expanding its regional footprint for years. Back in 2009, Ankara created the Organisation of Turkic States (formerly the Turkic Council). Today, the bloc’s five members (Azerbaijan, Kazakhstan, Kyrgyzstan, Turkey and Uzbekistan) and two observer states (Turkmenistan and Hungary) are home to some 170 million people and an aggregate GDP of $1.5 trillion.
In March, former Turkish deputy prime minister Binali Yildirim, chair of the bloc’s Council of Elders, said it hoped to establish an EU-like alliance, with full freedom in the movement of goods and people. This echoes the vision of the 10-member Economic Co-operation Organisation, which is significantly older and also counts Iran, Afghanistan and Pakistan as members, as well as Tajikistan.
If Nato seeks to counter this rising Russian-Chinese axis in Eurasia, it could hardly find a better partner than Ankara
But the stressing of pan-Turkic identity and Turkey’s status as the most populous member gives Ankara a degree of control over the Turkic organisation, which is why most observers view the bloc as a tool to expand Turkish influence, focused on energy and trade.
Turkey has few domestic energy reserves and thus must rely on imports, with Russia providing nearly half its natural gas. Ankara’s main goal in backing Azerbaijan in the late 2020 war for Nagorno-Karabakh was arguably its hope of gaining greater access to Azerbaijani gas and the Trans-Caspian, potentially becoming an energy transit state.
The Turkic organisation is all about developing bigger, better ports and more direct trade corridors. One recent example is the first Kazakhstan-Iran-Turkey train, which arrived in Tehran with its cargo of sulphur in late June. More specifically, Ankara aims to develop the Middle Corridor to China, poised between the southern and northern routes through Iran and Russia.
A crucial element of that vision is reviving the Zangezur corridor, which, as this column has previously detailed, is a train link across Armenian territory that would connect mainland Azerbaijan to its exclave of Nakhchivan, bordering Turkey. This would give Ankara a gateway to the Caspian basin and one of the faster routes to Central Asia and China, offering huge economic and energy potential and the opportunity for significant Belt and Road Initiative (BRI) investment.
Six weeks ago, Kazakh President Kassym-Jomart Tokayev visited Ankara and signed 15 bilateral deals as part of an enhanced strategic partnership. Mr Tokayev pointed out that, since Kazakhstan began using Turkish shipping corridors, the cargo transport time from Khorgos to Istanbul has gone from 60 days to just 13. Surely Beijing took note.
Kazakhstan also agreed to begin domestic production of Turkey’s unmanned Anka drones. This seemed fitting, as the Turkic organisation sometimes seems like a showcase for Turkey’s domestic defence. Turkey’s military backing, mainly via advisers and Bayraktar TB2 drones, played a crucial role in Azerbaijan’s victory in Nagorno-Karabakh. Late last year, Kyrgyzstan confirmed it had purchased Turkish drones.
Turkmenistan has also purchased at least one TB2, which it showcased last September. Home to the world’s fourth-largest natural gas reserves, Turkmenistan is the alliance’s most recent addition, becoming an observer in November 2021. It may soon request member status, despite its predilection for avoiding regional alliances. Its main energy customer has been China, but those proceeds mainly go to debt repayment.
Turkmenistan may now view Turkey as the best alternative buyer and the most direct trade route – across the Caspian to Baku, through Zangezur to Turkey and on to Europe. In February, Ankara agreed with Azerbaijan and Turkmenistan to transit gas from their joint Dostluk field to Europe.
Building its trade superhighway to the West, China probably hopes to keep Russia and Turkey from gaining a stronger foothold. One key node of that effort is Uzbekistan, where China emerged as the country’s leading export market last year ($1.74 billion compared to Russia’s $1.7bn). China is also Uzbekistan’s largest source of foreign investment, more than doubling that of Russia.
Mr Erdogan visited Tashkent in March to seal the Turkey-Uzbek partnership just weeks after Beijing and Tashkent signed their own deals. Turkey’s commitments included a $150 million thermal power plant and a $140m gas piston power plant, making Ankara the third-largest export market to Uzbekistan.
“It’s a race between Turkey and China in Central Asia,” Kamran Bokhari, former head of Central Asian studies at the US’s Foreign Services Institute, recently told me, “as to who gets more influence as Russia recedes.”
While Mr Putin was making nice in Central Asia, Sweden and Finland agreed to address Turkey’s concerns about terrorism – though they still need to follow through – as Russia’s Ukraine invasion spurred prompt Nato expansion. Receiving much less media coverage was Nato’s decision to shift its strategic focus eastward.
The bloc’s new strategic concept, released in Madrid, asserted that China’s “stated ambitions and coercive policies challenge our interests, security and values” and warned of “the deepening strategic partnership between the People’s Republic of China and the Russian Federation”.
Nato member state officials have for years expressed concerns about China spreading its economic influence through the BRI, with large investments in Central Asia, Afghanistan, Pakistan, Turkey, and into the Balkans. Now, one of the most pressing results of the war in Ukraine is Moscow aligning more closely with Beijing.
Ankara may be pursuing its own interests in Central Asia and the Caucasus, but as I detailed last year, those interests are largely aligned with its Nato allies. Both aim to ensure stability and access to energy resources while curbing the influence of Beijing and Moscow.
Paul Goble, a longtime specialist on Eurasia and once adviser to former US secretary of state James Baker, said in a recent interview that Turkey is likely to continue to emerge in the region as Russia declines. “Russia is terrified of the rise of [Turkey],” he said. “Russia is concerned that it represents a threat to the southern part of the Russian Federation, which it does.”
The US already supports the development of Turkey’s Middle Corridor as a way to help Europe move away from Russian energy, and may provide significant funding and diplomatic support for Ankara’s completion of the Trans-Caspian route. If Nato seeks to counter this rising Russian-Chinese axis in Eurasia, it could hardly find a better partner than Ankara.
As in Afghanistan with the Taliban, in Russia-Ukraine peace talks and grain release efforts, and with the Syrian refugee crisis, Turkey, despite regularly taking anti-western positions, once again finds itself perfectly poised to help out its western allies.
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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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High profile Al Shabab attacks
- 2010: A restaurant attack in Kampala Uganda kills 74 people watching a Fifa World Cup final football match.
- 2013: The Westgate shopping mall attack, 62 civilians, five Kenyan soldiers and four gunmen are killed.
- 2014: A series of bombings and shootings across Kenya sees scores of civilians killed.
- 2015: Four gunmen attack Garissa University College in northeastern Kenya and take over 700 students hostage, killing those who identified as Christian; 148 die and 79 more are injured.
- 2016: An attack on a Kenyan military base in El Adde Somalia kills 180 soldiers.
- 2017: A suicide truck bombing outside the Safari Hotel in Mogadishu kills 587 people and destroys several city blocks, making it the deadliest attack by the group and the worst in Somalia’s history.
Killing of Qassem Suleimani
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