Shalom Lipner is a non-resident senior fellow of the Middle East programme at the Atlantic Council. From 1990 to 2016, he served seven consecutive Israeli premiers at the Prime Minister’s Office in Jerusalem
August 03, 2022
Israel's parliament dissolved itself on June 30, ushering the way for Yair Lapid to replace Naftali Bennett as the country's Prime Minister on the next day. Elections have been scheduled for November 1, but recent precedents suggest that many long months might yet pass before politicians manage to form a stable, new coalition. The political upheaval has not diverted the focus of Israeli leaders from the challenge posed by Iran, however, where the goalposts are moving significantly.
The original Joint Comprehensive Plan of Action (JCPOA) was decidedly controversial within the Israeli policy establishment. Critics highlighted the deal's sunset clauses on restrictions to Iran's nuclear development and its silence with regard to other elements of Iranian belligerence. Those who voiced support for the agreement pointed, on the other hand, to the benefits of its interim checks on Iranian ambitions and to the necessity of avoiding open confrontation with Israel's primary ally in Washington. The 2018 withdrawal of then US president Donald Trump from the JCPOA eclipsed that debate when his "maximum pressure" campaign – whether because of its shortcomings or owing to its premature demise – witnessed a threatening surge in Iran's enrichment of uranium.
In July 2021, Mr Bennett, only a few weeks after assuming the premiership, accused his predecessor of falling asleep at the wheel. "Never in the history of the state of Israel," he lambasted Benjamin Netanyahu, "has there been someone who has spoken so much and done so little on Iran." Later that year, it was disclosed that, in 2019, Mr Netanyahu had twice denied the Israel Defence Forces funding requests for contingency planning vis-a-vis Iran – underscoring what Mr Bennett had referred to earlier as the "gap between the high rhetoric and the neglect that occurred".
The Bennett government devised its "Octopus Strategy" to strike directly in Iran, and not only at its proxies. Since the beginning of 2022, assaults on Iran's drone fleet near Kermanshah, a commander of the Islamic Revolutionary Guard Corps in Tehran and the nation's steel industry have all been attributed to Israel. Iran's trumpeted captures – whether genuine or contrived – of Israeli agents within its borders have reinforced the impression that the Mossad has penetrated the country thoroughly.
A new reality may soon be upon us
US President Joe Biden's visit to Israel brought matters to a head. On July 14, Mr Biden reiterated his belief that "diplomacy is the best way" to ensure that Iran never obtains a nuclear weapon. (In the Jerusalem Declaration, which he and Mr Lapid signed that afternoon, Mr Biden pledged that the US "is prepared to use all elements of its national power to ensure that outcome".) Mr Lapid, speaking alongside Mr Biden, had already telegraphed his scepticism. "Diplomacy will not stop them," the Prime Minister declared just before Mr Biden spoke. "The only way to stop them is to put a credible military threat on the table."
An apparent issue is Israel's preference for a more rigorous, "longer and stronger" Iran bargain than the one which the US is currently offering. Defence Minister Benny Gantz said as much on June 27, when he clarified that "Israel does not oppose a nuclear deal in itself; it opposes a bad deal". Two days after Mr Biden departed from Israel, Mr Lapid explained to Israel's cabinet that “we want the basis [for the negotiations with Iran] to be a credible military threat", but don't "necessarily agree on this with the Americans".
That difference of opinion may be moot. Josep Borrell, the EU's foreign affairs and security policy chief, proclaimed in the Financial Times on July 26 that "the space for additional significant compromises [with Iran] has been exhausted". The US is no less pessimistic about the way forward. Brett McGurk, the White House co-ordinator for the Mena region, has reportedly scored the chances of resuscitating the JCPOA as "highly unlikely". State Department negotiator Rob Malley has gone even further, pronouncing the deal "dead". In October 2021, Mr Malley, foreshadowing the current impasse, concluded that "at some point, the JCPOA will have been so eroded because Iran will have made advances that cannot be reversed, in which case we can’t be talking – you can’t revive a dead corpse".
A new reality may soon be upon us. According to former Israeli prime minister Ehud Barak, "this summer, Iran will turn into a de-facto threshold nuclear state", at which point it will be virtually impossible to detect Tehran's march to nuclear weaponisation. Israel, if Mr Barak's assessment is accurate, is approaching a moment of decision.
The Enghelab Square in Tehran on July 31. AFP
Mr Lapid is covering his flanks. He remains tightly co-ordinated with the Biden administration, with which he attests to maintaining "an open discussion about what is the best way to deal" with the Iranian theatre, while also asserting Israel's "right to act freely on the subject". Operationally, Israel's inclusion in the US Central Command's area of responsibility, together with the consolidation of the Abraham Accords, has facilitated the emergence of the Middle East Air Defence alliance to deter aggressive Iranian behaviours.
The big question, though, is whether Israel would employ kinetic force to prevent Iran from a nuclear breakout. Asked last month about Israel's ability to confront Iran, Mr Gantz replied ominously that "we are able to seriously harm and delay the nuclear [programme]". His words came on the heels of Mr Biden's latest reaffirmation, in the Jerusalem Declaration, of America's "steadfast commitment to preserve and strengthen Israel’s capability to deter its enemies and to defend itself by itself against any threat or combination of threats".
Would Mr Lapid despatch Israel's air force to attack Iranian nuclear sites? The answer can't be known with any certainty, but what is known is that, if Israel did embark upon such a mission, it wouldn't be the first time.
In 2007, facing the imminent possibility of an active nuclear reactor across its frontier with Syria, Israel mobilised to obliterate the facility. By then president George W Bush's telling of the episode, "prime minister [Ehud] Olmert hadn’t asked [me] for a green light, and I hadn’t given one. He had done what he believed was necessary to protect Israel".
Today's circumstances are, to be sure, not identical to those of 15 years ago. But if Israel's leaders should perceive – now or ever in the future – that there's absolutely no time left on the clock to make any other play, an encore would not be entirely surprising.
THE LIGHT
Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
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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