Raghida Dergham is the founder and executive chairwoman of the Beirut Institute, and a columnist for The National
November 06, 2022
Today the Middle East picture is incomplete, but it's important to take stock of a number of interesting signals from the region. Even as some Arab Gulf states are making ground-breaking moves, the Iranian regime is grappling with the repercussions of its crackdown on popular protests as well as its role in the Ukraine war.
Remarkable developments are indeed taking place in the region – from the various summits in Saudi Arabia, to Pope Francis's historic visit to Bahrain. The UAE has signed a strategic partnership agreement with the US to invest $100 billion to produce clean energy, strengthen energy security, and push for climate action.
But one of the most important developments this week is that the US, Saudi Arabia and other countries put their forces on high alert amid joint intelligence reports indicating that Iran is planning imminent attacks on energy facilities in the region, especially in the kingdom. Commenting on the development, US National Security Council spokesperson John Kirby said: “We are concerned about the threat … we will not hesitate to act in the defence of our interests and partners in the region.”
The Iranian regime is stunned by the uprising against its repression and the moral support Iranian women have received in international forums following the death of Mahsa Amini in September. Washington, meanwhile, is preparing more sanctions against Tehran in retaliation against its arms supply to Russia, including possible measures to intercept these shipments.
However, the Islamic Revolutionary Guard Corps is not panicking. In Iraq, the Iranian regime has secured its interests, including the control of key levers of government. Benjamin Netanyahu's return to power, meanwhile, could improve Israel's relations with Russia owing to his friendship with Vladimir Putin, which in turn could reflect on Iranian-Israeli relations.
President Sheikh Mohamed and Brett McGurk watch as Dr Sultan Al Jaber and Amos Hochstein sign an MOU. UAE Presidential Court
While US-Gulf strategic co-operation is being strengthened, Iran is reinforcing its strategic alliance with Russia
Pope Francis's visit to Bahrain to attend an inter-faith conference alongside Dr Ahmed Al Tayeb, the Grand Imam of Al Azhar, is significant. Bahrain is home to the largest Catholic cathedral in the Arabian Gulf region, in the city of Awali, and the pope's visit has highlighted the importance of strengthening Christian relations with the Muslim world – a crucial pursuit in an era in which sectarian tensions and religious extremism are festering around the world.
The separation of religion and state remains one of the biggest challenges in the Middle East, with the Israeli right and the Iranian regime converging on the issue of imposing religion on the state. The recent Israeli election results have confirmed this trend in that country. The Iranian regime, meanwhile, continues to impose a theocracy that has set the nation back by more than half a century.
Mr Netanyahu will pursue more extremist policies against the Palestinians, but he will not be able to fully extricate himself from the commitments of the previous government, such as the agreement demarcating the Israel-Lebanon maritime border. It will also be worth monitoring how Israeli-Russian relations develop, especially in the context of Ukraine and the implications for Russian-Iranian-Israeli relations.
Iran will not be able, nor does it want, to downgrade its strategic relations with Russia. It is aware that its regional role, especially in Syria, is linked to Russia. Iran will not end its involvement in the Ukraine war alongside Russia, even if it were to incur further US sanctions or if its arms supplies were intercepted.
Interestingly, despite the latest round of US-Iran tensions, the Biden administration has yet to say that the deal to revive the Joint Comprehensive Plan of Action is dead. But even in the best-case scenario, the talks are clinically dead and no one dares to breathe life into them now.
The other interesting development is the Saudi and US state of alert triggered by intel indicating Iran is planning an attack on energy facilities in the kingdom, to divert attention away from the regime's domestic troubles. If Tehran risks staging attacks, this would invite a US response – not in the form of war but by way of stronger US-Gulf security ties.
It is clear that the Biden administration has decided to contain any further deterioration in its relations with the Gulf states – which have suffered several shocks for reasons related to energy, arms sales and mutual distrust – especially security relations.
Dancers perform as Pope Francis attends a meeting with the youth at the Sacred Heart School in Manama, Bahrain, on Saturday. AP Photo
The UAE-US partnership carries plenty of significance, with the two sides stressing that their “close strategic alliance" will contribute to "supporting the transition process in the global energy sector and building a more sustainable future", as US Envoy for Energy Affairs Amos Hochstein said.
Last week, during the Future Investment Initiative conference in Riyadh, it was clear that America's private sector, led by major investment banks, was less interested in the Opec+ crisis involving Saudi Arabia than it was in the strong, historic and strategically important relations between the US and the kingdom. Moreover, the Biden administration has told Saudi officials in its own way that, while a political escalation against the kingdom was necessary amid clamouring in the US Congress for measures against Opec+, there is no real intention to reassess their relationship.
Thus, while US-Gulf strategic co-operation is being strengthened, Iran is reinforcing its strategic alliance with Russia. On the other hand, while Tehran continues its repression of its people, especially women, the Gulf states are pursuing reforms, developing their social infrastructure, opening up, and encouraging inter-faith engagement.
All eyes will now be on Iran to see whether it carries out potential attacks on Saudi Arabia, as has been reported, or whether it is manoeuvring to deliver a message to Washington, hoping that the Biden administration will return to the nuclear talks. I am told that the Iranian regime has supplied advanced drones to the Houthis in Yemen, which could be used for attacking Saudi ports and oil installations.
Iran is betting that the Biden administration won't be able to provide support to Saudi Arabia shortly before the mid-term election, and that its security options are limited and will come late anyway, only after the attacks have occurred. Tehran is also betting that America's preoccupation with the alarming developments on the Korean Peninsula will prevent it from dealing with another crisis at the same time, and therefore won't be able to take action against it.
The Iranian regime wants to deliver a message that it can take revenge if its interests are not respected, those being the revival of the nuclear deal and sanctions relief. But until it can escalate matters, it will continue to be stunned and bogged down, as it fears falling into a strategic panic if things continue along their current trajectory.
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.”
We Weren’t Supposed to Survive But We Did
We weren’t supposed to survive but we did.
We weren’t supposed to remember but we did.
We weren’t supposed to write but we did.
We weren’t supposed to fight but we did.
We weren’t supposed to organise but we did.
We weren’t supposed to rap but we did.
We weren’t supposed to find allies but we did.
We weren’t supposed to grow communities but we did.
We weren’t supposed to return but WE ARE.
Amira Sakalla
