A Houthi supporter holds up a mock missile during a protest in Sanaa on March 8. Addressing threats to Red Sea shipping is just one challenge where collaborative security measures are essential. EPA
A Houthi supporter holds up a mock missile during a protest in Sanaa on March 8. Addressing threats to Red Sea shipping is just one challenge where collaborative security measures are essential. EPA
A Houthi supporter holds up a mock missile during a protest in Sanaa on March 8. Addressing threats to Red Sea shipping is just one challenge where collaborative security measures are essential. EPA
A Houthi supporter holds up a mock missile during a protest in Sanaa on March 8. Addressing threats to Red Sea shipping is just one challenge where collaborative security measures are essential. EPA


It's time to revive the Gulf's ties with Nato


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July 04, 2024

Launched in the summer of 2004, the Istanbul Co-operation Initiative was envisioned as a fundamental pillar for security co-operation between Gulf countries and Nato. Bahrain, Kuwait, Qatar and the UAE have joined the ICI with the hope of fostering a robust security framework.

However, 20 years later, there seems to be an urgent need to revive the initiative after suffering inaction, fragmentation and loss of direction over the past years.

Today, there is a pressing need to reinvigorate the ICI in light of significant regional developments that demand Nato’s constructive engagement. The Middle East’s evolving security dynamics and the Gulf’s increasing strategic importance on the global stage underscore the necessity for a renewed and strengthened co-operation framework.

Since its inception during Nato’s summit in Istanbul, the ICI aimed to create a platform for the organisation and non-Nato Middle Eastern countries to address emerging threats and challenges. Although Saudi Arabia and Oman have not officially joined the ICI, they participated in its activities and events, including defence diplomacy, counterterrorism, crisis management, emergency and disaster response, countering weapons of mass destruction and counter-cyberwarfare.

The global security environment has become increasingly complex in an unprecedented way, presenting Nato with a rapidly evolving array of international strategic challenges. However, there have been limited efforts to enhance ties in recent years.

The initial enthusiasm that characterised the ICI has waned, and the initiative has not expanded as anticipated. Moreover, Nato has not sufficiently engaged with the emerging regional order, which differs significantly from the context in which the ICI was originally established.

These ideas were discussed at an event hosted by the Nato-ICI Regional Centre in Kuwait in May. The event focused on the future of Nato relations in the region with the theme: “Twenty years of the Istanbul Co-operation Initiative: what is the way forward for Nato-Gulf relations?” It also addressed the importance of Nato partnerships and the evolving security environment in the region.

Therefore, the 20th anniversary of the ICI presents an opportunity to make this year one of renewed, realistic and comprehensive action. The goal is to design a unified, collective and co-ordinated approach to address regional security challenges, manage several crises and conflicts and counter threats to stability and prosperity.

The revitalisation of the ICI hinges on the fundamental truth that security in the Gulf region is crucial to Nato’s overall security

Given the current uncertainty in both the region and the world, it is crucial to seek co-operation frameworks that can effectively and proactively safeguard the rules-based international order. These frameworks should also protect nation-states from the influence of militias, non-state actors and the rise of populism, while countering threats to cultural diversity and addressing new challenges such as climate change.

In this context, there is a timely opportunity for Nato to engage more closely with Middle Eastern countries on practical areas of co-operation to bolster regional security.

Key areas of focus include regional maritime security co-operation. The ongoing Gaza conflict and Houthi attacks in the Red Sea have posed significant threats to the flow of shipping, the security of international waterways and the resilience of supply chains. Addressing these challenges through collaborative maritime security measures is essential to ensure the stability and sustainability of these critical routes.

While efforts are under way to prevent a large-scale regional conflict in the Middle East in the aftermath of the war in Gaza, the worst-case scenarios remain alarming. One such possibility is the closure of the Strait of Hormuz. Although this outcome currently seems unlikely due to various strategic and geopolitical considerations, it is crucial to question whether Nato is adequately prepared for such severe developments that could dramatically escalate tensions in the region.

Revisiting and reassessing the ICI’s experience over the past two decades should include expanding it to welcome new members, considering the diverse and rapidly evolving regional dynamics. This reassessment also involves exploring increased co-operation to enhance air defence capabilities among members and other stakeholders. Given the proliferation of ballistic missiles and the rising use of drones across the Middle East, air defence should be a top priority for Nato co-operation in the region.

Additionally, focus should be placed on strengthening counterterrorism efforts, improving crisis and emergency management, and using technologies such as artificial intelligence to achieve shared security goals.

The revitalisation of the ICI hinges on the fundamental truth that security in the Gulf region is crucial to Nato’s overall security. The Middle East remains essential to western interests, and the profound changes over the past two decades are driving Nato forward, not holding it back.

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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.”

Updated: July 04, 2024, 2:00 PM