During the 1950s and 1960s, the Arab world was dominated by what became known as the “politics of axes,” in which regional dynamics were driven by the rivalries among different alignments of states. As “pax americana” in the Middle East has come to a halting end, the region is returning to a somewhat similar situation, in which the ultimate outcome may possibly bode well for the Arab states.
Generally speaking, there are three broad alignments, which range from formal military pacts to looser collaborative relationships, in which Arab states find themselves today. There is the Saudi-Emirati-Egyptian alignment, which took on an important new dimension when several Gulf states reached an agreement with Israel through the Abraham Accords.
There is the Iran-led alignment of states or organisations that includes Iran, Syria, to an extent Iraq, Hezbollah in Lebanon, the Houthis in Yemen and, more ambiguously, Hamas in the Palestinian territories. And there is a third alignment, that of Turkey and Qatar, the status of which appears to be in transition today following the reconciliation last week between the GCC states and Doha.
This range of relationships is not a replication of the politics of axes of the past. For one thing, it involves three non-Arab states – Israel, Iran, and Turkey – that all play a major role in Arab politics. Nor are the alignments as coherent as those during the 1950s and 1960s, when Arab alliances were more firmly anchored in the ideological divisions between the United States and the Soviet Union.
Today, ideology is very far from the minds of the region’s rulers. Instead, the primary driver of relations is flexibility and cool calculation in the pursuit of regional power and gains, in a political climate where Washington has left behind a vacuum that everyone wants to fill. States are not pretending to adhere to larger principles to justify their actions, they are boldly holding up national interest as validation for their choices, which often explains their sudden turnarounds.
This applies to Iran as much as to others, despite the fact that the leadership in Tehran has frequently used religious (and sectarian) terminology to explain its behaviour. But this appears to be a convenient veil, concealing a deeper Iranian nationalism nourished by regional hegemonic ambitions. Nor is Iran alone in reviving past instincts for domination to pursue power today. Turkey, too, has borrowed from its Ottoman past to colour its present policies.
President Donald Trump has sought to reduce American presence in the Middle East, something which could have an important impact on the region's various alliances. AP
Former US president Barack Obama understood these impulses. He thought they would allow his administration to set up a new order in the Middle East that would permit Washington to withdraw its military forces from the region.
In his famous interview with Jeffrey Goldberg of The Atlantic in 2016, Mr Obama observed, “The competition between the Saudis and the Iranians … requires us to say to our friends, as well as to the Iranians, that they need to find an effective way to share the neighbourhood and institute some sort of cold peace.”
A new politics of axes may one day lead to a measure of regional calm
The only problem is that by trying to offer Iran a stake in the region through the nuclear deal he helped agree with the country, Mr Obama only heightened anxieties among Arab states, making tensions more, not less, likely. Yet the former US president did have a point that a pull-out of American forces from the Middle East could only generate stability in the context of a new regional equilibrium.
That is why a new politics of axes, based on a realistic reading of the limits of one’s power, may one day indeed lead to a measure of regional calm. That won’t happen soon, however, because all the main regional actors are still testing how far they can go, facing setbacks that oblige them to constantly recalculate.
For a long time, Iran in particular felt confident that it could expand its influence in dysfunctional Arab countries. The limits of that strategy are increasingly apparent. Tehran helped preserve the Assad regime in Syria, for instance. But the price was the country’s destruction, perennial instability, and constant Israeli military pushback against Iranian efforts to build up a military infrastructure there.
Syria, like Lebanon or Iraq or Yemen, has shown that being in Iran’s sphere of influence usually creates a one-way relationship with Tehran. The result of Iranian power in these countries is destruction, collapse, and corruption, all for Tehran's gain. That’s hardly an appealing model for Arab societies, which means that over time Iran’s hold may slowly loosen if it doesn’t change course.
If a stable new order in the Middle East is to be established, regional alignments will have to show not only a capacity to impose limits on their rivals, but also to offer soft power incentives to increase their appeal. Given the precariousness of military agendas in a region armed to the teeth, persuasion and attractiveness will likely become more important than intimidation in defining outcomes. The Arab world’s major looming problems show why this can hardly be underestimated.
Michael Young is a Lebanon columnist for The National
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.”
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
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