People receive food rations in Kabul last April. Like Afghanistan, several poor countries are reliant on wheat delivered from Ukraine. AP
People receive food rations in Kabul last April. Like Afghanistan, several poor countries are reliant on wheat delivered from Ukraine. AP
People receive food rations in Kabul last April. Like Afghanistan, several poor countries are reliant on wheat delivered from Ukraine. AP
People receive food rations in Kabul last April. Like Afghanistan, several poor countries are reliant on wheat delivered from Ukraine. AP


Collapse of Black Sea and Syria cross-border deals will affect those who need help most


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July 19, 2023

One hot morning earlier this month, residents of one rural Afghan village were treated to an increasingly rare sight: a convoy of lorries operated by the UN’s World Food Programme barrelling through their muddy backstreets, weighed down with giant sacks of wheat. WFP operations in the country have been hit hard by funding cuts, bringing food aid deliveries such as these to a trickle.

Although the sacks doled out to the village men for their families bore the logo of the US aid agency, UN officials made a point of calling it a wheat delivery from Ukraine to Afghanistan. Ukraine, of course, has not donated much to the WFP, let alone Afghanistan, ever since it was invaded by Russia in February of last year. But highlighting the wheat’s Ukrainian origin was important because it reminded everyone how dependent on geopolitical circumstances humanitarian aid has become.

A more troubling reminder came on Monday, when Russia withdrew from the Turkish- and UN-brokered Black Sea Grain Initiative, the complex arrangement that had allowed Ukrainian wheat to be exported out of the country’s ports, which are encircled by Russian warships. Russia has alleged the initiative confers an advantage to Ukrainian agricultural exports over Russian ones, since the latter remain hobbled by broader efforts by western countries to isolate Moscow from the global economy.

The impact was both swift and severe. Wheat futures prices rose 3 per cent, adding to existing alarm over food-price inflation that has plagued the global economy since the start of the war. More than half of the WFP’s wheat for distribution to the world’s poor comes from Ukraine, which has – along with Russia – long been one of the world’s top grain exporters. “Hundreds of millions of people face hunger…they will pay the price,” said UN Secretary General Antonio Guterres.

Ukraine is already planning for alternative export routes. The country’s ambassador to the UAE, Dmytro Senik, told The National on Monday that Kyiv plans to build additional port capacity on the Danube river, further inland. But doing so “will require time, resources and increased cost”.

The Black Sea Grain Initiative is not the only aid lifeline that has fallen victim to geopolitical disputes. On July 11, the UN Security Council, a body famously riven with superpower rivalries, failed to extend a deal that had secured aid deliveries from Turkey to north-west Syria for the past nine years.

Besides the Ukrainians themselves, civilians in north-west Syria are perhaps the greatest victims of the Ukraine war’s spill-over into the humanitarian space. Not only has their sole aid pipeline been squeezed shut, but they are among the populations in the world most reliant on aid rations filled with donated wheat.

But Russia, a close ally of the Syrian government, had long complained that the so-called cross-border mechanism undermined Syrian sovereignty by bypassing Damascus to deliver aid to rebel-held parts of Syria. It is difficult to imagine that Russia’s wider dispute with the UN and western countries – the mechanism’s chief backers – over its war with Ukraine was not a factor, given the timing.

Whatever the proximate causes of the breakdown of the Syrian cross-border mechanism and the Black Sea Grain Initiative, the two arrangements were feats of diplomacy that afforded help to people desperately in need of it. As such, they were triumphs of global powers’ co-operation and compassion even in a divided world. Those same powers should be mindful of the full consequences of their collapse.

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 21, 2023, 11:58 AM