A Very Large Crude Carrier docking in the Port of Fujairah. Antonie Robertson / The National
A Very Large Crude Carrier docking in the Port of Fujairah. Antonie Robertson / The National

The US and Europe must unite over Iran



US Secretary of State Mike Pompeo has cancelled the Moscow leg of an official visit to Russia, in order to attend an emergency meeting of European powers on Iran. While Britain, France and Germany remain publicly committed to the flawed 2015 nuclear deal that US President Donald Trump withdrew from a year ago, they now appear to be aware of the threat Iran poses. The Trump administration and its Gulf allies have long agreed that the nuclear deal does not tackle Tehran’s destabilising influence on the region, grimly visible in the actions of its proxies in Lebanon, Iraq, Yemen and Syria. Nor did it halt Iran’s ballistic missile programme, which contravenes international law. With the regime ramping up its rhetoric, now is the time for Europe and the US to reach an agreement on how to proceed.

Tensions are sky high. On the anniversary of Mr Trump’s withdrawal from the nuclear agreement, and following a raft of punitive US sanctions that have decimated Iran’s oil output, Iranian President Hassan Rouhani announced that Tehran would pull out from some conditions of the nuclear deal. In response, European powers threatened sanctions of their own. In the past few days, Tehran has declared the US military presence in the Gulf a “target” and threatened to expel around three million Afghan refugees if sanctions are not lifted. Iran has repeatedly threatened the region’s waterways as a means of retaliation. From Hormuz to the Bab Al Mandeb strait, they are vital for the flow of international trade. The US might have dispatched forces to the Middle East amid “clear indications” of threats from Iran to American forces, but as Mr Pompeo said in an interview broadcast on Monday, “Our aim is not war”. It is encouraging that European powers appear to be joining the US and the Gulf in recognising the Iranian threat – even if they differ on how to tackle it. In such a febrile atmosphere, it is vital that all parties exercise restraint, because it is not just trade flows that are at stake, but the safety and security of us all.

All eyes are now on the Gulf of Oman, where around a fifth of the world’s oil passes and where an act of sabotage occurred on Sunday. The UAE has rightly been cautious in handling the situation, awaiting the results of an investigation. What we know is that two Saudi oil tankers – and two other vessels – were “sabotaged” off the coast of the Fujairah, suffering “significant damage”. While further details are yet to emerge about this worrying incident, cool heads must prevail, and proper measures should be taken to ensure that this situation does not spin out of control. Countries across the region have expressed their condemnation, while Abu Dhabi has called on world powers to keep maritime traffic safe. At this highly precarious moment, this message of caution must be heeded.

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.”

Real estate tokenisation project

Dubai launched the pilot phase of its real estate tokenisation project last month.

The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.

Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.

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