Russia has been warming to Pakistan for some years. This has happened at a key point for it and its neighbours. Although India claimed non-aligned status throughout the Cold War, it was always among Russia’s preferred allies – just as Pakistan was to the US.
As the US seems to be turning away from Pakistan, it would seem logical for Russia to turn towards Pakistan.
Meantime, the China-Pakistan Economic Corridor, CPEC, has caused concerns in India.
An increasing number of Indians are worried about whether this nexus poses a threat. However, to me it seems that the economic and strategic positioning of nations is creating new opportunities. Perhaps it is time to examine these.
Let us begin with Russia. While it feels betrayed by the UN-approved intervention in Libya, the US has imposed further sanctions on Russia. Lately, the EU has followed suit. Faced with economic strangulation, Russia turned towards China.
The most lucrative deal that followed from these overtures was when Rosneft, Russia’s state controlled energy organisation, finalised a $270 billion agreement, doubling oil supply to China.
China is having its own problems with the US. It may have been given an entree to Afghanistan but it is faced with a challenge from America in the South China Sea, and feels threatened by the numerous US naval bases in the region.
For China, therefore, CPEC is not merely a venture to improve its economy, it also checks the hold the US has in the Pacific.
It is for this reason that Pakistan and its port of Gwadar are invaluable, as CPEC only becomes an economic corridor when it gets access to the Indian Ocean through Pakistan.
The Russian dream is also Pakistan-dependent, because of geography.
In the past, Russia did everything possible to destabilise Pakistan and, most particularly, Balochistan, the Pakistani province where Gwadar lies.
Now that it is likely to become a beneficiary of CPEC it will, therefore, do everything possible to see Pakistan stabilised.
No wonder then, that Russia is warming to Pakistan.
Pakistan is also aware of the significance of the geopolitical repositioning in the region and the opportunities that might accrue.
For the past few years Pakistan has been seeking to broaden its diplomatic base, reduce its dependence on the US, and improve relations with its neighbours. CPEC has offered Pakistan a better bargaining position and some liberty of action, for which it is taking advantage.
Consequently, not only has Pakistan inked a deal with Russia for combat helicopters, it is also importing engines for its fighter jets, which it is building jointly with China. Furthermore, the Russian state-owned Rostekh Corporation has undertaken to build a 1,100-kilometre gas pipeline to Pakistan by 2017.
On the other hand, Iran has agreed to join the CPEC. Another victim of US-UN imposed sanctions, it too is economically isolated. China, which will build and fund the liquid natural gas terminal at Gwadar and the pipelines connecting this terminal to inland Pakistan, has also indicated its willingness to help complete the Iran-Pakistan pipeline.
China is as interested in Iran joining CPEC. For Iran, it opens opportunities to export oil, and for China, to import it.
An Iran-Pakistan-China oil pipeline will be a dream come true for all three countries.
In my opinion, the nexus is already there but for economic reasons than strategic ones.
However, China has made its position on CPEC and the inclusion of India very clear. Again, geographic realities, which afford India so many advantages, dictate that India does not naturally figure in the CPEC.
Consequently, while China will welcome India if it chooses to join it will have to give China greater access to the South Asian markets it currently finds itself unable to tap into.
Brig Shaukat Qadir is a retired Pakistani infantry officer
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.”
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