US sanctions Sharjah company for sales to Syria



ABU DHABI // A Sharjah-based company was sanctioned by the US government last week for aiding the Syrian regime.

Pangates International Corporation was accused of supplying the Syrian government and Sytrol, a state-owned oil company under sanctions from the US and the European Union, with a large amount of speciality petroleum products.

“Although these products can be used for military or civilian purposes, they have limited civilian application in Syria,” said a US Department of the Treasury spokesman. “The US Treasury took action to increase pressure on the Syrian regime and those providing support that could aid its military efforts.”

From at least 2012 to April this year, the company was said to be supplying the Syrian government with products including automotive gear box oil, turbine oil additives and marine engine oil.

Between January and April 2012, Pangates allegedly supplied 155 metric tonnes of fuel additive, 3,300 metric tonnes of lubricant oil additives and 1,000 kilograms of static dissipater additive – required by military jet fuels to increase the conductivity of the fuel.

In early 2012, Pangates also provided more than 4,000 tonnes of base oil to Syria, as well as supplying aviation fuel the following year. In April, it was said to have “helped arrange” for 1,000 tonnes of aviation fuel for the regime.

“The Syrian government’s continued violence against its own people is abhorrent,” said David Cohen, the US undersecretary for terrorism and financial intelligence. “We remain committed to applying economic and financial pressure on those providing support to the Assad regime.”

The company was sanctioned last Wednesday and it will remain on the Specially Designated Nationals (SDN) list of the Office of Foreign Assets’ Control (Ofac) until it demonstrates that it is no longer engaged in such behaviour.

“US persons are generally prohibited from engaging in any transactions with Pangates,” said Adam Szubin, Ofac director. “And any assets of Pangates subject to US jurisdiction are frozen.”

The company was sanctioned under US executive order 13582, which blocks all property of the Syrian government and bans certain transactions related to Syria.

“Sanctions are a means to an end,” he said. “The ultimate goal of sanctions is behavioural change. Ofac therefore seeks to respond to those who demonstrate a change in the behaviour that resulted in sanctions.”

Johan Bergenas, an Abu Dhabi security expert and deputy director of the Managing Across Boundaries Initiative at the Stimson Centre think tank, said that the Middle East had been the site of a wide range of illicit proliferation activities through front companies that provided materials related to weapons of mass destruction to countries such as Syria over the last decades.

“That is the nature of the proliferation challenge today,” he said. “A web of actors participate and we know that private-sector entities are an important part of the supply chain. It is important to point out, however, that companies in, for example, the US and the UK have also been identified as suppliers of proliferation-sensitive technology to the Middle East region.”

He said governments needed to do a better job at engaging private-sector firms in a productive dialogue that ensured global security while not hampering the industry’s need for legitimate business.

“It’s in companies’ interests not to deal with sanctioned private- sector entities because they too have a responsibility to prevent the illicit proliferation of WMD,” said Mr Bergenas. “Instability as a result of WMD proliferation is in no one’s interest and getting caught being a part of the illicit supply chain of WMD materials will have devastating consequences for the quarterly bottom line.”

From the onset of unrest in Syria to today, the US had imposed sanctions on nearly 200 individuals and organisations, including the government of Syria, its central bank and affiliated oil companies. The Syria International Islamic Bank was accused of helping what the US called the efforts by the government of Bashar Al Assad to obtain weapons of mass destruction.

Since 2012, Ofac has removed nearly 500 people from its SDN list upon showing a behavioural change.

“We at the treasury are committed to using sanctions aggressively but responsibly,” Mr Szubin said. “[This is] to advance US foreign-policy goals and protect our country’s most vital interests.”

Pangates, located in the Sharjah Airport Free Zone, declined to comment.

Over the past few years, companies and residents in the UAE have felt the pinch of US sanctions.

Last year, Syrian and Iranian nationals were refused service by certain banks in the UAE. A month later, gold dealers and exchange houses were targeted.

In 2012, former US secretary of state Hillary Clinton imposed sanctions on another UAE-based oil and gas company, Fal Oil Company Limited, under the Iran Sanctions Act, for conducting business with Iran’s energy sector. It was accused of providing more than US$70 million in refined petroleum to Iran.

Last November, US secretary of state John Kerry said the UAE had paid a great price for the Iran sanctions, including a $19 billion loss in business.

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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.”

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