Washington's secret deals allow 'allies' to play a double game



geopolitics

Ahmed Rashid

As the revolt by the Arab masses has spread, there has been much hand-wringing in western capitals about how to deal with dictators in the future and much self-flagellation about the US and Europe's failures to predict the anger of the Arab peoples much earlier.

There are demands for a more ethical foreign policy by western liberals that punishes authoritarianism, but that is hardly realistic when the world is still full of dictatorships and assets like oil, minerals, food and other things the West wants. Ostracising bad regimes as a kind of punishment can also lead to ignoring millions of ordinary people, while pushing authoritarian regimes towards reform is really only feasible when they are down and out.

What is really needed is greater transparency in the foreign policy agreements that western nations strike with authoritarian states. Agreements need to be made public so that the people and not just the rulers know what they are getting themselves into.

The Cold War was bad enough with the US and the Soviet Union striking secret deals for bases and listening posts in nations that were ruled by dictators - many of them in the Muslim world.

However, the post-September 11 world has been even worse. Mubarak's Egypt, Ben Ali's Tunisia, Musharraf's Pakistan, Karimov's Uzbekistan, King Abdullah's Jordan and many other states signed highly secret and immensely controversial agreements with the US and Europe that involved catching, holding and torturing al Qa'eda prisoners, or allowing hundreds of their citizens who became "the disappeared" to be picked up by western intelligence agencies.

The secret pacts extended far further, such as giving unprecedented access to the CIA in these countries, massive secret arms deals often at the cost of the country's developing economy, training programmes for local intelligence and para-military forces that were often used by the regime to crush local dissent and more. The local intelligentsia and media, let alone the masses, were and still are completely unaware of what has been signed and for what ends.

Meanwhile, the authoritarian rulers have basked in the sunlight of being an ally of the West and of receiving western support, arms and money, while the very secrecy of the deals still allowed the rulers to rail against the West to their own people if they needed to do so for their own political survival.

In March 2002, President Islam Karimov of Uzbekistan signed a deal in Washington with the Bush administration, promising to "intensify the democratic transformation" of Uzbek society, hold free and fair elections and stop the routine human rights abuses his regime conducts to this day. In return he would receive US aid and training for his army and intelligence services.

It was a public agreement covered in the US media, but there was no insistence by Washington that Mr Karimov actually publicise the agreement at home and make his commitments known to the Uzbek people. He never did so. To this day most Uzbeks still do not know about the agreement. That is how dictators have got away with worse than murder.

Pakistan is even a more tragic case in point. After September 11, the military regime under then-president Pervez Musharraf signed numerous secret agreements with the Americans that have never been made public. This lack of transparency allows the army to whip up anti-Americanism whenever it chooses - usually to avoid taking the blame. Washington then wonders why anti-Americanism is growing in Pakistan.

The prime example is the secret agreement for the use of US drones whose missiles kill al Qa'eda and Taliban leaders inside Pakistan. Many of the drones take off from inside Pakistan at a US-run airbase - obviously with the full permission of the Pakistan military. Yet the army and its Interservices Intelligence (ISI) frequently organises demonstrations by Islamic fundamentalists or briefs the local media to condemn drone attacks which infringe upon Pakistan's sovereignty.

What sovereignty, when it has been already secretly given away? And the civilian government of the Pakistan Peoples Party honours the secret agreements of the previous military regime which they publicly deny.

The US secretaries of defence and state have in recent days made impassioned pleas to the world for more use of diplomacy, less use of military force and a faster, larger reform agenda for the Arab world.

But they have not talked about real transparency in US foreign policy that would force state-to-state agreements to be made public - especially to the peoples in whose name they are being signed. The US and Europe must share the blame for allowing dictatorship to thrive, not just by embracing them for the sake of oil or strategic necessity, but by conducting secret relationships and deals that make them unaccountable to their own people.

Sadly, the incoming regimes in Egypt and Tunisia and soon Libya will find themselves saddled with secret agreements that their previous rulers made and that they now will have to honour and keep secret.

The Arab revolt signals that we are at the end of an era. The 20th century way of conducting state-to-state relations, secret diplomacy and bilateral agreements must come to an end if we are to really see the demise of dictatorship. The way forward is greater transparency, not pretending dictatorships are something other than what they are.

Ahmed Rashid is a Pakistani journalist based in Lahore. His latest book is Descent into Chaos

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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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