Iran poised for rapid build-up that 'risks missile arms race'

Mishandled international efforts to reduce Iran’s missile arsenal could spark increased tensions, leading to hi-tech weaponry being transferred to Hezbollah and Yemen’s Houthi rebels, according to a report.

Based on three years of research, it warns that improving relations between regional powers could be damaged if Iran is faced with demands to reduce its missile capability as a price for restoring the 2015 nuclear deal.

Former president Donald Trump pulled out of the deal in 2018 in part because it was limited in scope, failing to include the issue of ballistic missiles, or to tackle Iran’s support for violent militias elsewhere in the Middle East.

Many US politicians have said they cannot support a return to the agreement proposed by President Joe Biden without a reduction in Iran’s missiles.

But without nuclear deterrence or a modernised air force, Tehran has increasingly relied on developing ballistic weapons for its defence and is unlikely to support any reduction in its arsenal without others following suit, said the report, titled Ballistic Missiles and Middle East Security: An Alternative Approach.

And the report said Iran is instead poised for a significant and rapid expansion of its arsenal having overcome technical hurdles in its guidance systems. Iran tested powerful ballistic and cruise missiles and drones during a five-day military exercise in December as negotiations continued on a potential return to the nuclear deal.

The report warns that any future talks on controlling missiles focused only on Iran “will encourage the worsening of a regional missile arms race … also the transfer of capabilities to groups like the Lebanese Hezbollah and Yemeni Houthis”, according to the report by the think tanks European Leadership Network and Iran Project.

“Progress in improving regional security is fragile and could easily be derailed, especially by any mishandling of a restored nuclear deal,” said the report. “Ballistic and other types of missiles loom large over this situation.”

Six countries in the region maintain cruise missiles, along with Yemen’s Houthis. More states are likely to join the list soon, putting broader regional security at risk.

A cleric walks past missiles displayed in a missile capabilities exhibition by the paramilitary Revolutionary Guard a day prior to second anniversary of Iran's missile strike on U. S. bases in Iraq in retaliation for the U. S. drone strike that killed top Iranian general Qassem Soleimani in Baghdad, at Imam Khomeini grand mosque, in Tehran, Iran, Friday, Jan. 7, 2022. (AP Photo / Vahid Salemi)

In January 2020, Iran fired a volley of at least 12 ballistic missiles at US bases in Iraq after the death of Iranian general Qassem Suleimani in a US drone strike near Baghdad.

The accuracy of the missiles surprised some as they hit specific buildings on one of the US bases, Al Asad, injuring 100 American soldiers.

Iran is also accused by the UN of firing cruise missiles at major oil infrastructure in Abqaiq, Saudi Arabia, in September 2019. A UN report said “the cruise missiles and/or parts thereof used in the four attacks are of Iranian origin".

Iran says its ballistic missiles have a range of 2,000 kilometres and are capable of reaching Israel and US bases in the region.

Monday's results

UAE beat Bahrain by 51 runs
Qatar beat Maldives by 44 runs
Saudi Arabia beat Kuwait by seven wickets

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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.”