The Earth’s polar regions could become conflict zones as climate change opens them up to mining and militarisation, experts fear.
A complete ban on mining in Antarctica is due to expire in 2048 — by which time resources on other continents may be becoming scarce. Global warming could also make the continent's water a valuable commodity.
Although there is uncertainty about what lies beneath the ice, there are estimates that the southern continent could hold billions of barrels’ worth of oil and gas reserves.
In addition, Antarctica’s ice sheet is believed to hold between 70 and 90 per cent of the planet’s fresh water. Rising temperatures have already caused one glacier alone to lose a trillion tonnes of ice.
Laura Birkman, a security analyst at the Hague Centre for Strategic Studies, said these mineral attractions could make Antarctica a “major political hotbed” in the future.
By the time the mining ban comes up for discussion in 2048, fresh water could be “even more highly sought after as a result of further climate-induced water scarcity,” she said.
Speaking on an International Institute for Strategic Studies panel, she said the date was also significant because China’s rulers would be seeking material prosperity when they celebrate 100 years in power the following year.
“It will be potentially a critical year for the Chinese Communist Party in its efforts to realise its ambition to be one of the world’s most developed and powerful nations by its centenary in 2049,” she said.
The warning comes with experts and diplomats concerned more broadly that climate change will fuel conflicts over resources made increasingly scarce by natural disasters and global warming.
Delegates at last year’s Cop26 climate summit were told by the Nato secretary general and other top officials that environmental and security issues were two sides of the same coin.
Germany, which holds the G7 presidency this year, hopes to tackle some of the issues facing Antarctica at a Berlin conference in May, the 44th regular meeting of parties to the 1959 Antarctic Treaty.
Seven countries have territorial claims in Antarctica — Argentina, Australia, Chile, France, New Zealand, Norway and the UK — but these claims are partially suspended under the 1959 agreement.
A protocol to that treaty, which entered into force in 1998, designates Antarctica as a “natural reserve, devoted to peace and science” and bans mining on the continent.
Although that ban does not automatically expire after 50 years, it can be modified after 2048 by vote of a majority of the treaty’s 29 signatories.
That could open the door to exploration for oil and gas, despite many rich countries targeting 2050 as the date when they will reach net zero greenhouse gas emissions.
The Arctic could provide similar opportunities for oil and gas extraction as ice melts and waterways are opened up.
“Who has the right to control these seaways and benefit from the vast and undiscovered natural resources? This is an evolving geopolitical concern,” said Ms Birkman.
Mark Nevitt, an environmental law expert on the IISS panel, said this posed different questions to the ones commonly raised about security and climate change.
“We always talk about natural resources in the context of developing nations or poor nations. The Arctic is surrounded by very, very wealthy nations,” he said, mentioning, the US, Canada and Nordic countries as examples.
With developed countries potentially at odds, the melting ice caps could “increase the potential for militarisation and weaponisation” in the Arctic, he said.
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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.”