The EU has raised protests with the US, fearing that Washington’s latest green energy package is freezing European businesses out of the world’s richest market.
Brussels made a number of demands for changes in a submission to the US administration last week and the showdown will top the agenda at a meeting of EU finance ministers on Tuesday.
European Commission Executive Vice President Valdis Dombrovskis said that European finance and economy ministers would discuss Washington’s “discriminatory” green energy incentives amid heightened fears of an economic contraction gripping the continent this winter.
Approved by US politicians in August, the Inflation Reduction Act invests hundreds of billions of dollars into fighting climate change and includes a $10 billion investment tax credit for clean energy products such as electric vehicles.
The Inflation Reduction Act has provoked fury in Europe, where countries like France and Germany fear that it would block non-US electric vehicles from its markets and further weaken the competitiveness of European companies that are already suffering from sky-high energy prices.
The European Commission on Friday sent a document to the US Treasury detailing its preliminary views on the act, which it said contains “problematic elements”. The document is expected to be published soon on the US Treasury’s website.
The commission called on the US to remove “all discriminatory content and production requirements affecting the EU and its economic operators and products” and ensure “that the level and structure of subsidisation does not create adverse effects on the EU”.
The document also asked the US to ensure that EU companies were treated “no less favourably than other trading partners of [the] US” and to build “transparency provisions into subsidies to be granted through tax credits and other programmes” under the Inflation Reduction Act.
The commission’s spokeswoman for trade and agriculture, Miriam Garcia Ferrer, told The National that the EU reserves the right to complement its views at a later stage. She said that the EU hoped to find “constructive and amicable solutions”.
Negotiations are continuing within an EU-US task force which met for the first time last Friday. Ms Garcia Ferrer described the task force as a “clear, senior-level commitment by the US to address the serious concerns raised by the EU” related to the act.
But some European countries have taken a more aggressive stance than the commission, with France’s Energy and Finance Minister Bruno Le Maire calling for a formal complaint at the World Trade Organisation.
“Europe must defend its interests. No one will give it any favours, neither China nor the US,” he said in an interview to several European media outlets published on Monday.
Quoted by French newspaper Les Echos, Mr Le Maire said that he expected a “firm” reaction from the European Commission, including for example “European preferential schemes”.
Mr Le Maire claimed that the Inflation Reduction Act discouraged international companies that were previously interested in working in Europe and that they are considering moving to the US instead.
The value of subsidies offered by the US administration is in certain cases four to 10 times higher than the maximum authorised by the commission, Mr Le Maire said.
“In France, our preliminary estimates show that €10 billion [$9.9 million] in investments and thousands of jobs are at stake,” he said.
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.”
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
