Turkey is likely to face moderate sanctions from the EU as it continues its fuel exploration in the Eastern Mediterranean.
The punitive measures expected from EU leaders this week will fall short of trade or financial penalties, analysts say, but will worsen the stand-off that is becoming increasingly fractious.
Tension between Turkey and Greece heightened over the summer when Ankara sent a survey vessel to map out energy drilling prospects in waters also claimed by Athens.
Turkish President Recep Tayyip Erdogan vowed not to “bow down to threats and blackmail” but repeated his call for negotiations over the conflicting claims to energy resources.
When EU leaders meet on Thursday, it is likely that Germany will be the key player in deciding whether sanctions are imposed.
It had hoped to mediate between Athens and Ankara, but was angered when Turkey resumed its gas exploration off Cyprus in October after a pause.
“There have been too many provocations, and tensions between Turkey, Cyprus and Greece have prevented any direct talks,” German Foreign Minister Heiko Maas said on Monday.
“For this reason, we will talk about what consequences we should draw.”
EU leaders told Turkey in October to stop exploring in the disputed Eastern Mediterranean waters or face consequences.
France and the European Parliament, which formally called for sanctions last month, said it was time to punish Turkey.
Brussels considers Ankara to be fuelling the dispute for domestic political reasons.
Even if the EU does impose sanctions, there are doubts that they will be tough enough to force Turkey to change its stance.
“I question that the European Union will impose painful sanctions on Turkey,” said Fadi Hakura, the Turkey specialist for international think tank Chatham House.
“At most, they will merely be slaps on the wrist rather than anything to convince, to persuade Turkey to alter its behaviour.”
Analysts believe that harsh financial penalties would make Turkey change its position because its economy is in severe difficulty.
With more than 45 per cent of Turkey’s trade conducted with the EU, tough export sanctions would strangle its economy.
“They could also put restrictions on European tourists going to Turkey in the summer, with foreign ministries cautioning their citizens not to visit for security reasons,” Mr Hakura said.
He believes that Mr Erdogan is making an issue over the eastern Mediterranean to deflect attention from Turkey’s severe economic and political challenges.
“He's trying to demonstrate that Turkey is indeed an indispensable power in the region.”
Greece said it would not begin formal talks with Turkey over the maritime row while Turkish vessels remain in the contested waters.
The Turkish vessel Oruc Reis returned to port again last week, helping to calm tensions.
But European Council President Charles Michel warned Turkey not to play “cat and mouse” by returning exploration ships to port just before EU summits, only to send them back out once talks had concluded.
Sanctions could also be part of a bigger issue over European energy, including the oil pipeline from Libya to southern Italy, which would reduce European reliance on the Russian Nord Stream 2 pipeline, according to Prof Michael Clarke of the Royal United Services Institute.
Prof Clarke believes the dispute in the Eastern Mediterranean is part of the wider negotiation over Europe’s fuel supply, which also involves Turkey.
“I don’t think that the EU will pass tough enough sanctions. It’s a difficult call to make but sanctions could at least make Turkey wake up to what it’s doing," he said.
“The EU sanctions will not be crippling because Turkey and the EU have got lots of other things they want to talk about. It will be steps up in the escalation ladder.
"This issue is all eminently negotiable.
“But Turkey also has to understand that the Europeans are very annoyed because of the way in which they reacted to the exploration, because it directly challenges the whole legitimacy of Cyprus, which is part of the EU."
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UAE currency: the story behind the money in your pockets
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
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.”
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
