US unlikely to impose sanctions on Turkey over S400 missiles, says Turkish official

US President Donald Trump has become more understanding about why Turkey has purchased a Russian missile defense system and he is not expected to impose US sanctions on Ankara over the issue, a senior Turkish official said on Wednesday.

"My expectation is it (sanctions) would not be implemented," the senior official told reporters in Washington, adding that Trump had grown to empathise more with Ankara's position. "He understood the whole history behind how we got to purchasing the S-400s," she said.

Ankara and Washington have been at loggerheads over Turkey's purchase of the S-400 system, which the United States says is incompatible with NATO defenses and poses a threat to Lockheed Martin's F-35 "stealth" fighter jet that Turkey was also planning to purchase and in which it had been a production partner.

Turkey says it is facing multiple threats from Syria and is in urgent need of a comprehensive defense system.

The United States has expelled Turkey from the F-35 program over its purchase of the Russian air defense system, whose parts began arriving in Turkey in July, but it has so far fallen short of imposing sanctions, even though it had threatened to do so for months.

The White House did not immediately respond to a request for comment.

At a bilateral meeting in June in Osaka with Turkish President Tayyip Erdogan, Mr Trump said Turkey had been treated unfairly over its decision to buy the S-400s and blamed the "mess" on the administration of former President Barack Obama.

But he had not ruled out sanctions.

Last week, US Treasury Secretary Steven Mnuchin said the Trump administration was considering imposing sanctions related to Turkey's purchase of the S-400s but that no decisions had been made.

Mr Erdogan told Reuters in an interview last week that he would discuss buying US Patriot missiles with Mr Trump at next week's United Nations General Assembly meeting, saying his personal bond with the US leader could overcome the months-long crisis between two NATO allies.

The senior Turkish official said any imposition of sanctions would also contradict a recent agreement between Ankara and Washington to boost trade to $100 billion after the visit of US Commerce Secretary Wilbur Ross to Turkey earlier this month.

"You make a commitment like that and then you talk about implementing sanctions, that’s a big contradiction in itself," she 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.”