An Israeli Air Force F-35 flies during an aerial demonstration at a graduation ceremony for pilots at the Hatzerim air base in southern Israel. Reuters
An Israeli Air Force F-35 flies during an aerial demonstration at a graduation ceremony for pilots at the Hatzerim air base in southern Israel. Reuters
An Israeli Air Force F-35 flies during an aerial demonstration at a graduation ceremony for pilots at the Hatzerim air base in southern Israel. Reuters
An Israeli Air Force F-35 flies during an aerial demonstration at a graduation ceremony for pilots at the Hatzerim air base in southern Israel. Reuters

Israel won't block UAE buying F-35 stealth fighters

A deal with the US to upgrade the Israeli military will protect their qualitative edge, Defence Minister Benny Gantz says

The National

October 24, 2020

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After hashing out a deal to secure new high-tech hardware from the US to upgrade the Israeli military, Defence Minister Benny Gantz said on Friday that it would not oppose the sale of “specific weapons systems” to the UAE.

For decades, the United States has committed to protecting Israel’s “qualitative military edge”, ensuring it has a technological and tactical advantage over any other Middle Eastern country.

As such, Washington consults Israel over arms sales in the region.

But even as Israel forges ties with Bahrain, the UAE and now Sudan under US mediation, it has emphasised the need to maintain the military advantage.

An F-35 pilot prepares for take off from the Vermont Air National Guard Base with the flag of the United States. Reuters, file
An F-35 pilot prepares for take off from the Vermont Air National Guard Base with the flag of the United States. Reuters, file

Washington has agreed to consider allowing the UAE to buy F-35 stealth jets in a side deal to a normalisation agreement between Israel and Abu Dhabi.

Mr Gantz did not specifically mention the joint-strike stealth fighter jet, the world’s most expensive weapons system. Israel operates the F-35.

But this week he finalised deals in Washington with US Defence Secretary Mark Esper for new hardware to equip the Israeli military.

“Since the US is upgrading Israel’s military capability and is maintaining Israel’s qualitative military edge, Israel will not oppose the sale of these systems to the UAE,” Mr Gantz and Israeli Prime Minister Benjamin Netanyahu said in a joint statement.

Asked about potential F-35 sales to the UAE, US President Donald Trump said the “process is moving along”.

“We’ve never had a dispute with UAE; they’ve always been on our side. And that process is moving along – I think, hopefully, rapidly,” Mr Trump said.

His comments were made at the White House Oval Office announcement that Sudan would be the next country in the region to forge ties with Israel.

The removal of Israeli opposition clears one important hurdle to US congressional approval of F-35 sales to the UAE.

American politicians have expressed concern that plans by Mr Trump to sell the aircraft to the Emirates might not be welcomed in Israel.

Israel enjoys broad support in Congress, and if it opposed the deals it would be almost impossible for them to progress.

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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.”

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