Hamas's exiled leader Khaled Meshaal (left) with Saudi foreign minister Prince Saud Al Faisal at a meeting in Riyadh in January 2010. Saudi Arabia’s support or cold shoulder could have a decisive impact on Hamas’s political role.
Hamas's exiled leader Khaled Meshaal (left) with Saudi foreign minister Prince Saud Al Faisal at a meeting in Riyadh in January 2010. Saudi Arabia’s support or cold shoulder could have a decisive impaShow more

Hamas, now 'in play', could sway Saudis



After Hamas signed onto an Egypt-brokered ceasefire with Israel last week, Khaled Meshaal, the organisation's leader in exile, had a message that would have seemed impossible a year ago.

He thanked Iran for its role in arming the Sunni-Islamist group that rules Gaza and he called on Arab Gulf states to provide arms in the future.

The statement laid bare Hamas's fluid regional position. After breaking with the Syrian regime over its brutal crackdown, vacating offices in Damascus and clashing with Iran over continued support for the president, Bashar Al Assad, Hamas has moved tentatively away from the so-called "Axis of Resistance" toward the patronage of Sunni Arab states such as Egypt, Turkey and Qatar.

Missing from the stage so far has been Saudi Arabia, whose support or cold shoulder could have a decisive impact on Hamas's political role.

For the last decade, Riyadh has preferred to support the secular and US-backed Palestinian Authority (PA) in the West Bank. Now, analysts say that Hamas's rising profile - and the possibility that it could move away from the patronage of Riyadh's arch rival, Tehran - may entice Saudi Arabia to cultivate stronger ties.

"Hamas is in play," said Hussein Ibish, senior fellow at the Washington-based American Task Force on Palestine. "The Saudis have to ask themselves whether they want to simply stick with the PA or also get involved in the game of trying to court Hamas. And that raises the same question everyone is going to have to answer - particularly the United States and Israel: which group of Palestinians do they want to empower?"

A shift in Saudi policy would probably come slowly, but it could affect both the political dynamics of the region and the prospects for reopening the Arab-Israeli peace process.

Saudi Arabia has the region's deepest pockets, arguably the closest relationship with the US and a long history of behind-the-scenes involvement in efforts to find peace in the Middle East."The Saudis have become domestically focused, plus, they're trying to deal with the Arab Spring," said Kamran Bokhari, the London-based vice president for the Middle East and South Asia at Stratfor, which provides security analysis. "But the Gaza conflict will push the Saudis to say, 'We've been out of this for a while; it's time we go back in'."

In the lead-up to the Iraq war in November 2002, Saudi's then-Crown Prince Abdullah bin Abdulaziz sent a letter to George W Bush asking the US president to "confirm to us that you will be seriously engaging in solving the Middle East problem" in exchange for his support.

Saudi Arabia did not always favour Fatah over Hamas in Palestinian politics. In the early 2000s, US law enforcement officials estimated that as much as half of Hamas's operating budget, about US$10 million, came in cash from Riyadh.

But in the aftermath of the September 11, 2001, attacks on the US, Washington put heavy pressure on Saudi authorities to steer clear of Hamas, which the US calls a terrorist organisation. Saudi funding for Hamas dried up around 2004, according to testimony before the US senate by a treasury official a year later.

In the years since, Riyadh has repeatedly come to the financial aid of the PA in Ramallah. In July, Saudi Arabia announced that it would inject $100m (Dh367.31m) in emergency cash to the PA, which relies heavily on external budget support. Last year, Saudi Arabia contributed at least $200m.

But Riyadh has never abandoned its relationship with Hamas, said Ghassan Al Khatib, a former PA spokesman who now teaches at Bir Zeit University in the West Bank.

Despite receiving international support, the PA has seen its public support among Arabs drop in recent years over a failure to win concessions from Israel. Its continuing attempt to win recognition at the United Nations has so far only lost it financial backing; the US put a months-long hold on funding to the PA over the issue.

Hamas, by contrast, seems to be gaining leverage. A Muslim Brotherhood-inspired organisation, Hamas seems at ease dealing with ideological allies who now run the governments of Egypt and Tunisia.

Its armed resistance secured real gains in the latest clashes with Israel, despite a heavy cost. In the recent ceasefire, Mr Meshaal won a minor relaxing of the economic blockade on Gaza. "This last escalation between Gaza and Israel increased dramatically the political prominence of Hamas, not only among Palestinians in the Occupied Territories but also among Palestinians everywhere and Arab people more generally," said Mr Al Khatib. "The PA has taken the peace negotiations approach, which seems to be not working to Israel and US. Hamas went about things using the resistance approach which, at least this time, wasn't defeated."

Riyadh would likely struggle to completely displace Iran as a Hamas benefactor, since close ties to the US would preclude Saudi Arabia from arming the organisation. Still, the regional balance would almost certainly be altered if Hamas's patrons were largely allies of the West, rather than foes.

Mr Ibish argues that Hamas itself may change if it won broad international backing.

"If Hamas inherits or comes to dominate the Palestinian movement, the question is, will they adapt, and in what way?" he asked.

"Will they moderate? Will they become even more extreme? Will other radical forces emerge? It's in the least not clear. But the point is that there is a decision for everybody, especially the traditional backers of the PA, about whether they want to make that kind of open-ended gamble."

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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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