Newly imposed US sanctions on the Central Bank of Iran (CBI) and its National Development Fund (NDF) on Friday spell trouble for Europe's trade channel Instex with Tehran, and potentially target humanitarian goods, experts told The National.
US President Donald Trump announced the measures from the White House calling them the “highest sanctions ever imposed on a country.”
The sanctions are in direct response to the attacks on two Saudi oil facilities last Saturday, which the US administration has accused Iran of carrying out.
By opting for new sanctions and not a military response, Mr Trump said his restraint “shows strength.”
“It’s all set to go but I’m not looking to do that if I can,” he added.
In its announcement, the Treasury’s Office of Foreign Assets Control (OFAC) said the new sanctions on CBI and NDF fall “under its counterterrorism authority, Executive Order (E.O.) 13224.”
It accused the bank of providing billions of dollars to the Islamic Revolutionary Guards Corps (IRGC), its Qods Force (IRGC-QF), the Lebanese militant group Hezbollah, and Yemen’s Houthis.
US Treasury Secretary Steven Mnuchin linked the new measures to the attack on the Aramco facilities.
“Iran’s brazen attack against Saudi Arabia is unacceptable. Treasury’s action targets a crucial funding mechanism that the Iranian regime uses to support its terrorist network,” he said.
But experts and former officials in Washington saw varying impact for the sanctions, and adverse impact on the Iranian people.
Brian O’Toole, a non-resident senior fellow at the Atlantic Council and a former OFAC senior advisor, explained that the measures are not entirely new but would undermine European mechanisms for trade with Iran.
"CBI has been subject to US sanctions for a while, including under the National Defense Authorization Act (NDAA), in that sense this is not new," Mr O'Toole told The National.
The move serves two purposes, he argued.
The first, “to cut off actions above board facilitating transactions to Hezbollah and IRGC” and secondly to negate “any exemptions under OFAC for humanitarian goods since the CBI holds the funds for those imports.”
In doing that, Mr O’Toole said, “foreign transactions through Instex for example, are also no longer safe from secondary sanctions. They are functionally dead.”
“Essentially the Trump administration is responding by harming the Iranian people and undermining the EU,” he said.
Behnam Ben Taleblu of the Foundation for Defense of Democracies pointed out that the new sanctions, being under the counterterrorism list, make it more likely that they will stay in place regardless of which party controls the White House.
"By using counterterrorism authorities to go after Iran's central bank, it means to relieve those sanctions, any administration will have to cite evidence that Iran's central bank isn't involved in funding terror," Mr Taleblu told The National.
“The impact will be lasting. These penalties will require Iran’s central bank to prove it is not funding terror if it wants sanctions relief…a high-bar for a premier terror-funding institution in Iran.”
He called the CBI “a fundamental player in Iran’s terror and foreign policy apparatus” arguing that the new measures “will make it harder for Iran to mask its malign activities using the formal financial system.”
But Richard Nephew, a non-resident senior fellow at the Brookings Institution, did not foresee a deeper economic impact for the sanctions.
"In terms of practical impact, it will only curtail currently licensed transactions, including humanitarian ones, unless they amend the affected licenses," Mr Nephew told The National.
He said the US will “also need to deal with the Iraq and natural gas purchase issue” with Iran.
US Secretary of State Mike Pompeo welcomed the new sanctions, as a price for “attacking other nations and disrupting the global economy.” “The regime in Tehran must be held accountable through diplomatic isolation and economic pressure,” he said.
What vitamins do we know are beneficial for living in the UAE
Vitamin D: Highly relevant in the UAE due to limited sun exposure; supports bone health, immunity and mood.
Vitamin B12: Important for nerve health and energy production, especially for vegetarians, vegans and individuals with absorption issues.
Iron: Useful only when deficiency or anaemia is confirmed; helps reduce fatigue and support immunity.
Omega-3 (EPA/DHA): Supports heart health and reduces inflammation, especially for those who consume little fish.
RESULTS
6.30pm Handicap (TB) US$65,000 (Dirt) 1,400m
Winner Golden Goal, Pat Dobbs (jockey), Doug Watson (trainer)
7.05pm Dubai Racing Club Classic Listed Handicap (TB) $88,000 (Turf) 2,410m
Winner: Walton Street, William Buick, Charlie Appleby.
7.40pm Dubai Stakes Group 3 (TB) $130,000 (D) 1,200m
Winner Switzerland, Tadhg O’Shea, Satish Seemar
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Winner Lord Giltters, Adrie de Vries, David O’Meara
8.50pm Al Maktoum Challenge Round-1 (TB) $228,000 (D) 1,600m
Winner Military Law, Antonio Fresu, Musabah Al Muhairi.
9.25pm Al Fahidi Fort Group 2 (TB) $163,000 (T) 1,400m
Winner Land Of Legends, Frankie Dettori, Saeed bin Suroor
10pm Dubai Dash Listed Handicap (TB) $88,000 (T) 1,000m
Winner Equilateral, Frankie Dettori, Charles Hills.
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
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.”
The biog
Age: 30
Position: Senior lab superintendent at Emirates Global Aluminium
Education: Bachelor of science in chemical engineering, post graduate degree in light metal reduction technology
Favourite part of job: The challenge, because it is challenging
Favourite quote: “Be the change you wish to see in the world,” Gandi
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
