DUBAI // The Iran Air disaster of 1988 in which a US warship shot down an Iranian passenger jet is unlikely to happen again - despite tensions between the US and Iran, analysts say.
The incident, which happened 24 years ago, killed 290 civilians and is regarded as one of the worst military errors in modern history.
The USS Vincennes had engaged in small arms fire with several Iranian ships in the Strait of Hormuz and fired on and destroyed what it had believed was an F-14 fighter jet.
In fact, the aircraft was Iran Air flight 655, from Tehran to Dubai, carrying 290 passengers and crew. All onboard, including 66 children, died in the crash.
In March this year, the US Navy announced it was bolstering the presence of the Fifth Fleet in the Gulf amid rising tensions with Iran. Analysts said improved communications systems made it unlikely that another "fog of war" mishap would occur.
"With improved detection systems, it's unlikely to happen again," said Theodore Karasik, the research director at the Institute for Near Eastern and Gulf Military Analysis in Dubai.
"But in a hyper-charged environment, you never know. Mistakes can be made."
The incident caused a backlash against the US, not only from Iran but also from the Emirates, as there were 13 UAE nationals on the flight when it was shot down.
It caused ramifications for many years, with the US agreeing only in 1996 to pay Iran a settlement of US$131.8 million (Dh484.12m), a proportion of which was to compensate the families of victims.
However, there was never an admission of guilt on the part of the US government and, in 1990, the former captain of the Vincennes, William C. Rogers III, earned a high-profile award, the Legion of Merit, for "exceptionally meritorious conduct in the performance of outstanding service as commanding officer".
Before shooting down flight IR655, the crew of the Vincennes had mistakenly identified the jet as descending, as a warplane might do, rather than ascending. The ship had also broadcast challenges to the aircraft on military frequencies it was not equipped to receive and commercial frequencies, which could have been directed at any aircraft in the area.
The passenger jet was itself broadcasting in English and Persian to Bandar Abbas but the Vincennes did not have the capacity to monitor common civil aviation frequencies other than distress frequencies. Immediately after the incident, US Navy warships were given radios which could enable them to do so, and better access to flight details.
Since the IR655 disaster, the Iranian government has maintained that the incident was deliberate. Professor Ali Ansari, a professor in Iranian History at St Andrews University, Scotland, said the attitude of the captain was partly to blame.
"It wasn't deliberate, but I think it was more than an accident," he said. "The commander of the USS Vincennes was looking for a fight. I certainly don't think he deserved a medal for it."
However, he said that it was doubtful that the event could recur, given precautions taken after the incident. "I think they have learned their lesson," he said. "I would be very surprised if something happened like this again."
Attempts to contact Mr Rogers for comment through the US Navy press office were unsuccessful.
Iranian expatriates said that the disaster had largely been forgotten. Reza Samadipour, 43, the head of the secretariat at the Iranian Business Council in Dubai, said there was no concern it could be repeated. "This was something that had never happened before and probably will never happen again," he said.
A spokesman for the Dubai office of Iran Air declined to comment. However, he confirmed that despite its history, the flight name IR655 was still in use.
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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.”