Members of the Iranian Revolutionary Guard secure the area outside the Iranian parliament during an attack on the complex in Tehran on June 7, 2017. Hossein Mersadi / Fars News / AFP
Members of the Iranian Revolutionary Guard secure the area outside the Iranian parliament during an attack on the complex in Tehran on June 7, 2017. Hossein Mersadi / Fars News / AFP

Trump likely to designate Iran's Revolutionary Guard as terror organisation



US president Donald Trump is likely to designate Iran's Islamic Revolutionary Guard Corps as a terrorist organisation this week as he lays out what aides call his "overall Iran strategy".

As president Trump prepares to announce that he is decertifying the Iran nuclear deal for the first time in two years — thus leaving its fate to congress — one US official said it was "likely but not final" that the administration will designate the IRGC as a terrorist organisation.

Such designation would fulfil a requirement by congress under the “Countering America’s Adversaries Through Sanctions Act”, which was signed into law by Mr Trump on August 2. But there is also a risk it would provoke retaliation that would endanger America's military presence in the region.

According to the new law, Mr Trump has 90 days (until October 31) to either designate the IRGC under the treasury department's 13224 terrorist category, or waive that designation for national security reasons. The administration could also choose to go further and designate the IRGC as a Foreign Terrorist Organization (FTO) under state department authority, putting it in the same category as Hizbollah and Al Qaeda and warranting more sanctions internationally for any entity that deals with the group. Sources close to the administration told The National that a 13224 listing, and not an FTO designation, is the path the White House is more likely to take.

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But even designation under 13224 would be a milestone — the first time the US has labelled the military branch of another country as terrorists.

Amir Toumaj of the Foundation for Defence of Democracies told The National, "While president Trump could waive it, it  would be a politically difficult move because he would have to justify [to congress] that not designating the IRGC is in the vital interest of US national security."

A 13224 designation would freeze any assets the IRGC has in the United States and bars any US transaction with or through the group.  The US designated the Quds force in 2007 under the same category, but going after the IRGC is more wide-reaching and "a signal for a more muscular approach toward the Islamic Republic”, Mr Toumaj said.

Right on cue, Iranian officials this week vowed to deliver a  “crushing response” with “all options on the table” if the IRGC is designated a terrorist organisation.

The military risks leave many in the US defence establishment feeling nervous and hoping that the White House will reconsider. James Durso, a former navy officer for 20 years and the managing director  of consultancy firm Corsair, told The National that designating the IRGC a terrorist body would be a "mistake" that would backfire badly on America.

"It would play right into IRGC's hands … and put our troops and advisers in Syria and Iraq in the line of retaliation," Mr Durso said. “Eventually one of them will get grabbed” — a reference to the 1979 hostage crisis and the IRGC's eagerness to pick a fight with the US.

Mr Durso said it could mean that any captured US military personnel would lose any protections under the Geneva Conventions or be deprived of the intermediation of the International Committee of the Red Cross. With that in mind, he recommended going after the money and tightening screws on IRGC’s financial network, instead of “a designation that you cannot walk back.”

Another drawback  lies in cutting off any battlefield co-ordination or deconfliction channels with the IRGC or their proxies currently involved in the ground battle against ISIL.

“Certainly we have to watch out for that, given the history of militias attacking US forces in Iraq,” said Mr Toumaj.  However, he added, "Any IRGC response is likely to fall short of direct attack that would elicit a response but they could be expected to try to undermine US interests or attack through asymmetric means such as proxies.”

Both Mr Durso and Mr Tournaj agree that the military presence  in Iraq and Syria — which will continue for the foreseeable future — are likely to be the primary target for any response from Iran. That will be at the core of debate within the Trump administration before a decision is announced this week.

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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.”