A panel discussion at the Manama Dialogue in Bahrain last week. AFP
A panel discussion at the Manama Dialogue in Bahrain last week. AFP
A panel discussion at the Manama Dialogue in Bahrain last week. AFP
A panel discussion at the Manama Dialogue in Bahrain last week. AFP


Has the role of western allies in the region's security shifted?


Nasser bin Nasser
Nasser bin Nasser
  • English
  • Arabic

November 25, 2022

The Government of the Kingdom of Bahrain and the International Institute for Strategic Studies held the 19th Manama Dialogue over the past weekend in what has become the region's premier annual regional security conference.

Given the volatile and complex state of global affairs, there are naturally numerous observations from the conference, yet one stands out in particular is that western powers, both US and European, appear intent on demonstrating the depth and durability of their security partnership with the region.

At the conference, more than one visiting official went to great lengths to showcase different areas of defence and security co-operation with regional allies, underscoring their commitment to the region’s security.

This was partly to curry favour with the hosts of the conference – understandably so, but it was also intended to dispel concerns about the reliability of this partnership. The so-called pivot by the US towards the Asia-Pacific, the drawdown of US troops from the region and the Joint Comprehensive Plan of Action or the nuclear deal, are what initially triggered these concerns. Growing US energy independence also fuelled them. The combination of these developments seemed to suggest that the region was no longer a priority, given the growing list of other priorities.

Past attacks against GCC countries that did not elicit any response from the US also shook the partnership. The impression that the region is no longer a priority is still strong in the region, even if it is not rooted in fact. The region’s enduring importance is unlikely to change because of the maritime routes it borders, its central role in energy markets and its western-oriented economies. Yet sometimes impressions appear more important than facts.

A negotiated settlement, and not a military one, will be the only lasting solution to the conflict

For the skeptics in the audience though, this message was also interpreted as serving a dual purpose; it comes with an expectation of reciprocity, especially when it comes to Russia. On the issue of impressions, there is a strong one in the West – that countries in the region are adopting a position of “strategic neutrality” and are either hedging their bets or making light of the violation of international laws and norms that the invasion represents. To drive this point home, at least two European speakers drew parallels between the Iraqi invasion of Kuwait in 1990 and the Russian invasion of Ukraine.

Most countries in the region have already taken quite a strong stance to condemn Russia’s actions. However, they believe a negotiated settlement, and not a military one, will be the only lasting solution to the conflict.

The West might not buy this; in the same way that the region may not buy that their concerns vis-a-vis Iran are shared with the West, despite assurances given in Manama and elsewhere. As an example from the conference that sums this up succinctly, one conference delegate pointed out that Russian forces were using Iranian drones in Ukraine at the same time that the P5+1 was contemplating ways to revive the JCPOA, a comment which did not elicit acknowledgment from the speaker.

Some have argued that the US and European roles in the region are fundamentally changing because of issues of reliability. A more likely explanation is the absence of an organising principle for this role or the relationship, similar to that of containing Soviet expansion and counter-terrorism in the past. If, on the other hand, West-China competition will be the organising principle of international relations for decades to come, it is not clear where the region fits into this. Could it be the case that an Asia pivot hinges on the Middle East?

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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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