Raghida Dergham is the founder and executive chairwoman of the Beirut Institute, and a columnist for The National
October 24, 2021
Earlier in the week, I attended the Valdai Club’s 18th annual conference in Sochi for discussions on Russia’s strategic priorities. This year’s theme was “Global shake-up in the 21st century: the individual, values, and the state”.
Remarkably, the Middle East was absent as a topic of discussion this time. Attendees from the region were also small in number. This was an indication that Russians are lately less focused on our region than they are on their own country’s place in the world, its strategic options, its alliances and how to remain a superpower.
One of Russia’s challenges today is finding its rightful place in the league of superpowers. It has been sandwiched between the giants of yesterday and today, including the US, China and Europe. But where does Russia stand vis-a-vis the rest? Is it, like is sometimes suggested, a junior partner of China? After all, Russians don’t view their country as anything less than an empire. Moscow has long been suspicious of the West, particularly Europe, but how must it deal with the US? Moreover, Russia’s is not a top-five economy. In which case, is the essence of Russia more about its identity and its status as a geopolitical actor?
These are tricky questions and I came away with the impression that the country is facing complicated choices with regard to its alliances and relationships in a world in flux.
A potential Russia-China alliance, for instance, seems beneficial to Moscow in the short term. But it is fraught with risk over the long term for geographic, demographic and economic reasons. There are concerns in Russia that their country could, eventually, be effectively overshadowed by China.
Russia-Europe ties, meanwhile, are rooted in history and culture. But the likelihood of an alliance is minimal, given how different their respective political values are. The Europeans keep hankering over human rights as an issue, while Moscow sees any finger-pointing from Brussels as a pretext to meddle in its internal affairs. Also, Russia does not see a reason to adopt democratic values as defined by the West.
Russia’s relationship with Europe is also complicated by the latter’s association with the US. Which brings us to the possibility of a Russia-America alliance. One source of tension between the two countries, as one expert put it to me in Sochi, is that the US has been loath to view Russia as an equal partner.
So how does Russia engage with its three fellow superpowers? According to some Russian experts, it’s possible for Moscow to strike an “equilibrium” with China and Europe.
A group of naval vessels from China and Russia sails during joint military drills in the Sea of Japan earlier in the week. Reuters
There is strong co-operation between Russia and China in Central Asia, where the former provides security through military presence, and the latter offers developmental funds. The region is currently a source of great anxiety for Moscow, especially after the US’s withdrawal from Afghanistan. From Tajikistan to Turkmenistan and elsewhere in the Caucasus, Russia’s priority is stability – which, in the Russian sense, means political and ideological stability. Moscow worries about an uncontrollable influx of migrants, some of whom may be inspired by extremist groups such as Al Qaeda and ISIS.
Withdrawal of US-led forces from Afghanistan has undermined Russian strategy. Whether or not this was part of Washington’s ploy to lure Russia and China into Afghanistan – as some have claimed – there is little doubt that Russia once again finds itself at the heart of the Afghan question. It is, therefore, focused on containing the crisis and the possible subsequent threat of a terror contagion via Central Asia.
As for Europe, the Kremlin does not enjoy a friendly equation with the EU as a whole. Moscow has even been increasingly unhappy with some member states, notably Germany and France, for different, mostly economic reasons, ranging from sanctions to the gas supplies. Some of the sources of their friction emanate from outside the continent. Russia and France, for instance, have a clash of interests in parts of Africa and inside Lebanon. And yet, Moscow has cultivated favourable relations with other countries within the 27-member bloc.
Russia, meanwhile, also maintains pragmatic relations with countries outside the league of superpowers, such as Turkey and Iran, two players with outsized roles in the Middle East and Central Asia.
Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin shake hands to mark the completion of the sea part of the TurkStream gas pipeline, in Istanbul in 2018. Reuters
As was made apparent to me in Sochi this week, Russian-Turkish trade relations are deep and perhaps paralleled only by Moscow's trade relations with Israel. Both Russia and Turkey have some commonalities, too: for instance, they still hark back to a time when they were large and powerful empires.
Ties with Iran are different in substance. Deep economic or historical linkages don’t exist just yet, neither do cultural or ideological threads. As one expert put it to me, Iran is simply a “political partner” to Russia in war-torn Syria, where both governments are allied to the Assad regime.
What these ties suggest, in a nutshell, is that Russia remains open to creating a network of regional alliances that are entirely pragmatic in nature. An example of this is the so-called Astana Process, which brings together Russia, Turkey and Iran, all of which have different interests in Syria.
Curiously, according to Mr Putin himself, only the values that underpin Russia can pave the way for his country to emerge from any crisis – whether it is dealing with external shocks or adapting to change. Few solutions, he has insisted, are achieved through uprisings or revolutions. Indeed, the president has presented himself as a leader who espouses healthy conservatism, abhors extremism and knows how to position his country in the world. He also tends to push back against the notion that global problems require global solutions, as that would mean making certain compromises on national sovereignty.
Yet, it is evident that a healthy dose of pragmatism has been just as important a feature of how the Russian government has dealt with the myriad challenges the country faced over the years – and also how it continues to build relationships around the world.
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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.”
