Rouhani tells Iranians to brace for hard times under US sanctions

Iranian President Hassan Rouhani has warned Iranians that they may face hard times when new US sanctions take effect on Sunday but said the government would do its best to alleviate them.

Washington reimposed a number of sanctions on Iran in May after pulling out of an international 2015 agreement intended to curb Tehran's nuclear program. US officials have said they aim to reduce Iran's oil exports to zero.

The Islamic Republic of Iran Broadcasting (IRIB) news agency on Wednesday quoted Mr Rouhani as calling the move "a new injustice" which the government did not fear.

But he added: "In the past few months our people have faced difficult times and it's possible that the next few months will be difficult. But the government will use all its power to reduce these problems."

The cost of living has soared in recent months, leading to demonstrations against profiteering and corruption in which protesters have chanted anti-government slogans.

The rial currency has also sunk against the US dollar due to the sanctions threat, with a heavy demand for dollars among ordinary Iranians trying to protect their savings.

Iran began selling crude oil to private companies for export on Sunday as part of a strategy to counter the planned sanctions.

"You will not be able to reach any of your goals with regard to Iran's oil," Rouhani said, according to IRIB. "You will not be able to bring it to zero or reduce it."

Separately, Oil Minister Bijan Zanganeh said on Wednesday 280,000 barrels of oil had been sold on Iran's energy bourse and an additional 720,000 barrels would be offered for sale again on the exchange, according to Oil Ministry news site SHANA.

European powers will implement a so-called Special Purpose Vehicle (SPV) under consideration to facilitate trade with Iran next week, Mahmoud Vaezi, the presidency office head, said Wednesday, according to the Islamic Republic News Agency (IRNA).

The SPV aims to keep trade flowing when U.S. sanctions hit Tehran.

European diplomats have described the SPV proposal as a means to create a barter system, similar to one used by the Soviet Union during the Cold War, to exchange Iranian oil for European goods without money changing hands.

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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.”