New policy to limit US use of nuclear arms



WASHINGTON // The Obama administration will formally unveil a new policy today restricting US use of nuclear arms, renouncing development of new atomic weapons and heralding further cuts in America's stockpile. But even as US President Barack Obama limits the conditions under which the United States would resort to a nuclear strike, he is making clear that nuclear-defiant states such as Iran and North Korea will remain potential targets.

"I'm going to preserve all the tools that are necessary in order to make sure that the American people are safe and secure," Mr Obama told The New York Times in an interview that previewed his revamped nuclear strategy. The policy shift, calling for reduced US reliance on its nuclear deterrent, could build momentum before Mr Obama signs a landmark arms control treaty with Russia in Prague on Thursday and hosts a nuclear security summit in Washington next week.

But it is also likely to draw fire from conservative critics who say his approach is naive and compromises US national security. The Nuclear Posture Review is required by Congress from every US administration but Obama set expectations high after he vowed to end "Cold War thinking" and won the Nobel Peace Prize in part for his vision of a nuclear-free world. Under the new strategy, the United States would commit for the first time not to use nuclear weapons against non-nuclear states that are in compliance with the Nuclear Non-Proliferation Treaty, even if it is attacked with biological or chemical weapons, according to The New York Times and a US official who confirmed the details.

Those threats, Mr Obama said, could be deterred with "a series of graded options" - a combination of old and newly designed conventional weapons. Mr Obama insisted "outliers like Iran and North Korea" that have violated or renounced the treaty would not be protected. Still, Mr Obama is rolling back the Bush administration's more hawkish policy set out in its 2002 review threatening the use of nuclear weapons to pre-empt or respond to chemical or biological attack, even from non-nuclear countries.

An exception under Mr Obama's plan would allow an option of reconsidering the use of nuclear retaliation against a biological attack if there is reason to believe the United States was vulnerable to a devastating attack. To set an example for global arms control, Mr Obama's strategy - another departure from Bush-era policy - commits the United States to no new atomic arms development, US officials said.

The United States will, however, increase investment in upgrading its weapons infrastructure, which one White House official said would "facilitate further nuclear reductions". Arms control experts see potential for significant cuts in the US stockpile by upgrading weapons laboratories to weed out older, ineffective warheads. Mr Obama now faces the challenge of lending credibility to his arms control push while not alarming allies under the US defence umbrella or limiting room to manoeuvre in dealing with emerging nuclear threats from Iran and North Korea.

The review is a test of Mr Obama's effort to make controlling nuclear arms worldwide a signature foreign policy initiative. It is also important because it will affect defence budgets and weapons deployment and retirement for years to come. The strategy was developed after a lengthy debate among Mr Obama's aides and military officials over whether to declare that the United States would never be the first to use nuclear weapons in a crisis but would act only in response to attack.

Mr Obama appeared unlikely to go as far as forswearing the first-strike option, which will disappoint some liberals. The review comes a day before Mr Obama leaves for Prague, where he and the Russian president Dmitry Medvedev will sign a new START pact to slash nuclear arsenals by a third. The signing ceremony will occur nearly a year after Mr Obama's Prague speech laying out his vision for eventually ridding the world of nuclear weapons. Mr Obama acknowledged it might not be completed in his lifetime.

* Reuters

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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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