The Weekly Circuit: Erdogan’s Gulf tour + COP28 approaches

👋 Good Monday morning in the Middle East!

After mending political fences with leaders of the Arab Gulf states, Turkish President Recep Tayyip Erdogan will tour the region this week and try to generate trade revenue for his cash-starved country. Erdogan starts in Riyadh, Saudi Arabia, on Monday, followed by visits over the next two days to Doha, Qatar, and the UAE capital of Abu Dhabi.

The trip follows Erdogan’s reelection to a third term in May and his efforts to repair ties with Saudi Arabia and the UAE, which were strained for more than a decade because of the Turkish president’s support for the Muslim Brotherhood in Egypt and other radical Islamic groups. Erdogan further antagonized Saudi Arabia by publicly sharing evidence that its agents assassinated Washington Post columnist Jamal Khashoggi at the Saudi consulate in Istanbul in 2018.

Saudi Crown Prince Mohammed bin Salman signaled a year ago that relations were back on track by visiting Erdogan in the Turkish capital of Ankara and offering a public embrace. Turkey’s Finance Minister Mehmet Simsek and Central Bank Governor Hafize Gaye Erkan visited Saudi Arabia last week to attend a trade conference and prepare for Erdogan’s trip.

The 37-year-old crown prince, who is Saudi Arabia’s prime minister, is making his own strides in regaining international acceptance. He has been invited by the British government to visit London this fall for the first time in five years, the Financial Times reported over the weekend.

On a visit to the UAE on Saturday by Indian Prime Minister Narendra Modi, the two countries agreed to use the dirham and the rupee for cross-border transactions, aiming to boost trade ties and smooth financial transactions.

The Dubai International Financial Centre signed a preliminary agreement last week with the Alternative Investment Management Association and welcomed five hedge funds to its independently governed business zone. The funds include New York-based Hudson Bay Capital and King Street Capital Management; Verition Fund Management, located in Greenwich, Conn.; Hong Kong’s Asia Research and Capital Management; and Balyasny Asset Management in London. AllianceBernstein, one of the largest U.S. asset managers, announced plans earlier this month to open an office in the DIFC.

The UAE’s tiny emirate of Ras al Khaimah is challenging Dubai as a tourist magnet and haven for billionaires, Bloomberg reported. Plans are underway for a $3.9 billion gaming resort developed by Las Vegas-based Wynn Resorts as well as a storage facility for super-yachts.

Welcome to The Weekly Circuit, where we cover the Middle East through a business and cultural lens. Read on for the stories, deals and players at the top of the news. Please send comments and story tips to [email protected].

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ENERGY TRANSITION

UAE’s environmental summit chief pledges ‘brutally honest’ assessment of missed goals

With less than five months until the COP28 environmental summit opens in Dubai, the event’s Emirati leader, Sultan Al Jaber, pledged to confront the world’s slow response to global warming. Speaking in Brussels on Thursday, Al Jaber, president-designate of the United Nations climate change conference that will be hosted by the UAE, said more pressure will be applied on governments to accelerate reduction of greenhouse gas emissions, The Circuit’s Jonathan Ferziger reports.

Root causes: Al Jaber also laid out the schedule for the two-week event that opens Nov. 30 and will include the participation of some 200 countries. “We must be brutally honest about the gaps that need to be filled, the root causes and how we got to this place here today,” Jaber told climate ministers and senior officials from the European Union, the U.S., China and other G20 countries. “Then we must apply a far-reaching, forward-looking, action-oriented and comprehensive response to address these gaps practically.”

Oil executive: Al Jaber, who is head of the state-owned Abu Dhabi National Oil Company (Adnoc) and UAE minister of industry and advanced technology, said delegates at the conference will engage in a “global stocktake” that will indicate how far their countries lag behind goals for reduced fossil fuel use and making the transition to renewable energy production. The stocktaking exercise addresses the recognition that the current pace of replacing carbon-based fuels is insufficient to meet the target set in the U.N.’s 2015 Paris Agreement that would try to limit global warming to 1.5 Celsius (2.7 Fahrenheit) from preindustrial levels.

Climate critics: Some European legislators and members of Congress have attacked the choice of Al Jaber to preside over COP28 given Adnoc’s prominence in the fossil fuel industry. The appointment was defended by John Kerry, the White House special envoy for climate, and former New York City Mayor Michael Bloomberg who said Al Jaber’s connection to the industry and his role in the UAE government will make the conference more effective.

Tripling renewables: Al Jaber, who serves as chairman of Masdar, the UAE’s alternative fuel company, called for a tripling of the world’s renewable energy capacity by 2030 and a doubling of energy efficiency. He said all governments are being encouraged to update their emissions-cutting targets by September. The UAE’s climate ministry last month said it planned a 40% reduction in carbon emissions by 2030, raising its previous goal of 31%.

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MULTIPLIER EFFECT

Arabs and Israelis debate regional free-trade pact at Bahrain talks

Nearly three years after establishing diplomatic ties, representatives from a group of Arab countries and Israel met in Bahrain last week to brainstorm ideas about forming a regional free-trade alliance, The Circuit reported. The discussions were unofficial and meant to lay the groundwork for future negotiations among the countries that normalized relations with Israel under the 2020 Abraham Accords.

Road map: The talks were organized by the Atlantic Council, a Washington think tank, as part of the back-channel “N7 Initiative” it developed in partnership with the New York-based Jeffrey M. Talpins Foundation to bolster the Accords. “We brought senior trade negotiators together for a private discussion… to do a road map for a multilateral, regional free-trade agreement,” William F. Wechsler, senior director of the Atlantic Council’s Middle East programs and head of the N7 project, told The Circuit.

N7 brand: Taking part in the talks on Monday and Tuesday were trade officials from Bahrain, the United Arab Emirates, Morocco and Israel, Wechsler said, as well as former officials from Egypt and Sudan. Jordan did not participate. The N7 brand refers to Israel and the six Arab countries that have signed peace treaties or normalization pacts with it. Under the rules of the conference, none of the trade negotiators’ names could be made public.

Negev Forum postponed: The back-channel talks provided an opportunity for government representatives to discuss concrete steps for advancing normalization face-to-face at a time when such encounters have become less frequent. A meeting of the U.S.-backed Negev Forum, comprising the foreign ministers of the seven countries, has been repeatedly postponed this year amid violent eruptions of the Israeli-Palestinian conflict that have been strongly condemned by the Arab countries in the N7.

Shapiro moves on: The trade conference was the third in a series of N7 events aimed at generating ideas for specific areas of Arab-Israel cooperation that will be presented for consideration by the Negev Forum. Increasing the potential impact of the N7 project is the fact that it was directed until last month by Daniel Shapiro, the former U.S. ambassador to Israel. Shapiro was appointed on June 29 to be the State Department’s senior advisor on regional integration. In his announcement, Secretary of State Tony Blinken said Shapiro’s task was to help “deepen and broaden the Abraham Accords, and build the Negev Forum.”

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Circuit Chatter

Growth Spurt: Bahrain’s economy grew last year at its fastest pace in a decade, according to the IMF, with  non-oil sector revenue expected to grow by 3.3% in 2023.

Kuwaiti Fund: Kuwait plans to establish a new government investment fund called Ciyada – Arabic for sovereign – to support development of massive construction projects and drive the country’s economic growth strategy.

Crypto Suspension: Dubai authorities suspended the license of cryptocurrency exchange BitOasis because of noncompliance with government regulations.

Property Market: Saudi investor Abdullah bin Zaid Al-Malehi told Asharq al Awsat that he and partners from the U.S. and Singapore are building a global real estate company with plans to invest in the kingdom’s property market.

Blocked Gold: UAE authorities temporarily suspended Emirates Gold DMCC, one of the country’s biggest refineries, from delivering to Dubai’s gold bullion market, pending an investigation into suspected money laundering.

Venture Launch: Agthia Group, a unit of Abu Dhabi’s ADQ investment company, launched a new venture capital firm focused on technology startups named Agthia Ventures.

Smart Airport: Saudi Arabia’s Master Works signed an agreement to help manage Riyadh’s King Khalid International Airport with artificial intelligence and machine learning.

Pilots Wanted: Saudi Arabia’s new Riyadh Air has started recruiting candidates to fill 700 pilot jobs as the airline prepares for its debut in 2024.

Morality Cops: Iranian women are increasingly using a phone app called “Gershad” to evade the state morality police, which has been cracking down on violations of Islamic dress code.

Climate Target: PureHealth, the UAE’s largest health-care network, set a goal to achieve net-zero emissions by 2040.

Closing Circuit

Red Ink: Saudi Arabia’s sovereign wealth fund, which has captured world attention with its massive investments in golf and soccer, posted an $11 billion loss last year because of global stock and bond declines.

Peak Performance: The Dubai Financial Market reached its highest level since 2015, rising 20% this year and reflecting the UAE’s recent success in attracting investment.

Energy Supply: The UAE’s Multiply Group invested $100 million in Abu Dhabi-owned Breakwater Energy to focus on low-carbon power ventures.

Grocery App: Turkey’s Getir is in talks with the UAE’s Mubadala sovereign wealth fund for as much as $500 million in financing to keep its grocery delivery app operating in the U.K.

Border Watch: Edge, Abu Dhabi’s government-owned defense conglomerate, will acquire Etimad Holding to use its expertise in securing borders, protecting infrastructure and cybersecurity.

Oil Deal: BlackRock and KKR & Co. are close to selling their multibillion-dollar stake in ADNOC’s oil pipeline network to Abu Dhabi sovereign fund ADQ, Bloomberg reported.

Institutional Investors: Abu Dhabi Catalyst Partners invested in MEASA Partners to promote the Middle East, Africa and Southern Asia region with global institutional investors.

African Agriculture: Abu Dhabi-based Invictus will invest $272 million to expand into agri-food trading in North and East Africa through acquisitions and joint ventures.

Practical Investment: Palo Alto, Calif.-based Practical Venture Capital invested an undisclosed amount in Egypt’s Exits MENA, bringing the firm’s assets to $1.25 billion. 

Pet Care App: The UAE’s Mascotte Health raised $1.2 million in seed funding that it will use in part to launch a consumer-facing app for 24/7 pet care.

Divestment Bounty: Egypt has signed deals worth $1.9 billion to sell state-owned enterprises to private investors.

Italy Calling: The Abu Dhabi Investment Authority is discussing joining KKR & Co. in its $25 billion bid for Telecom Italia SpA’s landline network, Bloomberg reported.

Collecting Cobwebs: New York-based Spire Capital acquired Cobwebs, an Israeli web intelligence startup, for an estimated $200 million, expanding its interests in data analysis.

China Debt: Building Jordan’s new $2.1 billion Attarat power plant, which runs on shale oil, boosted the kingdom’s debt to China while it’s buying cheaper natural gas from Israel.

Farm Funds: China’s Syngenta is trying to interest Gulf sovereign wealth funds in its $9 billion IPO, noting its growing interest in agricultural investments, Bloomberg reported.

Chemical Merger: Austria’s OMV confirmed it’s in talks with Abu Dhabi’s ADNOC about merging the Borouge and Borealis companies in which they both hold stakes to create a $30 billion giant in the chemicals and plastics industries.

On the Circuit

Kuwaiti Finance Minister Manaf Al-Hajeri resigned three months into his term after his role as chairman of Kuwait’s $700 billion sovereign wealth fund was taken away.

Alex Mashinsky, ex-CEO of cryptocurrency lending platform Celsius, was arrested on U.S. securities fraud charges and the company agreed to a $4.7 billion settlement.

Mustafa Al Khalfawi is set to become CEO of Ajman Bank after resigning from First Abu Dhabi Bank, the UAE’s largest lender, Bloomberg reported.

Robin Roy, former head of financial crime compliance for Saudi Arabia’s Public Investment Fund, was hired by Alvarez & Marsal as managing director of its EMEA team.

Ahead on the Circuit

July 20, Dubai, UAE: Blockchain Banking Fest. Entrepreneurs discuss the impact of blockchain on banking and payments. DIFC Innovation Hub.

July 28-Aug. 6, Jerash, Jordan: Jerash Festival. Annual gathering at ancient city’s Roman ruins features concerts, plays, fashion shows and art exhibitions. Jerash archeological site.

Sept. 5-6, Tel Aviv, Israel. Agro-Mashov Conference 2023. Growers, buyers, retailers, wholesalers, importers gather for annual Israeli agricultural conference. Expo Tel Aviv.

Sept. 11-13, Riyadh, Saudi Arabia: Saudi Water Expo. Investors and leaders from industry and government discuss prudent use of the region’s water resources. Riyadh International Convention and Exhibition Centre.

Sept. 13-14, Riyadh, Saudi Arabia. IDC Saudi Arabia CIO Summit. Chief information officers explore new digital trends in business. Fairmont Riyadh Hotel.

Sept. 14-15, Abu Dhabi, UAE: Super Angels Summit 2023. Angel investors meet with startup founders at annual conference. Abu Dhabi National Exhibition Centre.

Sept. 19, Dubai, UAE: Middle East Investment Conference. Asset owners, managers, investors discuss latest trends in regional market. Ritz Carlton, DIFC.

Culture Circuit

Say What?: Google introduced Arabic and Hebrew versions of its generative AI tool, Bard, which is now available in 40 languages.

Sports Authority: The Qatar Investment Authority finalized a deal to pay $200 million for a 5% stake in Monumental Sports and Entertainment, owner of the NBA’s Washington Wizards and NHL’s Washington Capitals.

Sovereign Soccer: Saudi Arabia’s Public Investment Fund, owner of the U.K.’s Newcastle United football club, may be in the market to buy another top European team, Bloomberg reported. The New York Times, meanwhile, provides a deep dive into the sovereign wealth fund’s shopping spree that has rocked the worlds of professional golf and soccer. And the U.K.’s Chelsea club and Oman Air signed a cross-promotion deal.

Selling Supercars: The UK’s Briggs Automotive Company signed a distribution deal with Saudi Arabia’s Veloce Life enabling its single-seat “supercars” to be sold in the kingdom.

Airwallex sets sights on Arab Gulf states as it opens office in Tel Aviv

TEL AVIV, Israel – Airwallex, a digital payment platform that aims to disrupt the way businesses move money around the world, is building up its new office in Israel and aiming to expand its reach to the Arab Gulf states.

Founded in 2015  in Melbourne, Australia, Airwallex opened a branch in Tel Aviv in May, hiring Or Liban, a former Google executive, to run operations and expand in the region, Pranav Sood, general manager for Europe, the Middle East and Africa, told The Circuit.

“Across the Middle East, you see young, growing populations – populations that have lots of disposable income and people who are looking to spend online for e-commerce – also to travel and to buy and sell things around the world,” Sood said in an interview from London. “All of those factors mean that the Middle East is a region that we’re very excited about and looking to invest in.”

Airwallex, which processes more than $50 billion in transactions a year, is one of the fastest growing financial technology companies and carries a market value of $5.5 billion. The company raised $902 million from investors that include Salesforce Ventures, Sequoia, MasterCard, Tencent and Lone Pine Capital.

Sood will be in Israel on Monday to attend the Calcalist conference on financial innovation, which is being co-sponsored by Airwallex. Liban is scheduled to speak on a panel about the relationship between banks and fintech companies.

In Israel, the company’s customers include Papaya Global, which helps businesses manage payroll and payments, and OurCrowd, a Jerusalem-based venture capital investing platform. Airwallex has about 1,300 employees in 20 offices, including San Francisco, London, Amsterdam, Singapore, Hong Kong, Shanghai and Tokyo. The company is currently recruiting a staff of about 10 employees for its new office in Tel Aviv and is looking at potential acquisitions in Israel in the field of cybersecurity.

“Israel is a market where we are already present and we have customers,” said Sood, 33, who was hired a year ago and visits Israel every two or three months. “When we look at the UAE, we also see opportunity to expand our coverage. Many of our customers want access to the UAE because it’s a strong economy and there’s a lot of international trade that comes out of it.”

Airwallex’s creation story involves a coffee shop the company’s four founders opened as students at the University of Melbourne and “came to the conclusion that it is very, very painful and expensive to buy and sell things around the world,” Sood said. Jack Zhang, now the CEO, had a background in foreign exchange and had written trading algorithms for a number of investment banks, Sood said.

Eight years later, Airwallex is challenging the biggest players in the international payments market, led by the Brussels-based Swift network, which Sood says is too slow.  Airwallex’s proprietary technology revolves around a digital wallet that customers pay into and can use to make payments to countries where it is connected with local banking networks. The company has also focused on developing a “deep regulatory and licensing backbone” around the world, he said. It has managed to carve out a loyal customer base by focusing on small businesses and making it less complicated and expensive for them to pay bills and receive payments across national borders.

Airwallex’s founders “basically thought, ‘you know what, let’s use this experience and expertise and build something that fundamentally changes the way that people move money around the world,’” Sood said.

Israeli technology minister mobilizes startups to reinforce normalization accords

CASABLANCA, Morocco – From the Arab Gulf states to northern Africa, Israel is trying to sew up the normalization pacts it signed nearly two years ago by sharing its pioneering answers to drought, desertification and fossil-fuel replacement.

That’s what brought Orit Farkash-Hacohen, Israel’s minister of innovation, science and technology, to Morocco this week with a cohort of startup companies focused on addressing the region’s climate and energy nightmares.

“I’m here to say that Israel’s innovation, talent, our people and our minds can and should be a partner,” Farkash-Hacohen told an Israel-Moroccan business conference in Casablanca on Wednesday. “We are committed for this cooperation to succeed.” The conference was sponsored by Start-Up Nation Central, a nonprofit group that promotes Israeli technology companies.

The Israeli cabinet minister, a member of the Blue & White party in Prime Minister Naftali Bennett’s governing coalition, is scheduled to be in the capital city of Rabat on Thursday to sign a memorandum of understanding with her Moroccan counterpart, Abdellatif Miraoui, minister of higher education, scientific research and innovation. The broad agreement will cover cooperative efforts in agricultural technologies, water management, water desalination, renewable energy and artificial intelligence, Farkash-Hacohen said.

Her visit to Morocco follows a similar trip to the United Arab Emirates in October 2021 that covered joint activities in the realms of climate and energy, but also focused on cooperation between the two countries on space exploration, including Israel’s Beresheet 2 unmanned lunar landing mission.

“I hope this will echo a more moderate voice in the Middle East and in Africa,” Farkash-Hacohen told The Circuit in a brief interview on the sidelines of the conference. “We are facing a lot of extremists in our neighborhood. This is an alliance of the moderate countries.”

The 51-year-old minister, former chairwoman of the Israel Electric Authority, a regulatory body, and previously minister of strategic affairs, acknowledged that much of Israel’s new business ties with Arab countries follow years of defense cooperation.

“It’s no secret that a lot of the Israeli high-tech industry’s success stems from the army and the technology assets that we have,” Farkash-Hacohen said in the interview. “Our security industries have produced a lot of great ideas that transfer to commercial industry. We see that in space and telecommunications. We see that in cyber. I think that now we should share that expertise with our friends.”

Moroccan officials agreed that Israel’s technological prowess is attractive to them. Three cabinet ministers attended the first day of the Casablanca conference; Morocco’s former energy minister, Amina Benkhadra, said the two countries should make good partners.“We are facing the same challenges of desertification, water security and climate change impact,” said Benkhadra, now director of the National Office of Hydrocarbons and Mines. “We are aware that Israel has a lot of capabilities in many sectors so I think this partnership can be very fruitful,” she told The Circuit, adding, “You have to seize opportunities in this world of crisis.”

The Circuit attended the conference as a guest of Start-Up Nation Central.