Trump could be an opportunity for private equity
Donald Trump is both a disruptor and a deal-maker, so it’s possible to see an emerging scenario of greater stability and security in the Middle East, which can only be a good thing for investors in the region, says Karim Souaid
In a month’s time, Donald Trump will be back in the Oval Office and the world will change. Predicting the nature of that change is challenging. For the private equity and capital markets of the Gulf region, where I have worked for the past 25 years, there is the possibility that the “Trump effect” could be transformative. And that could be good for UK plc.
The two pillars of stability and growth in the Gulf are security and oil, and the incoming Trump administration may affect these profoundly. It seems counter-intuitive to talk about security in the current climate, with events unfolding in Syria, a fragile ceasefire in southern Lebanon and Iran exchanging blows with Israel. Conventional diplomacy would suggest a way out of the crisis but the road may be long and slow.
What we know, however, is that Trump is by nature both a disruptor and a deal-maker. Although he pulled America out of the Iran nuclear deal, he also oversaw the Abraham Accords normalising relations between Israel and Bahrain and the UAE. Might Trump focus the “art of the deal” on achieving some kind of détente with Iran? Or might he adopt stricter sanctions on oil exports till some concessions are conceded? Either way, the Iranian landscape could evolve towards a more conciliatory stance which is a net gain for regional stability.
Security and stability
Any deal will have to include guarantees for Israel’s security. Lowering the temperature of the relationship with Iran would have wider effects, making it more likely that other regional players like Lebanon and Syria could be brought into a network of peace or non-aggression agreements. The establishment of a greater level of security could offer a much more stable economic ecosystem for investors.
When it comes to oil, Trump is a devotee of American self-sufficiency: “Drill, baby, drill”. He has promised to expand domestic oil extraction and give the United States the lowest electricity and energy costs in the world. In a roundabout way, this may benefit some sectors in the Gulf: if oil prices fall as supplies from America augment, private businesses, including PE-backed entities, in non-oil sectors will be given space to flourish.
The key sectors are services and technology. Transport and logistics, as well as tourism, might become marginally less profitable in headline terms with lower oil prices, but profitability is likely to rise through the sheer volume of these industries. Those will soon be joined by knowledge-based enterprises such as coding and data storage. The tech sector is relatively insulated from fluctuating oil prices, which opens the door for nascent sectors like Abu Dhabi’s investment in AI to thrive.
It is possible to see an emerging scenario of greater regional security and stability, offering economic growth by reassuring investors. That will be a huge opportunity for private equity firms in the region, with diverse and innovative offerings.
The UK will be watching carefully. Recently the Prime Minister, Sir Keir Starmer, welcomed Sheikh Tamim bin Hamad Al Thani, the Emir of Qatar, to Downing Street. A few days later, he travelled to Abu Dhabi to meet Sheikh Mohamed bin Zayed al-Nahyan, the president of the UAE, and went on to Saudi Arabia for talks with Crown Prince Mohammed bin Salman.
If oil prices fall as supplies from America augment, private businesses, including PE-backed entities, in non-oil sectors will be given space to flourish
Starmer’s mission is unapologetically economic and commercial. He told reporters that “we have to win contracts and investment around the world, and UAE and Saudi Arabia are key partners of ours”. As Alastair King, the new lord mayor of London, wrote in Morning Wire, the Gulf is Britain’s fourth largest trading partner and businesses want to build on that. UK defence, technologies, services and trade are priority sectors. Also, some alliances between regional capital markets and the London Stock Exchange could benefit both.
As always where Donald Trump is concerned, none of this is inevitable. There is still anxiety about his dedication to tariffs and hostility to free trade, as well as his sheer unpredictability when it comes to international relations. However, the potential exists for huge investment opportunities in the Gulf if the stars align, benefiting the region, the US and the UK. As a Gulf-based financier who worked in New York and sent his children to British universities, that prospect excites me. Better days could be around the corner.
Karim Souaid is founder and managing partner at Growthgate Capital