Syrian regime change, start-ups and the Year of the Snake: PWM Tea Break

Louise Tumchewics, author and visiting fellow at the Department of War Studies at King's College London, chats over a cuppa to PWM's Yuri Bender and Ali Al-Enazi about the influence on investments by family offices of shipping, Shanghai's business models and shifting alliances in the Middle East. Louise has advised numerous international organisations and financial institutions on global trade patterns. Her recent book, Small Armies, Big Cities: Rethinking Urban Warfare, explores the pitfalls facing professional armies. She recently received the Admiral Castex award at the Paris Naval Conference for a research paper on the ability of navies to deter threats to the maritime economy.

Ali Al-Enazi: Hello and welcome back to our weekly Tea Break here at the FT Studios in London. Alongside my co-host, Yuri Bender.  Joining us this week is Louise Tumchewics, an author and visiting fellow in the Department of War Studies at King’s College London. Her research focuses on war and technology. She has advised numerous international organizations and financial institutions. Louise, how are you?

Louise Tumchewics: I'm very well this morning. Thanks.

Ali Al-Enazi: And what have you gone for?

Louise Tumchewics: Well, Ali, I have gone for a classic English breakfast tea with a splash of milk because, in these volatile and rapidly changing times, we need to keep calm and carry on.

Yuri Bender: She’s right. We need to keep calm and carry on. But I’ve been thinking about the standoff between geopolitical powers, and of course, we’ve got the Great Tea War between China and India, which has been going on for centuries—who is the premier tea producer?

Obviously, there’s a lot of focus today on these rising powers. We’ve just entered the Year of the Snake, and we’re running an interesting article this week from Xiadong Bao, the manager of the Edmond de Rothschild China Fund. He’s drawing our focus to the "Six Tigers of Hangzhou," which he believes will eventually rival the Magnificent Seven.

President Trump often speaks about the Chinese economic threat, but most family offices pulled out of investing in China a couple of years ago. Do you think they will eventually return?

Louise Tumchewics: I think we have to look at the geographic spread of family offices. Those based in North America or Europe may very well stick with their preference for staying out of China. However, family offices in Southeast Asia and the Middle East—where we are seeing the largest growth in family offices—may be attracted to the strong performance of Chinese tech stocks, provided that trend continues.

Yuri Bender: Ali, you’ve been looking at China as well, particularly the startups in Hangzhou, Shanghai and the Pearl River Delta,  vital areas of economic growth in the South. Do you think these hubs will give Silicon Valley a run for its money in the high-tech space?

Ali Al-Enazi: The startup scene in Shanghai, Hangzhou, and the Pearl River Delta are gaining prominence, and they could indeed give Silicon Valley a run for its money. We saw with Deep Seek’s success that this shift is real. Shanghai has now overtaken San Francisco in terms of unicorn potential, and much of that is due to China’s planned economy, government support, and emphasis on domestic innovation. Has China turned inward like the U.S., or will its economic warfare through the Belt and Road Initiative—building infrastructure across Asia and Europe—soon be revived?

Louise Tumchewics: Since the spring of 2020, China introduced its dual circulation policy aimed at strengthening the domestic economy, increasing trade among major Chinese cities, increasing trade with their near neighbours as a buffer against trade wars, economic competition and tariffs from the U.S. So they were, they were anticipating more difficulty in trading with the United States. Of course, the dual circulation policy was perhaps overshadowed by the introduction of COVID-19 in the spring of 2020.

Yuri Bender: China is also increasing its influence in the Middle East. The first time when I first started going to the Middle East in the early 1990s, I never saw any Chinese people there. But during my last visits, I saw a lot of Chinese investors and business people.

Ali, you’ve been writing about the shifting sands of alliances in the volatile Middle East. Do the experts you’ve spoken to see good economic prospects for the region despite its political instability?

Ali Al-Enazi: Yes, we’ve seen significant changes in the Middle East over the last few months - power shifts in Syria, the fall of Assad, and some of the experts that I spoke to saying Saudi Arabia and Turkey gain from that

We also have the ongoing war in Gaza. Private banks see potential in non-oil sectors such as tech, renewable energy, and tourism, driven by economic diversification—especially in the UAE and Saudi Arabia. Real estate and bonds are also well-positioned for growth, according to some of the private banks with demand from foreign investors.

Who will be the leading geopolitical power in the Middle East, and how will they reshape the region?

Louise Tumchewics: What we’ve seen in the past few months is a remarkable regime change in Syria—one that happened relatively peacefully compared to Iraq in 2003. And we've seen the transformation of Jolani from a warlord to a Western suited politician.

Consequently, with the fall of Assad, we've seen the diminishment of Russia's prominence in the region. And with the fall of Assad, the ceasefires with Hezbollah and Hamas, the reduction also in Iranian influence. So then, who fills that space? That's good news for Turkey and Saudi Arabia. We could see a shifting dynamic where, if the Middle East remains somewhat more peaceful, perhaps with the exception of Gaza, that other investors are interested in the region, and in not being Western investors, there's perhaps more interest in talking to different audience, different voices.

Yuri Bender: Louise, you’ve alluded to the influence of big families in the region. Traditionally, a handful of families have run much of the Middle East, and the Assads were one of them. That dynasty seems to have collapsed. The Saudi families remain very important.

If we look at pre-revolutionary Iran, it was very much a family-run regime. The region is still influenced by these families and clans, who want to control their destiny, their legacy, and their brand. And my colleague Elisa Travato has been writing about how families try to manage their future and spread a narrative.

Do you think the Trump dynasty operates in the same way? The Trump Inc is arguably the ultimate family office. They are trying to reshape the Middle East through real estate deals, overseen by the president and his son-in-law, Jared Kushner, who has long been talking about plans to redevelop Gaza into a luxury seaside strip—provided he can first relocate its Palestinian residents. Is that the way they see things?

Louise Tumchewics: If we think of your typical family office, they're very discreet. They're investing for the long term, for generations, possibly even centuries. They're looking for stability and longevity, and a managed amount of risk in their investments.  

And then let's contrast that with the Trump family, discretion probably isn't the word that first brings to mind, and their investment horizon is really an electoral cycle. So they're looking the next big win in the next three and a half years. Their fortunes have gone through far greater instability and volatility than many a family office would find comfortable, but they made their fortunes originally in real estate deals in Queens, New York, and they are looking at the Middle East from exactly the same perspective.

Ali Al-Enazi: Louise, when we think about the capture of countries by economic actors, we have an article this week from two partners at Katten Muchin Rosenman law firm in New York, which suggests that the crypto crew are about to take over Washington, that President Trump's fortunes are intimately tied up with the crypto world.

Louise, do we underestimate Bitcoin and other crypto assets’ influence on global supply chain, politics, organised crime and trade?

Louise Tumchewics: Ali, I would say that we often underestimate it, particularly in the circles that I am often in because there's a lack of comprehension about that asset class outside of the wealth management and financial sectors. People are familiar with the term, maybe have a superficial understanding of what it involves, but don't understand it in depth. And so often they are looking at economic relationships from a very traditional viewpoint, and maybe not taking into account the movement of money through cryptocurrencies and its consequent influence.

Yuri Bender: One of our readers, Alexander Bykovsky, a partner at Veduta, an investment firm in the U.S., asks about the growing trend of family offices and sovereign wealth funds investing in cryptocurrency. How important will this become in the industry, and will it influence the broader market,as well, because people are taking such big positions in crypto?

Louise Tumchewics: I think from your interview with Syz Bank last week, referenced the fact that the next generation of family offices is looking into cryptocurrency and developing a crypto product. There's a lot of curiosity and interest in exploring cryptocurrency. What I think that does is, when you have these very established, trusted names looking at cryptocurrency, it lends cryptocurrency a greater legitimacy and makes it much more mainstream than something that otherwise could be thought of as a Silicon Valley hobby, or is used by a shady underworld. It brings it to the forefront, consequently, that will have influence in the wider market.

Yuri Bender: I'm glad to see that your analysis of these trade patterns, Louise, it's being recognized more broadly because you won an award in Paris at the Naval Conference there for your research paper on the ability of navies to deter threats on the maritime economy.

We've been talking about technology, about electronic payments, about crypto systems and data centers, and investments in those. Do you feel that despite all this technological progress, the geopolitical focus will still be on protecting the maritime choke points, the channel from Odessa in Ukraine to the Bosphorus Strait, the Panama Canal, the Taiwan Straits, the Straits of Hormuz in the Middle East. Are these essentially still more important than the digital highways.

Louise Tumchewics: When we talk about the maritime economy, we have to look beyond just what is happening on the surface. 90% of the world's goods move by sea. We rely on the sea for the vast majority of trade. So when there is a disturbance in critical choke points for trade that has a real impact on the global economy. Therefore, naval vessels were deployed to the Red Sea to escort ships through and provide that protection and deterrence against continued strikes on ships. However, before any of that trade can take place, financial transactions have to happen, and worldwide financial transactions rely on a network of undersea fiber optic cables. So protecting the maritime economy is not just protecting what's happening on top of the water that's visible, but it's also protecting that undersea infrastructure.

Yuri Bender: Thank you, Louise. And congratulations once again!

Louise Tumchewics: Thank you so much for having me.

Ali Al-Enazi: That’s all we have time for this week. If you have any questions for our guests, please send them in. For more information, visit the PWM website. See you next week!

Further reading

Has rotation away from the Magnificent Seven begun?

Year of the Snake may re-awaken Chinese animal spirits

Chinese tech strikes back amid tensions with US

Private banks eye shifting sands in Middle East

Wealthy families must protect online reputations

From outsider to insider: crypto’s Washington makeover