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The West's fusillade of sanctions on Russia following its invasion of Ukraine has been likened to the detonation of a “nuclear weapon” by a leading economist.
Speaking at an investment summit in London, Dr Mohamed El Erian, chief economic adviser at Allianz, said “most national security people I know didn't realise how powerful the disruption of a payment system can be”.
Unlike trade sanctions, global payments networks don't have an organisation such as the World Trade Organisation acting as mediator and regulator. It is this regulatory absence that worries Dr El Erian.
“We have entered a world in which we have weaponised something without all the infrastructure that comes with weaponising something that's so powerful.”
He doesn't envisage an immediate collapse of the existing dollar-based world economic order, but he does foresee a “much more fragmented system” in future, with countries who don't full ascribe to the western view of the world left feeling vulnerable by the payment system's weaponisation.
Nouriel Roubini, chief economist at Atlas Capital Team, says Russian sanctions have irreversibly widened an already emerging global economic fissure and that countries with a foot in both camps will soon have to pick a side.
“I think there is going to be a process where these countries try to decouple themselves from the US dollar as their reserve currency, and from the dollar planning system,” Mr Roubini said.
Like Dr El Erian, Mr Roubini doesn't think the process will “happen overnight” but that countries are now seeking viable alternatives to dollar assets such as gold.
Chinese new order
China's ambitions to form a counterweight to the West and its worries over the Washington-led weaponisation of finance mean it is at the forefront of this dollar divestment.
Mr Roubini said President Xi Jinping could even seek to persuade Saudi Arabia to price oil and make payments in Chinese yuan, as well as increasing its reserves of China's official currency.
He sees such manoeuvring as the start of the establishment of a “bipolar world in which there are going to be two areas of influence separate from each other”.
“There will be a separate trading system, a separate monetary system, a separate financial system,” he said.
“One area is going to be around US, Europe and their own allies. Another one is going to be around China, Russia, North Korea, Iran, Pakistan and many emerging markets that are sympathetic.”
Bob Browder, chief executive of Hermitage Capital Management, is less convinced the West's Russia sanctions will have such a schismatic effect.
“I don't think there's any way round the dollar, euro, sterling system,” he said.
“Russia has said we don't need dollars, we'll just deal with the Chinese currency or gold. But the reality is that almost all the economic activity in the world is conducted with the US, the European Union and with Japan.”
Against this backdrop, he sees sanctions against Russia as being a very effective ploy.
“I think Russia won't be able to survive just with China, India, South Africa and Brazil,” he said.
He compared the dollar-based hegemony to democracy, paraphrasing the famous Winston Churchill quote in which the former UK prime minister called democracy is “the worst form of government — except for all the others that have been tried”.
Mr Browder's analogy is questionable given that many countries have eschewed democracy and so could just as well do the same with the US dollar.
Money talks
The flaw was highlighted by Mr Roubini, who said many countries would be wooed by the Chinese offer.
“I remember I was at a conference a few years ago, and there was the president of an African country … and somebody asked him, 'Are you going to use the Chinese 5G system?' He said, 'Absolutely, it costs 50 per cent less than the western version.”
The leader in question was unconcerned about any influence Beijing would gain, suggesting if it weren't China, it would be the US.
IMF reform needed
The task facing the West to prevent the dollar's obsolescence in much of the world is a steep one, but Dr El Erian had some practical tips.
“You start with the [International Monetary Fund] and the World Bank, you give better voice and representation to developing countries,” he said.
“You take away the feudalistic rule that the head of the IMF has to be European and the head of the World Bank has to be American.
“[You take] seriously what's going to be happening in the developing world and put a framework for orderly restructuring.
“There's going to be a lot of depth restrictions coming out and you need a cover of a multilateral system for that.”
Oligarchs sanctioned by the UK — in pictures
Tips for SMEs to cope
- Adapt your business model. Make changes that are future-proof to the new normal
- Make sure you have an online presence
- Open communication with suppliers, especially if they are international. Look for local suppliers to avoid delivery delays
- Open communication with customers to see how they are coping and be flexible about extending terms, etc
Courtesy: Craig Moore, founder and CEO of Beehive, which provides term finance and working capital finance to SMEs. Only SMEs that have been trading for two years are eligible for funding from Beehive.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
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Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
