Raghida Dergham is the founder and executive chairwoman of the Beirut Institute, and a columnist for The National
January 09, 2022
Three decades ago, the Cold War ended with the collapse of the Soviet Union and the establishment of the US as the world’s sole superpower. This week, we will find out if a cold war of a different kind is likely to emerge between Russia and the West.
On Monday, Russian and American delegates will meet in Geneva and two days later, a delegation from Moscow will visit Nato officials in Brussels. The purpose of the meetings is to find a solution to the geopolitical tensions emanating in Eastern Europe.
Meanwhile, the next round of talks between Iran and the five permanent members of the UN Security Council, plus Germany, will resume in order to resolve the former’s nuclear weapons programme.
A common feature of all these talks is the use of militarisation – on the part of Russia and Iran, respectively – as a diplomatic tactic ahead of their meetings. The goal is, of course, to pressure the opposite side at the negotiating table.
Indeed, the military establishment in Moscow believes it to be the best way to improve its negotiating hand – especially with the US – as a pre-emptive move to abort Nato’s expansion eastward, which Russia views as a threat to its security. Nato, after all, is a US-led western security umbrella that was created precisely to curb the Soviet Union’s influence in Europe but remains in place despite the fall of the so-called Iron Curtain.
Moscow’s military option would be to enter Ukraine, the focal point in the European crisis, on whose border Russian troops have assembled. Ukraine’s interest in joining Nato amounts to a red line for Russia, which considers it to be within its sphere of influence. Another source of discomfort for Russia is the continued western military co-operation with other former Soviet republics in Eastern Europe. Moscow believes something must be done now, because Nato’s gradual expansion into former Soviet territories would be even more difficult to counter in the years to come.
Likewise, the theocratic establishment in Tehran believes flexing its nuclear muscles is the only way it can force the western powers involved in the talks to agree to Iran’s demand that crippling sanctions against it be lifted in one fell swoop. It has, in the process, ramped up its nuclear development programme. But it seems France, Germany and the UK – the so-called E3 members in the nuclear talks – are beginning to tire of Iran’s pressure tactics and may be pushing back.
Islamic Revolutionary Guard Corps personnel take part in military exercises around the Bushehr nuclear power plant in southern Iran EPA`
Germany, meanwhile, is among those European states open to the idea of sanctioning Russia if it used its military option. The threats and counter threats from both sides, however, have dangerous implications amid an escalation of tensions.
Russian Foreign Minister Sergey Lavrov seems to believe that a diplomatic solution is possible, his rationale possibly being that for both the US and Nato, maintaining relations with Russia is more important than Ukraine's possible inclusion in Nato.
But if diplomacy fails, the question is whether Russia will risk sending its forces into Ukraine, particularly as it wants a resolution by the end of January, which leaves little room to manoeuvre. The current moment, therefore, could be fateful.
Of course, this standoff cannot be compared to, say, the Cuban missile crisis of 1962, which was much less complicated. It pitted two superpowers that were terrified of one another. The power deferential between the US and Russia today is far greater than it was between the US and the Soviet Union. Russia is not as powerful, militarily or economically, as the Soviet Union was in its heyday. The fear of nuclear escalation between the two powers, compared to the Cold War days, has also receded.
A P2V Neptune US patrol plane flies over a Soviet freighter during the Cuban missile crisis in this 1962 photograph. Getty Images
Yet, what makes the current crisis dangerous is the complicated security situation today, with a different kind of arms race – involving intercontinental missiles – coming into play.
It is also difficult to see how the US will concede to Moscow’s demand to rein in Nato and alter the structure of its alliances. Political polarisation in America may well have weakened Joe Biden’s presidency, but it is this very polarisation – and the thought of looking weak in the eyes of the electorate – that will prompt Mr Biden to not cave in.
The month of January is also critical in the context of the Iran nuclear talks, keeping in mind the regime’s ultimatum that it will cease to negotiate after the end of the month. And if the Vienna talks do collapse, the regime will feel less hard-pressed to launch military action in the region, perhaps even targeting Israel. Any such action will be met with an Israeli response, thereby putting the world on edge on two fronts.
We will soon know if diplomacy, both in the context of Eastern Europe and the Middle East, wins the day to keep the peace – or whether failure in the talks will lead to confrontation, conflict and possibly a new kind of cold war.
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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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