Raghida Dergham is the founder and executive chairwoman of the Beirut Institute, and a columnist for The National
January 30, 2022
US President Joe Biden, it seems, has been forced to address the limitations in his “maximum diplomacy” approach to foreign affairs, which he sought to pursue as an alternative to his predecessor Donald Trump’s “maximum pressure” policy. Mr Biden has in recent weeks wielded the sword of sanctions and military response to dissuade Russia from sending its troops into neighbouring Ukraine – at least thus far.
The Russian leadership seems divided on the Ukraine crisis. There are those who want Moscow to accept western overtures as a path to de-escalation and, thereby, avoid sanctions. Others warn against falling for what they view to be diplomatic stalling from the US and European powers, and seize the opportunity to stop Nato’s eastward expansion for the foreseeable future.
Russia’s allies are also closely watching.
China reportedly doesn’t want any escalation to affect the Beijing Winter Olympics, which gets under way on Friday. Iran, while feeling emboldened by the strategic pact it recently signed with Russia, feels anxious about the indirect impact sanctions against its ally might have on Tehran’s expansionist projects in the Middle East.
The regime is also worried that the possible collapse of its nuclear talks with the permanent members of the UN Security Council, plus Germany, would scuttle its hopes of getting crippling sanctions lifted. Additionally, Iran is concerned that it may have slid down the list of western priorities as an outcome of the Ukraine crisis. Meanwhile, it has to contend with the political and diplomatic support being mobilised around the UAE after the recent attacks on Abu Dhabi carried out by Yemen’s Houthi rebels, to whom Iran provides all kinds of support.
Tehran has watched with concern as the ice has begun to thaw between the Gulf countries and Turkey in recent months. It is also unhappy about the possibility of improving Gulf-Lebanon relations after the visit of Kuwait’s foreign minister, Sheikh Ahmad Nasser Al Mohammad Al Sabah, to Beirut earlier in the month. The trip follows a diplomatic rift that emerged between Lebanon and the GCC last year, after a senior Lebanese minister made controversial comments relating to the conflict in Yemen.
Lebanon’s Arab partners have proposed a set of prescriptions to rebuild the country. But with a corrupt governing class in charge in Beirut, the likelihood of any of these proposals being approved and implemented is next to none, at least for now. Moreover, Hezbollah remains a factor in the country’s politics. The Iranian-backed proxy answers only to Tehran, specifically the Islamic Revolutionary Guard Corps, which seeks to export Iran’s theocratic model of government to the Arab world, from Yemen to Lebanon via Iraq and Syria, through the destruction of their national sovereignty.
Hossein Salami, centre, attends military exercises conducted by Iran's Islamic Revolutionary Guard Corps in December. AFP
Russia understands Iran’s need to spread its influence in the Middle East, and it is a model that may even suit Moscow’s interests. But the Biden administration, which has so far paid little more than lip service to its Arab allies on this issue, may be having a policy rethink following the Abu Dhabi attacks.
But with its focus squarely on Ukraine, the Iran nuclear issue has, to Tehran’s chagrin, been moved to the backburner. The Iranian regime is worried that, with the US midterm elections scheduled to be held later this year, Washington may kick this can further down the road.
The sanctions, a key instrument in Mr Trump’s maximum pressure policy, have now become a key instrument for the Biden administration. This is why it is using it as a threat to Russia.
Moscow understands the devastating impact western sanctions could have on Russia’s economy and society. Cutting the country off from the “Swift” system – which serves as an intermediary and executor of financial transactions between banks worldwide – will mean it won’t be able to receive transactions from outside to pay for its exports, or to transfer funds to pay for its imports. The inability to use credit cards will make it very difficult for Russians to travel. Try explaining that to the approximately five million Russians who travel annually to Turkey.
Moscow finds itself with two options.
A Russian soldier attends a military exercise at the Golovenki training ground in the Moscow region, Russia. AP Photo
A member of the 14th Separate Mechanised Brigade of the Ukrainian Armed Forces takes part in anti-aircraft military drills in the Volyn region, Ukraine. Reuters
People walk past a sign reading 'I Love Ukraine' in the central square in Kiev. EPA
Russian naval frigate 'Admiral Essen' sails during an exercise in the Black Sea. AP
Employees of essential city industries and services attend a military training session outside Lviv, Ukraine. Reuters
Airman 1st Class Olabode Igandan organises ammunition, weapons and other equipment bound for Ukraine during a foreign military sales mission at Dover Air Force Base, Delaware. AP
A member of the public waves a Ukrainian flag at a rally attended by soldiers and police in Odessa, Ukraine. Bloomberg
A Ukrainian serviceman patrols the front line near Avdiivka village, not far from the pro-Russian militant-controlled city of Donetsk, Ukraine. EPA
A Belgian Air Force F-16 fighter jet participates in Nato's Baltic Air Policing Mission in Lithuanian airspace. AP
One is to quietly roll back its military measures and pivot to diplomatic talks led by Sergey Lavrov. The Russian foreign minister is adept at turning failure into a success. He has stated that the escalation of tensions in Europe’s east and the subsequent diplomatic attempts pursued by the West are exactly what Russia sought from the get-go. A strong claim to have forced negotiations with Nato could provide a face-saving way out of a confrontation.
The other view, led by the brass, is that military action may be necessary to avoid Ukraine being absorbed into Nato. They argue that the West has categorically rejected Moscow’s demands and ignored its proposals, which leaves the latter with few options.
The military, it seems, seeks to escalate matters in Donbass – the region in south-eastern Ukraine that’s been occupied by pro-Russian groups since 2014 – which could lead to a broader conflict.
It won’t be an easy decision for Moscow to make. But while its weighs its options, it will do well to remind itself that when Estonia, Latvia and Lithuania – all former Soviet republics, like Ukraine – joined Nato, this had little bearing on Russian security. Will Ukraine’s addition to the western security alliance – highly unlikely though it is at this stage – really change its fortunes?
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Timeline
2012-2015
The company offers payments/bribes to win key contracts in the Middle East
May 2017
The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts
September 2021
Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act
October 2021
Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence
December 2024
Petrofac enters into comprehensive restructuring to strengthen the financial position of the group
May 2025
The High Court of England and Wales approves the company’s restructuring plan
July 2025
The Court of Appeal issues a judgment challenging parts of the restructuring plan
August 2025
Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision
October 2025
Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange
November 2025
180 Petrofac employees laid off in the UAE
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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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Uefa Champions League semi-final, first leg
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