US President Joe Biden unveils the pact. AFP
US President Joe Biden unveils the pact. AFP
US President Joe Biden unveils the pact. AFP
US President Joe Biden unveils the pact. AFP

France calls UK-US Australia defence pact a 'stab in the back'


Tim Stickings
  • English
  • Arabic

France has reacted with fury after the UK, US and Australia signed a defence pact that sidelines Paris in the Indo-Pacific region.

As part of the deal, Australia is tearing up a submarine contract with France and will instead build nuclear-powered vessels with British and American help.

The so-called Aukus pact leaves Paris out in the cold despite France’s efforts to position itself as a power in the Indo-Pacific.

Responding to the announcement, France’s foreign and defence ministers said it “shows a lack of coherence that France can only acknowledge and regret”.

The ministers criticised what they described as “the American choice to push aside a European ally and partner… at a time when we are facing unprecedented challenges in the Indo-Pacific region”.

“It is a decision contrary to the letter and spirit of the co-operation with prevailed between France and Australia,” they said.

In more strongly-worded comments on Thursday, Foreign Minister Jean-Yves Le Drian told French radio that the move was “a stab in the back”.

“I’m very angry today, and bitter… this is not something allies do to each other,” he said.

Referring to the former US president, he said: “This sudden and unforeseeable decision very much recalls what Mr Trump would do.”

Australia ordered 12 submarines from French contractor Naval Group under the agreement made in 2016 which is now being scrapped.

Scott Morrison, Australia’s Prime Minister, sought to avoid a rift by reassuring France that it was still a “key friend and partner”.

He said nuclear-powered submarines had superior speed, endurance and weapons storage compared to the conventional ones ordered from France. He stressed that Australia was not seeking nuclear weapons.

But he acknowledged that the overnight announcement was a “very difficult and disappointing decision for France”.

“As a Prime Minister I must make decisions that are in Australia's national security interests. I know that France would do the same,” he said.

French President Emmanuel Macron and former Australian leader Malcolm Turnbull on the deck of Collins-class submarine HMAS Waller in 2018. AFP
French President Emmanuel Macron and former Australian leader Malcolm Turnbull on the deck of Collins-class submarine HMAS Waller in 2018. AFP

The deal with France had faced tensions before Wednesday’s announcement. Ministers had promised to ramp up industrial production last year.

Arnaud Danjean, a French politician and member of an EU Indo-Pacific delegation, placed the blame at the feet of Australian contractors.

“Putting the blame on the French group is totally unfair and untrue,” he said.

Benjamin Haddad, the head of the Europe Centre at the Atlantic Council think tank, said that “everyone in Paris is shell-shocked” by the decision.

He described it as the lowest point in US-France relations since 2003, when the two countries were at odds over the Iraq War, and a “major setback to a transatlantic strategy on China”.

Gerard Araud, a former French ambassador to the US, said: “The world is a jungle. France has just been reminded [of] this bitter truth by the way the UK and US have stabbed her in the back in Australia.”

The uproar comes on the day that the EU is expected to unveil its new strategy for engaging with the Indo-Pacific.

Britain laid out plans for its own Indo-Pacific tilt in a landmark defence and security review published in March.

The pact was widely seen as an effort to counter China, which responded by accusing the Aukus countries of having a “Cold War mentality”.

Australia is set to become the first country without nuclear weapons to obtain nuclear-armed submarines. The Aukus countries have also promised to deepen intelligence-sharing and integrate their supply chains.

French Defence Minister Florence Parly, right, shook hands on the submarine deal with Mr Morrison and her Australian counterpart Christopher Pyne, left, in 2019. AFP
French Defence Minister Florence Parly, right, shook hands on the submarine deal with Mr Morrison and her Australian counterpart Christopher Pyne, left, in 2019. AFP

UK Prime Minister Boris Johnson linked the alliance to his domestic agenda, promising that Aukus would create hundreds of highly skilled jobs across the country.

"We will have a new opportunity to reinforce Britain’s place at the leading edge of science and technology, strengthening our national expertise," Mr Johnson said.

"And perhaps most significantly, the UK, Australia and the US will be joined even more closely together, reflecting the measure of trust between us."

UK Defence Secretary Ben Wallace said it was natural that Australia would have turned to the UK and US because of its existing co-operation under the Five Eyes intelligence alliance, which also includes Canada and New Zealand.

“This is not a betrayal,” he told BBC radio on Thursday. “This is simply that the Australians have chosen a different strategic capability than the one they had originally planned for.

“I understand strongly the French disappointment, but there has been no sort of sneaking around behind people’s backs.

“France and Britain are incredibly important partners, not only in Europe, but also globally. We agree on so many things.”

Calls for Europe to reduce its reliance on the US have been growing since the fall of Afghanistan. The EU plans to convene a defence summit with France next year.

The French ministers said the submarine decision “only reinforces the need to raise the issue of European strategic autonomy loud and clear”.

“There is no other credible way to defend our interests and our values ​​in the world, including in the Indo-Pacific,” they said.

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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

Global state-owned investor ranking by size

1.

United States

2.

China

3.

UAE

4.

Japan

5

Norway

6.

Canada

7.

Singapore

8.

Australia

9.

Saudi Arabia

10.

South Korea

Why it pays to compare

A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.

Route 1: bank transfer

The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.

Total cost: Dh567.25 - around 2.9 per cent of the total amount

Total received: €4,670.30 

Route 2: online platform

The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.

Total cost: Dh74.10, around 0.4 per cent of the transaction

Total received: €4,756

The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.

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Updated: September 16, 2021, 2:05 PM