Beijing holds these National People’s Congress meetings every spring. Every five years, the gathering signs off on a new five-year development plan. This year’s version is the fifteenth such plan issued since 1953, so Beijing refers to it as the fifteenth five-year plan. These plans signal how Beijing views the world, what their priorities are, and how they want the Chinese people to view their government and where the nation is headed. The meetings are highly scripted, and the plans are finalized well in advance. This year, Beijing crafted the political theatre to send a very clear top-line message: Everything is going according to plan. China is becoming a high-tech power on the world stage, the economy is moving toward higher-value-added growth, and the Chinese Communist Party is taking care of the Chinese people. To the extent that there are bumps in the road, that is due to China’s “external environment,” particularly the United States, which Beijing likes to paint as a global spoiler. 

Those top lines are fairly consistent year-to-year. Beijing always uses these meetings to signal that everything is going according to plan. The details are where things get interesting. This year, five key signals stood out as particularly relevant to the United States and its allies.

1. China is doubling down on rare earths

Beijing has worked for decades to amass control over global critical mineral supply chains. In 2025, China used that control to pressure the Trump administration to back down on tariffs and other policies Beijing objected to. Now Washington—along with many of its allies—is working to undo that leverage. The Trump administration is investing billions to bring new rare earths production facilities online and reduce US dependence on China for the minerals. 

But the new plan suggests China does not plan to stand idly by. Instead, Beijing is gearing up to bolster its dominance over those same supply chains. The new five-year plan states that China’s goal over the next five years is to “continuously strengthen [its] competitive advantages in rare earths, rare metals, and superhard materials.” It orders Chinese firms to move up the value chain. Chinese firms are already buying up the mines that produce these minerals in other nations, and they already send the material those mines produce to China for processing. Now Beijing wants the processed minerals to stay in-country to the extent possible, going into Chinese factories and making the global economy dependent on China not only for processed minerals but for the final products that contain them, as well. China already has that end-to-end dominance in rare earth magnets. Beijing wants to see that vertical control applied in other sectors. 

Last fall, referring to US efforts to diversify these same supply chains to reduce Chinese control, US Treasury Secretary Scott Bessent stated that the United States is “going to go at warp speed over the next one to two years, and we’re going to get out from under this sword the Chinese have over us.” Beijing is signaling that it will be doing everything in its power to sharpen that sword and keep it exactly where it is. 

2. Biotechnology is ascendant

Until now, leading on biotechnology innovation was a stretch goal for China. For example, the Made in China 2025 plan (the ten-year industrial policy blueprint issued in 2015) lays out concrete targets for Chinese firms to replace their foreign competitors across multiple sectors, but the goals for biotechnology were uniquely vague. That is changing. This new five-year plan lists eight frontier technologies targeted for breakthrough advancements. Of those, three are directly tied to biotechnology innovation: life science and biotechnology, brain science, and pharmaceutical innovation (the other five are artificial intelligence [AI]; quantum computing; nuclear fusion, deep sea, earth and polar exploration; and deep space exploration). The new plan details research and development priorities for each. 

This is the first time a five-year plan has gone into such detail on biotechnology priorities. And for good reason. China is now the world’s primary destination for first-in-human trials, and US firms are paying record amounts for China’s biotechnology outputs. In 2024, US firms paid $52 billion in licensing fees for innovative Chinese drugs; in 2025, that number jumped to $137 billion. 

The new plan indicates that Beijing is now ready to reduce the nation’s reliance on foreign firms. It calls for China to “build out a self-sufficient biotech ecosystem,” which is Beijing’s code for reducing China’s reliance on US and other non-Chinese firms. The plan also calls for tighter biological data regulations and for Chinese firms to maximize AI across this sector. Biotechnology has officially moved up to join the elite echelon of industries receiving Beijing’s priority attention and support. 

3. The pace of exports will continue

During a press conference at the two sessions, Minister of Commerce Wang Wentao offered his view on China’s trade balance: “Exports and imports are like the two wheels on a car. The more balanced they are, the more steadily it runs, and the farther it goes.” Unfortunately for Wang, little about China’s current balance would suggest a smooth ride: The country’s exports are so excessive relative to its imports that this hypothetical car would likely drive in circles. 

Domestic consumption accounts for less than 40 percent of China’s gross domestic product (GDP), nearly half the US number, which is around 70 percent of US GDP. Since Chinese consumers are not buying what Chinese factories produce, the nation is overly dependent on exports. That is disrupting global markets. In 2025, China’s total trade surplus with the rest of the world was $1.2 trillion, over 6 percent of its GDP. That surplus is due to China’s massive export volumes, which are threatening the economic security of many of its trading partners, putting firms out of business and triggering unemployment in those nations. 

But Beijing is betting that its trading partners will fail to do anything about it. If the nations that absorb Chinese goods put real tariffs and other barriers in place to stem the flood of those imports, Beijing would be forced to reassess its entire economic model. It would be forced to do real rebalancing, boosting Chinese consumers to enable them to buy more of what the nation produces. The new plan gives no indication that this is on the horizon. Instead, Chinese leaders appear to be betting that the current global trade policy paralysis will continue through 2030. 

4. AI-induced job loss remains a major blind spot

Beijing is taking a “move fast and break things” approach to AI deployment. Chinese leaders see AI as a ticket to achieving all of their major political priorities, from surveilling their citizens to achieving global technology leadership and generating new jobs at home. They are pushing to deploy it across the economy as quickly as possible to soak up every benefit AI can provide. Some of the risks from this approach recently played out across the nation when Chinese officials and consumers enthusiastically embraced OpenClaw personal AI assistants. Some local officials—desperate to show Beijing that they are using AI—offered more than one million dollars in grants to anyone developing new businesses based on OpenClaw. Soon the AI assistants were going rogue, running up large bills on consumers’ credits cards and sending their information to identity thieves. The Chinese government is now scrambling to put new guardrails in place.  

With AI-induced layoffs and unemployment, the downside risks are much more serious and will be harder to rectify. Already, China is suffering high unemployment among its urban youth: nearly 20 percent are unemployed according to China’s official statistics. The real number is certainly higher. China’s official youth unemployment statistics were so poor in 2023 that Beijing stopped reporting them and revised its methodology to exclude some elements of the population, such as students. 

Among the young people who do have jobs, a growing portion are gig workers, struggling to find full-time employment. The new five-year plan paints a rosy picture of AI boosting people’s livelihoods. For example, it calls for more AI use in elder care, classrooms, entertainment, and public services. But it does not acknowledge the likely job loss this will trigger for nurses, teachers, artists, and civil servants. It even pushes AI deployment in the very sectors where it is most likely to trigger job loss, such as using AI agents for personal assistants and AI-empowered robots for manufacturing. 

The plan does include a nod to the potential for AI-induced job loss. For example, it calls for Chinese officials to set up “investigation and response mechanisms for the impact of AI on employment” and provide “employment stability guarantees, re-employment training, and employment support” for workers who lose their jobs to AI. But this amounts to just a few sentences of generalities. In contrast, biotechnology is referenced across multiple chapters, with incredibly specific goals. Beijing does not yet seem to view AI deployment as a serious employment challenge. That is a major blind spot. 

5. China aims to become the world’s biggest R&D funder

The new five-year plan calls for the Chinese government to keep research and development (R&D) spending growing at least 7 percent per year over the next five years. That means China’s national labs, universities, and industrial clusters will be flush with cash at a time when the United States is slashing those same budgets. As a result, new analysis in the journal Nature predicts that China’s public spending on research and development could surpass US spending by 2029. China is attempting to utilize this spending gap to leap ahead of the United States in “frontier science” and breakthrough technologies in critical sectors such as AI, quantum computing, and biotechnology. 

In the fourteenth five-year plan (2020-2025), Beijing focused primarily on commercial technology such as semiconductors, electric vehicles, and information and communication technologies. This new plan is aiming higher. It calls for Chinese firms to move the competition up the value chain to innovation in “future industries” or “frontier industries” that are not yet fully commercialized. It calls for Chinese firms to replace foreign competitors as the leading intellectual-property generators, reducing China’s reliance on the United States and boosting the nation’s “self-reliance.” Beijing is betting that US efforts to cut federal R&D spending are China’s big opportunity to surpass the United States as the world’s leading science and technology innovator. Chinese leaders do not plan to stand idly by and let that opportunity go to waste. 

Overall, the new plan indicates that Chinese leaders are much more focused on the nation’s strengths than its weaknesses, and they are feeling incredibly bullish going into 2026. This bodes for even more intense US-China competition over the coming years, particularly in advanced technologies. Washington needs to recognize that the margin of US leadership is narrowing.

The post Five takeaways for US policymakers about China’s new five-year development plan appeared first on Atlantic Council.

Bottom lines up front

• Iranian strikes on Gulf energy infrastructure show that uncertainty—not just supply loss—can trigger sharp global price shocks.
• Energy is reverting from a managed commodity to a geopolitical weapon, revealing where real power lies in times of crisis.
• Gulf states will likely seek to align with US security guarantees, while US dominance is reinforced as the key provider of energy, financial, and security stability.

GENEVA—In geopolitics, there are moments when systems do not evolve gradually but rather reset overnight. The world may be entering such a moment now. The attacks by Iran on energy infrastructure in Saudi Arabia, Kuwait, and Qatar matter not only for the damage they inflict, but also for what they reveal: how fragile the global energy system remains, and how quickly the world returns to first principles when that system is under threat.

For years, markets behaved as if energy had been domesticated—diversified, hedged, financialized. That illusion is now fading. Oil is no longer just a commodity. It is increasingly a weapon and a signal. It reveals, with precision, where real power still resides.

A global shock does not require a complete disruption of supply. It requires uncertainty. And uncertainty is priced more aggressively than scarcity. In such conditions, prices do not rise gradually. They jump, often overshooting fundamentals as markets attempt to price geopolitical risk in real time.

The Gulf states

The Gulf states understand this instinctively. For years, some of them pursued a careful balancing act by relying on US security while maintaining pragmatic relations with Iran, even amid accusations that elements within them tolerated or indirectly supported Iranian-linked proxy networks. That strategy collapses the moment infrastructure becomes a target. Ambiguity is a luxury of stability; it rarely survives contact with risk. States whose prosperity depends on uninterrupted energy flows will not tolerate prolonged uncertainty. They will align decisively with the only proven security architecture capable of guaranteeing stability. That architecture is American.

Iran

By contrast, Iran under the current regime risks a historic miscalculation. Its strategy has long relied on asymmetry—pressure without full confrontation, disruption without decisive response. But there is a threshold beyond which such a strategy becomes self-defeating. Targeting the infrastructure that underpins global energy flows is such a threshold. Nations rarely fail because they lack power. More often, they fail because they misjudge the consequences of using power. If Iran is perceived not merely as a regional challenger but as a systemic disruptor of global energy flows, then the response it provokes will not be incremental. It will be structural.

Russia, China, and North Korea

Much has been written about a new alignment among Russia, China, Iran, and North Korea—an emerging axis opposed to the West. In reality, this has always been more fiction than fact. China depends on stable energy flows from the Gulf. Russia benefits from higher prices but seeks equilibrium, not chaos. North Korea follows but does not lead. When the stakes become real, ideology gives way to interest—and those interests diverge.

Europe

Europe may be another major victim of this situation. At precisely the moment when hard power, energy security, and strategic clarity are required, Europe finds itself largely absent from the field. For decades, it built a model based on external energy, outsourced security, and the belief that economic and normative influence could substitute for geopolitical strength. That model is now showing its weaknesses, and a persistent energy shock could diminish Europe’s geopolitical role further. Without unified military capability or independent energy security, Europe is increasingly reacting to events rather than shaping them. It has shifted, quietly but unmistakably, from actor to arena.

The United States

Beneath all of this lies a deeper truth that has stayed with me for years. During my time at the London Business School, my professor Andrew Scott made a deceptively simple observation: oil and the dollar are the liquidity of the world. He was right. Oil remains the physical liquidity of the global economy. The dollar remains the financial system that prices and stabilizes it. Despite years of discussion about energy transitions, alternative currencies, and new geopolitical alignments, moments like this reveal how little has fundamentally changed. The system still runs on dollar-denominated energy flows. Liquidity, in the end, has no substitute.

There is also a historical parallel worth noting. When US President Ronald Reagan entered office, he defined a small number of strategic priorities. These priorities included restoring economic strength and confronting the Soviet Union. But on everything else, he reacted. That clarity allowed events, many of them unforeseen, to move in his favor. A similar dynamic may be unfolding today. US President Donald Trump did not set out to engineer a global realignment through crisis. But history does not ask whether leaders planned events. It asks whether they were positioned to benefit from them.

If the United States maintains economic strength, energy leverage, and military credibility, then shocks of this kind do not weaken its position. Instead, they reinforce it. Because when the system becomes unstable, the world does not look for consensus. It looks for order. And order requires a guarantor.

This is where one’s legacy is ultimately defined—not in moments of calm but in moments when the system begins to fracture, when uncertainty spreads and decisions become irreversible. Reagan understood this. He did not control events, but he shaped the environment in which they unfolded. History rewarded him for it. Trump may find himself in a similar position. If current dynamics continue, this period may be remembered not as a series of isolated crises, but as the moment when global ambiguity collapsed—and when US power reasserted itself, not by design but by necessity.

In geopolitics, power is measured not by who speaks the loudest, but rather by who cannot be replaced. In a world once again defined by energy, security, and liquidity, the United States remains indispensable.

The post The Iran war has set in motion a global realignment appeared first on Atlantic Council.

Bottom lines up front

• To make cross-border payments despite US sanctions, Iran has built a system of workarounds that includes banks, intermediaries, shadow networks, and cryptocurrency.
• China is the top purchaser of Iranian oil, and transactions are increasingly settled in yuan via indirect channels, limiting exposure to US financial oversight.
• Emerging infrastructure such as CIPS and experimental CBDC platforms could support or expand non-dollar settlement, though direct Iran-linked usage remains opaque.

WASHINGTON—There is a lot of attention right now on how Iran is managing access to the Strait of Hormuz—operating a kind of “toll booth” in which it clamps down on commercial flows through the vital waterway while reportedly allowing some vessels to transit for as much as $2 million per voyage or according to particular political and financial conditions.

But an important question has received far less attention: How are Iran and oil purchasers settling their payments under current conditions? What follows is an effort to answer that question, drawing on new GeoEconomics Center research, to shed light on the policy levers Tehran is pulling and the economic-statecraft and technological tools it is employing—as well as the implications for sanctions enforcement.

How Iran settles cross-border payments today

Iran’s cross‑border payments system reflects years of sanctions‑driven adaptation. In 2012, sanctioned Iranian banks were disconnected from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, which serves as the core infrastructure for global financial messaging. While this did not make all transactions with Iran impossible, it made standard cross-border settlement much more difficult by cutting off access to the main channel for bank-to-bank communication.

In January 2016, following verification steps under the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal, many Iranian banks were reconnected to SWIFT and some financial sanctions were lifted. But after the United States withdrew from the JCPOA in 2018 and reimposed secondary sanctions, access to formal financial channels narrowed again. This repeated cycle of reintegration and new restrictions made it clear to Tehran that formal dollar-clearing or euro-denominated trade finance was unreliable.

In response, Iran has shifted its cross‑border payments system to a set of overlapping workarounds. Some transactions still move through formal banking channels in jurisdictions willing to absorb sanctions risk. Others are routed through intermediaries that can hold funds, net obligations, or obscure beneficial ownership. Complementing these efforts are state-led initiatives such as the Shetab system. While primarily focused on domestic payments, Iran recently expanded Shetab for cross-border use through a strategic integration with Russia’s Mir payment system. This link connects the national payment switches of both countries, allowing their respective bank cards to be “read” and processed by the other’s banking hardware. There also are several informal networks that settle transactions entirely outside of the banking system. For example, the US Treasury’s Financial Crimes Enforcement Network has described Iranian “shadow banking” networks that rely on Iran‑based exchange houses and foreign front companies—particularly in the United Arab Emirates (UAE), Hong Kong, and Singapore—to move billions of dollars tied to oil exports and other activities.

At the base of this structure is hawala, a long-standing, trust-based system that enables value transfer without formal cross-border movement of funds. These networks are anchored in regional hubs such as Dubai, where a large number of Iranian-linked firms operate and provide counterparties for informal settlement. On top of this, Iran uses state-linked intermediaries, including front companies and trading entities, to facilitate transactions tied to oil exports. More recently, Iran also has relied on cryptocurrency to facilitate transactions that can bypass traditional banking rails. For example, the blockchain analysis firm Chainalysis estimated that Iran‑linked crypto activity reached $7.8 billion on‑chain in 2025, with stablecoins increasingly used for settlement and a growing share tied to sanctioned entities. US enforcement actions have increasingly targeted these channels, including sanctions on exchanges and wallet clusters associated with Iranian activity. 

For Tehran, formal, semi‑formal, and informal channels operate in parallel, with transactions routed through different layers depending on risk tolerance, counterparties, and the constraints in place at any given time.

How China’s yuan fits in

China is now Iran’s main oil customer, buying over 80 percent of its seaborne exports. In this partnership, Iran trades discounted oil for Chinese investment and goods, with payments increasingly handled in yuan instead of dollars to reduce exposure to US oversight while also advancing the internationalization of China’s renminbi (RMB). Chinese refiners often buy Iranian oil through intermediaries and non‑dollar banks. The money stays in controlled accounts and is mainly used to pay Chinese contractors or cover imports rather than flowing directly into Iran’s banking system.

China’s Cross-Border Interbank Payment System (CIPS), a clearing and settlement network launched by the People’s Bank of China (PBOC) in 2015 to process cross-border renminbi transactions, could be a potential channel for these yuan-denominated purchases of Iranian oil. 

GeoEconomics Center analysis of CIPS data shows in the chart below that monthly averages for daily transaction volume remained within a $85–105 billion (600–750 billion yuan) range over the past year. In mid-to-late March, however, daily observations rose to over $130 billion (around 940 billion yuan). The increase in volume is notable in the context of the ongoing Iran war, which began on February 28, but it does not by itself show that Iranian oil payments are moving through CIPS. CIPS handles tens of thousands of transactions a day that reflect a wide range of uses, so the data are best read as a sign of broader growth in renminbi settlement capacity, not as direct proof of Iran-linked flows. Beijing also has widened the mandate of CIPS so it can handle some non‑renminbi currencies and provide broader cross‑border services, making it more flexible as a backbone for regional payments. 

The UAE could be emerging as an increasingly important player in this network. First Abu Dhabi Bank joined CIPS as a direct participant in mid‑2025 and was later named an official renminbi clearing bank. Iran has incentives to use RMB in its energy trade with China, while the UAE has long functioned as a hub for Iran’s trade and commercial finance. Given China’s role as the primary destination for Iran’s shipped oil, a Gulf‑based RMB clearing hub could reduce friction in RMB‑denominated trade flows linked to China and support greater regional RMB liquidity. But there is little visibility into how these channels are being used during the current conflict or what is driving the recent uptick in CIPS activity. Any such transactions would likely occur indirectly through Chinese or third-country banks rather than through direct participation on the CIPS network, limiting visibility into how the systems are being used now.

China also could leverage Project mBridge, a cross‑border payments platform designed to enable direct settlement between central bank digital currencies (CBDCs), for purchases of Iranian oil. Originally incubated under the Bank for International Settlements (BIS) Innovation Hub, the project brings together the PBOC, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the United Arab Emirates, and the Central Bank of Saudi Arabia. The project has made more than 4,000 transactions worth $55.49 billion, with China’s digital yuan comprising 95.3 percent of the volume. 

In November 2025, the UAE executed its first government payment using the wholesale digital dirham on mBridge, testing readiness for settling energy and commodity trade—sectors in which China dominates. Data on mBridge usage remains limited, as neither the PBOC nor participant banks are required to disclose those details. There is no public evidence yet of Iran-linked usage of mBridge, and Iran is not a member of the system, which remains experimental. In practice, however, the UAE’s banks, exchange houses, and free‑zone shell companies already serve as conduits for Iranian‑linked trade and finance, raising the possibility that mBridge‑linked institutions could indirectly handle Iranian‑linked transactions even if Iran itself is not a participant in the platform. 

Conversations that the Atlantic Council’s GeoEconomics team recently had with policymakers in Europe indicate that Group of Seven (G7) finance officials believe participants may be leveraging mBridge during the Iran war. But the linkages and scale are impossible to know without more information. Given the project’s focus on commodity trade with Gulf countries and China, interest in its potential role in Iranian oil payments is high.

What to watch next

As developments around Iran and its oil trade continue to draw attention, policymakers should focus on several key signals.

First, will renminbi‑based payment infrastructure continue to grow? In particular, will CIPS continue to expand its network in the Middle East, where yuan‑denominated trade is easier to facilitate? Project mBridge remains opaque, with limited public data available. Still, as central banks continue to develop and test wholesale CBDCs, indicators such as new country participation in cross-border projects, energy-related pilot transactions, or spikes in activity during periods of financial or geopolitical stress could point to this technology being used more actively.

Iran, too, is advancing its “digital rial” CBDC, initially a reaction to US sanctions, which could eventually give Tehran an additional channel to steer retail and wholesale payments through digital channels. All founding BRICS countries are testing wholesale CBDCs and continue to push for a more multipolar global currency system. Much of this effort focuses on building domestic digital payment networks while piloting cross‑border applications that enable trade settlement in local currencies. Watch for any signals emerging from the next BRICS summit, planned for September 2026 in India, as well as broader developments in these payment systems—particularly given that India is the second‑largest buyer of Iranian oil.

It is important to note that these systems still do not challenge the dollar’s status as the reserve currency and its prevalence in international transactions. CIPS continues to have a much smaller network than the West’s financial architecture, which includes SWIFT and the Clearing House Interbank Payments System (CHIPS). However, these alternative systems do undermine a pillar of dollar dominance: the power of financial sanctions. Especially in this case, they provide Iran with channels to maintain oil revenue and trade flows despite pressure.

Iran has levers it can use to facilitate trade in yuan or other non-dollar currencies. Tehran’s payment landscape, however, remains fragmented. The yuan does not provide Iran with a way out of sanctions, but it may offer a cheaper way through them by reducing dependence on dollar-clearing channels and lowering the compliance and intermediary costs associated with sanctioned transactions. 

Perhaps the most important shift to watch, then, is how the routes connecting trade to payment are changing. Are those changes limited to the current crisis? And will they have longer-term implications for cross-border payments outside the dollar?

The post Inside Tehran’s toll booth appeared first on Atlantic Council.

This is the tenth chapter in the Freedom and Prosperity Center’s 2026 Atlas, which analyzes the state of freedom and prosperity in ten countries. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

Evolution of freedom

The Dominican Republic’s recent political history is defined less by rupture than by consolidation. By the mid-1990s, the country had already resolved the most consequential question of its institutional life: how political power is contested and transferred. Since the decisive elections of 1996, Dominican politics has been characterized by regular, competitive elections, peaceful alternation in power, and the absence of constitutional ruptures or electoral breakdowns. Governments have come and gone, and parties have risen and declined, but the basic rules of the game have remained intact.

In a regional context marked by institutional volatility—coups, impeachments, constitutional rewrites, and contested elections—this continuity stands out. The Dominican Republic institutionalized electoral competition early and maintained it across political cycles—including long periods of single-party dominance—without sliding into electoral authoritarianism. The result has been more than procedural stability. Over time, this durability has produced cumulative institutional returns: greater predictability for investors, incremental strengthening of legal frameworks, and an environment in which political dissatisfaction is resolved through elections rather than systemic crisis. For three decades, this steadiness has underpinned one of the strongest growth performances in Latin America. The Freedom Index captures this trajectory, showing sustained gains from 1995 onward and further consolidation after 2020.

This pattern is most visible in the political dimension, which provides the clearest entry point into the country’s broader institutional evolution. The Dominican Republic’s democratic transition was prolonged and uneven, beginning with the assassination of dictator Rafael Leonidas Trujillo in 1961 and unfolding through cycles of hope and reversal—including a coup, civil war, US intervention, and decades of semi-competitive elections under Joaquín Balaguer. The decisive consolidation came in 1996, when competitive elections finally became the uncontested mechanism for political power. This continuity is reflected in the consistently high level of the elections component of the political subindex over the entire period.

What is particularly notable is that even prolonged periods of single-party dominance did not translate into electoral authoritarianism. Between 2004 and 2020, when the Dominican Liberation Party governed for sixteen consecutive years, concerns arose about institutional sclerosis, clientelism, and attempts to alter constitutional term limits. The suspension of the February 2020 municipal elections following failures in a new electronic voting system further exposed procedural weaknesses and eroded public trust. Yet constitutional boundaries ultimately held, the electoral framework was restored, and power transferred peacefully to the opposition later that year.

The evolution of political rights over the past two decades reflects a more nuanced reality. From roughly 2010 to 2020, the political rights component shows a gradual decline. This movement does not suggest a drift toward authoritarianism, but rather the accumulated effects of prolonged incumbency. Media outlets became increasingly entangled with government advertising, patronage networks expanded, and civil society grew more skeptical of the political class. These tensions culminated in the large “Marcha Verde” protest movements that began in 2017 and persisted until the 2020 elections, demanding an end to corruption and impunity. Rather than weakening democracy, these mobilizations ultimately reinforced it by channeling discontent through institutional means and contributing to a legitimate transfer of power.

The rebound in political rights after 2020 appears to reflect shifts in political tone and enforcement patterns more than sweeping institutional reform. The arrival of the Luis Abinader administration brought a clearer rhetorical commitment to transparency and accountability, reduced pressure on critical media, and signaled greater tolerance for scrutiny, contributing to improved perceptions of political openness. Civic space widened, even if the formal legal framework governing political rights remained largely unchanged.

Civil liberties, by contrast, have remained relatively stable and high throughout the period. The country did not experience the sharp pandemic-related declines seen in many advanced democracies, particularly with respect to restrictions on movement or assembly. This stability reinforces the broader picture of an open political system that, despite its imperfections, has avoided the authoritarian and electoral backsliding observed elsewhere in the region.

The most puzzling feature of the political subindex is the persistently low score on legislative constraints on the executive, a pattern that in the Dominican case reflects institutional design rather than weak democratic competition. The country operates under a robust presidential system, and the 2010 constitutional reforms aligned legislative and presidential elections on the same electoral calendar. As a result, the party that wins the presidency almost invariably controls Congress as well, reducing incentives for legislative oversight. The limited professionalization of the legislature compounds this structural feature.

However, this does not mean that the executive operates without constraints. In practice, civil society organizations, business associations, trade unions, and protest movements play a decisive role in shaping and blocking legislation. A clear example was President Luis Abinader’s withdrawal of an ambitious fiscal reform proposal in 2021 after strong opposition from business groups and civil society. Similar dynamics have constrained reform efforts in areas such as education, transportation, and labor markets. The low legislative constraint score therefore reflects a misalignment between formal institutional checks and the informal, societal forces that operate in the Dominican political system.

The economic subindex reinforces the broader picture of institutional continuity that characterizes the Dominican Republic’s experience since the mid-1990s. Rather than reflecting abrupt policy shifts or ideological swings, the data point to a gradual and largely uneventful expansion of economic freedom, aligned with a stable political environment. One reason for this continuity lies in the country’s distinctive political economy: Across party lines, there has been broad consensus around openness to trade and foreign investment, while redistributive policies have not been the exclusive domain of the left. In practice, governments of different political orientations have combined pro-market and social welfare objectives in varying proportions, reducing the likelihood of sharp policy reversals. Over the same period, the country completed a structural transition from an agriculture-centered economy to a highly diversified one in which tourism, manufacturing, mining, construction, and services contribute in comparable proportions to GDP, strengthening resilience to external shocks. As a result, changes in economic policy have tended to be incremental, allowing the Dominican Republic to maintain a consistently business-friendly framework while adjusting gradually to social and fiscal pressures.

Trade freedom has been among the most stable components throughout the period. The country adopted an outward-looking growth model early on, anchored in tourism, free trade zones, and export-oriented manufacturing. This openness has proven resilient to changes in government and political cycles. Across party lines, successive administrations have actively pursued and ratified trade agreements with regional blocs and major economies, reinforcing a broad political consensus in favor of international economic integration. As such, trade policy has not been subject to abrupt reversals.

Investment freedom follows a similarly stable, though slightly more uneven, path. The Dominican Republic has long been perceived as relatively business-friendly within the regional context. Periodic fluctuations in this component appear to capture moments of regulatory or fiscal uncertainty rather than shifts toward state intervention or capital controls.

Property rights show gradual improvement but remain an area where institutional limitations are most visible. While large investors tend to operate within a relatively predictable legal environment, smaller firms and households continue to face slower judicial processes and administrative bottlenecks. This uneven protection of property rights contributes to the persistence of informality and limits the diffusion of economic freedom across the broader economy.

Women’s economic freedom registers a clear upward trend over the past three decades, reflecting the steady removal of formal legal barriers to women’s participation in economic life. This formal progress has coincided with increased visibility of women in both political and business leadership, including sustained cross-partisan representation at the vice-presidential level. As in many middle-income countries, improvements in formal equality coexist with persistent gaps in labor market outcomes, suggesting that social norms and institutional rigidities continue to constrain full convergence.

The sharp improvement in legal indicators subindex after 2020 aligns closely with a combination of legal reform and changes in prosecutorial practice. On the legislative side, reforms to the penal code helped modernize the criminal justice framework, clarify legal definitions, and strengthen sanctions for corruption-related offenses, contributing to greater clarity of the law and procedural coherence. At the same time, the appointment of an unusually independent attorney general marked a clear departure from past patterns in the enforcement of those laws. For the first time in decades, high-profile corruption cases were brought not only against figures associated with previous administrations, but also against politicians and officials linked to the governing coalition. Investigations involving senior legislators, mayors, and politically connected actors sent a strong signal that prosecutorial discretion was no longer being exercised along partisan lines, and this shift had an immediate effect on perceptions of judicial independence and effectiveness, as reflected in the legal subindex. However, the conversion of investigations into final convictions has been slower and more uneven, reflecting judicial inertia and inherited procedural constraints. This underscores that prosecutorial autonomy does not necessarily amount to systemic judicial transformation.

At the same time, this episode raises an important institutional question. The recent strengthening of the rule of law appears to rest heavily on the personal credibility and independence of the prosecutor, rather than on a fully consolidated system of judicial autonomy. Whether these gains can be normalized—embedded in procedures, safeguards, and professional norms that outlast individual officeholders—remains to be seen. Taken together, the evolution of freedom in the Dominican Republic shows an institutional trajectory shaped by steadiness rather than spectacle. Political competition has remained credible over time, legal institutions have strengthened without abrupt breaks, and economic rules have evolved through adjustment rather than ideological swings. This pattern stands in contrast to much of the region, where institutional change has often been driven by sharp turns, constitutional resets, and recurrent political crises. In the Dominican case, stability has carried weight. It has allowed investment decisions to be taken without persistent institutional uncertainty and has given economic activity room to expand without the disruptions associated with repeated policy reversals. Social demands, in turn, have tended to find expression through elections, courts, and public debate rather than through systemic crisis. The payoff from this understated but resilient institutional framework becomes clearer when attention shifts from rules to results. The following section examines how this steady expansion of freedom has translated into sustained improvements in income, health, education, and overall standards of living.

From freedom to prosperity

The Dominican Republic’s experience over the past three decades suggests that institutional stability, while rarely dramatic, can be economically productive. The country has recorded the fastest GDP growth in Latin America in the last half-century, averaging approximately 5 percent annually—well above the regional average of 3.2 percent. This performance has translated into the fastest income convergence with the United States of any major Latin American economy: From one of the poorest countries in the hemisphere in the 1960s, the Dominican Republic now has a standard of living roughly one-third that of the United States, compared to one-quarter for the region as a whole. This remarkable performance reflects the cumulative effect of a predictable institutional environment in which economic activity could expand over time rather than being repeatedly disrupted. The Prosperity Index captures this payoff, showing steady improvements in income and basic social indicators since the mid-1990s.

Rather than relying on a single engine of expansion, the Dominican Republic has built a diversified growth model that has evolved gradually over time. Economic activity has been rooted in a combination of tourism, free trade zones, mining, construction, and services, with each sector playing a stabilizing role at different phases of the cycle. Tourism has provided a steady source of foreign exchange, while export-oriented manufacturing in free trade zones has integrated the country into global value chains, especially in medical devices and electronics. Gold mining—anchored by Pueblo Viejo, Latin America’s largest gold mine—has emerged as the country’s leading export and proved especially valuable during the pandemic when mineral revenues helped offset the collapse in tourism. Construction and related services have supported domestic demand, partly reflecting sustained population growth and urbanization. This diversification has reduced exposure to commodity price volatility and limited the risk of abrupt downturns, distinguishing the Dominican Republic from many regional peers whose growth paths have been more narrowly concentrated.

The United States occupies a central place in the Dominican Republic’s external economic relations, but it does so within a relatively diversified trade structure. Geographic proximity, preferential trade arrangements under DR-CAFTA, and long-standing commercial ties have made the United States the country’s most important single trading partner. The relationship cuts in both directions: The Dominican Republic exports free trade zone manufactures and traditional agricultural commodities—tobacco, sugar, cocoa, coffee—while importing energy, machinery, and consumer goods from the United States. This two-way integration has provided a stable demand anchor and supported export-oriented sectors from traditional agriculture to modern manufacturing, with growing nearshoring opportunities. At the same time, the Dominican Republic has avoided excessive concentration on a single market. Trade links with Europe, the Caribbean, and Latin America have expanded over time, and tourism revenues draw on a broad set of source countries. This diversification has reduced vulnerability to shocks originating in any one economy, allowing the country to benefit from deep integration with the United States while maintaining a degree of external balance.

Education presents a more ambivalent picture. The Dominican Republic made a highly visible and politically salient commitment to education funding during the 2010s, following sustained social pressure to comply with constitutional spending mandates. Public investment expanded rapidly, leading to clear improvements in access, school infrastructure, and enrollment. These efforts marked an important shift in public priorities and are reflected in gradual gains in educational attainment indicators captured by the Prosperity Index.

However, improvements in educational quality have lagged far behind the scale of financial effort. Learning outcomes remain weak by international standards, as reflected in the Dominican Republic’s consistently low performance in the Programme for International Student Assessment, where students score well below the OECD and Latin American averages in reading, mathematics, and science. This gap points to institutional constraints rather than a lack of resources. Rigidities in the public education system—particularly regarding teacher evaluation, incentives, and accountability—have proven difficult to overcome. Opposition to reforms aimed at improving performance has often succeeded in preserving existing arrangements that disproportionately benefit a relatively protected group of workers, while limiting gains in system-wide quality and student outcomes. As a result, education has yet to play the role in productivity growth and social mobility that is required for sustained income convergence.

Health outcomes have followed a more linear trajectory. Life expectancy has increased steadily over the period, reflecting income growth, expanded access to basic healthcare, and incremental improvements in coverage. The Dominican Republic did not undertake a radical overhaul of its healthcare system, but rather expanded it gradually, with uneven quality but broad reach. These gains are consistent with the country’s level of development and contribute meaningfully to improvements in overall well-being, even as efficiency and quality challenges persist.

Inequality has improved markedly over the past decade. The Prosperity Index shows a substantial reduction in income inequality since around 2010, with the inequality component increasing by roughly twenty-five points, placing the Dominican Republic among the stronger performers in the region on this dimension. This improvement reflects a combination of sustained economic growth, rising employment, and gradual formalization, which together helped lift incomes at the lower end of the distribution. Unlike in many neighboring countries, these gains were achieved without the boom-and-bust cycles that tend to reverse distributional progress.

At the same time, the decline in measured inequality masks emerging forms of segmentation that could become more consequential over time. High levels of informality continue to limit upward mobility for a large share of workers, constraining access to stable income trajectories and social protection. While overall income dispersion has narrowed, disparities in job quality and long-term opportunity persist. The Dominican Republic’s experience illustrates that inequality can fall meaningfully even as structural dualities remain entrenched—a pattern consistent with a growth model that has been inclusive in aggregate terms but uneven in how opportunities are distributed across the labor force.

These distributional patterns also shape how migration from Haiti features in the prosperity debate. The issue is deeply polarizing, and this polarization has produced policy incoherence rather than resolution. The 2013 Constitutional Court ruling (TC 168-13) held that tens of thousands of Dominican-born individuals of Haitian descent had never been entitled to citizenship—a decision that drew accusations of creating statelessness from the Inter-American Court of Human Rights.  Subsequent regularization efforts reached only a fraction of the affected population, constrained not only by domestic political backlash but also by Haiti’s limited administrative capacity and inability to provide basic civil documentation for many affected individuals. Meanwhile, mass deportations coexist with the massive use of undocumented labor in construction, agriculture, and services, while Haitian migrants and their descendants represent a substantial share of public spending on schooling and healthcare. The result is neither exclusion nor integration but an intractable ambiguity: pervasive informality, legal precarity, and administrative inconsistency that entrenches inequality even as aggregate indicators improve.

The more consequential challenge lies in the longer-term implications of informal integration. When access to services, education, and employment relies on ad hoc arrangements rather than clear institutional pathways, the risk is not immediate marginalization but gradual stratification. Over time, this can translate into persistent differences in educational trajectories, job quality, and social mobility, even without explicit barriers or discriminatory intent. Haitian migration, therefore, does not currently undermine prosperity outcomes, but it does test the capacity of Dominican institutions to transform informal inclusion into sustainable integration and to prevent new forms of segmentation from emerging alongside otherwise improving inequality indicators.

The path forward

The Dominican Republic approaches the coming years from a comparatively favorable position within Latin America. Democratic norms are consolidated, institutional performance has improved incrementally, and prosperity gains have accumulated without major reversals. The central question ahead is therefore not one of stability, but of trajectory. The challenge is whether the country can move beyond a successful middle-income equilibrium and sustain the kind of productivity gains required to converge toward high-income status.

Externally, the Dominican Republic is unusually well positioned, particularly in its relationship with the United States. Close economic, political, and security ties have long defined the country’s development path, and recent shifts in US trade and industrial policy have, in principle, reinforced this advantage rather than undermined it. Even amid more protectionist rhetoric and policy experimentation in Washington, the Dominican Republic has remained a trusted partner, benefiting from geographic proximity, established supply chains, and a reputation for macroeconomic and political reliability. Yet this favorable positioning has not always translated into concrete gains at the scale one might expect. A telling example is the presence of a US International Development Finance Corporation office in the country, which was initially seen as an opportunity to channel investment and support strategic projects but has so far had very limited activity. This gap highlights a broader risk: Close alignment with the United States creates opportunities, but capturing them requires domestic institutional capacity, project readiness, and strategic coordination. Without these, proximity and trust alone may result in underused potential rather than accelerated convergence.

This places the question of the middle-income trap at the center of the country’s outlook. The Dominican Republic has already captured most of the gains associated with macroeconomic stability, openness, and sectoral diversification. What lies ahead is a more demanding transition toward productivity-driven growth. The risk is not a return to instability or crisis, but a gradual settling into growth rates that are sufficient to sustain middle-income status yet insufficient to achieve convergence with advanced economies. Persistently low educational quality, high informality, limited innovation capacity, and weak spillovers from export sectors continue to constrain productivity. Escaping the middle-income trap will depend on transforming these underlying drivers through improvements in learning outcomes, technical training, and innovation capacity to enable diversification toward higher-value sectors.

Institutionally, recent improvements in the rule of law and anti-corruption enforcement have strengthened public trust and international credibility. However, the durability of these gains remains an open question. Much of the progress since 2020 has relied on leadership choices and informal norms rather than on fully entrenched institutional safeguards. Whether judicial independence, prosecutorial autonomy, and legal clarity can be preserved across political cycles will be a key determinant of future performance. Moreover, prosecution is not the same as prevention, and high-profile cases have demonstrated that corrupt practices persist even under the credible threat of enforcement. A partial rollback would not necessarily trigger immediate instability, but it would weaken the institutional foundations required for higher-quality growth and more complex economic activity, while leaving underlying vulnerabilities in procurement, asset disclosure, and political finance unaddressed.

Regionally, instability represents a more immediate and less controllable risk. The situation in Haiti has deteriorated to an unprecedented degree: Since the assassination of President Jovenel Moïse in 2021, gangs—some designated as terrorist organizations—have seized control of an estimated 90 percent of Port-au-Prince, while state institutions have effectively ceased to function. The violence has displaced over one million people and caused tens of thousands of deaths since 2018. This is not cyclical instability but a qualitatively different breakdown. Persistent institutional collapse and humanitarian distress across the border generate security concerns, fiscal pressures, and diplomatic constraints that the Dominican Republic cannot fully manage on its own. While the country has so far absorbed these pressures without major disruption, prolonged instability in Haiti could increasingly test its administrative capacity, border management, and social cohesion, particularly if international engagement remains insufficient.

A related risk stems from the very factors that have underpinned the Dominican Republic’s success. Relative political stability, improving infrastructure, and deep integration into international trade networks also make the country an attractive transit and logistics hub for illicit activities, particularly drug trafficking and associated financial flows. As enforcement pressures shift across the region, there is concern that criminal networks could seek to exploit the Dominican Republic’s ports, transportation systems, and financial channels. This risk does not reflect institutional failure—in fact, the country has achieved record drug interdictions in recent years—but exposure created by openness and connectivity. If not handled carefully, these dynamics could strain security institutions, distort local economies, and erode public trust, undermining some of the institutional gains achieved in recent years.

Finally, the political economy of reform will remain decisive. The Dominican political system continues to combine a strong presidency with a relatively weak legislature and a vibrant civil society capable of constraining government action. As earlier sections have shown, this configuration has been effective at preventing democratic backsliding and forcing accountability, but it has also made structural reform difficult. This tension is particularly evident in the fiscal sphere. A narrow tax base and extensive exemptions limit the state’s capacity to finance higher-quality public services and consistent public policy execution, as well as to strengthen social protection and further reduce structural inequalities. As a result, the government has increasingly turned to debt: Interest payments alone now approach 4 percent of GDP, and debt service consumes 25 to 30 percent of the state budget, crowding out productive public investment. Meanwhile, intractable problems persist—most notably electricity subsidies required to cover distribution losses—that continue to drain fiscal resources. The result is a budget squeezed between debt obligations, unproductive subsidies, and inadequate investment in human capital and infrastructure.

Without fiscal reform, efforts to improve education, infrastructure, and social protection will remain constrained, even as parts of the economy continue to advance. The risk is that inequality, which has declined in aggregate, could begin to rise again in more structural forms, producing a segmented society marked by pockets of high prosperity and opportunity alongside regions and communities that remain disconnected from growth. Whether the political system can move from preserving stability to actively reforming itself—making choices that broaden the tax base and strengthen state capacity—will determine whether the country can convert steady momentum into sustained development. In sum, sudden crises or dramatic reversals are unlikely to define the Dominican Republic’s future. Its prospects hinge instead on whether it can leverage its favorable external position, preserve recent institutional gains, and overcome domestic constraints that limit productivity, human capital formation, and social integration. Stability has served the country well. The challenge now is to turn that stability into sustained convergence—by moving beyond a political culture of indefinite deferral that has allowed structural problems to persist even as the economy expanded. Whether leaders are prepared to make difficult and politically costly decisions—rather than merely avoiding destabilizing ones—will determine whether the next half-century is defined by incremental continuity or genuine transformation.

Marino Auffant is a nonresident senior fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security. He is a historian and geopolitical strategist whose work examines global macro trends, great-power competition, and economic statecraft. Based in Washington, D.C., he advises public- and private-sector leaders on structural competitiveness, supply-chain strategy, and industrial policy, with a particular focus on strategic dynamics in the Western Hemisphere and US–Dominican Republic relations. His research and advisory work spans energy markets and semiconductor nearshoring strategy. He holds a PhD in history from Harvard University.

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With scenarios for the conflict’s next phrase ranging from diplomatic off-ramps to military escalation, we asked Atlantic Council experts to identify their biggest takeaways from the war so far.

What we’ve learned about . . . 

The Iranian regime

US military capabilities 

The Trump doctrine

The Iranian opposition

The Gulf states

Israel

The global economy

Global energy markets

Russia and Iran

China and Iran

The Iranian regime

One month into the Iran war, the Iranian regime is bruised, battered, and (perhaps irrationally) bullish about its future. The regime’s apparatus has withstood the decapitation of its leadership and more than 15,000 strikes on its capabilities and infrastructure. At the same time, the regime has executed a premeditated and effective response that has imposed significant costs on US Gulf allies and energy infrastructure. The de facto control of the Strait of Hormuz by the Islamic Revolutionary Guard Corps (IRGC) has been its most potent weapon, inflicting significant pain on the global economy that has netted the regime unilateral concessions from the United States to relieve stress on financial markets. 

Internally, the regime appears stable. The Islamic Republic has proven to be much larger than any one individual. There has not been any significant domestic uprising to date. Most notably, there have not been any defections among political and security elites. The most hardline voices within the system have been empowered. All these factors have led many within the regime to believe it is winning the war despite the conditions of the battlefield.   

Yet there are significant challenges ahead for the regime that extend beyond the war. It’s increasingly clear that after rejecting talks with the United States, Iran has no clear plan for what comes next. A reported US offer was nowhere near viable, but the rejection of that offer increases the likelihood of US ground troops invading Iranian territory. A messy situation looks primed to get much worse. 

Assuming the Iranian regime does survive the war, it still faces a long-term existential crisis. The regime cannot provide the economic or political opportunities its population craves. To stay in power, Iran will either need to consistently and systematically repress dissent or make significant changes to the Islamic Republic’s core ideologies. Those changes seem unlikely to happen in the short term. Therefore, surviving this war will only delay the next crisis. 

—Nate Swanson is a resident senior fellow and director of the Iran Strategy Project at the Scowcroft Middle East Security Initiative. Beginning in 2015, he served as a senior advisor on Iran policy to successive administrations, including most recently as director for Iran at the US National Security Council. 

US military capabilities

The United States can execute fast, precise, and integrated multi-domain operations at scale, but it can’t sustain this kind of high operational tempo over time. 

Headlines have highlighted new technologies, such as the US military’s use of LUCAS (Low-Cost Uncrewed Combat Aircraft Systems), PrSM (Precision Strike Missiles), and an artificial intelligence–driven battle management system. 

The real story, however, is the joint integration of these and other capabilities across at least six combatant commands and thousands of soldiers. The United States is delivering coordinated strikes faster than ever while simultaneously working with allies and partners to effectively defend against Iranian attacks. No other military in the world has demonstrated this level of proficiency. Adversaries can acquire new technologies, but they can’t buy talent and the type of command-and-control culture that empowers US soldiers to act together seamlessly. 

Sustaining these capabilities, however, is a perennial challenge. Demand for munitions exceeds available supply, and as Diana Maurer of the US Government Accountability Office noted in her testimony this month: “DOD has been unable to sustain its weapon systems to meet its goals across all domains and faces challenges providing logistical support to US forces, especially in contested environments.” 

This is why it’s a national security imperative to invest in domestic capacity. The United States must be able to sustain its military in a longer high-end fight—a topic of Forward Defense’s ReForge Commission. 

—Joe Costa is the director of the Forward Defense program of the Scowcroft Center for Strategy and Security at the Atlantic Council. Previously, he served as US deputy assistant secretary of defense for plans and posture in the Office of the Secretary of Defense. 

The Trump doctrine

One month into the war with Iran, Trump’s actions have us rethinking his “peace through strength” doctrine. Until this point, it was pretty clear that Trump was okay with short, sharp, decisive actions like we saw with the strike to eliminate Iranian IRGC general Qasem Soleimani in the first Trump administration; Operation Midnight Hammer, which targeted Iranian nuclear sites; and Operation Absolute Resolve, which removed strongman Nicolás Maduro from power in Venezuela. We also know that Trump is uncomfortable with long, drawn-out military campaigns with no end in sight, such as in Iraq, Afghanistan, and Ukraine.  

So while I am not surprised by the airstrikes against Iran, I am surprised by the scale of the campaign and by the fact that it now appears Trump is on the verge of sending in ground forces. Some commentators had previously remarked that we were never going to see Trump send the 82nd Airborne Division to the Middle East. But that’s exactly what he did this week.  

It is still my prediction that, consistent with Trump’s “peace through strength” doctrine, the US president will ultimately declare victory and end the conflict soon rather than allow himself to get into an extended military quagmire.   

—Matthew Kroenig  is vice president for geostrategy and fellows and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security.

The Iranian opposition

Amid conflicting messages from the Trump administration about the goal of continued US and Israeli military strikes on Iran (is it for regime change or to only weaken the Islamic Republic’s nuclear and ballistic-missile capacity?) the Iranian opposition has found itself needing to urgently define the path forward.  

This weekend, a group of hundreds of ideologically diverse opposition activists are meeting in London as part of the Iran Freedom Congress to discuss Iran’s future and a pluralistic vision for guiding a transition. Critically, they are not positioning this as a challenge to any other opposition figure, including Reza Pahlavi, the son of the deposed shah. Rather, it is intended to “broaden the tent” to ensure that diverse voices are represented in any democratic process moving forward. Pahlavi has also made efforts in recent weeks to expand his reach by holding meetings with a wider set of activists and bringing Nobel Peace Prize laureate and Iranian jurist Shirin Ebadi on to chair a transitional justice committee. Ebadi’s involvement is significant not only for her deep global reach and connections to figures leading transitional justice processes in other countries, but also for the fact that she once supported the 1979 revolution that unseated Pahlavi’s father.  

While this show of unity was celebrated by some, it has also been critiqued by others who have even called for Ebadi to be stripped of her Nobel (which is a technical impossibility). Meanwhile, still others contend that no movement for human rights and democracy can move forward without an immediate cease-fire, that the bombs only weaken the civil society that is seeking an end to this regime, and that a meaner, harsher regime may be left standing once the strikes end.  

In short, much is yet to be determined but will become clear over the next few weeks—including in light of reports from some on Pahlavi’s team that Iranians have organized a ground game that will be activated soon. 

—Gissou Nia is the director of the Atlantic Council’s Strategic Litigation Project and a board member of the Iran Human Rights Documentation Center.

The Gulf states

However the Iran war ends, it will not eliminate all of Iran’s attack capabilities. The Iranian regime’s apparent resilience and resolve suggest that the war will not change Iran’s intent to terrorize the region and assert leverage over the Strait of Hormuz either. The United States and Israel may feel comfortable with the dent the war has put in Iran’s long-range missile capabilities and nuclear program, especially as Trump seeks an exit that will quell global markets and relieve political pressure at home. But the threat to Iran’s Gulf neighbors will remain.  

Iran’s attacks on all six members of the Gulf Cooperation Council (GCC) provide an unprecedented opportunity for its member countries to deepen their diplomatic, security, and economic integration in ways that could profoundly strengthen their resilience. GCC solidarity in the immediate aftermath of the attacks demonstrated the potential of such unity, including a historic UN Security Council Resolution.  

One month in, however, longstanding fissures are re-emerging, including around how and when to end the war and what the region should look like after the bombs stop. And it appears there is still a rift between Saudi Arabia and the United Arab Emirates that will jeopardize Gulf unity going forward.  

Gulf countries do not have a simple solution for navigating heightened security and economic threats after the war. While there may be frustration with the United States, Russia and China’s responses to the war make it clear that there is no replacing US security support. And while the war’s disruption to oil and gas production reinforces Gulf countries’ efforts to diversify their economies, the disruption to air travel, shipping, and investor confidence underscores that no sector is completely safe.   

The Gulf solution to these threats is likely to be intense diversification: deepening security partnerships with a range of different partners, reducing strategic redundancy through new trade and energy corridors, and embracing a range of industries that are less vulnerable to disruptions to the movement of goods and people, such as advanced technology.  

—Allison Minor is the director of the Project for Middle East Integration with the Atlantic Council’s Rafik Hariri Center & Middle East Programs. She previously served as US deputy special envoy for Yemen and as director for Arabian Peninsula affairs at the National Security Council.

Israel

While US and Israeli forces engage in an unprecedented, combined military campaign in Iran with considerable operational achievements—a high point in bilateral military cooperation—views on the conflict diverge considerably among the American and Israeli publics. 

In contrast with US polls that indicate around 60 percent opposition to the war, support for the war effort began and remained high in Israel, with initial polls indicating well over 80 percent support, and over 90 percent among Jewish Israelis. More recent polling suggests slight slippage, as four weeks of being sent to bomb shelters by missile attacks wears on the population, but an overwhelming majority still support continuing the war. That steady backing is understandable, considering the Iranian regime’s long-held and oft-stated commitment to Israel’s destruction, and its hostility expressed in sponsoring terrorist organizations, attacks on Israel with ballistic missiles, and pursuit of a nuclear program that could enable Iran to possess a nuclear weapon.  

The global interests that animate so much of the American debate around the war—the fear of overstretch in regime-change wars, the global economic shock caused by the closure of the Strait of Hormuz, and the impact on strategic competition with China and Russia—feature far less prominently in the Israeli discourse. 

While Prime Minister Benjamin Netanyahu remains a divisive figure in Israeli politics, his political opponents have nearly universally expressed backing for the campaign in Iran. They have echoed his hope that the campaign will weaken the regime to the point that the Iranian people will overthrow it. But that consensus has not translated into a meaningful boost for the prime minister in polls ahead of a crucial election later this year. In a sense, the Israeli consensus, surrounding the need to strike a dangerous foe at its weakest point and take advantage of the opportunity presented by Trump’s willingness to join the fight, exists alongside, and distinct from, Israel’s longstanding polarized politics. 

—Daniel B. Shapiro is a distinguished fellow with the Atlantic Council’s Scowcroft Middle East Security Initiative. He served as US ambassador to Israel from 2011 to 2017 and most recently as deputy assistant secretary of defense for the Middle East. 

The global economy

We’ve learned two connected things about the global economy in the month since the Iran war started. The first is that the markets matter for the military. Strikes have consistently ramped up on Friday evenings and over the weekend, while statements about deescalation have often coincided with Sunday evening (when Asian markets open) or Monday morning. This is not a coincidence. There is a direct line of communication between the White House and Wall Street. But Tehran understands this dynamic as well: Many Iranian statements have been crafted precisely to sow confusion in markets at key moments.  

But neither market sentiment nor media rhetoric can overcome the hard reality of oil and gas not being transited through the Strait of Hormuz. Time and again, the reality of the closure has rippled throughout the global economy. In the first week, gas prices dominated concerns. In the second, it was helium, a key component for chip-making throughout the world. In the third week, it was fertilizer and the potential strain on the global food supply. Just like the COVID-19 pandemic, the war has reminded us that for all the discussion about resiliency and artificial intelligence, the global economy is still incredibly reliant on a few strategic chokepoints, and the Strait of Hormuz is one of the most vital. 

—Josh Lipsky is the chair of international economics at the Atlantic Council and the senior director of the GeoEconomics Center. He previously served as an advisor at the International Monetary Fund.

Global energy markets

Geopolitical risks are and will remain an enduring feature of energy markets, but the next energy crisis could dwarf even the Iran war.  

In recent history, Russia’s full-scale invasion of Ukraine in February 2022 sent world energy and food prices soaring, further amplifying inflation already triggered by the COVID-19 pandemic’s effects on global supply chains and revenge consumption. In 2026, the US–Iran war could become the world’s largest energy crisis in living history, with the head of the International Energy Agency warning that the current supply shock could outstrip the two oil crises of the 1970s combined.  

While energy-related geopolitical risks are inherently unpredictable, they are generally not unforeseeable. The COVID-19 pandemic was sui generis, but Russian President Vladimir Putin credibly threatened a full-scale military action in Ukraine in early 2021, and analysts have been warning about Iran’s ability to shut down the Strait of Hormuz for decades.  

Another, greater foreseeable geopolitical risk looms over global energy markets. If the People’s Republic of China (PRC) attempts to coercively absorb Taiwan, probably via quarantine or blockade, Beijing will likely trigger the greatest geopolitical and energy crisis in history. Both the United States and the PRC are nuclear-armed, of course, but both also hold critical leverage over global energy supply chains.  

If the PRC initiates hostilities, Beijing would use its monopoly across critical minerals, including graphite for batteries and possibly petrochemicals, while potentially exploiting cyber vulnerabilities embedded in its energy exports. The United States would seek to constrain the PRC’s imports of crude oil, iron ore, and other commodities, although Beijing is assiduously mitigating its Malacca Dilemma and reducing oil-import exposure via electric vehicles and other measures.  

Just as Russia’s full-scale invasion of Ukraine and Iran’s closure of the Strait of Hormuz were foreseeable risks, a cross-Strait crisis, while not inevitable, must be prepared for—starting now.   

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and the Indo-Pacific Security Initiative; he also edits the independent China-Russia Report. 

Russia and Iran

Russia has largely been a beneficiary of the war for several reasons. First, US and global attention has shifted from Moscow’s aggression in Ukraine to the war in the Gulf. Second, the United States’ need for weapons in the Middle East may reduce stocks available for Ukraine. Third, the predictable jump in oil prices prompted by the war led Washington to suspend its sanctions on Russian oil, providing a substantial, immediate income boost to Russia’s stumbling economy. 

But not every consequence of the war works in Moscow’s favor. The Gulf countries’ air defense, which is heavy on expensive US weapons, has not been fully up to the task of protecting against Iranian drones and missiles, and has prompted some of these countries to make deals with Ukraine for both drones and help in establishing a layered air defense system. This provides money for Ukraine’s growing drone and defense industries, which means more production not just for the Gulf Arab states but also for Ukraine to use against Russia. This has also improved Ukraine’s standing in the Middle East, where many states had leaned in Moscow’s direction.   

There is one more important issue related to Russian policy in this war: Russian President Vladimir Putin’s decision to provide Iran with drone components and intelligence that Tehran can use to target US forces, Israel, and the Gulf Arab states. Iran’s drone supply to Russia after Moscow’s full-scale invasion of Ukraine was critical to its campaign against Ukrainian infrastructure and civilians. Russia not only used those drones in its war on Ukraine, but also took the prototype and started improving the drones and producing them in large numbers. Iran has been a beneficiary of these improvements.   

Moscow’s aim is clear: To prevent a US victory in Iran, or at least to slow it down and make it more expensive. It also wants the suspension in oil sanctions to continue as long as possible. The perplexing thing here is the Trump administration’s efforts to ignore or explain away this unpleasant fact. While criticizing US allies for not being more supportive in the Middle East—a fair criticism—it lets Russia off the hook for aiding Iran’s attacks on US servicemembers.

This situation is not likely to hold. Washington’s inaction on this matter may be encouraging Russia to provide additional help. According to Western intelligence, Moscow may now be sending drones to Iran. If a Russian drone or an Iranian drone with Russian components strikes and kills US soldiers, that may prompt the Trump administration to take strong measures to force Putin to knock it off. One such step would be to provide Ukraine the weapons it needs to take out Russia’s massive drone factory in Tatarstan. 

—John E. Herbst is the senior director of the Atlantic Council’s Eurasia Center and a former US ambassador to Ukraine.

China and Iran

One month into the war, Beijing increasingly views this conflict as a strategic opportunity. On the energy front, it is less dependent on imported oil than many of its neighbors and has massive stockpiles that it can use to offset near-term shortages. It is in Iran’s interest to keep the oil payments from China flowing, so Tehran is carefully avoiding firing on China-flagged tankers transiting the Strait of Hormuz. Those ships are among the few passing safely through, with Iran’s blessing.

Thus far, the downsides for China are minimal, and Beijing is focusing on a major upside: This war is forcing the United States to draw down military assets in the Asia-Pacific region. For China, that is a massive strategic win, and well worth any near-term disruptions to global energy markets. China has long complained about the US Terminal High Altitude Area Defense (THAAD) antiballistic missile system stationed in South Korea. Now, for the first time since its deployment in 2017, the United States is moving some of those interceptors to the Middle East to deal with Iran’s retaliatory strikes.  

Across the board, the US military is already running low on munitions, forcing it to consider pulling assets away from Ukraine as well. That will further embolden Russia, which is yet another win for China given that Chinese Foreign Minister Wang Yi has said Beijing needs to ensure Russia does not lose that conflict. The Chinese foreign minister told his European counterparts that Beijing benefits when Russia’s actions toward Ukraine keep the United States tied up in that war and unable to focus on China. The Iran conflict is delivering an even bigger distraction from China than the war in Ukraine. 

Chinese analysts do not expect the Iranian regime to fall or the United States to achieve its objectives. Instead, they anticipate that the United States will become mired in a protracted war that further drains US resources. One of China’s leading think tankers recently published a piece framing the war as a “strategic opportunity” for China. China’s censors quickly pulled that article down, most likely to avoid angering Iran or undermining Beijing’s message of outrage over the assassination of Iranian Supreme Leader Ayatollah Ali Khamenei. But make no mistake: That is the inside view. China sees the United States as dropping a rock on its own foot, becoming (yet again) entangled in the Middle East in ways that will make it exponentially harder for the United States and its allies to counter China’s ambitions in the Indo-Pacific.        

—Melanie Hart is the senior director of the Atlantic Council’s Global China Hub. She previously served as senior advisor for China in the Office of the Undersecretary for Economic Growth, Energy, and the Environment at the US Department of State.

The post Ten lessons from the first month of the Iran war appeared first on Atlantic Council.

Today, the global economy is wrestling with a similar conundrum. The US-Israeli attack on Iran has prompted Iran to all but close the Strait of Hormuz, disrupting the safe passage of roughly one-fifth of the world’s petroleum liquids consumption (around twenty million barrels per day) and liquefied natural gas (LNG) supplies. In less than three weeks, Brent crude spot prices have surged by more than 50 percent, triggering significant declines across major equity markets worldwide.

As with the war in Ukraine, however, the economic disruption will not stop at energy markets. Beyond the immediate shocks to oil, gas, and growth projections, tensions in the Strait of Hormuz are poised to ripple through industries closely tied to consumers’ everyday spending. Global agriculture and the aluminum sector, in particular, could feel the effects.

Disruptions in fertilizer supply threaten corn planting and food prices

Modern agricultural systems rely on nitrogen-rich fertilizer, and Persian Gulf nations play a critical role in its production and supply: according to the American Farm Bureau Association and The Fertilizer Institute, the region provides nearly half of the world’s seaborne urea—a key nitrogen fertilizer—and roughly 30 percent of global ammonia demand. Overall, roughly one-third of global fertilizer passes through the Strait of Hormuz, underscoring the region’s importance as a critical hub for modern agriculture.

As shown in the chart below, urea prices have risen by more than 50 percent over the past three weeks. Moreover, LNG accounts for up to 70 percent of production costs for nitrogen-rich fertilizer. The combination of reduced LNG supply and limited fertilizer exports from the Persian Gulf is already causing notable disruptions in global fertilizer availability. This trend is especially concerning as Northern Hemisphere corn producers enter the planting season.

The price shock will hit corn—a highly nitrogen-intensive crop—the hardest, driving food prices up more broadly. With one-third of the world’s corn production located in the United States (see the chart below), American farmers will likely bear the brunt. For them, the spring months are a critical period: most fertilizers, which arrive at US Gulf Coast ports after a thirty- to forty-five-day journey from the Strait of Hormuz, must be ordered by March and applied in April or May.

Due to the de facto blockade of the strait, however, shipments scheduled for April are unlikely to arrive on time, threatening this season’s corn planting and yields. The largest corn-producing states—Iowa, Nebraska, and Illinois—are most vulnerable. Analysts predict that American farmers may shift up to 1.5 million acres from corn to soybeans, a less nitrogen-dependent crop. This, in turn, would have ripple effects on food prices in the United States and globally through 2026 and potentially into 2027.

In the United States, beef prices rose 15 percent in 2025, and overall food prices are projected to climb 3.1 percent in 2026. Because nitrogen fertilizer is a primary input for corn—the foundational feedstock for US beef, dairy, and poultry—prices for these products are likely to climb further. This will place an even greater burden on low-income American households, as the bottom quintile of earners already spend nearly one-third of their disposable income on food, forcing difficult trade-offs between groceries, utilities, and rent.

Developing countries face greater vulnerability to fertilizer supply shocks than wealthier economies. They often lack strategic reserves, subsidy buffers, or the fiscal capacity to protect farmers and consumers when global supply chains break down. Farmers in sub-Saharan Africa are especially at risk, as even modest price increases can make fertilizers unaffordable and jeopardize critical planting seasons.

According to the UN World Food Programme (WFP), an additional forty-five million people worldwide could face acute hunger if the Iran war drags on. By comparison, after Russia’s full-scale invasion of Ukraine in 2022, WFP projected that acute hunger would increase by an estimated forty-seven million.

The aluminum sector faces strain but remains resilient

Beyond energy and fertilizer markets, the aluminum sector—vital to aerospace, automotive manufacturing, construction, consumer electronics, appliances, and furniture industries—is also at risk. After all, Gulf Cooperation Council countries account for about 20 percent of global raw aluminum exports and 8 percent of global aluminum production. 

As a result, aluminum prices initially spiked by roughly 15 percent after the US-Israeli attack on Iran. Since other major aluminum-producing and exporting countries—including Canada, India, Malaysia, Norway, and Australia—have been largely unaffected and are expected to have some spare capacity to partially offset the shortfall, the initial price surge has eased somewhat. As of today, aluminum prices remain about 6 percent above pre-conflict levels.

Still, this increase is expected to be passed on to consumers, inflating the cost of aluminum-intensive goods such as vehicles, aircraft, and household products.

To break the crisis cycle, the world needs diversified supply chains

Over the past five years the global economy has experienced major supply shocks: first the COVID-19 pandemic, then Russia’s invasion of Ukraine, and now the near closure of the Strait of Hormuz. All three shocks highlight the intricate interdependencies of the global economy and its heightened vulnerability to concentrated supply chains—from semiconductors to wheat, energy, and fertilizers—in a single country or region.

If the past five years have shown anything, it is that supply shocks are no longer rare anomalies. Instead, rising geopolitical rivalries and severe climate events have made these disruptions a defining feature of the global economy. Without deliberate efforts to diversify supply chains, invest in strategic reserves, and reduce dependence on chokepoints like the Strait of Hormuz, the world risks cycling from one costly crisis to the next, each more damaging than the last. In other words, building resilient, diversified, and strategically buffered supply chains is no longer a matter of efficiency—it is a prerequisite for global economic stability.

Amin Mohseni-Cheraghlou is a senior lecturer of economics at the American University in Washington, DC, and was a macroeconomist with the Atlantic Council GeoEconomics Center from 2021 to 2024. Previously, he served as a senior advisor at the International Monetary Fund’s Office of Executive Directors and was a research economist and consultant in different departments of the World Bank.

Eduardo Gomez Horta is a graduating senior from the Department of Economics at American University, Washington, DC.

The post The Iran war’s economic fallout won’t stop at oil—agriculture and aluminum are next appeared first on Atlantic Council.

Bottom lines up front

• China, Russia, and Iran have developed an “Axis of Evasion” that includes integrated supply chains to circumvent Western sanctions.
• Through these supply chains of dual-use technology, Iran is able to develop drones, navigation systems, and other military capabilities. 
• The US should press China on its support of these supply chains, and it should take additional steps to disrupt transshipment hubs and other intermediaries.

WASHINGTON—As the US-Israeli war with Iran continues, some commentators have speculated about why China and Russia appear to be keeping their distance from the conflict. Neither appears eager to intervene militarily to support Iran. Moreover, China is reportedly hesitant to send arms to Iran, while Russia is benefiting from the global oil supply shock caused by the conflict. Some rhetorical support aside, many commentators predict that Russian President Vladimir Putin and Chinese President Xi Jinping will not get meaningfully involved in Iran.

But such conjecture misunderstands the economic relationships and motivations behind the “Axis of Evasion,” the network of US adversaries that coalesce to circumvent Western economic restrictions. Specifically, it misunderstands how Beijing and Moscow enable Tehran to continue its violence across the Middle East through supply chains. 

The war with Iran is not solely a challenge posed by Iran. To bring about an end to the war and prevent Iran from rebuilding its military capacity, US President Donald Trump will need to confront Xi and Putin about their support for the Iranian regime and their schemes to evade sanctions and export controls.

How the Axis of Evasion works

China enables Russia and Iran by importing their sanctioned oil and selling them sophisticated dual-use technology. Over the past few years, we in the Atlantic Council’s GeoEconomics Center have proposed the term “Axis of Evasion” to describe the complex networks these countries use to evade and bypass Western sanctions. Our research has focused, for example, on Russia’s shadow fleet of oil tankers, as well as on alternative payment systems, money laundering schemes, and the barter trade. The current war with Iran has brought attention to yet another system or tactic of this Axis: integrated supply chains.

Trade and technology transfer between China, Russia, and Iran—and the associated supply chains—are the result of geography as well as significant Western economic pressure. Due to restrictive export controls and sanctions, these states cannot easily access Western technology and components directly from the United States and other Western countries. Because trade among the Axis of Evasion occurs outside of the Western financial system and, therefore, the reach of Western economic restrictions, these integrated supply chains are more resistant to sanctions and export controls enforcement.

Iran has been subject to extensive and comprehensive US sanctions and Western restrictive economic measures for decades. In October 2021, the United States announced the first export controls specifically targeting unmanned aerial vehicle (UAV) production. Since then, the Department of Commerce, Department of State, and the Treasury have also restricted third-party countries from exporting US-origin technologies to Iran. Despite the intensity of these restrictions, Western components continue to feature in Iranian drone designs. Often, these components come from China. 

China has supplied Iran with drones, anti-ship cruise missiles, surface-to-air missiles, and the components thereof, to aid in its aerial and maritime defense capabilities. In other instances, China directly supplies Iran with Western or Chinese technology components that are found in Iranian drones used against US military installations and economic interests in the Gulf, as well as on Russia’s battlefield in Ukraine. Treasury and Commerce actions targeting Iranian sanctions evasion schemes frequently identify and designate Chinese individuals, entities, and addresses that are used as shell or front companies and transshipment hubs. This cooperation extends beyond trading goods, but helps partners to develop and improve their own technological capabilities.

Drones

Iran’s drone program offers the clearest example of how the Axis of Evasion uses localized supply chains to circumvent restrictive economic measures and enhance military production. Iranian UAVs, such as the Shahed series, rely on an ecosystem of imported electronics, engines, navigation components, batteries, and semiconductors. While many of these parts originate in the United States, Europe, and Japan, procurement networks frequently route them through Chinese distributors or trading companies before they reach Iranian manufacturers. Chinese dual-use exports to Iran spiked in January 2024 when the two states formalized a strategic partnership emphasizing defense and security cooperation. Likewise, Chinese exports rose after Trump signed a memorandum restoring maximum pressure on Iran and again in June 2025 after the US attack on Iranian nuclear facilities.

Russia further reinforces this system through wartime cooperation with Iran. Since 2022, Moscow and Tehran have exchanged drone technology and production know-how, allowing both countries to expand manufacturing capacity. In February 2023, Russia established a drone production facility supported by Iranian technology and expertise at the Alabuga Special Economic Zone in Russia. As part of a deal, Iran transferred 600 disassembled Shahed-16 drones, components for 1,300 drones, training, and technical expertise to Russia to assist in its war in Ukraine. By 2025, Moscow had moved roughly 90 percent of Shahed assembly to Russia. Meanwhile, Russia developed the Garpiya-3, a modified and improved version of the Shahed, with the help of Chinese specialists and a reported Russian drone factory in China. 

This partnership now appears to be coming full circle. Recent comments by Ukrainian President Volodymyr Zelenskyy reveal that Russia is now supplying Iran with Russian-made Shahed drones to use in attacks against the United States and Israel. What began as a sanctions-driven workaround has evolved into a self-reinforcing production network, fueled by Western components, Chinese procurement channels, and Russian manufacturing capacity.

Navigation systems

In another example of these integrated supply chain networks, China facilitates the transfer of both Chinese- and Western-made navigation technology to Iran. Meanwhile, Russia is reportedly sharing satellite imagery and modified Shahed drone technology to improve navigation and targeting based on Russia’s experience of using drones in Ukraine.

Chinese electronics markets and distributors play a critical role in this process. Components originally manufactured for civilian applications—such as inertial sensors or satellite navigation modules—can be purchased through Chinese intermediaries and integrated into Iranian weapons systems. Russia’s experience adapting commercial electronics also feeds into this innovation ecosystem.

Some experts believe that Iranian drones and missiles incorporate Chinese satellite navigation systems to target US and Israeli military assets. In February 2025, the US Treasury Department sanctioned Chinese front companies that were supplying gyro navigation devices to enhance Iranian-made UAVs. In November 2025, a separate network connected to Iran’s Aircraft Manufacturing Industrial Company was accused of using shell firms to acquire Chinese sensors and navigation equipment.

In 2021, China gave Iran access to BeiDou, the global positioning satellite system owned and operated by the China National Space Administration. Since the start of the war with the United States and Israel, Iran has used BeiDou to produce decoy signals to confuse threat analysis and conceal actual Iranian military movements.

Chemical precursors

Iran’s ability to sustain missile and explosives production depends on access to chemical precursors and industrial materials. Although these substances are subject to Western export controls, and the US Treasury has sanctioned individuals and entities in Iran and China for procuring ballistic missile propellant ingredients, enforcement is more difficult when production is distributed across multiple jurisdictions. Chinese chemical companies—many of which operate in sprawling industrial clusters—have repeatedly been linked to shipments of dual-use materials to Iran as well as Russia. Another recent report suggests that Iranian shadow fleet vessels sailing from China contain precursors for rocket fuel.

For Iran, these imports provide critical inputs for solid rocket fuels, propellants, and explosives used in missile systems and other weapons systems. By purchasing precursor materials through intermediaries or reexport hubs, Iranian procurement networks obscure the destination of shipments and exploit gaps in global export-control and sanctions enforcement. The scale and diversity of China’s chemical industry make it particularly difficult for regulators to monitor the end use of every exported compound. 

What to do now

China, Russia, and Iran continue to work together to circumvent and evade Western sanctions and export controls. Meanwhile, the United States has been inconsistent in implementing economic restrictions. After the last Trump-Xi summit in October 2025, Washington suspended the Bureau of Industry and Security Affiliate Rule in exchange for China’s lifting of export controls on critical minerals, effectively revealing how much leverage Beijing retains through its dominance in rare-earth supply chains. Additionally, Washington is easing oil sanctions on Moscow and Tehran in response to rising energy prices and the crisis in the Strait of Hormuz, exposing the precise issues on which the US is willing to compromise.

As the White House diverts its attention toward the Middle East, the Trump-Xi summit, originally scheduled for next week, was postponed until May. However, a productive push on China could also advance the US position in the Iran conflict. In his meeting with Xi—if not sooner—Trump should confront China’s role in enabling these supply chains, tightening scrutiny of Chinese exports and intermediaries that facilitate sanctions evasion. The White House must make stronger export control enforcement, expanded entity listings, and greater transparency requirements for Chinese distributors involved in dual-use trade central to the agenda. 

But pressure on China alone is not enough. Iran’s procurement networks depend on a web of transshipment hubs and trading companies that move controlled technologies across jurisdictions before they reach their destination in Iran. These networks often rely on distributors and logistics firms in third countries to obscure the origin and destination of sensitive components.

The United States should therefore expand its focus beyond direct exporters and identify the intermediaries and transshipment hubs that repeatedly appear in Iranian procurement chains. With targeted sanctions, enhanced export control enforcement cooperation, and intelligence sharing with partner governments, the United States can help disrupt the flow of dual-use goods before they reach Iran’s defense sector.

This increased enforcement should be paired with incentives. Many countries that serve as transshipment hubs are not politically aligned with Iran but lack the regulatory capacity or economic incentives to fully enforce export controls. Such third countries have also been hit hard by US tariffs, pushing them toward US adversaries purely due to economic incentives. In deploying incentives to encourage stronger compliance, the United States can cooperate with countries willing to strengthen export-control enforcement. In addition to incentives, capacity building programs, including customs modernization, export-control training, and industrial diversification could also enable firms in these jurisdictions to comply with Western restrictive economic measures.

Despite the severity and consistency of US sanctions and export controls targeting Iran’s drone acquisition, Iran maintains the technical knowledge, mature production lines, and continued access to dual-use components necessary to rebuild its drone stockpiles. Cooperation with adversarial states—predominantly China and Russia—further reinforces these capabilities by distributing supply chains and insulating production from Western pressure.

A failure to confront this Axis of Evasion across its networks allows it to continue enabling the flow of dual-use technologies among its members, which will allow Iran to rebuild and expand its drone and missile arsenals both during and potentially after the current war. 

The post From drones to rocket fuel, China and Russia are helping Iran through supply chains appeared first on Atlantic Council.

The Trump administration has taken adversarial and unconventional approaches with European allies on subjects ranging from trade to content moderation, but in another important area the United States is proceeding more traditionally. The subject is politically controversial: biometric information sharing for purposes of border security. In late January, European Union officials flew to Washington to start low-key formal talks with the Department of Homeland Security (DHS) aimed at an international agreement. Despite the sensitive nature of the endeavor, EU member states and the European Data Protection Supervisor have endorsed it. 

Why is the United States taking a consensual approach with Europe on border security information sharing, and why is the European Union so far willing to accommodate? Why is this agreement on a fast track in Washington and Brussels when law enforcement initiatives such as the projected EU-US CLOUD Agreement have been paused by the Trump administration? Is the border security information-sharing effort a one-off or could it be a harbinger of a return to traditional transatlantic legal diplomacy?

DHS seeks enhanced border security partnerships

DHS operates an international biometric information-sharing program to assist in “assessing the eligibility or public security risk of individuals seeking an immigration benefit or encountered in the context of a border encounter or law enforcement investigation related to immigration or border security issues,” according to the department’s privacy impact assessment (PIA). The program entails “automatic comparison of the fingerprints collected by DHS or a foreign partner on international travelers, suspected criminals, asylum seekers, irregular migrants, refugees, [and] applicants for visa and/or immigration benefits,” the PIA states. Biometric identifiers potentially include facial and iris scans and DNA, as well as traditional fingerprints.

In 2022, DHS decided that all forty-three countries that benefit from visa-free entry to the United States through the Visa Waiver Program (VWP) must conclude agreements, dubbed enhanced border security partnerships (EBSP), enabling DHS to screen their biometric records for immigration or border security purposes. When DHS queries a name against a foreign state’s identity records and it yields a match, DHS automatically receives the responsive biometric data. Other identity information also could be conveyed by the foreign state. In the absence of a match in the foreign database, no fingerprints or other biometric information would be supplied to DHS.

Shared competence: EU and member-state roles

Twenty-four of the EU’s twenty-seven member states (all but Bulgaria, Cyprus, and Romania) participate in the VWP; they comprise more than half of all VWP members globally. Each EU state maintains its own national biometric information records for border purposes. Thus, DHS could take an important step toward fulfilling the overall EBSP goal by reaching biometric information-sharing agreements with these EU countries.

The EU, for its part, also has two relevant responsibilities: setting rules protecting personal data transferred outside its territory, per Article 16(2) of the Treaty on the Functioning of the European Union (TFEU); and setting common policy on visas and external border checks, per Article 77(2) TFEU.

As popular sentiment for stricter border controls has swelled across Europe in recent years, the EU’s policymaking role in this area has become more prominent. In the past year, it has finalized a Pact on Migration and Asylum, a new set of rules on managing migration and asylum applications. In addition, new systems for tracking the entry and exit of foreign travelers and collecting the personal data of those entering EU territory on a visa-free basis are being put in place. These new systems show the EU moving in a similar direction as the United States in collecting information on foreign visitors.

DHS’s demand for biometric information-sharing agreements with EU member states thus touches on an area of “mixed” competence, i.e., one shared between the EU and its member states. In such a situation, the EU and its member states had to decide who would be responsible for negotiating with the United States.

The question took time to resolve. Only in 2024 did the Council of the European Union—which comprises the member states’ national ministers—invite the European Commission to develop a mandate for an international agreement at the EU level. Member states reportedly were eager to bring the collective negotiating strength of the EU to the table with the United States, rather than facing Washington individually.

A year passed before the Commission presented its draft negotiating mandate. It did so based on the understanding that the agreement sought by the United States related to the VWP and thus fell within the EU’s visa policy competence. Negotiations between the Council and Commission on the final contours of the mandate ensued during the second half of 2025.

Finally, in December 2025, the Council adopted a decision authoring the negotiation of an EU-level “framework” agreement with the United States. The framework would provide an overall legal structure for EU member states to conduct bilateral information exchange with DHS, setting the general conditions under which EU member states could provide biometric information to the US border agency. Each eligible member state subsequently would conclude an implementing agreement or arrangement with DHS identifying its relevant databases and operationalizing the data transfers.

Other relevant EU-US agreements

Over the past two decades, the EU has entered into a series of law enforcement and security information-sharing agreements with the United States—ranging from airline passenger name records (PNR) data to financial messaging data (via SWIFT) to mutual legal assistance in criminal matters. DHS is the principal beneficiary of PNR data sharing; the US Department of the Treasury receives SWIFT data used in tracking terrorist finance; and the Department of Justice manages information exchanged for criminal investigations and prosecutions. The United States and the EU also have concluded an agreement elaborating the data protection safeguards that must accompany transfers for law enforcement purposes, the so-called Umbrella Agreement.

In addition, DHS already enjoys access to foreign biometric and biographic data for purposes of preventing and combating serious crime (referred to as PCSC agreements), under a separate negotiating program that commenced in 2009. This earlier generation of agreements assists DHS in border encounters with persons suspected of terrorism and other serious offenses, but they do not apply to all foreign persons seeking to enter the United States.

The EU at that time had also sought to negotiate a PCSC agreement collectively on behalf of its member states, but DHS rebuffed Brussels and instead chose to negotiate individually with each EU member, believing the agency would have better leverage that way. The first two PCSC accords were concluded with Greece and Italy, and eventually all the European participants in the VWP program reached agreements as well.

An EU-level agreement on broad-scale border security information-sharing cooperation with the United States would represent a novel departure for Brussels. “It would be the first agreement concluded by the EU implying large-scale sharing of personal data, including biometric data, for the purpose of border and immigration control by a third country,” the European Data Protection supervisor has observed. 

This time, DHS appears to have appreciated the relative speed and efficiency that comes from negotiating one uniform set of access conditions that will apply to all EU VWP participants. The EU and its member states, meanwhile, seem to have reached a sensible division of labor that respects member states’ prerogatives for controlling their own biometric information databases and for managing technical interactions with DHS.

EU negotiating goals

One major EU ambition in setting the rules and procedures governing DHS queries is to preclude generalized processing of all travelers’ data. A Commission press spokesman emphasized the “non-systematic nature of the information exchange and that the exchange is limited to what is strictly necessary to achieve the objectives of this cooperation.”

The EU mandate further stresses that the EU seeks an agreement that would be reciprocal in nature, enabling member states’ border authorities to query corresponding DHS databases. A leaked Council presidency working paper suggested that a monitoring mechanism should ensure reciprocity in implementation: “Information on member states’ citizens should be exchanged under the framework only if the U.S. exchanges information on American citizens.”

It is not clear that the United States and the EU are entering into these negotiations with entirely congruent views on the scope of the framework agreement. DHS envisages checking the biometric databases of travelers from VWP countries on a routine basis. However, the European Commission, as noted above, views the information exchange as “non-systematic.”

In addition, the US international biometric information-sharing program envisages access to foreign databases “in the context of a border encounter or law enforcement investigation related to immigration or border security issues,” according to the DHS Privacy Impact Assessment (italics added). The EU mandate, by contrast, concentrates on security screening and identity verification at the border, with subsequent law enforcement data access to be exclusively governed by other bilateral agreements. 

The EU’s data protection rules are its main tool in ensuring that information conveyed to DHS pursuant to the EBSP agreement remains targeted. For example, the negotiating directive insists that processing of personal data be limited to what is “necessary and proportionate in individual cases.” Necessity and proportionality is a key concept in EU data protection law, including in the Schrems jurisprudence of the European Court of Justice, albeit one that is hard to define a priori.

The EU also seeks to include other traditional data protection safeguards in the EBSP agreement with the United States, according to press reports. One reported provision would require human involvement in decisions having significant adverse effects on individuals, rather than permitting entirely automated decision-making. Another would allow for the transfer of “special categories” of personal data—such as sensitive data regarding political opinions, religion, and sexual orientation—only when necessary and proportionate to prevent criminal or terrorist offenses, and with additional protections that limit the universe of individuals who may access it and the duration of retention. Onward transfers of foreign-supplied biometric data to third countries would require the explicit consent of the country from which the data originated.

According to the European Commission version of the negotiating mandate, the EU also seeks to limit DHS retention of transferred personal data to cases of “travelers in respect of whom there is objective evidence from which it may be inferred that there is a continuing risk to public security or public order.” In other words, DHS would not be permitted to store fingerprint data supplied by EU VWP countries on a generalized basis; it could do so only if it has reason to believe that the person would continue to be a threat—a difficult prediction for a security agency to make at the time of the initial border encounter.

The European Data Protection supervisor stated in his opinion that he “largely supports” the proposed approach with the United States. At the same time, he pointed to certain information-sharing constraints the EU would face. Two important EU data repositories prohibit sharing of information with third countries: Eurodac, which contains biometric information on persons who have applied for refugee status in an EU member state or otherwise have migrated irregularly, and ECRIS, which links together member-state records of third country nationals with criminal convictions within the EU. However, the member states themselves regard the exclusive focus of negotiations with the United States on national databases as “without prejudice to any further reflections on the possibility for information exchange with selected third countries from EU databases,” the leaked Council presidency document suggested.

Finally, the EU mandate also seeks the right to an “effective remedy” for persons whose information has been transferred to DHS. This principle, enshrined in the EU Charter of Fundamental Rights, consistently has proven very difficult to resolve in past EU information-sharing agreements with the United States.

Major issues and possible solutions

The existing web of EU-US information-sharing agreements offer valuable precedents for the latest negotiation on access to biometric data for border security purposes. The PCSC agreements, for example, can provide a template for structuring technical interaction between DHS and EU member-state databases. Equally, the types of data protection provisions contained in the law enforcement Umbrella Agreement could be mirrored in the EBSP agreement, even if the former cannot directly be applied to the border security context.

Remedies for misuse of information likely will prove more difficult to resolve. The Data Privacy Framework (DPF), which offers safeguards against illegal US intelligence agency access to personal data transferred from Europe in the commercial context, provides redress in the form of a special tribunal established within the US Department of Justice. Europeans may not petition an ordinary US court if they believe a US intelligence agency has improperly used their data, however. The Court of Justice of the European Union has yet to decide if this specialized form of recourse meets EU fundamental rights standards.

By contrast, the EU did secure US judicial redress for EU citizens whose information is exchanged for law enforcement purposes, under the terms of the EU-US Umbrella Agreement. It took a US statutory change, through the adoption of the Judicial Redress Act, to extend such a right to foreign persons. (The US Privacy Act otherwise limits the right of judicial redress only to US individuals.) Extending this right to Europeans’ whose biometric data is transferred to DHS for the purposes of border security—as opposed to law enforcement—likely would require a further US statutory amendment. Persuading Congress of the necessity of such a change would be challenging.

The necessity and proportionality concept in EU fundamental rights law serves as a legal technique for balancing data protection rights with legitimate public order and public security interests. In the DPF, the United States accepted explicit reference to the EU’s necessity and proportionality standard—in a sensitive context dealing with potential intelligence agency access to personal data. Incorporating this concept in the border biometric information-sharing setting could similarly assure the EU and its member states that DHS is not engaged in mass data collection.

Legal and political dynamics

DHS faces a complex legal situation in pursuing negotiations involving both the EU and its member states. It is consistently difficult for a US government negotiator to be certain where a particular responsibility lies within the EU’s confederal system. In this case, the task is complicated by the cumbersome division of competences for visa and border policy.

In addition, since DHS seeks information for not just border security but also related law enforcement purposes, it must engage with two separate and varying sources of EU data protection law. Data protection rules for immigration control and visa policy are governed by the General Data Protection Regulation, while the rules for protecting law enforcement data fall under a separate directive.

Political factors in Europe also could slow completion of the agreements with the United States. Some members of the European Parliament who belong to the liberal Renew parliamentary group wrote to the European Commission in January, stating: “Looking at the current geopolitical context, we consider it undesirable for the European Commission to start or continue such negotiations.” Although the European Parliament does not have the power to stop the negotiations, it must approve any international agreement that the EU reaches with the United States.

The Trump administration’s removal of Democratic members serving on the Privacy and Civil Liberties Oversight Board (PLCOB) and on the Federal Trade Commission (FTC) have undermined confidence in European privacy circles in US institutions charged with privacy protection. Moreover, DHS’s proposed rule requiring visitors to the United States to supply five years of details on their social media activity has generated widespread outrage abroad. Although this initiative is formally separate from the VWP program, the European public might well conflate the social media and biometric information demands of the United States.

DHS’s goal of wrapping up both the EU framework agreement and, subsequently, the twenty-four implementing agreements with EU member states by the end of 2026, as has been reported, will likely prove overly ambitious. A more achievable ambition would be to complete the EU framework by that date, with the necessary member states implementing agreements afterward. (The leaked Council presidency document sternly states that it considers “Member States’ commitment to refrain from bilateral negotiations with the US while material discussions on the framework are ongoing to be of critical strategic importance.”)

Nevertheless, there is reason for optimism that the US-EU engagement on border security biometric information sharing will yield success. Both sides appear to have entered talks pragmatically, the EU and its member states by agreeing on a sensible division of labor between themselves, and the United States by accepting the practical benefits of negotiating with both Brussels and member-state capitals. Each is impelled by a desire to have greater control of its borders and sees reciprocal information sharing as a promising approach. However, flexibility on both sides will be indispensable to overcoming divergent positions on issues such as remedies.

Further, by winning support in principle for the framework agreement from the EU’s data protection supervisor, the EU already has shown its commitment to achieving a broadly acceptable agreement. Europe’s collective approach to these negotiations also reflects a sober appreciation of power realities. EU citizens value the ease of visa-free travel to the United States, so member states ultimately will do what is necessary to retain VWP status, within the confines of fundamental rights.

Finally, the EU’s decision to take a leading role in the EBSP negotiations reflects its increased institutional maturity and importance in the field of border security. DHS’s willingness to pursue a framework agreement with the EU may show a corresponding recognition of Brussels’ growing role in this area. As popular sentiment has converged in Europe and America on more tightly controlling borders, there is now an opportunity to achieve a balanced transatlantic agreement on sharing information to that end.

Kenneth Propp is a nonresident senior fellow with the Atlantic Council’s Europe Center, an adjunct professor of European Union law at the Georgetown University Law Center, and a senior fellow with the Cross-Border Data Forum. His prior experience includes serving as legal counselor at the US Mission to the European Union in Brussels and in the Office of the Legal Adviser at the US Department of State. 

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In Brussels, “digital sovereignty” may be the new “strategic autonomy”: a push for Europe to go its own way and depend less on the United States. As US tech companies and EU regulators clash, catch up on a policy debate with consequences playing out online and in the halls of power.

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Republican-led US lawmakers and the White House are likely just getting started in critiquing the European Union’s Digital Services Act.

European Union Internet

The Europe Center promotes leadership, strategies, and analysis to ensure a strong, ambitious, and forward-looking transatlantic relationship.

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The post Negotiating an EU-US biometric information-sharing agreement appeared first on Atlantic Council.

Demographic change is a critical variable affecting long-term economic development, including economic growth, capital accumulation, government budgets and debt, technology adaptation, and prosperity. Global demographic trends differ markedly, with some countries experiencing population stagnation or even decline, while other countries’ populations expand rapidly. Governments are not powerless in the face of the headwinds these demographic shifts produce. Mitigating the effects, however, of a shrinking working-age population in advanced economies and leveraging demographic expansion in developing economies will require far-sighted public policies.

Countries with declining working-age populations face significant challenges. Economically, the combination of low growth and increased government social spending creates financial pressures. Politically, demographic aging creates so-called “gray majorities” that can make it difficult for governments, particularly democratic ones, to enact the reforms necessary to maintain long-term financial stability. To the extent that voters view health and pension expenditures as acquired rights, political opposition to reform tends to be significant. Similarly, countries with a large share of young people may be more prone to political instability, particularly in the context of uneven economic growth and limited employment opportunities. These countries also often lack the ability to mobilize the resources necessary to invest in human and physical capital.

This issue brief is divided into three parts. First is an overview of demographic trends in advanced, emerging, and developing economies. These three groups of countries largely coincide with those identified in the Atlantic Council’s Freedom and Prosperity Indexes: high prosperity/high freedom, medium and low prosperity/medium and low freedom, and low prosperity/low freedom. Second is a discussion of the various economic, financial, and political challenges faced by the three groups, followed finally by high-level recommendations to cope with the economic challenges of demographic change.

Demographic change in advanced, emerging, and developing economies 

When discussing the impact of demographic change on prosperity, it is helpful to divide countries into three categories: advanced economies (or high-income countries), emerging economies (or middle-income countries), and developing economies (or low-income countries). Demographic trends in advanced, emerging, and developing economies differ markedly, leading to different economic and political challenges. The median age in high-, middle-, and low-income countries is forty, thirty, and twenty years old, respectively.

Advanced economies are characterized by high per capita income, slow economic growth, and a rapidly increasing elderly population. (See Figure 1.) In some cases, even the overall population is declining after decades of below-replacement fertility rates. (See Figure 2.) Where the overall population continues to increase, it is often due to net immigration. The so-called old-age dependency ratio—the share of people over sixty-five relative to the working-age population—averages thirty in advanced economies, meaning that for every person of retirement age there are roughly three people of working age. In Japan, a demographically very advanced country, the ratio is currently fifty, meaning there are two people of working age for every person over sixty-five.

Emerging economies, characterized by middling per capita income but generally fair economic growth, are also aging, in some cases very rapidly (e.g., China). Their old-age dependency ratios, however, remain lower than those of most advanced economies. Until recently, emerging economies were in a demographic sweet spot as they experienced declining overall dependency ratios. Today, fertility rates have fallen to near or below replacement levels in many upper-middle-income countries, setting them up for what are likely to be rapid increases in their old-age dependency ratios over the next few decades. In advanced economies, this transition was comparatively gradual. In many emerging economies, the transition will be considerably faster. The related economic challenges will affect these countries more precipitously, if more predictably.

Developing economies have low per capita income and are characterized by young, growing populations. The variability of economic growth is significant within this group of countries, with some registering very rapid economic expansion, while others are experiencing stagnation, typically in the context of domestic civil strife and political instability. Like high old-age dependency in advanced economies, a high youth dependency ratio in developing economies translates into a large share of economically inactive youth relative to the working-age population. This in part helps explain low levels of savings and investment.

How demographic change affects prosperity 

Favorable demographic momentum enhances a country’s economic potential. But there are many other factors that can affect economic outcomes, either favorably—sensible economic policy, strong human capital (e.g., high-quality schooling)—or unfavorably (e.g., political instability). The economic and financial outlook for each group differs markedly.

First, advanced economies have a significantly lower growth potential than emerging and developing economies. (See Figure 3.) Advanced economies grow less rapidly because they operate near the so-called technological frontier. By comparison, emerging and developing economies find it easier to generate productivity gains due to physical capital accumulation and the adaptation of existing technologies. In principle, developing economies are even more favorably positioned, but they often fail to fully exploit their potential catch-up growth because of political and economic instability.

Second, advanced economies are faced with adverse labor supply dynamics, compared to emerging and developing economies. An increasing old-age dependency ratio means the share of workers shrinks relative to older, economically inactive individuals. (See Figure 4.) According to the standard economic growth model, labor, in addition to capital and technology, contributes to economic output. Provided they are fully employed, expanding working-age populations will add to economic output, while a declining working-age population will subtract from it, all other things equal.

Third, advanced economies’ aging can affect the level of savings and hence investment and economic growth. As the share of economically inactive people—namely retirees, who do not produce but consume—increases, consumption tends to also increase and savings to decrease (relative to the baseline scenario where the old-age dependency ratio remains constant). This is akin to the life cycle hypothesis, which posits that savings peak in middle age. Indeed, the savings ratio in “middle-aged” emerging economies is significantly higher than in advanced and developing economies. (See Figure 5.) Of course, many other factors affect savings and investment in an economy, but an increasing old-dependency ratio should, all other things equal, reduce or at least limit savings, while a declining overall dependency should increase savings.

Fourth, advanced economies are, on average, characterized by high debt–to–GDP ratios and face significant increases in age-related government spending. (See Figure 6.) Social transfers and age-related spending (e.g., on health care and pensions) typically constitute the largest spending category in advanced economies. Moreover, advanced economies, and also some emerging economies, face large increases in age-related expenditures, as represented by the net present value of future pension and health care spending. By contrast, the government debt burden (measured as a share of GDP) in developing economies is typically lower, as is age-related spending. But while advanced and emerging economies have higher debt than developing economies, they also have a broader tax base, a more captive investor base, superior governance, and higher per capita income. Nonetheless, the financial challenges in the face of demographic change are significant in advanced economies; somewhat less significant, though rapidly increasing, in emerging economies; and virtually absent in developing economies.

Finally, distributional conflict is easier to manage in rapidly growing emerging economies than in slow-growing advanced economies, particularly in regard to age-related spending. It is more challenging to rein in spending or increase revenue in slow-growing economies, as a “pie” that is growing less rapidly makes distributional conflict more intense. In advanced economies especially, an expanding “gray majority” keen on defending acquired rights is electorally influential given its growing share of the voting population. By contrast, a rapidly expanding youth population can lead to instability (“youth bulge”). This also can make it harder to pursue a forward-looking policy consistent with long-term financial stability. Compared to advanced economies, emerging economies may find it easier to deal with distributional conflict given generally high economic growth rates as well as less pressure to rein in age-related spending. (See Figure 7.)

Policy recommendations 

Demographic change will have a major impact on economic outlook and government finances, particularly in advanced economies and increasingly in many emerging economies. Developing economies also face demographics-related economic challenges. Following are high-level recommendations for coping with demographic change.

For advanced economies

Advanced economies faced with declining or slow-growing working-age populations, slow economic growth, and increasing government debt should do the following:

• Devise policies aimed at slowing and, if possible, reversing declines in fertility rates. Few if any countries have thus far proved successful at increasing fertility rates. Even countries with supportive childcare and education policies have seen their rates decline significantly (e.g., Scandinavia). It is worth experimenting with policies to prevent a further, potentially catastrophic decline.
• Pursue policies to prevent further decline in economic growth. Such policies include creating incentives for older workers to remain in the workforce for longer, if only part-time, and supporting the development and integration of productivity-enhancing technologies (e.g., AI). Higher growth will help make demographic aging slightly more manageable.
• Reduce upward pressure on age-related spending. Adjust benefits and make spending more targeted and efficient in addition to automatically adjusting expenditures for increases in longevity.
• Increase immigration to counteract an accelerating decline of the labor force and thus slow the increase in old-age dependency ratios. In view of political headwinds in many advanced countries, it is important to explain the benefits of immigration and put in place appropriate policies aimed at rapidly integrating immigrants economically, politically, and socially. Consider issuing temporary or conditional work permits and conduct recurrent cost-benefit analysis of various types of immigration based on economic needs (e.g., individuals with specific educational or professional backgrounds, like medical professionals to meet increased demand in healthcare sector).

For emerging economies

Emerging economies faced with a rapidly slowing demographic momentum, a fair economic growth outlook, and middling debt levels should avoid replicating the mistakes of advanced economies and do the following:

• Devise policies to sustain continued high economic growth. Individual policies will vary by country, as different economies face different challenges (e.g., China has a high rate of saving; Brazil’s is low). Economically closed countries can generate efficiency gains by way of trade liberalization or creating more attractive conditions for foreign investment.
• Attract high-quality, low-risk capital inflows from less rapidly expanding advanced economies. This requires a credible commitment to sensible economic policies and macroeconomic stability and favorable regulatory and attractive tax policies, among other things. Enshrining such commitments in difficult-to-change laws or constitutional law may prove helpful.
• Limit future age-related government spending in view of rapid demographic aging. Avoid making expenditure commitments that will put stress on government finances by, for example, tying contributions and expenditures to projected demographic developments before a politically strong gray majority capable of preventing forward-looking age-related policies emerges.

For developing economies

Developing economies have low savings rates due to a high youth dependency ratio, while a rapidly expanding young population creates economic and political challenges. To address this, they should do the following:

• Maintain and/or increase political and economic stability to exploit their considerable economic catch-up potential and reduce the incentives for skilled individuals to immigrate to high-wage economies where there is strong demand and both political stability and living standards are higher. Political and economic stability are likely to prove self-reinforcing.
• Mobilize greater fiscal and financial resources, including from abroad, to invest in infrastructure and education in order to increase physical and human capital and facilitate integration of young people into the formal economy.
• Pursue policies aimed at lowering the youth dependency ratio to enhance the economy’s savings potential. This should be done through incentives, ideally by providing women with better access to education and offering targeted, affordable age-related policies to reduce the incentives to have large numbers of children, particularly in poor, rural areas.
• Create conditions to facilitate the return of skilled emigrants through incentives, such as tax benefits. Emigrants often gain valuable economic experience and skills in their host countries. They can also help create transnational economic networks, allowing knowledge, skills, and even capital to move more easily between advanced and developing economies. The easier it is for emigrants to return to their country of origin, without forfeiting the right to reside in either country, the more likely they are to return or engage in economic activities in their home country.

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Senior Advisor

Freedom and Prosperity Center

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By Ignacio Campomanes, Nina Dannaoui-Johnson, Annie (Yu-Lin) Lee, Joseph Lemoine

As the Freedom and Prosperity Indexes show political freedom declining worldwide for the twelfth straight year, new data analysis shows its importance for lasting prosperity: Though authoritarians promise economic rewards, democratizing countries gain an 8.8 percent GDP per capita boost over twenty years than their autocratic peers. With democracy on the ropes, what else can the Indexes tell us?

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Democratic peace theory holds that democracies do not go to war with each other. The democratic alliance hypothesis suggests democracies prefer alliances with fellow democracies over nondemocratic powers. If both theories hold, US foreign policy should prioritize democratization, as prosperous, democratic nations are less likely to align with authoritarian states.

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Freedom and Prosperity Indexes

The indexes rank 164 countries around the world according to their levels of freedom and prosperity. Use our site to explore twenty-eight years of data, compare countries and regions, and examine the sub-indexes and indicators that comprise our indexes.

The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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The post The economic and political traps awaiting aging societies appeared first on Atlantic Council.

Policymakers around the world, market participants, and the general public would all benefit from the IMF’s insights into the unfolding Iran crisis and the consequences of Tehran’s de facto blockade of the Strait of Hormuz. After all, the institution has unmatched access to financial markets, central banks, and finance ministries around the world.

So far, however, the Fund has issued only a few statements. On March 3, it said that it was “closely monitoring developments,” and Managing Director Kristalina Georgieva—speaking during a trip to Asia—urged countries to “think about the unthinkable and get ready for it.” Yesterday, an IMF spokesperson provided estimates for the impact of oil prices should they remain elevated for a year and raised concerns about economically vulnerable countries.

Real-time shocks, delayed insights

To be fair, IMF staff may already have shared preliminary analyses with the IMF Executive Board, which includes both a US and an Iranian representative, and they are now busy rewriting the World Economic Outlook (WEO) to account for recent developments.

However, this highlights a structural challenge.

The IMF’s multilateral surveillance is constrained by its standardized reporting frameworks. By the time the WEO and the Global Financial Stability Report (GFSR) are published in mid-April, their forecasts will already lag behind unfolding developments. An alternative forecast derived from quantitative macro models was helpful after the April tariff announcements last year, but policy recommendations often remain too broad to inform decision-making amid fast-moving crises like the Iran war.

The IMF’s current model leans toward achieving a consensual point forecast, which makes it more difficult to anticipate sudden turning points. The WEO, for instance, not only underestimated the 2022 inflation surge—as did the Fed and other major institutions—but also overestimated the pace of the post-COVID recovery.

From rearview mirror to forward radar

The developments in the Strait of Hormuz underscore the need for the IMF to pivot toward real-time, scenario-driven foresight that anticipates shocks and guides coordinated responses.

This is not only due to geopolitical uncertainty. Geoeconomics itself has moved to center stage, as economic dependencies are increasingly weaponized by conflict parties. At the same time, global repercussions may also push them toward negotiations if the indirect costs become too painful even for the aggressor to bear.

The IMF should therefore reorient its surveillance around scenarios, financial transmission maps, and actionable policy options—delivered when needed, not on a semiannual schedule. This should be accompanied by regional, if not country-specific, vulnerability assessments, policy toolkits for affected economies, and analysis of how shocks ripple through real and financial channels, along with an assessment of mitigating factors.

Simultaneously, the IMF should expand its capacity to identify material dependencies, supply chain vulnerabilities, and geoeconomic chokepoints.

This would transform the Fund from a recorder into a radar, scanning for spillovers before they cascade. The budgetary resources for this shift exist; what’s needed is redeploying or rehiring analytical talent, as headcounts in the IMF’s macroeconomic workstreams have dwindled in recent years.

Producing analysis within days, not weeks

In a world where economic and geopolitical shocks move at the speed of missile strikes and oil futures, this will require the IMF to move beyond its traditional reporting framework. It should develop a rapid-response, integrated surveillance capacity capable of producing and publishing reports within days of a major disruption, not weeks.

Moreover, the teams producing the WEO and GFSR should be fully integrated—a long-standing point of contention within the IMF. The October 2025 WEO projected steady global growth of 3.3 percent in 2026, highlighting the resilience of the AI-driven investment boom and the fading drag from US tariffs. By contrast, the October 2025 GFSR cautioned that “beneath the calm” significant vulnerabilities remain: stretched asset valuations, sovereign bond market pressures, growing interconnectedness between banks and nonbank financial institutions, and the opacity of a shadow banking sector that now holds roughly half the world’s financial assets.

While analyzing the same global economy, the WEO saw resilience and the GFSR saw fragility. The integrated picture—that a geopolitically triggered energy shock could simultaneously slash growth forecasts and trigger disorderly financial corrections—was left for the reader to piece together.

Similarly, no single IMF product currently connects the dots between oil supply shocks, emerging-market inflation, risk repricing, strain on leveraged nonbank intermediaries, and feedback into sovereign and banking systems. But such integrated analysis is exactly what the Fund’s 190 member countries should expect.

A moment tailored for the IMF

Beyond operational reforms, IMF shareholders should allow space for candid analysis of developments in systemically important economies and the global economy as a whole. They should hold management accountable for protecting the independence of its technical staff and enable swift Executive Board discussion of staff analysis, allowing only factual corrections.

Members with direct Executive Board representation bear special responsibility. Many represent systemic economies and must lead by example, refraining from influencing country teams and avoiding interference with specific risk assessments or policy recommendations

They would do well to heed the recommendations of several recent US administrations to have the IMF focus on “core macroeconomic issues” in line with its original mandate. An oil shock that threatens to reignite global inflation and tip energy-importing developing countries into crisis is exactly the kind of macroeconomic issue the institution should be able to handle.

The IMF was founded in the wreckage of a world war, by statesmen who understood that economic instability and geopolitical conflict feed on each other. Eighty years later, a new war is producing exactly the type of economic shock the institution was built to diagnose and mitigate. The IMF’s staff have the expertise do so—and its member countries have a strong interest in timely analysis.

The Executive Board should therefore encourage—and management should aim to provide—a comprehensive, integrated macrofinancial assessment of the Iran war’s economic fallout and likely scenarios, with clear and actionable policy recommendations well before the April meetings. The world cannot afford to wait.

Martin Mühleisen is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a former International Monetary Fund (IMF) official with decades-long experience in economic crisis management and financial diplomacy.

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Russian aggression in the cyber sphere has forced Ukraine into rapid and often improvised defense. Coordination mechanisms have emerged across government agencies, volunteer networks, and private sector IT firms, with operational responses conducted under constant pressure. Permanent mobilization, however, is not sustainable. Instead, the goal is to codify the next phase of reform in Ukraine’s evolving cyber security strategy.

For Ukraine, the strategic objective is no longer limited to repelling cyber attacks. It is to ensure continuity of state functions even when attacks succeed. This requires a national cyber resilience framework that encompasses government, business, and civil society. It demands continuous professional training along with strengthened legislative and risk management frameworks. It also implies a culture of cyber hygiene at the citizen level. Together, these measures represent a shift from episodic defense to durable digital statehood.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Ukraine’s experience over the past twelve years underscores a central truth of cyber defense: People play a decisive role in cyber security. Since 2014, thousands of professionals from the private sector, volunteer networks, and academia have mobilized to defend Ukraine’s digital front. Sustaining this momentum requires institutional support and a long-term talent strategy.

Priority areas include integrating cyber education across schools, universities, and military institutions. Partnerships between industry and academia should undergo expansion through education and internships. Workforce development is not merely a labor market issue; it is a pillar of cyber sovereignty and continuity of government. It is also crucial to establish a national cyber reserve supported by access to cyber ranges and allied training platforms.

Wartime conditions have already accelerated innovation in Ukraine. Cloud-based backups, relocation of critical data to secure environments abroad, and decentralized platforms for citizen services are now routine. These practices must be institutionalized to endure beyond the war. Priorities include embedding innovations into permanent government processes and establishing applied cyber research centers at universities.

The convergence of academia, defense institutions, and the technology sector in wartime Ukraine is enabling a distinct national cyber security model to emerge rooted in operational experience and continuous adaptation. It is a model that complements existing frameworks while reflecting Ukraine’s realities. As a result, Ukraine has become an integral actor within the Euro-Atlantic cyber ecosystem.

At the international level, cooperation with the EU, NATO, United States, United Kingdom, Canada, and Japan has evolved from ad hoc assistance to structured partnerships. Core focuses include joint threat intelligence-sharing mechanisms; harmonization with EU and NATO standards; participation in multinational exercises; and the development of a shared resilience space in which national resilience contributes to collective defense. Ukraine’s expertise positions it not only as a recipient of assistance, but increasingly as an exporter of operational resilience models to partners confronting hybrid threats.

Ukraine’s progress demonstrates the importance of embedding cyber resilience in institutional architecture rather than treating it as a reactive function. A resilience-by-design model entails distributed system architecture to reduce single points of failure. It requires adoption of open standards and transparent protocols, along with continuous training and simulations embedded in institutional life cycles.

Psychological resilience training for cyber professionals operating under sustained pressure and information warfare conditions is also crucial. This should position cyber security as a governance principle, framing Ukraine not only as a state under attack but as a testing ground for next generation digital resilience.

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Since the onset of Russia’s invasion in 2014, Ukraine has become the world’s most consequential real-time laboratory for cyber resilience. The country’s experience demonstrates that effective cyber security is an integrated system encompassing governance, education, law, diplomacy, and economic resilience. Institutionalizing these lessons into a durable national cyber resilience ecosystem will underpin postwar recovery and long-term digital sovereignty.

For partners, Ukraine’s experience offers much more than a narrative of resistance. It represents a practical plan for collective security for the coming decades of international military conflicts, each of which will have a mandatory digital component.

As Ukraine develops its forthcoming National Cybersecurity Strategy 2.0, several priorities should guide the next phase of institutional reform. First, Ukraine should expand the doctrine of active cyber protection, enabling defensive operations that proactively detect, disrupt, and neutralize threats before they impact critical systems.

Second, the continued Euro-integration of Ukraine’s cyber regulatory framework will be essential. This should include alignment with EU directives such as NIS2, the Critical Infrastructure Resilience framework, and the Digital Operational Resilience Act (DORA), ensuring interoperability with European cyber governance standards.

Third, Ukraine should actively participate in the development of a European cyber shield. The goal should be a collective resilience architecture built on shared threat intelligence, joint incident response mechanisms, and coordinated defensive capabilities across the continent.

Fourth, long-term resilience requires sustained investment in cyber workforce development aligned with the NIST Cybersecurity Framework 2.0. This should include standardized training pathways, public-private talent pipelines, and the expansion of national cyber reserve capacities.

Fifth, strengthening cyber security capacity at the regional administration level across Ukraine will be vital. This can help ensure that local governments and regional critical infrastructure operators possess the operational capabilities and resources necessary to implement national cyber resilience policies effectively.

Finally, Ukraine’s next cyber strategy should also define a clear wartime framework that establishes legal authorities, operational coordination mechanisms, and public–private responsibilities for defending national digital and operational infrastructure during periods of armed conflict or hybrid attack.

With each subsequent international conflict, the digital component will grow in importance and become an increasingly critical part of the battlefield. This is already becoming clear in the current context of revolutionary progress in robotics, the development of AI, big data, parallel computing, and ever-accelerating data transmission technologies.

In this evolving environment, success will no longer depend on greater human or conventional military resources, but on an innovative, flexible, and progressive approach toward the development and use of the latest technologies. In these conditions, cyber resilience is not only a security strategy but also the foundation of freedom.

Dr. Oleksandr Bakalinskyi is a Senior Researcher at the G. E. Pukhov Institute for Modeling in Energy Engineering at the National Academy of Sciences in Ukraine. Maggie McDonough is the Senior Vice President and Chief Innovation Officer at the Baltimore Development Corporation. She was previously affiliated with the Purdue Applied Research Institute (PARI) and Purdue’s Center for Education & Research in Information Assurance and Security (CERIAS), where she served as a technical advisor on global cyber security resilience programming.

Further reading

UkraineAlert Mar 14, 2026

UN: Putin’s deportation of Ukrainian children is a crime against humanity

By Peter Dickinson

Russia’s deportation of Ukrainian children is a crime against humanity, a new United Nations investigation has found. The mass abduction and indoctrination of Ukrainian children is part of a genocidal Kremlin plan to erase Ukrainian identity, writes Peter Dickinson.

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Iran war highlights Ukraine’s rapid rise to drone superpower status

By David Kirichenko

The Iran war has sparked a sudden surge in international demand for Kyiv’s unique anti-drone expertise and highlighted Ukraine’s rapid emergence as one of the world’s leading drone warfare superpowers, writes David Kirichenko.

Conflict Defense Technologies

UkraineAlert Mar 5, 2026

Russian army faces comms crisis amid Starlink cut and Kremlin crackdown

By Katherine Spencer, Marc Goedemans

The Russian army in Ukraine is facing a growing communication crisis amid recent disruptions to Telegram and Starlink, leaving troops increasingly in the dark and exposing mounting strains inside Russia, write Katherine Spencer and Marc Goedemans.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Wartime Ukraine offers global lessons on the future of cyber resilience appeared first on Atlantic Council.

From tariffs to sanctions, the Trump administration relied heavily on the geoeconomic toolkit in 2025. With the war in Iran and capture of Nicolás Maduro in Venezuela, has President Donald Trump lost his patience with these tools? Josh and Jessie debate this question with Shawn Donnan, senior writer for economics at Bloomberg. They discuss the use of economic statecraft in the US-Israel-Iran conflict, how these tools developed, and the ever-shifting intersection between economic statecraft and national security. 

For more, read Shawn’s Bloomberg newsletter, which sparked this debate: “Trump Ditches Economic Statecraft for the Power Politics of War.”  

And check out Josh’s Wall Street Journal op-ed: “To Squeeze Iran, Trump Reaches Into the Geoeconomic Toolkit”  

Listen to The Guide to the Global Economy wherever you get podcasts

Guide to the Global Economy is your go-to podcast for navigating the increasingly busy intersection of global economics, finance, national security, and geopolitics. Through interviews with leading experts and behind-the-scenes insights from the Atlantic Council’s GeoEconomics Center, we break down the storylines that matter most for the global economy—from major news everyone’s talking about to developments few have noticed. These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Guide to the Global Economy Podcast

These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Dispatches Mar 11, 2026

Twenty questions (and expert answers) about the Iran war

By Atlantic Council experts

As the US-Israeli war against Iran reverberates across the Middle East and the globe, Atlantic Council experts bring clarity to the fast-moving events.

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Econographics Mar 12, 2026

By threatening the Strait of Hormuz, Iran turns geography into a global economic weapon

By Alex Mills

Iran’s threat to attack vessels in the Strait of Hormuz has effectively shut down one of the world’s most critical energy shipping routes, turning geography into a powerful economic weapon.

Economy & Business Energy & Environment

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post Does the Iran war signal the end of economic statecraft? appeared first on Atlantic Council.

But why is today different from, say, the Iraq war of 2003? For one, the steeper rise may be explained by the concentration of energy exports through the Strait of Hormuz combined with ongoing disruptions from Russia’s war in Ukraine. From an energy perspective, we have not seen such a concentration of output affected by conflicts in over eighty years.

At present, the eleven countries openly engaged in major global conflicts—whether in the Gulf or in Ukraine—account for 51 percent of global crude oil production and 56 percent of global gas production. The closest modern comparison is the First Gulf war, when countries involved in conflict accounted for 45 percent of global energy production.

While there are more alternative supply routes and energy sources today that didn’t exist thirty years ago, the world still heavily depends on oil—and according to OPEC’s estimates, demand for crude will only increase. This year, global output of crude oil is set to reach an all-time high, exceeding one hundred million barrels per day. The Strait of Hormuz already saw a flow of around twenty million barrels per day last year.

Saudi Arabia and the United Arab Emirates have built pipelines to bypass Hormuz, but most countries, including Iran, are still heavily dependent on the waterway. The consequences of this conflict—particularly if the strait remains closed—could be substantial, with wide-ranging implications for global markets.

The implications, however, will differ for exporting and importing countries. Some large importers, such as China and Europe, have recognized their oil dependency and have pursued efforts to electrify their economies. Yet both remain highly reliant on imports. Additionally, more than 80 percent of the oil leaving the Strait of Hormuz is exported to Asian countries, many of which have limited capacity to shield themselves from prolonged price instability.

To cushion the shock to the global economy, coordinated short-term stabilization efforts have been implemented. These include the release of four hundred million barrels of emergency oil reserves, the US administration’s loosening of restrictions on the purchase of Russian oil, and US President Donald Trump’s sixty-day waiver of the Jones Act, opening up domestic shipping routes to foreign-flagged vessels. Most of these measures, however, are limited in both scope and feasibility.

At the beginning of 2026, a barrel of crude oil averaged around $60. Since the onset of the US-Israeli strikes against Iran, prices have averaged above $90. All the while, it remains unclear whether markets have fully grasped the scale of what is unfolding—or whether the United States is adequately prepared to manage the impact of a prolonged conflict on the global energy market.

Going forward, continued volatility in oil markets is to be expected. The question now is whether this volatility will spill over into global equity markets.

Josh Lipsky is chair of international economics at the Atlantic Council and the senior director of the Council’s GeoEconomics Center.

Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

Jessie Yin is an assistant director at the Atlantic Council’s GeoEconomics Center.

This post is adapted from the GeoEconomics Center’s weekly Guide to the Global Economy newsletter. If you are interested in receiving the newsletter, email JYin@atlanticcouncil.org.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post The Iran oil shock may be different from other price spikes appeared first on Atlantic Council.

This is the ninth chapter in the Freedom and Prosperity Center’s 2026 Atlas, which analyzes the state of freedom and prosperity in ten countries. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

Evolution of freedom

If one focuses exclusively on aggregate indicators of institutional quality, Italy’s political and economic evolution since the mid-1990s scores high. Indexes such as those produced by Freedom House consistently classify the country as a consolidated democracy with strong political rights and civil liberties, while measures of market orientation point to broadly open and competitive economic institutions. In line with this broader assessment, the Freedom Index also places Italy among countries with strong democratic and market-oriented institutional frameworks. Yet these reassuring classifications coexist with chronic political instability and a persistent sense that institutions do not work as intended. The central question, therefore, is not whether Italy’s institutions are formally free, but why they have increasingly struggled to generate predictability and effective governance in practice.

To understand this tension, some country-specific context is essential. Since the early 1990s, Italy has undergone a profound political transformation following the collapse of its postwar party system. What is often described as the transition to the “Second Republic” was accompanied by repeated electoral reforms, the emergence and disappearance of new political parties, and a persistent pattern of short-lived governments. Since 1994, Italy has had many prime ministers and governments, and even the average time in office for senators and house representatives has shortened significantly. This instability has not weakened democratic rules as such: Alternation in power has remained regular, elections have remained competitive, and constitutional guarantees have held. But it has profoundly shaped the incentives under which political and administrative institutions operate.

The high score Italy receives on the legislative constraints on the executive component of the Political subindex should be interpreted carefully. The score is due to the perfect bicameralism and to the fact that governments are typically formed by coalitions, which require ongoing negotiation among parties with heterogeneous preferences. However, these legislative constraints are often bypassed by the executive governments of the second republic with more and more frequent government decrees and confidence votes, which reduce the quality of laws. In an environment characterized by frequent government turnover and weak retrospective accountability, unfettered executive power would increase the risk of large and difficult-to-reverse policy mistakes. Under such conditions, strong checks and balances operate as a form of institutional insurance, limiting the potential damage associated with political instability rather than generating it. In other words, given Italy’s political volatility and informational constraints, the institutional frictions that limit executive power play a stabilizing role, and the real worries relate to the frequent government decrees aiming to bypass such checks and balances.

Political instability has far-reaching consequences for how governing takes place. Short political horizons systematically alter legislative incentives. When governments expect a brief tenure, the political drive for visible action exceeds careful implementation. In Italy, this logic has translated into a sustained increase in legislative output since the mid-1990s (see, for example, Gratton et al., 2021). In the early 1980s, the Italian Parliament typically approved on the order of 250–300 laws per year. By the late 1990s and early 2000s, annual legislative output regularly exceeded 500 acts, a large share of which consisted of emergency decree-laws later ratified and expanded by Parliament. When political survival depends more on signaling activity than on long-term outcomes, frequent lawmaking becomes individually rational even if it increases systemic complexity (Aghion et al., 2006; Gratton et al., 2021).

Repeated attempts to reform public procurement in Italy provide a concrete illustration. Successive revisions of the public procurement code (Codice dei contratti pubblici) were introduced (notably in 2016, with major amendments in 2020 and 2023) with the stated objective of simplification and acceleration. Yet each reform layered new rules onto an already dense regulatory framework, generating long transition phases and widespread uncertainty for administrations and firms. Rather than resolving bottlenecks, reform activity itself became a source of legal opacity. This outcome is not accidental: It reflects a political environment in which legislating serves as a signal of decisiveness under instability, while the costs of complexity materialize only after governments have moved on.

Given this sustained accumulation of legislation, the burden of adjustment shifts to the administrative and judicial system. Bureaucracies are required to implement rules that are frequently amended, internally inconsistent, and embedded in dense webs of cross-references. As a result, administrative effort is increasingly diverted from implementation to interpretation. Discretion narrows not because rules are clear, but because ambiguity raises the risk of error and ex post sanction. Faced with unstable legal frameworks, public officials adopt more cautious and formalistic behavior, slowing decision-making and amplifying delays. In my view, the sustained deterioration observed until the mid-2010s in the control of corruption and bureaucratic quality components of the Freedom Index is driven primarily by the latter: It reflects a gradual weakening of bureaucratic effectiveness rather than a sharp increase in corrupt behavior. After 2014, the apparent change in trend seems to be largely explained by improvements in perceptions of corruption control, while underlying bureaucratic quality may not have experienced a comparable structural improvement.

Courts face a similar challenge. When legislation is complex and rapidly changing, judges are required to interpret overlapping provisions with limited guidance. This increases divergence across jurisdictions and over time, even in cases involving similar facts. Legal outcomes become less predictable, not because enforcement is weak, but because interpretation itself becomes uncertain. Firms and citizens, in turn, face a moving legal target: Compliance depends not only on what the law formally prescribes, but on how it will eventually be read and enforced. Legal uncertainty thus emerges as an endogenous consequence of legislative overproduction.

Taken together, these dynamics mark a profound change in how public authority operates in practice. The Italian state still relies on formal rules, written procedures, and legal guarantees, but the proliferation and instability of those rules increasingly undermine their coordinating role. Where a rules-based system is designed to reduce discretion and uncertainty, legal complexity has had the opposite effect. For citizens and firms, interacting with the administration often feels less like following clear rules and more like navigating a maze of overlapping requirements, exceptions, and interpretations. Outcomes depend not only on compliance, but on timing, jurisdiction, and the specific office involved. In this sense, legality itself ceases to be a source of predictability and instead becomes an additional layer of risk. The problem is not the absence of rules, but their excess: When the legal framework becomes too dense and unstable to be reliably understood, the promise of rules-based governance is hollowed out.

Legal uncertainty has significant economic consequences. If Italian laws were written with a level of clarity comparable to that of Italy’s constitution, the country’s GDP today would be almost 5 percent higher. In current terms, this corresponds to roughly €110 billion per year in foregone output. This cost reflects the cumulative effect of legal ambiguity on investment, innovation, and firm growth: When rights and obligations are difficult to interpret, economic actors delay decisions, scale back projects, or avoid activities that are most subject to regulatory scrutiny. These aggregate losses do not arise uniformly across the economy, but are mediated by systematic changes in firm behavior and by who is better able to cope with legal complexity.

These costs are not borne uniformly across firms. Legal uncertainty disproportionately penalizes firms that operate transparently, invest in scale, and rely on predictable enforcement of contracts and regulations. By contrast, firms that operate at a smaller scale or in more informal ways are better able to adapt to unstable rules, absorb ambiguity, or avoid exposure altogether. In environments characterized by complex regulation and uneven interpretation, informality and opacity can become competitive advantages rather than constraints. A large body of evidence shows that regulatory complexity and legal uncertainty systematically shift activity away from more productive, formal firms toward smaller, less transparent ones, with adverse consequences for aggregate productivity. In Italy, this selection mechanism reinforces a bias toward small firm size and low growth strategies, amplifying the long-term economic costs of institutional fragility.

Another important phenomenon that cannot be captured by the freedom scores relates to political participation and trust: Citizens’ engagement with politics is a dimension that most institutional indexes only partially capture. Italy continues to meet high standards in terms of electoral competition and political rights, yet participation has declined markedly over time. Voter turnout in national parliamentary elections fell from around 90 percent in the 1970s to about 64 percent in the most recent election in 2022, one of the lowest levels in postwar Italian history. Participation in European and local elections has declined even more sharply, with turnout in European Parliament elections falling below 50 percent in recent cycles (ISTAT; International IDEA). These trends suggest that disengagement results not from the erosion of formal rights but from a weakening belief that political participation meaningfully affects outcomes in an institutional environment perceived as opaque and ineffective.

The gap between formal institutional quality and lived experience has repeatedly shaped Italy’s political trajectory over the past two decades. Since the early 2000s, Italian politics has oscillated between technocratic solutions—invoked in moments of crisis to restore credibility and stability (as under Mario Monti and later Mario Draghi)—and populist reactions that promise to bypass institutional complexity and reassert political control (seen most clearly in the rise of the Five Star Movement and the League under Matteo Salvini). Neither approach has proved fully successful. Technocratic governments have often stabilized short-term outcomes without addressing deeper institutional fragilities, while populist experiments have struggled to translate political mandates into effective and predictable governance. This pendular movement has contributed to political volatility and reinforced public frustration with both expertise and representation. As shown in a forthcoming book by Guiso et al., the 2008 financial crisis served as the watershed of populism in Europe, but in Italy, distrust in politics and government institutions is also due to the country’s political dynamics. In this context, the relative stability of the current government led by Giorgia Meloni marks a potential turning point: For the first time, a populist-led administration is joining political durability with a rhetoric—particularly on immigration and national identity—that raises concerns about the implications for political and civil rights. Whether Italy’s institutional safeguards will continue to prevent slippage along these lines is a question without an obvious answer and will be addressed more fully in the final section.

Overall, Italy’s experience shows a widening gap between formal institutional strength and institutional effectiveness. Democratic procedures and legal guarantees remain largely intact, and this is reflected in Italy’s relatively strong performance on many aggregate institutional indicators. Yet the capacity of these institutions to generate predictability, sustain investment, and foster broad-based economic opportunity has weakened. This disconnect helps explain why dissatisfaction and disengagement can coexist with formally strong institutions. It also provides the starting point for understanding Italy’s prosperity record since the mid-1990s, and why improvements in formal institutional characteristics have not translated into comparable gains in economic performance.

From freedom to prosperity

Measured along many conventional dimensions, Italy remains a prosperous country. Income per capita is high by international standards, life expectancy is among the longest in the world, and access to education, health care, and basic infrastructure is widespread. Material deprivation is limited for most of the population, and inequality, while not low, is broadly comparable to that of other large European economies. At the same time, these relatively favorable aggregates mask important compositional shifts beneath the surface, which pose a significant risk for the country’s long-term growth and social cohesion.

Although Italy remains a high-income country, its growth performance since the mid-1990s has been consistently weak. Over the past three decades, economic stagnation has become a defining feature of the Italian economy rather than a temporary deviation. Real GDP per capita has grown by less than 10 percent since the mid-1990s, compared with roughly 30 percent in France and more than 40 percent in Germany. Labor productivity growth, which averaged close to 2 percent per year during the postwar decades, has been close to zero since the late 1990s. These patterns point not to a sudden deterioration in living standards, but to a prolonged slowdown in economic dynamism that has reshaped expectations and long-term prospects.

A central feature of Italy’s stagnation is the persistent structure of its productive sector. Employment remains heavily concentrated in small firms, with businesses employing fewer than ten workers accounting for roughly half of total employment—far more than in France or Germany. While this structure once supported growth, it has become increasingly ill-suited to an economy characterized by scale economies, global value chains, and the mounting importance of intangible capital. Productivity dispersion across firms is high, yet reallocation toward more productive firms has been weak, limiting aggregate productivity growth. A substantial empirical literature documents how Italy’s skewed firm-size distribution constrains investment, innovation, and organizational upgrading, contributing to persistently low productivity.

Italy’s firm structure is closely reflected in investment behavior. Business investment as a share of GDP has trended downward since the late 1990s and remains below the euro area average, with particularly weak investment in productivity-enhancing and intangible assets such as software, organizational capital, and research and development. The institutional environment described in the previous section helps explain this pattern. Legal uncertainty and regulatory instability raise the fixed costs associated with expansion and long-horizon projects, increasing firms’ exposure to administrative procedures and judicial risk as they grow.

Italy’s weak growth performance has been accompanied by a gradual but persistent deterioration in distributional outcomes. While overall income inequality, as measured by standard Gini coefficients, remains close to the European average, the aggregate masks important shifts in how income is generated and distributed. Real wage growth has been largely stagnant since the late 1990s, particularly for large segments of the workforce, while income streams less directly exposed to economic volatility have proven more resilient.

Alongside weak growth and limited firm dynamism, Italy’s education system has struggled to function as a channel of social mobility. While average educational attainment has increased, learning environments have become increasingly segmented by family background, neighborhood, and territory. Students from lower-income households are disproportionately concentrated in schools with fewer resources, higher teacher turnover, and more challenging classroom climates. Evidence suggests that perceptions of discrimination, disengagement, and exposure to conflict are significantly more prevalent in schools serving Italy’s disadvantaged populations, and that the differences are strongly correlated with parental income and socioeconomic status. Rather than acting as a powerful equalizer, the education system increasingly mirrors existing inequalities, reinforcing differences in cognitive and non-cognitive skill formation from an early age. These patterns risk entrenching social stratification and limiting intergenerational mobility over the long run, even as aggregate indicators of educational access continue to improve.

Prolonged stagnation and repeated economic shocks disproportionately affect middle- and lower-middle-income groups whose welfare depends on stable employment and the returns to long-term investment in skills. Rather than primarily increasing demand for redistribution, this form of insecurity tends to undermine trust in mainstream political actors and institutions, fueling support for alternatives that promise protection through exclusionary policies. In this sense, social tension is less about inequality per se than about the loss of expected mobility for groups that previously experienced steady, if moderate, progress.

Expectations play a central role in this dynamic. Economic growth depends not only on material inputs or formal rules, but on whether individuals believe that effort will be rewarded over time. As Isaiah Berlin emphasized, a meaningful distinction exists between negative freedom, understood as protection from coercion, and positive freedom, understood as the effective ability to act on one’s choices (Berlin 1969). In Italy, formal guarantees and rights remain largely intact, yet the practical capacity to turn effort, education, and investment into progress has weakened. When income prospects are uncertain and educational opportunities are uneven, formal freedoms coexist with constrained agency. This gap helps explain why improvements in institutional indicators have not translated into stronger productivity growth or renewed economic dynamism.

These constraints are felt most acutely by younger generations. Entering the labor market after two decades of weak growth, today’s young Italians face lower expected returns to education, fragmented career paths, and delayed economic independence. For many, higher educational attainment no longer guarantees stable employment or upward mobility, while access to quality learning environments and early career opportunities remain strongly shaped by family background and territory. As a result, uncertainty is experienced not as a temporary phase but as a persistent condition, influencing decisions about work, mobility, and family formation.

This erosion of confidence in institutions also shapes outcomes in areas where prosperity depends on collective action over long horizons, most notably environmental policy. Italy has made measurable progress in reducing emissions and expanding renewable energy, yet its performance has lagged behind that of several peer countries. Resistance to environmental transformation often reflects concerns about local costs, distributional effects, and the credibility of promised compensation rather than outright opposition to climate goals. In an environment where trust in institutions is fragile, commitments to future benefits carry limited weight. Policies that require short-term adjustment in exchange for long-term gains become harder to sustain, even when they are economically sound and socially desirable. Environmental outcomes therefore reflect not only policy design, but the broader institutional capacity to generate belief in credible, shared returns over time.

Taken together, these patterns point to a central tension in Italy’s recent trajectory. Formal institutions have remained broadly stable, and material living standards remain high, yet the capacity of those institutions to sustain investment, mobility, and credible long-term expectations has weakened. Economic outcomes reflect not a single failure, but the cumulative effects of legal uncertainty, constrained firm growth, segmented education, and eroded confidence in future returns. Prosperity has become more uneven, more fragile, and more dependent on background and position than headline indicators suggest. Whether the equilibrium that has characterized Italy over the past two decades is sustainable in the medium term is the core question addressed in the next section.

The path forward

Italy’s medium-term prospects are shaped by a small number of risks that revolve around institutional credibility, economic sustainability, and demographic pressure, and that together will determine whether the current equilibrium can endure.

The most immediate concern is politico-legal. A proposed constitutional reform of the judicial system, scheduled for a general referendum vote on March 22nd, could result in a significant shift in the balance of powers. Public debate has focused on a narrow and largely symbolic issue—the possibility for prosecutors to become judges—which in practice affects a very small share of magistrates. The more consequential element of the reform is the creation of a new body, appointed in part by the political majority, with the authority to oversee and evaluate the actions of the judiciary. This introduces a clear risk to judicial independence. Even in the absence of direct interference, the mere possibility of executive oversight may discourage the pursuit of sensitive cases involving politically connected actors or the government itself. The institutional risk is amplified by the political process through which the reform is advancing. Because it failed to obtain a two-thirds majority in parliament, the reform will be decided by referendum. In a context of low political participation and widespread disengagement, there is a non-negligible possibility that a far-reaching constitutional change could be approved by a relatively small share of the electorate. Such an outcome would further weaken the perceived legitimacy (or lack thereof) of institutional checks and balances.

A second risk concerns civil and political rights. Italy has long exhibited a gap between strong formal guarantees and uneven lived experience. Recent developments suggest that this gap may narrow—in an unfavorable direction. Since 2022, a stronger emphasis on security and anti-immigration rhetoric has yielded policy initiatives and administrative practices that have already begun to affect indicators of political and civil rights. While the changes observed so far remain limited, the concern is one of persistence rather than rupture. If these trends continue, Italy risks moving from a situation in which dissatisfaction coexists with formally strong protections to one in which the erosion of rights is tangible. This would represent a qualitative shift relative to the past three decades.

The third challenge is economic and structural. Italy’s traditional development model, centered on small, family-owned firms operating in established sectors, has become increasingly inadequate in an economy driven by innovation, scale, and intangible capital. A transition toward more dynamic and technologically intensive activities is necessary. Yet the incentive structure produced by the current institutional environment remains unfavorable. Legal uncertainty, administrative complexity, and limited predictability discourage the long-term investments required to develop new sectors and expand firm size. Without changes to these underlying conditions, the prospects for a meaningful shift in the growth model remain weak, despite the urgency of the challenge.

Demographic and fiscal pressures reinforce these concerns. Stagnant incomes, persistently low fertility, and high levels of public and private debt interact in ways that constrain policy choices. Italy’s population is aging rapidly, and the working-age population is shrinking—placing an increasing strain on the pension system and welfare programs. At the same time, high public debt limits fiscal space, reducing the government’s ability to respond to shocks or to support growth through expansionary policies. In the absence of stronger growth, the sustainability of existing social arrangements will become increasingly difficult to maintain.

Finally, there is the risk associated with the conclusion of the Next Generation EU program. In recent years, these funds have supported public investment and contributed to stabilizing economic activity. There is a concern, however, that they may also have masked underlying weaknesses. Whether these resources have been systematically directed toward projects capable of raising long-term productivity remains unclear. Moreover, they will have to be repaid. When combined with already high debt levels, this raises the possibility that the apparent stabilization of recent years could give way to renewed strain once extraordinary support fades. Temporary fiscal expansions can relax political and financial constraints in the short run while delaying necessary adjustments and amplifying vulnerabilities when support is withdrawn. If growth does not materialize, the adjustment required could be abrupt.

Taken together, these risks point to a fragile equilibrium. Italy has so far avoided abrupt institutional breakdowns and severe economic crises, relying instead on gradual adjustment and external anchors. Whether this equilibrium can be sustained in the medium term will depend on the ability of institutions to preserve independence, restore credibility, and support a development path capable of generating durable growth under tighter economic and demographic constraints.

Massimo Morelli is professor of political science and economics at Bocconi University and senior research scientist at the Luxembourg Institute of Socio-Economic Research (LISER). A political economist, he earned his PhD in economics from Harvard University in 1996. He spent twenty-two years teaching and conducting research at leading American institutions, including the Institute for Advanced Study at Princeton and Columbia University, where he held a full professorship in economics and political science. Since returning to Italy in 2014, he has continued his work at the intersection of economics and political science, publishing in leading journals across both fields.

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Bottom lines up front

• The Iran conflict has effectively halted tanker traffic through the Strait of Hormuz, disrupting oil and LNG flows and triggering global energy market turmoil.
• Europe is vulnerable because it must refill depleted gas storage after high winter demand and increased exports to Ukraine.
• As LNG markets tighten, Europe will have to compete with China, Japan, South Korea, and Taiwan for purchases—risking either severe price shocks or potential energy shortages.

WASHINGTON—With the conflict in the Gulf well into its third week, a difficult reality is setting in across Europe: Even if a cease-fire were agreed today, the continent is likely already heading toward an energy crisis.

The ongoing US-Israeli strikes on Iran, along with Tehran’s retaliation across the Gulf, have produced one of the most severe disruptions to global energy markets in decades. At the center of the crisis is the Strait of Hormuz, the most critical chokepoint in the global energy trade. Before the current conflict, roughly 20 percent of the world’s oil supply transited the strait each day. The looming threat of Iranian sea mines and missile attacks has brought commercial tanker traffic through the Strait of Hormuz to a near standstill, as some operators opt to anchor outside the waterway rather than risk passage.

While the effective closure of the strait has sent shockwaves through global oil markets, Europe’s immediate vulnerability lies elsewhere: liquefied natural gas (LNG). Approximately 20 percent of global LNG trade passed through the strait before the current conflict, much of it originating in Qatar, the world’s second-largest LNG exporter. There is no viable alternative export route for this LNG.

For Europe, the timing could scarcely be worse.

Preparation for winter starts now

Europe is entering the critical period when underground gas storage must be replenished ahead of winter. Yet European countries are beginning this process in one of the weakest positions in years. Refilling these reserves now depends heavily on LNG imports, following Europe’s rapid shift away from Russian pipeline gas following Russia’s full-scale invasion of Ukraine in early 2022. According to the Aggregated Gas Storage Inventory database, European storage levels are currently below 30 percent, a five-year low. A colder-than-average winter, combined with increased gas burn in the power sector, pushed European gas demand up nearly 7 percent since the start of the year. At the same time, pipeline year-over-year exports from the European Union (EU) to Ukraine surged more than tenfold, further accelerating withdrawals. 

Under EU regulations, storage levels must reach at least 90 percent capacity by December. Given current conditions, Europe will need to inject nearly 60 billion cubic meters (bcm) of gas during the upcoming refill season just to meet this target. For context, that translates to about 586 terawatt-hours (TWh) of energy—enough to power around 57 million US homes annually, based on average household consumption data from the US Energy Information Administration. Crucially, not all gas imports can be directed into storage; much of it must first satisfy ongoing daily consumption. Even before the escalation in the Gulf, Europe’s depleted storage position was forcing it to plan record LNG imports in 2026.

Further squeezing the LNG market is the March 2 Iranian drone strike on QatarEnergy’s Ras Laffan facilities, which forced an immediate shutdown of production. Two days later, the company declared force majeure, meaning that QatarEnergies is temporarily suspended from its contractual commitments of LNG shipments to customers. This declaration has added significant uncertainty to the timeline for restoring Qatari output. Even if the conflict were to end today and the strait were to reopen, full restoration of production could take weeks or even months. Markets know this: QatarEnergy’s announcement triggered an abrupt spike in European gas benchmarks, with prices jumping by more than 50 percent on March 2. It was the largest single‑day increase since the 2022 energy crisis following the Russian invasion of Ukraine and the ensuing disruption of Russian pipeline flows. These market pressures affect far more than just Europe; they risk reigniting competition between European and Asian importers for scarce LNG cargoes.

Between Asia and Europe

In the past, Asian importers dominated global LNG markets through long-term contracts with exporters, while Europe relied heavily on pipeline gas from Russia. When those flows collapsed after Russia’s 2022 invasion of Ukraine, European buyers drove LNG prices sharply higher, drawing cargoes originally contracted for Asian markets toward European terminals. This dynamic characterized the 2022 energy crisis, when Europe repeatedly outbid Asian buyers for flexible supply. The current crisis, however, may reverse that pattern. As the loss of Qatari supply tightens global LNG markets, Asian buyers may be willing to outbid Europe for available cargoes—particularly the four major East Asian economies of China, Japan, South Korea, and Taiwan. Together, these four accounted for approximately three-quarters of all LNG imported across Asia in 2025, according to data sourced from Kpler. China alone relied on Qatar for 29 percent of its LNG imports in 2025, making it the world’s top LNG importer that year.

Early signs of this dynamic may already be emerging, with reports in recent days that a US LNG tanker originally bound for Belgium changed course toward China—a potential signal that this competition for cargoes is one Europe will likely lose on cost. US LNG exports have become one of Europe’s most important diversification tools since 2022, but even if US producers increase output, it is unlikely to fully offset the loss of Qatari supply in the near term. US liquefaction facilities are already operating near capacity, and the JKM–TTF spread, the price differential between Asian and European LNG markets, has fluctuated sharply in recent months. The spread could significantly widen as Asian buyers compete for alternative supply.

The scale and cost of this supply gap are further amplified by Europe’s decision to phase out Russian pipeline gas and LNG imports by the end of 2027. The EU is set to ban short-term Russian pipeline contracts beginning in June of this year, with all remaining long-term flows required to cease by the end of September 2027. While Russian LNG accounts for a relatively small share of Europe’s supply, it remains a meaningful component: In 2025, the EU imported roughly 17 bcm of Russian LNG, representing approximately 13 percent of total gas imports. European policymakers had anticipated replacing this volume primarily with US LNG, but given the ongoing Middle East conflict, Europe’s plans to fill this gap are increasingly fragile, placing immense strain on both supply security and cost. 

Back where it was in 2022

Brussels has yet to offer a meaningful solution for the energy shock. European Commission President Ursula von der Leyen has indicated that the EU is exploring measures such as the expanded use of power purchase agreements, temporary state aid mechanisms, and potential gas price caps. During the 2022 crisis, proposals for a gas price cap faced strong opposition from Germany and the Netherlands, which argued that artificially limiting prices could undermine Europe’s ability to attract scarce LNG cargoes and allow Asian buyers to outbid European importers. Today, too, similar measures are likely to face contention and stoke further divisions among the EU member states. 

The current crisis has reignited a debate that emerged in 2022 regarding Europe’s energy strategy and dependence on external suppliers. From 2022 to 2024, Europe undertook an ambitious push to diversify its energy mix and accelerate the deployment of nuclear and renewable capacity. However, these efforts were partially overshadowed by reliance on US LNG and related trade negotiations, in effect trading one dependency for another. Analysts have long cautioned against this pattern of dependence, yet after years of shutting down continental energy projects, most notably the near-complete collapse of German nuclear energy, Europe now finds itself back where it was in 2022: heavily reliant on US LNG, exposed to global price competition, and bringing a policy knife to a global production gun fight. To break this cycle, Europe would need to invest more in its own production capacity. But further deployment of clean energy infrastructure or nuclear development is a multi-year process, and thus it is not a solution to the current crisis.

The Russia question

The energy shock has also reopened the question of Russian sanctions. Notably, the United States appears to be signaling a change in tone. Last week, the White House temporarily loosened restrictions to allow India to import Russian crude oil stranded at sea—a shift from what was agreed to during US-India trade negotiations in February. On March 12, the administration went further, issuing a broader temporary exemption in permitting the sale of Russian seaborne oil currently in transit. The administration’s rationale was that this will help ease pressure on global energy prices. Though framed as a short-term measure, the move underscores how quickly sanctions policy can shift under acute energy market pressure. US Treasury Secretary Scott Bessent further justified the measure by arguing that Russia taxes production rather than sales, so licensing completed shipments therefore does not provide significant financial benefit to the Kremlin. This argument is difficult to sustain: Since February 2022, Moscow has repeatedly restructured its oil and gas tax regime to maximize state revenues, and there is little reason to believe it would not do so again. 

The Group of Seven (G7) price cap could tell a similar story. The mechanism works by using Western control over global shipping insurance and finance as leverage: tanker operators and insurers who want access to Western financial services must certify that the oil was sold below a set price ceiling, forcing buyers to demand a discount from Moscow. When the cap was set at sixty dollars in 2022, it was just below the market price for Russian oil. But Russian crude has since fallen well below that level, meaning the cap no longer constrains prices. In response, the EU and the United Kingdom lowered their ceiling to around forty-seven dollars to restore its bite, but the United States declined to follow, creating a gap that operators can exploit, and particularly undermining the EU’s move. The Trump administration has never been enthusiastic about the mechanism, and a decision to stop enforcing it entirely cannot be ruled out. If that happens, then one of the few remaining tools limiting Russian energy revenues effectively collapses. 

So far, European leaders have mostly remained firm in their commitments to diversify away from Russian energy. On March 11, von der Leyen warned that returning to Russian energy would be a “strategic blunder” that increases Europe’s vulnerability. At a recent meeting, French President Emmanuel Macron, German Chancellor Friedrich Merz, and Italian Prime Minister Giorgia Meloni joined other Group of Seven (G7) leaders in rejecting calls to ease sanctions despite the turmoil in global oil markets. Merz has also publicly criticized the US decision to temporarily lift sanctions, calling it “wrong.” However, Belgian Prime Minister Bart De Wever broke openly with the EU’s agreed position this past weekend, arguing that Europe “must normalize relations with Russia and regain access to cheap energy.” He added that European leaders privately agree with him but are unwilling to say so publicly. Hungarian Prime Minister Viktor Orbán remains another strong European voice publicly urging a reconsideration, though his position carries little weight among his peers because of his long-standing alignment with Moscow. 

Could the EU extend the window of continuing Russian supply past the current deadlines? Perhaps, but doing so would require reopening a complex political and legislative process between the Commission, the European Parliament, and the Council. Even under accelerated or emergency procedures, such a move would be politically fraught. In practice, this would mean revisiting the sanctions architecture that has been painstakingly constructed since 2022. Beyond the legal and institutional challenges, such a move would undermine the EU’s geopolitical strategy and effectively finance Russia’s continuing war in Ukraine. For Brussels, this option remains politically untenable. But pressure from individual member states may continue to intensify if prices rise sharply. 

The European dilemma

What this conflict has made clear is that while higher oil prices will raise energy costs globally, Europe’s more immediate challenge is securing sufficient LNG cargoes to refill its depleted gas storage. Toward this end, the calendar is working against European importers. With the refill season running from April to November, losing even two months to a Qatari production halt means forfeiting roughly 25 percent of the injection window before a single additional cargo arrives. European countries could attempt to suppress demand for gas through conservation measures and reduced industrial energy consumption, though the scale required would be politically and economically difficult to sustain. 

More realistically, European buyers will be forced to wait until Asian demand is satisfied, and then pay whatever price remains. Unlike emerging market economies, which may be priced out entirely, Europe has the financial depth to outbid most competitors. But that calculation carries its own cost: securing supply at any price means passing that cost onto households and industry, with all the economic and political consequences that follow.

Ultimately, the crisis reduces to a binary—scarce cargoes mean physical shortages; available but expensive supply means an extraordinary price shock. An obvious release valve—importing Russian pipeline gas once again—remains politically toxic. Reopening that faucet would undercut two years of painful European energy diversification, hand Moscow a significant revenue stream at a moment when the war in Ukraine remains unresolved, and reintroduce precisely the strategic dependency that left Europe exposed in the first place. Either way, this episode has exposed structural weaknesses in Europe’s energy supply chain. Finding a way out of this dilemma will dominate the continent’s political and economic agenda for months to come.

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A financial disruption in Egypt would reverberate not only across the Middle East and North Africa but potentially across global markets as well. Egypt’s economy is large, systemically important within the region, and interconnected with global financial flows. In addition, for the United States in particular, Egypt holds significant geopolitical importance as a partner for stability in an already volatile region.

Egypt’s macroeconomic fundamentals illustrate why investors are watching closely. The country carries a substantial external debt burden while simultaneously managing significant domestic fiscal pressures. This combination makes the sustainability of financing conditions particularly important during periods of heightened geopolitical risk and market uncertainty. History shows that financial crises rarely remain contained. The Mexican peso crisis of 1994 and the Thai baht devaluation of 1997, which triggered the Asian financial crisis, both began as localized currency events but quickly propagated across markets, asset classes, and national economies.

In the event of a financial crisis, Egypt may be forced to weaken its currency to preserve its reserves and maintain creditworthiness. However, a weaker currency would increase debt servicing costs in local currency terms and likely push inflation (already at 13 percent) even higher. This could create a negative feedback loop between currency weakness, inflation, and fiscal pressure.

The Executive Board of the International Monetary Fund (IMF) completed the fifth and sixth reviews of Egypt’s Extended Fund Facility arrangement and the first review under the Resilience and Sustainability Facility, allowing authorities to draw the equivalent of about $2.3 billion on February 25, right before the conflict in Iran began. 

The IMF’s advocacy and support for Egypt should be augmented by policymakers in the United States and other nations such as the United Arab Emirates and Qatar. It is important to signal confidence to the marketplace for Egypt now, before market forces begin to cascade into a more challenging outcome.

“Egypt is a resilient society with highly entrepreneurial and talented people,” James Harmon, chairman of the US Egypt Enterprise Fund and former chairman of the US Export-Import Bank, told me. “Just a week before the current conflict in the Gulf, the IMF expressed confidence in the progress being made in Egypt’s economy. Egyptian policymakers are implementing the right reforms and executing them effectively. That said, current events, largely outside Egypt’s control, are creating unexpected economic pressures that warrant careful monitoring. Given Egypt’s significance to the region and to the United States, it is important to support Egypt now.”

Below are several key macroeconomic indicators that highlight Egypt’s current financial position. These figures are sourced from the IMF and the Institute of International Finance and are estimates or forecasts.

External position

• Total external debt: $169 billion (approximately 40 percent of GDP)
• External debt service due in 2026: $27 billion
• Projected current account deficit (baseline assumption): $15 billion
• International reserves: $53 billion (approximately five months of import cover)

Domestic and fiscal position

• 2026 fiscal deficit: 1.427 trillion Egyptian pounds ($27.2 billion, or 6.8 percent of GDP)
• Total government expenditures: 4.396 trillion pounds
• Interest payments: 2.3 trillion pounds (more than half of total expenditures)

Egypt’s balance of payments outlook is driven largely by three variables: oil prices, tourism revenue, and remittances from Egyptians working abroad. The interaction of these variables will ultimately determine the trajectory of Egypt’s current account deficit and therefore its need for external financing.

To assess the uncertainty surrounding these variables, I performed a Pearson–Tukey analysis for each. This technique uses a three-point approximation, typically the fifth, fiftieth, and ninety-fifth percentiles, to estimate the expected value of a variable. In practical terms, this method combines pessimistic, baseline, and optimistic scenarios to estimate the most likely outcome. The accuracy of this approximation is measured in standard deviation units.

In reality, Egypt’s external balance is influenced by a much wider set of factors, including several offsetting dynamics. For example, while this framework considers the impact of higher energy prices on Egypt’s import bill, it does not incorporate the potential benefits of higher energy prices on Egyptian energy exports. The objective here is not to produce a precise forecast but rather to frame key uncertainties and illustrate how shifts in a few critical variables could affect Egypt’s external position.

The results suggest that under current market conditions, Egypt’s external position has become increasingly sensitive to global oil prices. While tourism and remittances traditionally act as stabilizing inflows, the magnitude of the oil shock now dominates the balance of payments outlook. In periods of geopolitical stress, when oil prices tend to rise and tourism tends to fall, these dynamics can reinforce one another.

Oil prices have a direct effect on Egypt’s external balance because the country remains a net importer of energy products. For the purposes of this analysis, I assume a baseline oil price of $75 per barrel. The Pearson–Tukey estimate produces an expected oil price of approximately $108 per barrel, implying an increase of roughly $33. As a rule of thumb, each $10 increase in oil prices raises Egypt’s energy import bill and worsens the current account balance by approximately $2.5 billion. Thus, the expected oil price shock would deteriorate Egypt’s external balance by roughly $8 billion.

The projections indicate that Egypt’s current account deficit will increase from roughly $15 billion to $24 billion. This analysis suggests that Egypt’s external position is correlated to regional instability. Small shocks are manageable, but simultaneous shocks across remittances, tourism, and oil prices can create exponential stress.

A current account deficit widening from a projected $15 billion to approximately $24 billion suggests that Egypt retains the capacity to manage its external balances, though with limited margin for error. This is particularly notable in the context of Egypt’s approximately $54 billion in international reserves and the $27 billion in external debt service due in 2026.

The chart below illustrates how Egypt’s current account balance responds to changes in oil prices and tourism revenues.

Taken together, these figures highlight the structural pressures facing Egypt’s fiscal and financial system. While the country is not currently in crisis, its reliance on continued market confidence and external financing leaves it exposed to shifts in investor sentiment.

In periods of geopolitical stress, markets often look for the first point where macroeconomic vulnerabilities begin to surface. Given its scale, financial linkages, and sensitivity to oil prices, tourism, and remittance flows, Egypt occupies a unique position in the regional economy. Should financing conditions tighten or external shocks intensify, stress in Egypt could serve as an early signal that broader financial instability is beginning to emerge across the region.

Khalid Azim is the director of the MENA Futures Lab at the Atlantic Council’s Rafik Hariri Center for the Middle East. 

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Financial agency for Palestinians is the missing piece in most proposed plans to rebuild Gaza after the destruction of the post-October 7 war. Gaza has historically been a primarily cash-based society and economy, but under the current financial system, Palestinians in Gaza and the West Bank are dependent on Israeli banks for cash and access to the global financial system. Today, inside Gaza, civilians navigate collapsing markets, shrinking access to goods and services, and an economy increasingly mediated by whoever controls distribution and cash. In the West Bank, fiat currency surpluses have caused alarm and chaos. This all continues while reconstruction proposals, ceasefire sequencing, security arrangements, and donor pledges are discussed at the highest political echelons, without meaningful Palestinian representation.

Economic exclusion is known to fuel instability. More political rhetoric cannot resolve it. Just as employment needs to be central to Gaza’s security strategy, Palestinians need access to reliable, dependable, and readily available monetary systems. The absence of jobs and ready access to methods of payment to buy daily necessities leaves a vacuum that will continue to be filled by patronage networks run by Hamas or other armed actors.

Because the West Bank and Gaza Strip are not a country, their financial institutions don’t issue currency. Transactions within the Palestinian territories occur in the new Israeli shekel (NIS). Palestinian banks thus depend on corresponding Israeli banks to clear their transactions. The Israeli government has passed laws designed to prevent the financing of designated terrorist organizations, such as Hamas, so those Israeli banks need a waiver from the government to do business with the Palestinian banks. This gives the Israeli government significant leverage over money and how the flow of value and exchange is controlled.

Under these circumstances, there will always be new recruits for armed struggle. This is why the mechanics of exchange—the microeconomics of daily life, including the ability of ordinary Palestinians to receive, hold, move, and spend money safely—are central to any path forward for Gaza and the Palestinian national project.

A systemic choke point 

Today, the Palestinian economy stands on the brink of systemic financial collapse. For over a year, Palestinian banks and the Palestine Monetary Authority (PMA) have raised the alarm. Palestinians in both occupied territories (Gaza and the West Bank) have access to banking services that depend on Israeli banks providing correspondent banking relationships, and that relationship is at a breaking point.  

All Palestinian shekel settlements, shekel cash repatriation, and a large share of trade-related payments rely on two  Israeli banks,  Bank Hapoalim and Israel Discount Bank. These correspondent banks operate under an indemnity waiver issued by Israel’s Ministry of Finance. The indemnity waivers shield the banks from legal or regulatory exposure when processing Palestinian-linked transactions (including transactions for the Palestinian Authority). These relationships allow Palestinian banks to clear shekel transactions, repatriate excess cash, process trade-related payments, and maintain access to international transfers and cross-border payments through SWIFT messaging and international bank account number codes—the core financial tools for international transfers between banks.

Cumulatively, this reliance on Israeli indemnity waivers for correspondent banking, dependence on Israeli central bank decision-making, and Palestinian’s inability to manage their own financial sector has resulted in the current absurd state of affairs for the Palestinian economy: West Bank banks hold a growing number of physical shekels while their digital balances in Israeli correspondent accounts are depleted—threatening trade settlement and clearance payments—while there is also insufficient cash in Gaza for everyday transactions.

As early as 2024, Israeli banks were raising various concerns about the future of the indemnity waivers. Throughout 2024, the United States and others urged the Israelis to maintain the indemnity. However, by mid-2025, Israel’s finance minister, the right-wing politician Bezalel Smotrich, ordered the cancellation of the waivers, though they were later temporarily extended amid quiet diplomatic pressure.

The most recent renewal of this temporary status was for two weeks and was last issued on February 12. Smotrich meanwhile had been arguing that the entirety of the Palestinian banking system rides on the profit of the Palestinian Authority’s reported practice of issuing payments to Palestinians convicted of terrorist offenses and to the families of those killed carrying out terrorist attacks (often called its “pay for slay” policy in Israeli politics). Despite Finance Ministry demands, the Bank of Palestine did not agree to de-bank the Palestinian Authority, even as its Israeli correspondent bank was only two weeks away from being forced to cease its correspondent banking operations due to the expiring indemnity coverage.

How we got here

The Israeli banks providing services to the Palestinian economy, either directly to the Palestinian banking industry or to Jordanian banks operating in the Palestinian market, are the only linkage to the traditional international banking and fiat currency systems.

To understand the scale of the Palestinian banking industry today, however, consider that in 2023, Palestinian banks reported processing approximately NIS fifty-three billion through Israeli banking channels. Clearance dependence means that all remittance or donation transfers, as well as the ability of millions of Palestinians to access savings held in Palestinian banks, rely on the renewal of these indemnity waivers, underscoring one of the many reasons that Palestinians need to be able to transact with the international banking system, and have equitable access to its fiat currency, for the territories’ future stability.

Palestinians’ structural dependency on the shekel was established under the 1994 Paris Protocol on Economic Relations, which designated NIS as the central medium of exchange. That agreement established the Palestine Monetary Authority to perform central-bank-like functions, though without control of the issuance or settlement of currency. The Paris Protocol also established the Palestinian-Israeli Joint Economic Committee as a mechanism to oversee implementation of the agreement; however, the last meeting on record was in September 2009, according to EU records, meaning the structure has been effectively dormant for more than sixteen years.

In Gaza, major humanitarian organizations rely on Palestinian banking channels to distribute digital cash assistance and pay operational expenses. Cash scarcity and disrupted physical aid routes have increased reliance on digital transfers, a model that has also proven more transparent and auditable than any other aid model over the years since October 7, 2023.

The humanitarian and financial crises are linked

The weakening of the already fragile banking system continues to unfold in parallel with a significant expected reduction in humanitarian aid and access. Recent reporting indicates that Israel has imposed new registration requirements to continue operating in Gaza on dozens of international nongovernmental organizations, including the requirement to disclose more information about NGO staff. Several prominent organizations have refused, including Médecins Sans Frontières (Doctors Without Borders), Norwegian Refugee Council, Oxfam, and others, which initially raised the threat of these major aid organizations being fully denied access to Gaza and the West Bank by the end of February. The Israeli Supreme Court’s temporary injunction delayed implementation of the new rules, pending its hearing and ruling.

The indemnity waiver also allows aid organizations to pay their local staff; therefore, an end to indemnity waivers would collapse aid organizations’ capacities, hobbling the broader Palestinian economy. Such a scenario would be absolutely devastating and have lasting, disastrous consequences for the Gaza Strip, the Palestinian economy, and especially the people it would impact directly.  

As the US-assembled Board of Peace raises its own $10 billion without clarifying where it will be directed to, and is applauded in Washington, the entire Palestinian economy faces the potential of restricted access to the international financial sector. Gaza, especially, faces the prospect that even the minimal aid that was and is being delivered, including medical care, is set to cease, with no clear plan to replace it.

Today, the Israeli government effectively has executive authority, especially through the Finance Ministry led by Smotrich, over whether to bank the West Bank and Gaza. Furthermore, the ministry oversees access to Palestinian tax income sources; since 2019, the ministry has continued to withhold billions of shekels in tax revenues from the Palestinian Authority. 

The question for policymakers is whether Israel would allow Smotrich to leverage this power in a move that, given its wide-ranging implications, would inevitably further destabilize the region.

Digital wallet growth is a sign of resilience

Over the past year, digital wallet adoption has expanded significantly, with platforms such as PalPay and JawwalPay now functioning as core transaction methods, amid a shortage of physical cash. The United Nations Development Programme (UNDP), RedRose, and others have partnerships with digital wallet providers, which have strengthened this digital financial solution in response to the liquidity crisis and decreasing access to physical aid. Still, the majority of these wallets are tied to banking systems for account settlement, and PMA data indicate that cash withdrawals still dominate wallet transactions, underscoring the crucial role of physical cash, even with digital wallet adoption at scale. A recent report, however, provides evidence that many recipients in Gaza have been able to retain their assistance in digital form and transact for their needs accordingly.

This has been a year of market transition toward digital transactions and the active use of e-cash via digital wallet platforms. The Palestinian system has now had substantial adoption. In 2023, it began with about 684,000 active Palestinian e-wallets holding over $32.3 million, including almost 18,000 affiliated merchants, 4,100 authorized agents, and 2.15 million transactions completed. By 2025, reports show wallet usage nearly tripling over the first six months of the year, from processing $40 million to $115 million, and nearly 800,000 active wallets. The PMA’s own digital payment system in 2025 reportedly saw 2.8 million transactions exceeding $550 million.

The recent announcement by the Board of Peace of an initiative to introduce a stablecoin to the Palestinian economy, alongside increased digital infrastructure for Gaza, is a much-needed step toward a short- or medium-term solution. In the long term, however, this solution remains tethered to the same banking systems subject to external control through Israeli banks.

New beginnings for Palestinian financial sovereignty

A new vision of Palestinian financial sovereignty must provide individuals with access to reliable, secure, and readily available transaction mechanisms. For example, this would include a monetary environment with predictable settlement capabilities, diversified banking relationships, accessible international digital financial corridors, integrated standards for anti-money laundering and countering the financing of terrorism (AML/CFT) and compliance mechanisms, and an infrastructure that enables microenterprises to safely store value and grow.

Financial sovereignty for Palestinians does not imply secession from central-bank monetary systems, but rather a principled, human-rights-based approach to (re)creating a Palestinian economy. Continued failure to provide access and lawful options, however, leaves average Palestinians behind with their existing informal broker networks—often charging fees between 20 percent and 40 percent—and a cash payment structure in which Hamas patronage thrives. It provides another example of Hamas’s financial power and ability to raise and move funds existing in the places where the formal (financial) systems fail.

Economic resilience requires financial sovereignty and market access, which can enable peace and conflict resolution through economic development, resilience, stability, job creation, and more. Every person should have the ability to pursue and have reasonable access to financial inclusion and market stability. This is in part why many developing economies have supported and integrated digital assets, including stablecoins, into their markets. Stablecoins are also paired with new technology for tracking and oversight, such as services like Chainlysis or other providers offering software for investigation, compliance, and risk-management services for on-chain transactions.

True financial sovereignty for Palestinians remains a diplomatic challenge that will only be fully resolved with state-level negotiations and agreements.

Yet, in the meantime, Palestinians can develop pathways to financial agency while accounting for Israeli security needs. For example, there can be new efforts to develop industry-standard AML/CFT networks compliance, without putting Palestinians at personal added risk, including putting KYC (“know your customer”) information on blockchain and other new innovations now available in the field.

Technology as a stabilization tool

There are several emerging models that demonstrate that compliant digital infrastructure and aid rails can operate without undermining international financial regulatory systems. Humanitarian platforms such as Red Rose and UNDP demonstrate that transparent, rules-based digital distribution and transactions are possible, even in the most fragile economic environments.

Though these efforts have proven successful, these digital-cash-distribution projects still rely on Palestinian banking and, therefore, Israeli bank clearing. They nevertheless demonstrate the adaptability of these tools in creating digital aid rails and cash-settlement opportunities, with embedded compliance screenings and point-of-sale integrations, in an extremely constrained context. These models of cash distribution still provide protections, auditability, and accountability for regulations on anti-money laundering and sanctions compliance.

Other futures are possible

A humanitarian crisis is brewing that Israel has a unilateral opportunity to either prevent or exacerbate. Much of this power is centralized with Smotrich and depends on Israeli political decisions, and therefore, it is ever more critical to build financial inclusion, autonomy, and resilience for Palestinians.

Israel and the international community have very real security needs when it comes to Palestinian banking and finance due to the sophisticated use of crypto, cash, and international shell companies by Hamas and its core funder, Iran. Yet, ordinary, civilian Palestinians have very real financial needs. These are not zero-sum.

There are methods for the Palestinian economy to be granted reasonable access to financial inclusion and transaction models that are not dependent on Israeli banking.

While the options to preserve correspondent banking access, restart shekel repatriation, and other solutions are priorities in the immediate term for the Palestinian financial sector, in the medium and long term, Palestinians and their allies can and should be supported in efforts to build both new, accessible, and low-cost economic models and transmission rails, using innovative fintech, which are interoperable with international financial actors, compliant with international regulations, and secure.

A credible plan for Gaza and the future Palestinian state must account for financial agency at the household and small enterprise levels. The “last mile” for Gaza will not rely entirely on physical infrastructure or even on the military defeat of Hamas; it will be its financial future and the corresponding financial infrastructure. Now is a moment when Palestinian tech entrepreneurs, economists, and business leaders can begin moving toward a future free of dependence on Israeli political decisions or external central bank infrastructure.

Staff

Melanie Robbins 

Deputy Director, Realign for Palestine

Rafik Hariri Center & Middle East programs

Civil Society Extremism

Melanie Robbins is the deputy director of Realign for Palestine, a project of the Atlantic Council’s Rafik Hariri Center and Middle East programs. 

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Through our Rafik Hariri Center for the Middle East, the Atlantic Council works with allies and partners in Europe and the wider Middle East to protect US interests, build peace and security, and unlock the human potential of the region.

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Amid a war in Iran, a slowdown in shipping in the Strait of Hormuz, and tariff uncertainty, host Christoph Hodel brings you a conversation with John Jovanovic, chairman and president of the US Export-Import Bank (EXIM). In conversation with the Atlantic Council’s vice president for energy and infrastructure, Landon Derentz, Jovanovic stresses the importance of supply chains that are “free, fair, and functioning,” the need for US companies to be competitive, and the role EXIM plays in strengthening those supply chains. He also offers a behind-the-scenes look at Project Vault, a new initiative to create a strategic critical mineral reserve.

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By threatening the Strait of Hormuz, Iran turns geography into a global economic weapon

By Alex Mills

Iran’s threat to attack vessels in the Strait of Hormuz has effectively shut down one of the world’s most critical energy shipping routes, turning geography into a powerful economic weapon.

Economy & Business Energy & Environment

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This disruption adds to existing security pressures on key maritime corridors in the region, including cargo routes through the Red Sea and the Suez Canal, where Houthi attacks have forced many operators to reroute and driven up insurance and freight costs.

Beyond the immediate economic fallout, however, Iran’s de facto blockade highlights a broader strategic challenge: it shows how a single country can hold critical shipping lanes hostage and exert geopolitical pressure at relatively low cost.

Tehran’s chokehold on global trade

Iran has long understood its unique geographical position and the critical importance of maritime trade. Over several decades, the Iranian government and industry have utilized aspects of the maritime sector to protect economic security and circumvent sanctions. This includes the longstanding use of shadow fleets, the manipulation of Automatic Identification Systems (AIS) data, and a general disregard for established maritime law and regulations.

Now, Iran is turning its geographic advantage into a lever for global economic pressure. Following the Iranian threat against vessels in the Strait of Hormuz, major shipping companies—including Maersk, Hapag-Lloyd, and CMA CGM—have halted their routes through the strait. Last week, this was further compounded by Maersk’s decision to completely suspend its FM1 service, connecting the Far East to the Middle East, and its ME11 service, which runs from Europe to India via the Suez Canal and the Red Sea. The ME11 had only recently been relaunched and was advertised as significantly reducing transit times.

Iran is now utilizing its de facto control over shipping lanes and its years of experience in evading sanctions through maritime trade to escalate the conflict into a potential global economic turning point.

Insurance is technically available for vessels in the area, but likely prohibitively expensive even for firms willing to take the risk. As a result, vessels are weighing anchor in regional ports, hoping to avoid the worst.

The most immediate impact is on energy pricing, as Middle Eastern oil and gas can no longer be safely transported via these routes. Waiting in port may allow operators time to reassess the situation, but given the scale of the conflict, it could still leave vessels vulnerable.

Oil tankers aren’t the only vessels in the area, however. Many operators utilize this route for Asia-Europe trade, providing additional port calls and refueling opportunities.

Energy prices are just the tip of the iceberg

From a maritime perspective, solutions are few and far between. Vessels caught on either side of the Strait of Hormuz when the conflict began are now waiting in nearby ports for safe passage.

Vessel routes are determined far in advance—often several months ahead—making it difficult to redirect and find suitable berths to either unload or wait out the conflict, further compounding logistical pressures. Ports are now congested as vessels overstay their scheduled berth bookings, while additional ships weigh anchor, hoping for a swift resolution and reopening of the strait.

Safety remains a major concern for vessels—not just due to missiles or drones, but also due to GPS jamming, which disrupts navigation systems. Though the source of the jamming remains uncertain, the impacts are direct, with vessels unable to accurately broadcast their location. Combined with ships intentionally “going dark” by turning off AIS, it is increasingly difficult for vessels to track each other.

This creates risks not only for vessels in transit but for all ships operating in the area. The large vessels utilized for transport in the Middle East cannot quickly change direction. Being unable to accurately locate other ships dramatically increases the risk of collision—and considering many vessels in the area transport petroleum or chemical products, an accident could trigger a major ecological disaster.

Redirection creates additional challenges

As other routes are utilized, there will be longer delivery delays and higher costs for transport and insurance.

The “solution” for many shipping firms has been to redirect vessels around the Cape of Good Hope. This adds not only additional transit times but also higher fuel costs due to longer periods at sea and more challenging weather and sea conditions.

Depending on how long the conflict lasts, additional bookings will create a crunch. Vessel numbers and capacity are limited, and many capable ships are already committed months in advance. Redirecting ships already en route will take time, energy, and money.

The closure of Middle Eastern shipping routes has a particularly acute impact on Europe, as these corridors serve many of the continent’s major ports. The already high costs of detours and delays are compounded by the fact that the European Union has been working to lower maritime emissions by including them in its Emissions Trading System, adding another layer of cost.

Longer detours around the region further drive up transport expenses, and even a swift end to the conflict would offer little relief. These costs are already baked in, with the ripple effects of rerouted shipping, repriced services, and recalculated insurance premiums well underway.  

A playbook for creating economic havoc

The larger issue this raises is the continued demonstration of how a single country can shut down critical shipping routes traversing its territory.

Despite severe bombardment and decades of sanctions that have crippled its economy, Iran can effectively hold the Strait of Hormuz hostage. Maritime traffic has virtually halted without the need for an intensive naval presence or significant additional military expenditure.

The Strait of Hormuz is only one of several major shipping line chokepoints. Similar congestion points exist naturally, such as the Strait of Malacca, while others—like the Panama Canal and the Suez Canal—are major feats of engineering.

With over 80 percent of the world’s trade conducted via ship, halting even one of these routes for a short period can create economic shocks—and a prolonged closure could easily trigger sustained global disorder at best, and a major crisis at worst.

Iran is demonstrating that mass-produced drones, limited firepower, and credible threats may be enough for any country positioned along a critical maritime chokepoint to shut down major shipping lanes. The consequences could be far more severe if such leverage were wielded by a nation with a stable economy or a state-of-the-art navy.

The ability to hold and maintain control of shipping lanes creates immense economic pressure with few practical countermeasures, quickly turning global trade into a geopolitical hostage situation, not just for those directly involved in the conflict, but for the global economy at large.

The damage has already been done

This disruption comes at the same time that European countries face increased energy costs due to the ongoing Russian invasion of Ukraine. The United Kingdom, for instance, is expected to see a sharp increase in inflation figures, which will be further exacerbated as energy prices rise. Alongside increasing oil prices, the cost of transporting goods via ship will also increase.

From the operating side, how vessel owners and operators act in the coming weeks will be telling. In the immediate term, vessels could increasingly “go dark” and attempt to maneuver their way around the conflict. This has been done before but is a risky approach, considering it obscures visibility not only for hostile actors but also for other vessels in a high-traffic area.

If the conflict drags on, vessel flagging could become more important. Vessels have been using Chinese designations, for instance, to dodge Houthi attacks in the Red Sea. It is possible this will become necessary for traversing the Strait of Hormuz as well. However, changing flags also comes with its own complications: it alters the regulatory and legal regime for the vessel, as well as the flagging countries’ protection obligations.

Regardless of how long the Iran war lasts, the economic damage has already been done. Oil prices continue to push above $100 per barrel, vessels remain stranded, and shipping costs remain high. Iran has shown how easily a strategically positioned country can create global economic shocks. The geopolitical genie is out of the bottle: by capitalizing on geography to disrupt global trade, countries can strengthen their strategic position at relatively low cost.

Alex Mills is an international trade expert specializing in financial services, maritime law, and ESG. They have a decade of experience across the private and public sector, including in UK and US government.

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Mutually antagonistic narratives have served domestic political purposes in both countries and have become something of a staple in the age of populist democracy of the twenty-first century. Yet the two countries rely on each other extensively in matters of trade, diplomacy, and security. State-to-state relationships are sometimes smoothed over in public but fractious in practice; the US-Turkish dyad is the rarer obverse: disagreeable in public for domestic audiences while resting on a high degree of alignment and collaboration.

Where do bilateral relations go when trust is low, mutual perception negative, but operational collaboration frequent? The answer depends less on rhetoric or polemical discourse and more on alignment of practical interests: We therefore must clear away the smoke of domestically motivated rhetoric to instead focus on mutual benefit. If two states pursue compatible goals and interests, room remains to balance internal political benefits with geopolitical cooperation in a form of complex interdependence. Whether that is the case for the United States and Turkey is a matter of substantial interest, given the weight that both have in the international system and the substantial number of crises and international matters that affect them.

Rorschach test

Articulating interests is more of a political than an academic exercise. It also presents something of a Rorschach test: If you ascribe ideological frames as determinative of status for Ankara (e.g., neo-Ottomanism, Muslim Brotherhood Islamism, reckless aggression) it brings you to one implied set of Turkish interests. If you accept declarative policy as the whole story you get another implied set. It is similarly the case for the United States: If you assume hegemonic interests are the primary driver, it takes you down a certain path; however, that road shifts significantly between and sometimes within presidential administrations. American interests as viewed by Trump differ significantly from those of his predecessor. Yet pattern analysis over time—observed behaviors and statements toward particular goals—tell us how specific a US president and his Turkish counterpart actually perceive the degree to which their interests overlap.

As an imperfect but useful generality, we can ascribe the following traits to Turkish foreign policy: multiaxial engagement and balance-seeking, nationalistic, hard power/realpolitik, traditionally but conditionally attached to the status quo. For decades, Ankara has sought to maximize autonomy while pressing for positive coalitions, where possible. For most of the current century, the United States has focused on maintaining a privileged or primary position in the international system, leavened increasingly with a dose of parsimony and pragmatism, but resting on what might be called enduring counter-revisionism (still in the tradition of US naval strategist and historian Alfred Thayer Mahan).

Ankara and Washington have demonstrated a generally cooperative approach across numerous regional and global issues in recent decades because their top-line approaches are compatible: one a retrenching-but-potent leading power, the other a rising middle power, both disinclined to establish imperial arrangements or to allow others to do so. A brief review of these issues illustrates this general (if imperfect) alignment by assigning numeric values reflecting relative alignment of strategic and diplomatic approaches between the two. Any such numbers game comes with attendant risk of overgeneralizing and missing some context, but statecraft and policy analysis at the higher levels of abstraction unavoidably entail some risk in this regard. So the numbers below are presented as suggestive rather than determinative.

In the table below, full interest alignment equals 1, partial interest alignment 0.5, neither alignment nor friction 0, friction -0.5, counteralignment -1. Descriptions of the cases follow the table.

Table 1: Sizing up US-Turkish alignment and friction on sixteen issues

Black Sea/Ukraine: Both sides wish to see the war end with Ukrainian independence intact; neither recognizes Russian claims over Crimea or Donbass, though Washington has signaled willingness to negotiate the status of territories Russia partially or fully occupies at present. Some differences exist regarding Black Sea access: The United States might like to have access for its own ships and more broadly for a NATO presence and routine access, while Turkey has preferred littoral NATO states do the lifting and a strict interpretation of the Montreux Convention; but neither wants a Russian conquest of Ukraine’s coastline. For a Trump administration interested in some compromise deal with Moscow, the Turkish position is complementary.

Caucasus/Russia: While the Trump Route for International Peace and Prosperity (TRIPP) offers wins for the region and the United States, the Armenian position is a wildcard with elections approaching. Should Armenian Prime Minister Nikol Pashinyan get the boot in parliamentary elections (to be held no later than mid-June 2026), the United States may tack back to a position that pressures Azerbaijan and marginalizes Ankara. Russian and Iranian pushback on a deal that opens the region to trade on US-friendly terms can be expected. Interest alignment here between Ankara and Washington is solid, though the prospects for realized gain uncertain.

Central Asia: The TRIPP shows US interest in opening up more trade to Central Asia and balancing against outright domination of the region by Russia or China. The Middle Corridor and the Organization of Turkic States both have value in this regard—and have generated more interest from the Trump administration than its predecessor. Central Asia has not traditionally been an area of high investment for the US government; however, energy companies are interested, so having an ally be more engaged is an advantage.  

Africa: US investment and engagement in Africa has lagged, but Washington has concerns about Chinese or Russian influence on the continent. Meanwhile, Turkey has dramatically increased its diplomatic, military, and economic presence in Africa over the past two decades. In countries like Somalia and Libya, Turkish presence has lent heft to US diplomatic and counterterror initiatives. Africa demonstrates the complementarity of having compatible goals but varying levels of commitment.

Syria: Trump has made clear his policy that Syria will be stabilized and maintained as a unitary state and that Ahmed al-Sharaa is an acceptable figure to lead. This comports with Turkish policy, despite Israel’s objections. The assignment of Trump confidant Thomas J. Barrack Jr. as special envoy and positive statements from the US-Turkish working group on Syria have shown close convergence on Syria policy, a remarkable turnaround from the previous decade. The January 2026 agreement to reintegrate northeast Syria with the Syrian Transitional Government was a sign that this alignment was proving determinative on the ground. 

Iraq: Washington wants a stable Iraq that is: not dominated by Iran; oriented to Western energy markets more than Iranian or Chinese; and working amicably with the Kurdistan Regional Government. Iraq may not fulfill all those interests, but Ankara shares them, and the Development Road project to foster Eastern trade with Europe provides a vehicle for all three countries to earn profits while tightening Baghdad’s ties to Western economies. The presence of PKK fighters in northern Iraq remains a point of friction, but ongoing negotiations to disarm the PKK – and US support for those talks – has taken helped reduce that friction.

Gaza: Washington and Ankara both pressed Israel and Hamas, respectively, to accept a ceasefire deal, return of hostages, and military withdrawal from Gaza in return for disarmament. While the truce remains shaky as of late 2025 and the end state Trump and Erdoğan have in mind may differ somewhat, the coordination on diplomatic efforts has been unambiguous.

Iran: There is divergence here between the hard line taken in Washington toward the Islamic Republic and the modus vivendi approach in Ankara. While Ankara may not want regime change in Tehran, and wants to protect trade with its neighbor, the Turkish government has no illusions about Tehran’s destabilizing regional behavior and shares an interest in deterring it. Ankara has tightened enforcement of multilateral sanctions on the Iranian nuclear program—partially redressing a long-standing US grievance with Ankara. The launch of Israel-U.S. Operation Epic Fury to destroy Iran’s power projection and nuclear capabilities has driven fears of instability and chaos along the Turkish border, turning this from an area of some overlap into an area of friction.

Energy: Ankara’s energy diplomacy has sought to position the country as a hub for multidirectional energy transit and major new gas, oil, and nuclear deals have been signed with Washington. US pressure to decrease oil purchases from Russia has created some strain, as Ankara cannot shift to alternate suppliers as quickly as it can with gas.

US global leadership: American leadership that cooperates with Ankara on key strategic objectives, praising in public and transacting in private, plays like music to the ears of Turks. This contrasts greatly with the constraining approach Turkish leaders called for regarding perceived American overreach in Iraq, Syria, and other regions over the past two decades, including demands to reform the United Nations to lessen the power of the five permanent members. Still, this middle power and the great power have imperfect but positive alignment at present.

Trade/defense trade: The relatively light 15 percent tariff levied on Turkish goods and the $100 billion shared goal for bilateral trade are clear indicators of positive intentions. But defense trade is thorny, with a congressional role and some competition between rising Turkish defense players and US prime defense contractors.

European Union: Ankara and Washington remain at odds with Brussels ideologically and stylistically, while maintaining strong strategic and trade ties with numerous members states. Yet the tensions stem from different sources: Turkish desire to enter the bloc and the American administration’s desire to end what it perceives as the EU’s exploitative trade and security practices.

Eastern Mediterranean: The continuing friction between Greece and Turkey redounds against US-Turkish bilateral relations—a problem that continues to play out in the region and in Congress.

Sanctions: The divergences are clear regarding imposition: Ankara supports multilateral but generally not unilateral sanctions and enforcement, whereas the Turkish track record looks spotty from Washington’s perspective.

Israel: Ankara and Jerusalem pursued a rapprochement in the months before October 7, 2023; since then, rancor, acrimony, and mutual suspicion have become the norm. While regional competition over Syria, the Palestinians, and other issues can be managed, related tensions spill over into US-Turkish bilateral relations in a major way—and that seems likely to persist.

Venezuela: Erdoğan’s quixotic friendship with President Maduro had its roots in terms of oil sales and multipolarity theory, but was a clear point of policy divergence as Trump upped the pressure level on Caracas. With the early 2026 arrest of Maduro and muted response from Ankara, this seems likely to be a decreasing source of tension in U.S.-Turkish relations.

A clear trend and policy takeaway

In conclusion, this assessment sketch of sixteen complicated cases of regional and global policy matters yields eleven that demonstrate substantial bilateral alignment, four with significant unalignment, and one somewhere in between. The aggregate score by the simple rubric of “words and deeds reflect alignment” was positive (+4.5 – with the caveat that these numbers are illustrative but rooted more in subjective alignment rather than formal quantitative criteria). An honest critic might quibble with individual ratings and the framing of the cases or argue for the salience of other matters. Yet sixteen is a reasonable sample size, the thought exercise is revealing, and the trend clear: more alignment than friction overall.  

The policy takeaway is equally clear: maintaining a working relationship is vital for both countries. Those arguing for punitive approaches (by the United States) or hedging (by Turkey) disregard potential mutual benefits as well as both opportunity costs and implementation costs. Managing differences and satisfying domestic sentiment require an adaptive response from policy elites in both countries, but the record of cooperation in 2025 indicates that the pragmatism of both presidents fits the moment—and the alignment.

Rich Outzen is a geopolitical consultant and nonresident senior fellow at the Atlantic Council in Turkey with thirty-two years of government service both in uniform and as a civilian. Follow him on X @RichOutzen.

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It’s been four years since Moscow launched its invasion of Ukraine and the G7 responded with an unprecedented level of coordinated economic statecraft measures. Where is Russia’s economy now?

Josh Lipsky and Jessie Yin are joined in this episode by director Kim Donovan and associate director Maia Nikoladze of the Atlantic Council’s Economic Statecraft Initiative to tackle the energy dimension of Russia’s wartime economy. From sanctions to shadow fleets, we discuss evasion tactics and how Russia could benefit from an extended conflict in the Middle East that boosts oil prices.

Note: This episode was recorded on March 3, 2026.

Listen to The Guide to the Global Economy wherever you get podcasts

Guide to the Global Economy is your go-to podcast for navigating the increasingly busy intersection of global economics, finance, national security, and geopolitics. Through interviews with leading experts and behind-the-scenes insights from the Atlantic Council’s GeoEconomics Center, we break down the storylines that matter most for the global economy—from major news everyone’s talking about to developments few have noticed. These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Guide to the Global Economy Podcast

These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Dispatches Mar 5, 2026

Enforce sanctions to prevent Russia from benefitting in a prolonged Iran crisis

By Kimberly Donovan

Russia has millions of barrels of sanctioned oil it is ready to sell—unless the United States and its allies step up sanctions enforcement.

Conflict Energy & Environment

New Atlanticist May 22, 2025

Gold’s geopolitical comeback: How physical and digital gold can be used to evade US sanctions

By Kimberly Donovan, Maia Nikoladze

The rise of gold-backed currencies that circumvent the US banking system could create a massive blind spot for US sanctions enforcement efforts.

Economy & Business Financial Crimes & Illicit Trade

Econographics Apr 17, 2025

Russia Sanctions Database

By Kimberly Donovan, Maia Nikoladze, Lize de Kruijf

The Atlantic Council’s Russia Sanctions Database tracks the level of coordination among Western allies in sanctioning Russian entities, individuals, vessels, and aircraft, and shows where gaps still remain.

Eastern Europe Economy & Business

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Energy markets, however, have reacted more strongly. Natural gas prices have spiked, reflecting the physical disruption and impairment of certain Gulf-based processing facilities. Oil prices briefly crossed the psychological threshold of one hundred dollars per barrel, while shipping in and out of the Strait of Hormuz slowed dramatically. Monday’s comments by President Donald Trump suggesting that the conflict may be nearing an endpoint subsequently brought oil prices back near ninety dollars per barrel, underscoring how sensitive energy markets are to perceptions about the duration of the conflict.

Predicting market movements in moments like this is extraordinarily difficult, and it would be unwise to offer precise forecasts. Instead, two variables deserve particular attention.

The first variable is time. Energy demand tends to be relatively inelastic in the short run. Homes still need heating, vehicles still require fuel, and factories must continue operating. As a result, when disruptions occur in energy supply chains, markets tend to focus less on demand destruction and more on the persistence of supply constraints.

If supply disruptions persist, prices tend to rise. Higher energy prices often feed into inflation expectations, which can ultimately influence monetary policy. Central banks may respond by tightening financial conditions, which in turn can affect interest rates, currency valuations, and economic growth. In this way, what begins as a geopolitical disruption in energy markets can gradually propagate through the broader global economy.

The second variable is uncertainty. Financial markets can absorb significant shocks when the strategic path forward is reasonably clear. What markets struggle with is ambiguity. When investors lack clarity about the trajectory of a conflict or the potential for escalation, they demand a higher premium for bearing risk. This manifests through elevated volatility, wider credit spreads, and shifts toward perceived safe-haven assets.

These same two variables, time and uncertainty, play a central role in how financial markets price geopolitical risk.

Option play

One way to understand this dynamic is through the lens of options pricing. An option is a financial instrument that gives its owner the right, but not the obligation, to buy or sell an underlying asset at a predetermined price. The two most important determinants of an option’s price are time to expiration and volatility.

Consider the global economy as the underlying asset. A geopolitical shock introduces the possibility of downside outcomes. Investors respond by seeking protection against those outcomes, which conceptually resembles buying a put option. A put option allows its owner to sell an asset at a predetermined price, even if the market value falls significantly below that level.

The analogy can be framed in the following way:

Within this framework, both time and uncertainty influence how markets price risk.

From a time perspective, prolonged disruptions in energy supply shift the aggregate supply curve of energy and place upward pressure on prices. Rising energy costs can alter inflation expectations, which in turn shape monetary policy responses and influence economic growth.

From an uncertainty perspective, several variables widen the distribution of possible outcomes: disruptions in the Strait of Hormuz, escalation of military conflict, supply-chain fragmentation, regional instability across the Middle East and North Africa, and the possibility of broader social or civic disruptions.

Importantly, a put option increases in value not just because the underlying asset has already moved, but because the range of possible outcomes has widened. In other words, the probability distribution around future outcomes becomes more dispersed.

This provides a useful way to interpret current market behavior. Long-dated geopolitical options are effectively being repriced. Markets are not simply reacting to realized economic losses; they are responding to the option value of uncertainty.

What policymakers can do

In practical terms, this means that policymakers themselves can influence how markets price geopolitical risk.

First, they can reduce the duration of the disruption. If Trump sticks with his assessment from Monday, the expected timeline of the conflict shortens. In options terminology, the maturity of the geopolitical risk contract declines, which reduces the premium investors demand.

Second, policymakers can reduce uncertainty by articulating a clear strategic framework. When governments provide credible clarity regarding objectives, escalation thresholds, and pathways toward de-escalation, the volatility parameter embedded in market pricing declines.

Both mechanisms would serve to lower the effective price of what might be called a geopolitical put option on the global economy.

Ultimately, financial markets are not just reacting to the immediate shock of conflict. They are pricing the duration and uncertainty surrounding it. Understanding how these two variables interact provides a useful framework for interpreting market behavior and for understanding how policy decisions themselves can shape the financial cost of a geopolitical risk event.

Khalid Azim is the director of the MENA Futures Lab at the Atlantic Council’s Rafik Hariri Center for the Middle East. 

The post How to understand the Iran war market swings: A geopolitical put option appeared first on Atlantic Council.

Every fluctuation in the dollar directly affects African balance sheets, as roughly 60 percent of the continent’s external public debt is denominated in dollars. Nearly all critical imports are priced and settled in dollars—and even intra-African trade is often transacted in dollars and routed through correspondent banking networks, costing Africa more than $5 billion in fees per year. In North and West Africa, the euro adds an additional layer of dependence, as the CFA franc zones are pegged to the euro.

In recent years, African governments have taken more active steps to reduce this reliance, and volatile US tariff policies over the past year have further accelerated efforts to diversify trade settlement mechanisms. Africa is attempting to address these vulnerabilities, at least in part, through a regional payment system. Progress, however, has been uneven—and in the meantime, an alternative to the dollar has quietly gained ground: China’s renminbi is making inroads across Africa’s trade and finance networks.

Africa’s push for local-currency payments

In 2022, Afreximbank and the African Continental Free Trade Area Secretariat launched the Pan-African Payment and Settlement System (PAPSS), designed to enable cross-border payments in local currencies without routing transactions through the dollar.

It’s a novel initiative that bets on digital innovation as a substitute for a monetary union and a capital markets union. By debiting and crediting local-currency accounts at participating central banks, PAPSS removes correspondent banks and intermediary currencies from the chain. The system claims it can reduce transaction fees by up to 70 percent.

Membership has expanded to seventeen central banks, more than 150 commercial banks, and fourteen payment switches. Interoperability agreements with other regional systems—such as BUNA, the Arab Monetary Fund’s cross-border and multi-currency payment system—also seek to eliminate intermediary currencies from cross-regional trade.

Yet the system remains in its early stages. Public data on transaction volumes and settlement values are limited, making it difficult to evaluate the scale of adoption. Onboarding across diverse regulatory regimes has taken time—and structural constraints persist. Chronic currency volatility and sovereign credit downgrades may discourage firms from shifting away from hard currencies, even if local-currency settlement becomes technically easier.

PAPSS is strategically vital—but for now, its economic footprint remains modest.

Across the continent, the renminbi is gaining ground

While PAPSS represents a long-term, intra-African solution to dollar dependence, a more immediate and externally driven shift is also underway. Africa has become a key arena for China’s experimentation with the internationalization of the renminbi. As China’s economic engagement with the continent deepens—and as US engagement has waned over the past year—the use of the renminbi in African economies has accelerated.

In 2025, Africa emerged as China’s fastest-growing export market, with Chinese exports to the continent rising by 27 percent year over year. Simultaneously, China announced that it would institute a zero-tariff policy for fifty-three African countries. Trade expansion alone, of course, does not guarantee currency adoption. But Beijing has paired commercial incentives with financial plumbing designed to normalize renminbi settlement in trade, investment, and finance across the continent.

Several African countries, including South Africa, Egypt, Nigeria, Mauritius, and Morocco, have signed currency swap agreements with China, giving them liquidity to pay directly in renminbi. Zambia is in talks with China over a potential currency swap agreement. Some countries also accept renminbi for domestic transactions. In Zambia, Africa’s second-largest copper producer, mining companies can now pay royalties and taxes in renminbi. Meanwhile, in Nigeria and Kenya, informal networks allow local traders to pay intermediary logistics firms in local currency, which then convert the funds into renminbi for Chinese suppliers.

Usage of China’s Cross-Border Interbank Payment System (CIPS) is also growing in Africa. In 2024, CIPS processed 47,000 cross-border renminbi transactions between China and African countries, a year-over-year increase of 20.4 percent, with the value of these transactions totaling 238.34 billion renminbi, a year-over-year increase of 160.9 percent. Growth is likely to continue as Afreximbank and South Africa’s Standard Bank joined CIPS in 2025. Standard Bank, the largest commercial bank on the continent, is among the first major financial institutions globally to join China’s payment infrastructure. Afreximbank has also indicated that it intends to finance more projects in renminbi through its CIPS membership, marking a strategic shift away from dollar-based funding.

China has also pledged to open its domestic debt markets to African issuers through renminbi-denominated Panda bonds. Both Egypt and Afreximbank have issued Panda bonds, raising 3.5 billion renminbi ($478.7 million) and 2.2 billion renminbi ($299.9 million), respectively. Other countries and multilateral lenders, including the Africa Finance Corporation and Kenya, have expressed interest in issuing bonds this year. In parallel, Kenya and Ethiopia have negotiated agreements to convert existing dollar-denominated debt into renminbi.

The path forward is multipolar—but it comes with its own risks

While these developments incrementally normalize the renminbi as a reserve, settlement, and financing currency across segments of African economies, they do not automatically dethrone the US dollar. Although reliance on the dollar is receding in some areas, full dedollarization remains distant. The dollar’s entrenched global role, combined with Africa’s structural dependencies, still anchors much of the continent’s external economic activity to the US currency.

Remittances illustrate this reality clearly: representing an estimated 5.1 percent of Africa’s GDP in 2024 and constituting one of its largest sources of external finance, they remain overwhelmingly dollar denominated. Additionally, dollar-backed stablecoins are gaining traction across Africa as a lower-cost alternative for cross-border transfers, reducing the fees traditionally associated with currency conversion in remittance flows. This has reinforced the dollar’s relevance even as the infrastructure around it evolves.

What is emerging, therefore, is not displacement but diversification. There is a clear appetite for a more multipolar monetary landscape—one that reduces the costs and vulnerabilities of single-currency dependence. While the dollar will likely continue to play a vital role, the use of the renminbi is expanding. Yet as Africa continues down this road, caution is warranted. Reducing reliance on the dollar only to substitute it with dependence on the renminbi carries its own strategic risks, particularly given the renminbi’s partial convertibility, China’s capital controls, and the potential for political leverage in times of financial stress.

In the long run, Africa’s strongest path forward lies not in substituting one external anchor for another, but in deepening regional economic integration. Systems like PAPSS offer a way to reduce dependence on both the dollar and the renminbi while simultaneously strengthening intra-African trade—a critical objective for a continent that continues to suffer from some of the lowest levels of regional trade globally. Achieving this outcome, however, will require more than technology. It will demand political resolve, sound macroeconomic management, and sustained commitment to institutional reform.

Lize de Kruijf is a program assistant at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center.

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.

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Dollar Dominance Monitor

This monitor analyzes the strength of the dollar relative to other major currencies. The project presents interactive indicators to track BRICS and China’s progress in developing an alternative financial infrastructure.

The post The renminbi is winning over Africa—but can it rival the dollar? appeared first on Atlantic Council.

Bottom lines up front

• EU policymakers have proposed adopting a two-tier membership system: New members would gain some benefits of membership but lack veto power in key votes.
• The two-tier EU proposals risk undermining the credibility of the accession process and stalling the momentum for reforms in candidate countries.
• The two-tier system could also be exploited by embattled Western Balkans leaders seeking to avoid having to make the rule-of-law reforms required for full membership. 

TIRANA—On Monday, European Union (EU) foreign policy chief Kaja Kallas said that enlargement of the twenty-seven-member bloc should speed up. “Enlargement is the antidote to Russian imperialism and a sign that the most ambitious multilateral project in history—the European Union—is here to stay,” she told EU ambassadors.

It is an antidote that some EU member states seem hesitant to take, however. No country has joined the EU since 2013, when Croatia was admitted. In the dozen-plus years since then, the bloc has struggled with a fundamental dilemma on further enlargement: Would admitting new members strengthen the EU? Or would the addition of poorer countries with weaker democratic institutions—including some close partners of Russia—further undermine its cohesion due to the bloc’s unanimity-based decision-making?

There have been many reasons why the EU has resisted enlargement for the past dozen-plus years. But concern over the cost to EU member state taxpayers is rarely one of the strongest concerns. The EU could without difficulty absorb the financial costs of admitting the countries of the Western Balkans (Ukraine, on the other hand, is a different matter). For many skeptics of enlargement, a bigger concern than cost is the potential for new members to take EU decision-making hostage and backslide on the rule of law once they are in. Hungary provides perhaps the biggest cautionary tale for this concern. Budapest has exploited the need for unanimous votes by vetoing accession negotiations with Ukraine on geopolitical grounds.

More generally across the EU, however, Russia’s full-scale invasion of Ukraine in 2022 softened resistance to enlargement, with EU leaders reframing the addition of new members as a security imperative. That year, the candidate pool expanded rapidly beyond the six Western Balkans countries and Turkey to also include Ukraine, Moldova, and Georgia. This year, Trump’s claim on Greenland has drawn renewed EU membership interest in other parts of Europe, such as Iceland, which will hold a referendum on pursuing membership in the coming months.

Riding this momentum, the EU’s executive wing is pushing ahead with talks with Albania and Montenegro, the two candidates facing the least resistance to accession, as they are both NATO allies without major bilateral disputes with any current member states. Montenegro may now be on the cusp of drafting an accession treaty. Last year, Montenegrin Prime Minister Milojko Spajić announced that it was his goal for Montenegro to join the EU by 2028, while Albanian Prime Minister Edi Rama has set the goal of his country joining by 2030.

Sandwiched between the geopolitical imperative of enlargement and domestic pressures from Euroskeptic parties, the European Commission is now considering solutions that would allow enlargement to move forward without weakening the EU’s decision-making capacity. The solutions reportedly being discussed in Brussels would effectively offer new member states a kind of second-class status in the bloc, effectively creating a two-tier EU.

The proposal for a two-tier EU: Pragmatic or indecisive?

In the proposals reportedly under discussion, new member states would waive their veto rights for an indefinite transition period. During this period, each new member state would have full access to EU funds, institutions, and membership in the single market, but it would not be allowed to block decisions requiring unanimity. This idea does have some precedent, as transition periods on the rights of new members have been used in previous enlargement waves. In 2004, for example, new members had limits on the free movement of workers for up to seven years. But these earlier conditions were policy-specific and clearly time-bound; they did not relate to the new members’ institutional rights.    

At the same time, Brussels has emphasized the need to strengthen post-accession safeguards on the rule of law. These safeguards would embed into the accession treaties provisions that would allow the EU to retain oversight and correction mechanisms over the new members’ performance, thereby preserving some of the leverage that the EU has during the accession process. Last month, European Commission officials touted Montenegro’s upcoming accession treaty as the first of a “new generation” of treaties that give the bloc enforcement tools it can use if new members backtrack on the rule of law.

While these ideas have some benefits, they are also incurring immediate costs to the credibility of the accession process. In effect, the EU is publicly hollowing out the meaning of membership and moving the goalposts midway through accession, all while failing to make a clear political commitment on the timeline of enlargement. Thus, the EU is once again signaling indecisiveness at a critical moment, undermining accession candidates’ momentum for reforms.

The EU’s policy of conditioning accession on reforms can help candidate countries’ political transformations if there is a clear and credible offer for membership. This drives political accountability and empowers candidate countries’ civil societies to push for reforms. Ukraine, for example, has been taking steps to fight corruption, and there have been large anti-corruption protests there even as Kyiv fights a war for survival. This is largely because Ukrainians understand that the fight against corruption is tied to Ukraine’s case for EU membership.

Western Balkan leaders are exploiting the decision-making vacuum

The prolonged indecision by EU member states on the timing, scope, and structure of its enlargement policy risks further derailing the process. It is also providing leaders in the Western Balkans with opportunities to come up with distractions under the guise of strategic leadership and pragmatic solutions.

On February 28, Rama and Serbian President Aleksandar Vučić published a joint op-ed in which they called for the Western Balkans to be granted quick access to the EU single market and the Schengen area while forfeiting representation in EU institutions. This would mean even fewer institutional rights than the second-class membership proposal the EU is discussing. It would effectively make the countries of the Western Balkans members of the European Economic Area, like Norway and Iceland, without giving them the institutional rights of EU member states.

It is not a new idea. It has been circulating for almost a decade, promoted primarily by think tanks such as the Berlin-based European Stability Initiative. The argument goes that absent a clear political commitment to enlargement, the EU should offer the accession states something credible and politically feasible in the interim that would anchor them in the EU’s economic orbit and generate tangible benefits until it is ready to bring in countries as full members.

Yet there are reasons to believe that the enthusiastic endorsement of such ideas by Rama and Vučić—at a moment when both Montenegro and Albania appear to have an open path to membership—may be motivated by reasons other than pragmatism.

For one, Brussels is reportedly discussing the suspension of some or all of the EU’s conditional funding for Serbia due to its backsliding on the rule of law, at a time when the country has been roiled by an ongoing wave of anti-corruption protests that began in November 2024. Rama, for his part, has been intensifying his attacks against an empowered judiciary that is going after his party’s top brass. Rama is also facing pushback from the EU for his attack on the judiciary, a troubling sign for Albania’s accession process, since rule-of-law reform is seen as a litmus test of its membership bid.

Regional leaders who are used to governing in conditions of widespread corruption might be hoping that by voluntarily agreeing to second-rate membership, the EU might in turn tolerate second-rate governance and anti-corruption standards. The prospect of receiving EU funds without the accountability and responsibilities required of full member states—including alignment on foreign policy—may sound appealing to those who would like to be EU members while doing business as usual. But in doing so, Western Balkan leaders may in fact be strengthening the arguments of those who believe that the EU should not import new problematic members.

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Available data still demonstrate the scale of the challenge ahead. The World Bank’s latest Women, Business and the Law (WBL) report finds that women globally hold only two-thirds of the legal rights that men enjoy when it comes to participating in their national economy. Meanwhile, the systems that implement those rights lag even further, with the average score on the supportive frameworks index sitting at just 47 out of 100 and the enforcement perceptions index at 53.

Yet the same data highlight a major growth opportunity that middle powers are already seizing: each one‑point improvement in the legal score is associated with a 0.6‑point increase in women’s labor force participation—a tangible growth multiplier for economies seeking to boost productivity and expand fiscal space. The evidence is clear: better rules, backed by institutions, deliver real empowerment dividends.

In this era of great-power rivalry, middle powers are increasingly pairing domestic reforms with multilateral leadership to overcome global gridlock. They innovate at home, align domestic priorities with international engagement, and scale what works through foreign policy and development cooperation and finance: coalitions and platforms such as BRICS, the G20, regional blocs like ASEAN, multilateral development banks (MDBs), and the United Nations (UN). Their comparative advantage is not necessarily dominance, but agility and legitimacy—the ability to gain traction at home and diffuse ideas and implementation abroad.

Momentum, models, and the hardest hurdles

Between 2023 and 2025, the World Bank’s WBL benchmarking project tracked 113 reforms across sixty-eight economies, and middle powers account for many of the most substantive advances (a sampling of examples cited in Annex 3A of the report are included below). Their leadership on gender equality is grounded in domestic reforms that deliver results at home and credibility abroad. Many—including Sweden, Spain, Germany, Canada, and Mexico—are advancing feminist foreign or development policies. These strategies show why middle-power countries often outperform larger powers on gender equality: they prioritize high‑return reforms, back them with implementing institutions and enabling technologies, and share what works through regional and global cooperation.

They are also targeting the most binding constraints identified by widespread research and as highlighted in the WBL—each with digital and systemic dimensions—shaping women’s economic participation and, by extension, growth:

• Safety remains the lowest‑performing WBL dimension globally, with enforcement ineffective in roughly 80 percent of cases. Middle powers are working to close this “last mile” gap by pairing comprehensive statutes with integrated service ecosystems—hotlines, shelters, and survivor‑centered justice pathways. The United Kingdom and Brazil, for example, enacted legislation on cyberharassment, including criminal penalties for such conduct. They are also elevating these models in G20 and UN processes, where safety increasingly intersects with peacebuilding, digital governance, and climate resilience. In doing so, they help shape broader commitments, financing, and peer learning.
• Care—especially childcare—remains one of the most underbuilt forms of productive infrastructure. In low‑income economies, only about 1 percent of the enabling mechanisms for quality, affordable care are in place. Middle powers are increasingly reframing care as core economic infrastructure, developing standards, financing mixed provision, and designing policies that raise women’s labor force participation and productivity. Spain’s childcare benchmarks, Oman’s pension credits for caregiving, and South Korea’s paid leave for fathers illustrate practical models with macroeconomic payoff—approaches middle powers can share through South-South and triangular cooperation.
• Entrepreneurship also remains constrained: ninety-one economies still lack non-discrimination protections in access to credit, gender‑responsive procurement is limited, and small and medium-sized enterprise finance remains underdeployed for women‑led firms. Here, too, middle powers are making measurable progress—expanding women’s market access through governance reforms and procurement tools, while development finance institutions (DFIs) in the Nordics and sovereign wealth funds in Gulf states deploy blended finance to de‑risk lending and unlock capital, including for women entrepreneurs, and Ireland is among several middle powers prescribing gender quotas for corporate boards. This blend of technical cooperation, policy reform, and catalytic finance—an area where middle powers excel—has direct and scalable impact.

The multilateral multiplier

International influence is also a key aspect of middle-power leadership in this space. Recent G20 presidencies—Indonesia in 2022, India in 2023, Brazil in 2024, and South Africa in 2025—have kept inclusive growth, human capital, and sustainability at the center of consensus documents, normalizing gender equality as a macroeconomic priority rather than a social sideline. At the UN, for example, the CANZ countries—Canada, Australia, and New Zealand—have used sustainable development negotiations and general debates to advance gender-responsive financing, data, and governance standards essential for tracking progress on gender equality.

As BRICS continues to enlarge, it adds financing heft via the New Development Bank to mainstream gender‑smart infrastructure and services—such as safe transport, childcare, and digital public goods. This is what middle‑power leadership looks like: leveraging platforms, aligning agendas, and moving from principle to practice. At its Global Forum last week, the European Investment Bank—home to several middle-power member states—pledged to maintain its gender investments and renew its action plan.

Taken together, the middle-power approach—practical, institution‑focused, and coalition‑driven—is helping redefine what effective, gender‑responsive economic governance and cooperation looks like in today’s geopolitical landscape.

Toward a portable playbook for gender-equal growth

From these middle-power experiences, a replicable set of actions is emerging—steps that a committed government can adopt and partners can support:

1. Legislate the high‑return basics: guarantee equal pay for work of equal value; enact comprehensive anti‑discrimination; remove job bans; and implement robust anti-violence legislation, including cyber provisions.
2. Invest in the systems and institutions that make rights real: inspectorates, survivor services, specialized courts, digital infrastructure, childcare standards and financing, skilling, and sex‑disaggregated data architecture.
3. Mobilize capital at scale: use DFIs, pooled funds, and guarantees to finance care, women’s health, safe transport, water, and digital public infrastructure; crowd in private capital—especially for women entrepreneurs—through gender‑responsive procurement and disclosure; and leverage financial technology to expand access.
4. Align trade and investment tools: embed gender parity and safety standards in procurement, trade facilitation, and investment promotion to create durable market incentives.
5. “Multilateralize” the model: deploy G20 and UN platforms and processes, the Organisation for Economic Co-operation and Development, MDBs, and regional organizations to champion gender equality, standardize indicators, share tools, and scale financing and replication.

Why does this matter now? Because when it comes to women’s economic participation, the growth math is decisive. Closing gender gaps in the labor force could lift GDP by between 15 and 20 percent in many economies—and by up to 50 percent in the MENA region and South Asia. For aging OECD and East Asian societies, women’s economic participation is a macroeconomic stability imperative. For youthful regions, it is the difference between a demographic dividend and a demographic drag. Middle powers straddle both realities and are translating evidence into institutions at a time when credibility is currency. Trust in global governance may be fragile, but results are within reach. By grounding reforms in evidence, investing in institutions, and scaling through coalitions, middle powers are building the next playbook for gender‑equal growth and development. And in doing so, they remind us that influence and impact are not necessarily about size—they are about what works.

Nicole Goldin is nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and head of equitable development at United Nations University-Centre for Policy Research.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Public Event Wed, March 4, 2026 • 3:00 pm ET

EXIM Bank Chairman John Jovanovic on US priorities for global competitiveness

AN AC FRONT PAGE EVENT—John Jovanovic, president and chairman of the Export-Import Bank of the United States, discusses EXIM’s role in supporting US manufacturing, strengthening supply chains, and recalibrating trade.

Economy & Business Europe & Eurasia Geopolitics & Energy Security Trade and tariffs

Amid a war in Iran, a slowdown in the Strait of Hormuz, and a surge of tariff uncertainty, leaders around the world have their minds squarely on the risks associated with short-term economic volatility. According to US Export-Import Bank (EXIM) Chairman and President John Jovanovic, “these times call for a very strong, robust export-import bank.” 

At an Atlantic Council Front Page event on Wednesday, Jovanovic recalled speaking to President Donald Trump before his appointment as head of EXIM in September, recounting that he told the president, “you need something on the other end of a tariff” to ensure US companies can continue to compete globally. 

EXIM, as part of its role, works to shape supply chains in which US companies can be competitive. “We’ve all become overreliant on supply chains that aren’t free, fair, functioning anymore,” he argued, addressing US partners and allies: “It’s not your fault, it’s ours. But let’s solve it together, and if you help us solve it, it’ll accrue value to you as well.” 

Below are more highlights from the event, where Jovanovic talked about the supply chains he is working to reshape, from critical minerals to energy. 

A look into the vault

• Jovanovic offered a behind-the-scenes look at the discussions behind Project Vault, a new initiative to create a critical mineral strategic reserve. “The fundamental problem” that the president was looking to address, explained Jovanovic, is that manufacturers rely on a “just-in-time inventory model,” which presents risks amid geopolitical shifts. 
• Those designing Project Vault, Jovanovic said, wanted to ensure that the model they set up didn’t allow “free riders,” envisioning a scenario in which a company “latches onto this and the US taxpayer subsidizes.” He explained, “if the manufacturers are the ones for whom we’re solving the problem, they’ve got to be on the hook and help us.” 
• He also explained that those creating Project Vault intend for it to be “demand-oriented,” because “the market told us what it needed.” He added, “we don’t want to create massive market disruptions.” 
• Project Vault, he argued, offers partners an “opportunity to collaborate” with the United States and thus serves as an example of “things that we’re doing to solve our own issues,” which “are going to accrue primary and secondary value to our strategic allies.” 

An eye on energy 

• Last month, EXIM approved a $400 million deal supporting US liquefied natural gas (LNG) exports headed to Turkey, one of a slate of LNG export deals over recent months totaling up to billions of dollars. “What we’re doing,” he said, “is acknowledging the realities of the world in which we live,” where countries are wondering how to “make the most secure energy supply decisions.” 
• Jovanovic said that he’d tell countries considering energy proposals from adversary countries to “think about the holistic risk-reward inherent in it and weigh all the pluses and minuses.” 
• Today, with support from EXIM, “American LNG exports are going to places in the world they’ve never been,” he argued, “displacing molecules that they otherwise would have procured from adversaries.” 
• Discussing US energy-security cooperation with the Western Balkans, Jovanovic said that it is “mission critical” for the United States to help the region attain the energy security “that they need and they deserve long-term,” with the Western Balkans’ challenges proving particularly persistent. Toward that aim, he said, there’s an “underdeveloped opportunity” to “work together on supply chain security.” 

What US businesses are saying 

• As EXIM has worked to strengthen supply chains, “we haven’t had to go pound the table and convince CEOs that they need to rethink some of these decisions that they’ve made,” regarding relying on cheaper goods from adversary countries, Jovanovic said. They already understand, he argued, that “what in the near term may yield some financial efficiency opens up considerable operational vulnerability in the mid- to long-term.” 
• Jovanovic explained that it isn’t just large companies that will benefit from stronger supply chains. “Ninety percent of what the bank does,” he said, “is actually work with small and medium-sized companies.” 
• Yet, he explained, having “the biggest companies participating” at a meaningful scale “creates the room and opportunity for the mids and smaller guys.” 
• With artificial intelligence shaking up how businesses of all sizes around the world operate, Jovanovic argued that the technology is “an excellent way to give a shot in the arm to American productivity,” unleashing the country’s “pent-up economic growth.” 

Katherine Golden is an associate director of editorial at the Atlantic Council and an anchor of the Council’s flagship newsletter, AC Intel. 

Watch the full event

The post Inside Trump’s long-term economic strategy, with EXIM Bank’s John Jovanovic appeared first on Atlantic Council.

Bottom lines up front

• The Trump administration negotiated a record number of trade deals over the past year, including eight agreements on reciprocal trade and ten related framework deals.
• The Supreme Court’s recent ruling that the president cannot impose tariffs under the International Emergency Economic Powers Act removes what was powerful leverage to make these deals.
• The administration is now shifting to investigations under Section 301 to maintain pressure, but if it does so unpredictably, then countries could abandon agreements, reimpose barriers, or retaliate.

WASHINGTON—On February 20, the US Supreme Court ruled that the US president cannot apply tariffs under the International Emergency Economic Powers Act (IEEPA). In effect, this ruling also poured cold water on the Trump administration’s approach of using country-specific tariffs as leverage to make quick trade deals. 

Up until the Supreme Court’s decision, US President Donald Trump and his US trade representative (USTR), Ambassador Jamieson Greer, were able to put together a remarkable number of trade deals with a wide range of partners in record time. This effort ran from the first announcement of a deal with the United Kingdom in May 2025 to the latest ones with India and Bangladesh in early February of this year. According to the president’s 2026 Trade Policy Agenda, issued by the USTR on March 2, the administration concluded eight agreements on reciprocal trade (ARTs) and ten framework deals that will lead to ARTs or equivalent agreements.

Clearly, the IEEPA tariffs were effective leverage as the USTR pushed others to negotiate and conclude groundbreaking trade deals. Many previous administrations had sought trade agreements to address specific trade barriers, particularly high tariffs and persistent nontariff barriers (NTBs), which can restrict trade to a trickle in key sectors. For example, the USTR worked for over a decade in the World Trade Organization (WTO) beginning in the early 2000s to bring major developing countries to the table to negotiate reductions in their high tariffs, but to no avail. This failure was a central reason why the WTO has lost so much relevance and its rules on most-favored (non-discriminatory) treatment have come under attack in recent years. In previous years, the USTR released its National Trade Estimate report cataloguing foreign trade barriers, and each year it generally cut and pasted descriptions of longstanding trade restrictions and updates to add new ones.

What was lacking in these efforts to address foreign trade barriers was effective leverage. And what made the Trump administration’s record of recent achievements in such a short time possible was a new source of leverage—sudden, unpredictable, massive US tariffs under IEEPA with no regard for WTO rules on tariff bindings and MFN treatment. Now, however, that leverage seems to have disappeared in a puff of smoke only days after the Supreme Court ruling. It has been replaced by the thin gruel of a temporary tariff at a maximum level of 15 percent under Section 122 of the 1974 Trade Act for balance of payments crises. But even this tariff will expire after 150 days without congressional approval, and it, too, may rest on tenuous legal ground.

So, does this mean that Trump’s leverage disappeared with the removal of the IEEPA tariffs? Does it mean that trading partners will walk away from the trade deals already negotiated or drag their feet on concluding the ones that are still pending? 

Some countries might indeed reassess the current situation and conduct senior-level discussions on how they should position themselves going forward. After all, their trade negotiations with the United States on the ARTs and framework deals occurred under duress, in the face of tariff increases that had not been seen since the 1930s. With the creation of the multilateral trading system after World War II and then decades of progressive reductions in tariffs in the United States and other major developed countries, they had a high degree of certainty that tariffs would not go up again across the board, especially in the United States. That all changed dramatically with the Trump administration and the announcement of a new system of reciprocal tariffs on April 2, 2025. And now that the Trump administration has been substantially disarmed, some may wonder if tariffs have peaked and could start to drift down.

Since the lifting of the IEEPA tariffs on February 24, Trump and Greer have expressed confidence that the ART program will continue and that trading partners will stick with the deals already negotiated. In fact, there have been few signs of cold feet in this regard. While India cancelled a visit of its chief negotiator scheduled for the week after the Supreme Court decision to finalize legal text for an “interim agreement,” this was understandable. Of course, negotiators would need to double-check their mandate following such a sudden development. The European Parliament on February 23 decided to postpone its consideration of the US-European Union (EU) framework deal, reportedly out of concerns that the Trump administration may raise the Section 122 tariffs to the maximum allowable 15 percent, which could be inconsistent with US commitments under the deal. Otherwise, trading partners do not appear to be running for the exit.

There are plenty of reasons for US trading partners to be cautious in moving forward. It is clear, for instance, that the Trump administration and the USTR are proceeding with plan B, namely the initiation of trade barrier investigations under Section 301 of the 1974 Trade Act. In the first days of the Trump administration, plan B could have been plan A if the president had not been so focused on imposing tariffs immediately and without the constraints of statutory requirements that might slow the execution of his grand vision of tariffs as a solution to many problems. A more predictable, defensible, and legally credible approach could have been to initiate multiple Section 301 investigations on a country-by-country and sector-by-sector basis. It is a tried-and-true tool that has been around even before the WTO was established, and it has proven durable over the decades since. It has the advantage of providing impressive USTR authority to impose tariffs and other trade restrictions to address a full range of foreign trade barriers. The rub is that Section 301 investigations require a well-established process of consultations, opportunity for comment, hearings, timetables, and published findings that the president likely felt he could dispense with by using IEEPA authority, which, in fact, did not actually exist.

And while Section 301 investigations generally require a year or more to complete, there is a provision for expedited action. This now seems to be the USTR’s plan over the next few months before the expiration of the Section 122 tariffs. What the United States has now, then, is a new kind of leverage that can be deployed to maintain the ARTs negotiated to date, conclude the pending ones, and continue negotiations on new frameworks and eventual ARTs for virtually every other trading partner. It seems quite likely that early results in these Section 301 cases will match the reciprocal tariffs already agreed with multiple countries. These cases also provide discretion to threaten increased reciprocal tariffs as enforcement leverage if a trading partner hesitates to deliver on its end of the bargain.

However, it will be critical for the Trump administration to use this tool wisely. Even with the increased predictability offered by Section 301 procedural guarantees, random threats of additional tariffs or even total bans on trade will undermine the credibility of this plan B. For example, there remain many cases still pending under Section 232 of the 1962 Trade Act relating to national security, including semiconductors and derivative products, medical devices, robotics, and polysilicon. This authority rests with the Department of Commerce, and there have been hints that more cases may be in the works in additional sectors. 

If US trading partners find that their good-faith efforts to settle on terms for ARTs are rewarded with additional tariffs, then they may start to withdraw from these agreements, walk away from further negotiations, and reimpose higher tariffs and NTBs that the USTR has so diligently sought to negotiate away. Some may even choose to retaliate with even higher tariffs of their own. This is a true turning point for the Trump administration’s trade policy and an opportunity to set it on a more stable and productive course. While it retains leverage, it can just as easily lose this leverage, and the next time, it may not be so easy to recover.

The post How the White House’s plan B on tariffs can give it all the trade leverage it needs appeared first on Atlantic Council.

Bottom lines up front

• The ongoing Middle East conflict is pushing oil prices higher, and analysts warn prices could exceed one hundred dollars per barrel if disruptions in the Strait of Hormuz persist.
• Higher oil prices could benefit Russia, which has large volumes of sanctioned oil in storage and could gain revenue needed to fund its war in Ukraine.
• The US and its allies should strengthen enforcement of existing sanctions on Russia, expand some restrictions, and discourage China and India from increasing their purchases of Russian oil.

WASHINGTON—As all eyes turn to the war in Iran, the United States and its Western allies cannot afford to take their sights off Russia. Ongoing US and Israeli strikes on Iran, combined with Iran’s threats to close the Strait of Hormuz and its attacks on energy and military infrastructure across the Middle East, are leading to spikes in oil prices. Some analysts warn that oil prices could rise to one hundred dollars per barrel if there is a prolonged disruption of oil exports from the Gulf. Watching all this is Russia, eager to sell the hundreds of millions of barrels of sanctioned oil it currently has sitting in storage tankers at sea.

Oil’s rise

Oil futures have fluctuated since the war began. On Tuesday, Brent crude traded at nearly $84 per barrel, its highest price since July 2024. While the surge appears to be leveling off, oil prices are up 15 percent this week. Many analysts anticipate that the longer the conflict goes on and risks to the Strait of Hormuz and Gulf energy infrastructure persist, the greater the likelihood of further price increases.

There are global economic implications associated with high oil prices, including higher inflation, negative impacts on markets, and increased prices at the gas pump and for common goods. But there are also more specific implications for the Russian economy: Higher oil prices could help Moscow continue funding its war against Ukraine despite being under heavy sanctions. As policymakers consider next steps with Iran, they should double down on enforcing sanctions against Russia to prevent Moscow from benefiting from the conflict in Iran.

Russia’s opportunity

Russia has been under increasing economic pressure from Western sanctions since its full-scale invasion of Ukraine in 2022. The United States and its allies imposed sanctions, export controls, asset blockings, an oil price cap, and other restrictive economic measures aimed at reducing Moscow’s ability to fund and equip its war. This pressure, for example, includes US and UK sanctions targeting Russia’s four largest oil companies—Rosneft, Lukoil, Gazprom Neft, and Surgutneftgas—and their subsidiaries, as well as US, UK, and European Union (EU) sanctions targeting the “shadow fleet” of Russian oil tankers and facilitators enabling Russian sanctions evasion. These sanctions took the Group of Seven (G7) advanced economies’ sixty-dollar price cap on Russian oil, enacted in December 2022, a significant step forward by further restricting Moscow’s ability to sell its oil and reducing Russia’s oil revenue.

As these sanctions have taken hold, Russia’s economy has been hit hard. While the Kremlin has sought to reshape Russia’s economy into supporting its war, its revenue from oil exports has fallen. Prior to 2022, fossil fuel exports funded nearly 40 percent of Russia’s federal budget. In 2025, this dropped to 25 percent. This fall in revenue was due to a combination of a global oil surplus, low oil prices, and Western economic pressure.  

After European countries started to phase out purchases of Russian Urals due to the price cap and sanctions, China and India became the primary importers of Russia’s oil. In the past year, however, Beijing and New Delhi reduced their imports of Russian oil due to concerns over US secondary sanctions exposure, tariffs, and, in India’s case, difficult trade negotiations with the United States. China continued to buy oil from Iran and Venezuela, evading US sanctions, and it began importing more oil from Saudi Arabia. Meanwhile, India started sourcing more oil from the United States and Gulf states to meet its domestic demand.

But now, as oil prices surge and it becomes more difficult to move oil out of the Persian Gulf, big oil consumers such as China and India will need to shore up their supplies. Russia is ready and waiting for fresh demand for its oil: On Wednesday, Russian Deputy Prime Minister Alexander Novak said that Russia is getting “signals of renewed interest from India.”

In January, the EU and the United Kingdom reduced the Russian oil price cap to $44.10 per barrel, a move that was intended to further curb Russian oil revenue. But with oil prices over $80 per barrel this week and many analysts expecting those prices to rise, $44.10 per barrel becomes an attractive discount for readily available oil, giving Russia an opportunity to increase oil sales.

The Western response

While the US-Israeli war against Iran is expanding across the Middle East, Russia’s war in Ukraine continues. If Russia is left unchecked and sanctions are not enforced, Russia may have the opportunity to replenish its coffers with oil revenue. This would shore up Russia’s declining economy, provide it with the funds it needs to continue the bloodshed in Ukraine, and weaken US and Western leverage in peace negotiations. The West cannot afford to let this happen. 

The United States, the EU, the United Kingdom, and the broader G7 sanctions coalition should step up the enforcement of their existing sanctions against Russia now. This should include levying additional sanctions on Russia’s energy sector, including currently unsanctioned oil companies, refineries, ports, and financial institutions that facilitate oil and gas transactions. 

In addition, the United States should align its shadow fleet sanctions with those of the EU and the United Kingdom. Aligning or matching sanctions with allies extends the tool’s reach across jurisdictions and reduces sanctions evasion. In addition to designating the shadow fleet vessels, allies should expand operations to seize them. These seizures reduce Russia’s profits from sanctioned oil and send a clear message that sanctions evasion will not be tolerated. Further, these operations remove dangerous unseaworthy vessels from the water, preventing potential environmental and maritime accidents, as well as potential national security risks, such as undersea cable cutting.

Beyond oil, Western partners should also pursue sanctions on Russia’s liquefied natural gas (LNG) sector, especially now that Qatar’s LNG capacity is shut down as a result of the war in Iran. Qatar’s LNG exports represent 20 percent of the global supply. Meanwhile, Russia remains the fourth-largest LNG supplier, behind Australia, Qatar, and the United States. With Qatari LNG offline, Russia, if left unchecked, could fill the gap in supply. Further, the United States, the United Kingdom, and the EU should make clear to China and India that sanctions on Russian energy remain in place and it would be in their best interest to comply with them.

The weaker the Russian economy performs, the greater the West’s leverage in negotiations to end Moscow’s war in Ukraine. To maintain and bolster this leverage over Russia, the United States and its allies should enforce and increase their sanctions efforts to ensure that the Kremlin cannot economically benefit from a boost in energy sales as a result of the Iran war.

Energy Sanctions Dashboard

This dashboard focuses on US sanctions and restrictive measures placed on crude oil from Russia, Iran, and Venezuela—including the unintended consequences and the lessons learned.

The post Enforce sanctions to prevent Russia from benefitting in a prolonged Iran crisis appeared first on Atlantic Council.

The problems began in early February when Elon Musk imposed restrictions on unauthorized Russian access to Starlink satellites operated by Musk’s SpaceX company that provide high-speed internet. The move came following talks between Musk and recently appointed Ukrainian Defense Minister Mykhailo Fedorov.

Starlink made headlines in 2022 as a crucial tool for the Ukrainian military during the initial phase of the Russian invasion. More recently, Russia has acquired thousands of Starlink internet terminals and incorporated them as an important element of the invading army’s communications infrastructure. 

Efforts to disable unauthorized Russian terminals operating in Ukraine had an immediate impact, with Ukrainian officials reporting a sharp drop in Russian bombardments and drone attacks on front line positions. In one incident on the Zaporizhzhia front, twelve Russian soldiers were reportedly killed by friendly fire after a Starlink terminal failure.

Ukraine appears to have benefited from Russia’s sudden loss of connectivity. In the first five days following the Starlink cutoff, Ukrainian forces reportedly liberated more than two hundred square kilometers of territory, representing an area roughly equivalent to the Russian army’s gains throughout the whole month of December. This trend has continued into early March. 

While there is still some debate over the extent to which the areas reclaimed by Ukraine had previously been under Russian control, the advances provided a boost to Ukrainian morale while strengthening the country’s front line position. According to the Institute for the Study of War, this battlefield success owed much to the disruption caused by Russia’s loss of Starlink services.   

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

With no domestically produced alternative to Starlink technology, Russian units are now scrambling to find alternative ways to communicate. Some have sought to revive access to the Starlink system, with the Ukrainian authorities warning that Russians are now attempting to pressure the families of Ukrainian prisoners to register terminals. 

Russia’s own satellite communications system, which is run by Gazprom Space Systems, has been used in a limited capacity during the war. However, it is regarded as far less reliable than Starlink and is not seen as a viable alternative.

The fallout over the loss of Starlink has sparked a scandal in Russia, with many questioning why the army allowed itself to become so dependent on a communications system owned and controlled by an American company. Critics have attacked this development as both a national humiliation and a strategic blunder which left the Russian military dangerously vulnerable.  

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Russia’s recent communication woes are not only due to external restrictions. Days after Musk agreed to cut Starlink access, the Kremlin moved to slow down the hugely popular messenger app Telegram, citing the application’s failure to comply with Russian data laws.

This was widely seen as a significant step toward closing one of the few remaining uncensored communications channels in Putin’s Russia. Telegram serves as a leading news platform among Russian audiences with over 93 million users in the country.

The Kremlin decision to restrict Telegram sparked a rare backlash within Russia’s own ranks, with pro-war bloggers particularly vocal in their criticism. The limitations further undermined connectivity between Russian forces fighting in Ukraine, with many soldiers complaining that the loss of Telegram would hamper their ability to share battlefield information and conduct fundraising activities.  

Recent measures against Telegram are part of a much larger effort by Putin to exert greater control over all digital communications. The end goal appears to be the establishment of a “sovereign internet” inside Russia sealed off from foreign influence.

Since the start of the full-scale invasion, Russia has banned Instagram, Facebook, YouTube, WhatsApp, and X. Meanwhile, the Kremlin is now actively pushing Russians to use the new state-controlled MAX app, which contains extensive tracking capabilities for surveillance and is now pre-installed on all phones in Russia.

As the war in Ukraine has progressed, Russia has also restricted internet usage through the widespread implementation of mobile internet blackouts. Putin recently signed a law expanding the ability of state bodies to restrict connectivity, essentially handing the security services a kill switch to the internet inside Russia.

Putin’s readiness to target Telegram despite the challenges this creates for the Russian army in Ukraine has led to speculation that he may be prioritizing domestic regime stability over military success. Some have suggested that he could be preparing for a new and politically risky mobilization; others believe the Kremlin fears unrest as the economic situation in Russia worsens.

Whatever the true motives behind recent efforts to throttle Telegram in Russia, the Kremlin’s actions do not project confidence. On the contrary, they hint at a regime seeking to silence critics and prevent any potential grassroots discontent from gaining traction.   

Katherine Spencer is a program assistant at the Atlantic Council’s Eurasia Center. Marc Goedemans is a Young Global Professional at the Atlantic Council’s Eurasia Center.

Further reading

UkraineAlert Mar 2, 2026

Ukraine’s experience is indispensable in the fight against Iranian drones

By Peter Dickinson

Britain has announced plans to deploy Ukrainian drone warfare specialists to the Middle East as part of international efforts to counter the growing threat posed by swarms of Iranian drones, writes Peter Dickinson.

Conflict Defense Technologies

UkraineAlert Mar 2, 2026

Missiles made in Ukraine are bringing Putin’s invasion home to Russia

By David Kirichenko

Ukraine is investing in a domestic missile program to create the kind of long-range strike potential that could force Putin to the negotiating table and serve as a deterrent against future Russian aggression, writes David Kirichenko.

Conflict Defense Industry

UkraineAlert Mar 2, 2026

Europe must not seek Putin’s approval before sending troops to Ukraine

By Stephen Blank

European leaders representing Coalition of the Willing countries reportedly reject the idea of sending troops to Ukraine without first securing Russian President Vladimir Putin’s approval, writes Stephen Blank.

Conflict European Union

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

Read more from UkraineAlert

UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values, and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia, and Central Asia in the East.

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The post Russian army faces comms crisis amid Starlink cut and Kremlin crackdown appeared first on Atlantic Council.

What’s on the agenda for the 2026 Three Sees Summit (3SI) in Dubrovnik?

Senior Fellow Ian Brzezinski sits down with Special Envoy for Strategic Connectivity and Three Seas Initiative of Croatia Ambassador Romana Vlahutin to discuss the upcoming 3SI Summit in Croatia and opportunities for international engagement on energy, economy, and more. 

Fellow

Ian Brzezinski

Senior Fellow

Europe Center Scowcroft Center for Strategy and Security

Central Europe Defense Policy

The post #AtlanticDebrief – What’s in store for the Three Seas Summit? | A Debrief from Amb. Romana Vlahutin appeared first on Atlantic Council.

In this episode, host Juliette Matos brings you a conversation with Congressman John Moolenaar (R-MI-2), chairman of the House Select Committee on China, as questions about US support for Taiwan come back into focus in Washington. When Moolenaar joined us, he said deterring Chinese aggression in the Taiwan Strait is a “core US national security interest.” In conversation with the Atlantic Council’s Markus Garlauskas, Moolenaar also shared his views on the economic stakes of the US-China relationship and how Washington should approach cooperation in the Indo-Pacific.

Watch the full event and read the transcript here: Congressman John Moolenaar on deterring aggression against Taiwan.

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The AC Front Page Podcast, hosted by Juliette Matos, brings you exclusive conversations with heads of state and government, senior US officials, CEOs, and global decision maker—recorded live at the Atlantic Council’s headquarters in Washington, DC, and on stages around the world. From geopolitics and national security to technology and the global economy, this podcast will keep you updated and informed on the policy debates driving today’s headlines.

Listen wherever you get your podcasts. Full videos and transcripts of our events are available at AtlanticCouncil.org/ACFrontPage.

AC Front Page Podcast

Newsmakers. Big ideas. Global impact. The AC Front Page Podcast delivers high-level conversations with global leaders shaping the global agenda.

Past event February 12, 2026

Congressman John Moolenaar on deterring aggression against Taiwan

AN #ACFRONTPAGE EVENT—Moolenaar, chairman of the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party, discusses how the United States and Taiwan can strengthen deterrence in the Taiwan Strait.

New Atlanticist June 17, 2025

China is militarizing its coast guard against Taiwan. Here’s how Taipei and its allies can respond.

As new evidence emerges about China’s long-suspected practice of using its coast guard for military purposes, Taiwan and the US have the tools to push back.

AC Front Page harnesses the convening power and expertise of the Council’s sixteen programs and centers to spotlight the world’s most prominent leaders and the most compelling ideas across sectors. The premier platform engages new audiences eager for nonpartisan and constructive solutions to current global challenges. This widely promoted 45-minute program features the Council’s most important guests and content serving as the highlight of our programming.

The post How to deter Chinese aggression against Taiwan, with Rep. John Moolenaar appeared first on Atlantic Council.

Asfura’s narrow win 

Nasry “Tito” Asfura was sworn in as Honduras’ president on January 27, following one of the country’s most contentious electoral cycles in years. The former mayor of Tegucigalpa won the November 2025 general election with 40.27 percent of the vote, a margin of less than 1 percentage point over Salvador Nasralla, the Liberal Party candidate.

Mirroring the pro-business approach that characterized his tenure as mayor of the country’s capital from 2014 to 2022, when he advanced 1,142 infrastructure projects, Asfura won with a platform emphasizing job creation and legal certainty for businesses. With about 60 percent of Hondurans living in poverty and more than 38 percent in extreme poverty, economic concerns were the main issue for voters. Against this backdrop, Asfura’s “Vamos a Estar Bien [We Are Going to Be OK]” campaign emphasized attracting national and international investment and reducing red tape for starting businesses, while also reforming social services and fighting corruption.

Endorsed by President Donald Trump in the final hours of the campaign, Asfura entered office with a commitment to strengthen cooperation with the United States on shared priorities, one of the pillars of his so-called “Five-Star Vision.” He also campaigned on broader shifts in foreign and commercial policy, including cutting ties with China, rebuilding relations with Taiwan, and strengthening engagement with Israel. In the days leading up to his inauguration, Asfura traveled to Washington to meet with Secretary of State Marco Rubio, as well as to Israel to engage with President Isaac Herzog and Prime Minister Benjamin Netanyahu.

More broadly, the first month of Asfura’s presidency has signaled a sharp departure from his predecessor’s ideological orientation. While former President Xiomara Castro’s LIBRE party pursued a progressive social agenda, including alignment with left-leaning regional partners, Asfura’s National Party is more conservative. The changes in ideology and aligned partners will likely reshape the direction of domestic policy debates, whether concerning education, social spending, or health.

A congress tilted toward traditional parties 

In the November 2025 elections, Hondurans also elected all 128 members of the National Congress. In the new congress, Asfura’s National Party makes up the largest bloc with forty-nine seats, followed by the Liberal Party with forty-one and LIBRE with thirty-five. Smaller parties hold just three seats combined.

While no party holds an absolute majority of sixty-five seats, the National and Liberal Parties together control ninety, marking the legislature’s return to the more traditional two-party dynamic that dominated politics for decades prior to LIBRE’s 2021 victory. The legislature’s new makeup also marks a return to a more conservative agenda. The new configuration will generally allow the government to pass legislation without relying on LIBRE’s support, but negotiations between the National and Liberal Parties will still be essential. Tensions from the contested elections remain, with some legislators from the Liberal Party still demanding the verification of electoral results by independent or international entities. Differences over policy priorities and these lingering disputes could complicate efforts to move proposals forward. After such a contested election, translating campaign promises on the economy and social progress into tangible outcomes will be key for consolidating trust.

Early actions in office 

Asfura’s governing style became visible within his first hours in office. He was sworn in during an austere ceremony, with no international guests in attendance. In his inaugural address, he framed his presidency’s focus on fiscal efficiency by reducing the size of the state and highlighted infrastructure, education, and health as priority areas. Reporting afterward noted that the government plans to cut or merge twenty institutions to optimize resources. That framing carried into the president’s first policy actions. He closed the inauguration ceremony by signing three bills into law that reflected broader efforts to reallocate public resources and prioritize economic activity. These included authorizing the sale of the presidential plane, broadening the presence of the National Autonomous University by opening new campuses in eight additional national departments, and expanding the Temporary Import Regime. Through this last measure, 125 additional companies will benefit from the duty-free import of inputs used for export-oriented production. The government argued this will lower costs for exporters, improve national competitiveness, and generate approximately forty-seven thousand additional jobs. 

One day into the role, Asfura moved on health priorities, requesting that congress declare a national emergency to tackle surgical backlogs, which currently affect more than ten thousand patients, and to ensure the adequate supply and distribution of medicine.

On the international front, the administration initiated Honduras’ return to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID), reversing the previous government’s 2024 withdrawal. This earlier decision came after investors in the Prospera special economic zone filed arbitration claims against the government following the National Congress’s 2022 attempt to repeal the 2013 Zones of Economic, Development, and Employment (ZEDE) law, which underpinned Prospera’s legal and operational framework. Castro’s move last year to withdraw from ICSID contributed to heightened investor concerns about legal certainty and access to dispute resolution mechanisms for companies operating in Honduras. Rejoining ICSID signals renewed adherence to international norms, an important first step toward attracting foreign capital and creating jobs.

Asfura’s early February meeting with Trump was another concrete step in advancing his foreign policy priorities. The Mar-a-Lago meeting reportedly focused on trade, investment, and security. In line with these priorities, Asfura has announced plans to pursue reciprocal trade negotiations with the United States to strengthen economic ties and attract investment. But the context has since shifted, with Trump now imposing global tariffs under Section 122 of the Trade Act of 1974 rather than under the International Emergency Economic Powers Act (IEEPA). The new legal justification could shift the objective of these engagements. Asfura is also one of a select few Latin American heads of state who will participate in the March 7 regional summit convened by Trump in Miami.

Opportunities ahead: How to turn early reforms into lasting gains 

Asfura’s first reforms have sent positive signals to different stakeholders, including local and international investors and the US administration. The follow-through work will now be critical. To deliver on campaign promises and achieve results, Asfura needs to consider structural reforms on trade, investment, and energy, leveraging Honduras’ early engagement with the Trump administration and the possibility of renewed ties with Taiwan.

1. Shape the economic agenda with the United States beyond tariffs

The United States is Honduras’ largest trading partner, accounting for roughly 37 percent of its total trade. With the Supreme Court’s IEEPA ruling, Honduran exports to the United States—primarily textiles, coffee, and agricultural products—will continue to benefit from preferential access under the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR). As Washington continues to advance and sign reciprocal trade frameworks with partners across the region, Honduras could have an opportunity to reframe the bilateral US trade agenda beyond tariffs, focusing more on customs and trade facilitation, as well as long-standing labor concerns. Locking in a reciprocal trade deal would help Honduras address investment fundamentals and better weather US domestic trade volatility.

Asfura and US Trade Representative (USTR) Jamieson Greer already met and announced their intent to “launch negotiations as soon as possible.” The Asfura administration should expect Greer to seek commitments in areas that the United States has previously identified as constraints on US economic engagement, including the following:

• Reducing trade barriers: Since February 2023, exporters of US poultry products and rice (and onions starting in 2024) must complete an annual registration process andapply for import permits for each shipment. The process requires engaging with multiple Honduran government agencies and navigating numerous administrative steps, which can increase costs and delay shipments. These guidelines were introduced without advance notification or a phase-in period. Reducing duplication and clarifying procedures will be key to opening opportunities for US exporters.  
• Improving labor standards and oversight: According to the US Bureau of Labor Statistics, Honduras made moderate progress in strengthening labor laws, especially those regarding child labor, in 2024 and 2025. Progress will likely remain slow because the relevant Honduran agencies lack both financial and human resources to effectively carry out their mandates, but it is important that the government continues advancing reforms. Demonstrating progress on freedom of association and collective bargaining, and guaranteeing acceptable working conditions and wages in priority sectors, will be important goalposts.
• Intellectual property (IP) enforcement: Honduras must reinforce the implementation of IP laws under CAFTA-DR, addressing concerns about the lack of border enforcement regarding the sale of counterfeit goods, online piracy, and cable signal piracy. Alignment and modernization of IP laws has issue in the new White House’s reciprocal trade frameworks with several partners in Latin America and the Caribbean (LAC).

With these priorities in mind, the government should start consultations with local private-sector actors and coordinate across relevant ministries to define commitments and ensure their timely implementation.

2. Explore targeted investment and trade deals with Taiwan

Until 2023, Honduras and Taiwan maintained a free trade agreement that was particularly important for Honduras’ shrimp sector, a key component of the country’s aquaculture industry. In 2022, for example, shrimp exports to Taiwan alone generated more than $105 million, accounting for roughly 30 percent of Honduras’ total shrimp exports, which represented the country’s fifth-largest export sector at the time.

As part of its new economic engagement with China, which followed the diplomatic switch from Taiwan in March 2023, Honduras sought to expand shrimp exports through the early harvest agreement. Producers hoped that access to China’s 1.4 billion consumers would increase demand. However, of the 250 containers initially projected for export, China purchased only one in 2024. At the same time, the loss of preferential access to Taiwan and the imposition of a 20-percent tariff led to a significant decline in export volumes to the sector’s main market, which fell to $25 million that same year, down from $51.7 million in 2023 and $105 million in 2022. It is safe to say that Honduran trade with China has been underwhelming.

Producers attempted to mitigate these losses by tapping into alternative destinations, including the European Union and Mexico. These markets, however, could only take in much smaller volumes at lower prices. As a result, total shrimp exports were 67 percent lower by 2025 compared to pre-diplomatic switch levels. This downturn also forced more than sixty companies, including two processing plants, to close, resulting in the loss of about fourteen thousand jobs.

Restoring relations with Taiwan could offer Honduras a pathway to rebuild the sector. Taiwan has a track record of providing targeted assistance and investment to its diplomatic partners, including support for aquaculture sectors in Fiji, Grenada, and Belize.

For Honduras, potential areas of support from Taiwan could include:

• aquaculture infrastructure, including processing facilities;
• technical cooperation programs to improve production and supply chain efficiency; and
• investment in complementary sectors such as transport logistics connecting key shrimp-producing departments, such as Choluteca and Valle, to major distribution hubs such as San Pedro Sula and Puerto Cortes, strengthening the sector’s competitiveness and export capacity.

Recently, Taiwanese business actors have expressed interest in restoring shrimp import levels to pre-2023 volumes. If Asfura moves forward with reestablishing relations with Taiwan, diplomatic engagements could be accompanied by trade missions that include representatives from the aquaculture sector. In parallel, consultations with producers and industry associations would help assess current production capacity and inform the design of a renewed trade framework supported by technical assistance and investment cooperation.

3. Reform the energy sector

During his Washington visit in late 2025, when he was still president-elect, Asfura emphasized the importance of attracting US capital into critical sectors such as energy. The cost and reliability of electricity are among the most significant constraints on Honduras’ investment climate. Energy reform should not be seen simply as a route to fiscal stabilization but as a key part of the country’s national competitiveness strategy.

The state-owned Empresa Nacional de Energía Eléctrica (ENEE) has been in financial and operational distress for years. As of early 2026, according to the new ENEE manager, ENEE carried an accumulated debt of more than $3 billion, including nearly $1 billion owed to private power generators. This high level of debt, combined with limited cash flow, has constrained the company’s ability to invest in critical improvements and maintenance of the energy sector.

Technical and non-technical losses in Honduras’ distribution system remain among the highest in Latin America, at roughly 40 percent. This means that more than one-third of generated electricity is either lost in transmission or goes unbilled. The country’s average industrial electricity tariff also ranks among the highest in Central America, directly undermining the competitiveness of its manufacturing and agro-industrial sectors.

To restore the sector’s stability, the government should work on a multi-layered strategy.

• Restructure ENEE’s debt while laying the groundwork for future growth and reforms: While debt restructuring is essential for short-term stabilization, long-term credibility will depend on institutional reform. Honduras should engage with multilateral banks and financial institutions to secure short-term financing and alleviate cash flow constraints. Prioritize clearing arrears with private generators to restore confidence and normalize commercial relationships. In parallel, ENEE’s new leadership should advance a restructuring of ENEE’s cash flow through transparent and competitive procurement processes. This would help ensure that future power purchases are contracted under market-based conditions that improve cost efficiency, reduce structural deficits, and avoid the accumulation of new payment arrears.
• Infrastructure investment for today: Upgrade generation and transmission systems to reduce losses and improve reliability. Public-private partnerships and international cooperation could support grid upgrades, including anti-theft measures such as automated meters. Other targeted projects, similar to the Inter-American Development Bank’s Remote Area Rural Electrification Program, could support efforts to ensure adequate supply in remote areas through mini-grids and solar systems. Investments in infrastructure will also be key if the country wants to attract data centers.
• Operational and governance reforms: To ensure reliable service and timely payments to generators, Honduras should strengthen billing and collection systems, enforce the legal framework to address non-payment and arrears, and improve ENEE’s operational capacity. In parallel, it should update existing laws to ensure the country’s regulatory framework is aligned with open and competitive market principles. Doing so would also strengthen energy-sector public institutions, provide legal certainty to investors, and establish predictable regulation that sends credible signals for long-term investment, while enabling lower electricity prices and security of supply. 
   

4. Address crime to improve investor confidence 

Honduras’ security environment remains a real, tangible constraint on investment, as noted by the 2024 update to the country guide published by the US Department of Commerce’s International Trade Administration. While homicide rates have declined from their peak earlier in the decade, the country still faces elevated levels of extortion, gang-related violence, and organized crime—all of which increase operating costs and deter both domestic and foreign investors. A 2022 World Bank “Country Private Sector Diagnostic” report also highlighted crime and insecurity as top obstacles for firms operating in Honduras. 

Asfura has signaled a tough-on-crime posture, but the approach must go beyond policing. International experience suggests that sustained reductions in crime require institutional reform in the justice system, professionalization of security forces, and investment in violence prevention programs. For investors, predictability matters as much as headline security gains: clear and enforceable property rights, transparent permitting, and judicial processes that function without corruption are all part of the security equation. 

The Honduran government should work with the United States to ensure that cooperation frameworks address both traditional security threats and the governance deficiencies that enable corruption and impunity. Strengthening the attorney general’s office and supporting anti-corruption institutions would reinforce the legal certainty message that Asfura’s early economic moves have tried to communicate.

Conclusion

Asfura has moved quickly to set the tone for four years in office. The early steps on fiscal discipline, trade openness, and alignment with Washington respond directly to Honduras’ most pressing economic realities. The expansion of the Temporary Import Regime, the move to rejoin ICSID, and the outreach to the Trump administration on trade, security, and broader cooperation are all positive signs. Turning these initial moves into lasting results will require technically sound reforms, particularly after a contested election. With favorable congressional alignment, international partners ready to engage, and a population eager for economic improvement, the administration has an opportunity to strengthen Honduras’ investment climate, support broader economic growth, and consolidate the country’s position as a reliable partner for Washington in the years ahead.

Staff

María Fernanda Bozmoski

Director, Impact and Operations and Lead for Central America

Adrienne Arsht Latin America Center

Central America

Staff

Isabella Palacios

Program Assistant

Adrienne Arsht Latin America Center

Central America Colombia

Memo to…

Nov 24, 2025

Memo to the Secretary of State: In the upcoming Honduran elections, democracy and US interests are at stake

By María Fernanda Bozmoski, Isabella Palacios, Jason Marczak

The upcoming general election in Honduras demands international attention—both because of the potential instability it could trigger and its implications for US economic interests.

Americas Central America

The Adrienne Arsht Latin America Center broadens understanding of regional transformations and delivers constructive, results-oriented solutions to inform how the public and private sectors can advance hemispheric prosperity.

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The post One month in, can Honduras’ new president put the country on the path to lasting economic gains? appeared first on Atlantic Council.

The US Development Finance Corporation (DFC) reauthorization is finally here as an amendment to the FY2026 National Defense Authorization Act (NDAA). Reauthorization of the agency matters for global connectivity: deploying the right kind of capital to the right places, and to the right recipients, remains the binding constraint on building affordable networks that bring high-speed internet to all. China has used its state-led industrial model to do exactly that, often at the expense of US economic and security interests. The reauthorization takes several important and concrete steps to counteract this trend, but a few outstanding gaps and questions remain.

In March, we outlined a set of recommendations to make DFC more fit for this challenge. Below, we assess the changes Congress passed and benchmark them against our connectivity-focused proposals. We look at where those recommendations were met, and the gaps that still exist, and then put forward concrete signals to look for down the line to assess if US actions will meet the needs of the moment.

Provisions that will promote connectivity

In March, we recommended increasing DFC’s investment capacity (then capped at $60 billion) and allowing the agency to reinvest the profits it generates, which at the time were returned to the US Treasury. The reauthorization delivers a major step forward on capacity: DFC’s maximum contingent liability rises to $205 billion. This expansion is particularly important for higher-risk but strategically critical connectivity projects, including last-mile networks and undersea cables, which are highly capital-intensive. That said, a higher cap is a necessary—but not sufficient—condition for success.

The new DFC reauthorization also expands country eligibility, authorizing DFC to operate in many more parts of the world, including in some high-income countries subject to spending caps, cost-share limits, and national-security certification. ICT-related deals are explicitly called out as a priority, exempting these transactions from some requirements. We previously argued that DFC needed the flexibility to operate in a broader set of geographies, including middle- and high-income countries in certain circumstances. Under the prior framework, DFC could operate in only a handful of higher income countries (just four in Latin America and the Caribbean) without a bureaucratic and ineffective national security waiver process.

Next, the reauthorization emphasizes “catalytic” investments and requires reporting on risk appetite in less-developed markets and low-return sectors, including new authorities around subordinated debt and 100% loan guarantees. This is a positive signal in response to our call for DFC to shift toward more patient, concessionary financing, which many connectivity projects require. However, questions remain about who will ultimately receive this financing and, critically, how much greater risk appetite DFC will have in practice. In our March article, we argued that DFC investment should prioritize investment in specialized intermediaries and community-focused internet service providers (ISPs), which consistently deliver faster speeds, better service, and lower costs than large multinational telecom firms, and recommended DFC offer concessionary terms (e.g., lower rates of return and/or taking more junior positions in capital stacks) where appropriate.

Lastly, we recommended that to accelerate dealmaking, DFC should be allowed to rely on the due diligence and underwriting of trusted specialized intermediaries and capital partners. These intermediaries are better positioned to pool DFC capital with other sources, originate and diligence connectivity investments, deploy appropriately sized financing to local ISPs, and provide pre- and post-investment support that improves project success and returns for taxpayers and co-investors.

The reauthorization allows DFC (with board approval) to create holding companies or investment funds where DFC can act as manager for national security needs. It also addresses secondary lending via intermediaries with safeguards. This could serve as a meaningful enabler for connectivity-focused blended finance vehicles and specialized intermediaries.

The Gaps and “Wait and See” Issues

The biggest question marks in the DFC reauthorization are around the new equity investment revolving fund. Congress has now authorized a $5 billion equity revolving fund at the Department of the Treasury to provide a dedicated capital stream for equity investments and will now allow DFC to consider and keep the returns of those investments to fund investments in the future, technically closing the “equity loophole”. As we noted in our previous article, federal budget rules require the DFC to treat all equity investments as an immediate and 100 percent loss, with any returns that were realized returned to the Treasury.

On one hand, equity investments can be a useful tool for the DFC to have in its toolbox, even if the cashflows of many connectivity projects can support reasonably priced debt financing. On the other hand, Congress did not actually provide an appropriation for this new equity revolving fund. Moreover, because returns from equity investments will be returned to the DFC to be redeployed in future investments, there’s a risk that the agency will be incentivized to chase high-return investments rather than using equity as a truly catalytic tool. Nevertheless, if Congress actually provides funding for the use of equity investments, this will be helpful in enabling the DFC to demonstrate that it knows how to craft an investment approach that doesn’t lose money and will hopefully build a track record of appropriately assessing risk-return potential that it can score against in the future.

Another concern is the bureaucratic red tape we flagged in our earlier article. DFC has long been required to notify Congress for transactions above $10 million, slowing deal execution, and it remains subject to burdensome Federal Credit Reform Act requirements on insurance products that further delay transactions and limit its ability to crowd in private co-investment.

With the new authorization, the project notification threshold does increase to $20 million, but the statute also adds new notification and reporting requirements for equity investments, which could lengthen—rather than streamline—approval processes. Moreover, the legislation does not clearly resolve the FCRA/OLC insurance scoring issue we identified. Whether these changes ultimately reduce or increase friction will only become clear as implementation unfolds.

Next, on personnel: we argued that the DFC should be restructured around specific regions and sectors (including internet infrastructure) and that staff should be incentivized to take prudent risks to catalyze investment from other capital providers. The reauthorization makes some directionally positive changes by adjusting internal roles, planning requirements, and senior leadership structures. However, these structural changes do not yet address a core constraint on connectivity lending: the lack of sector-specific investment expertise. The legislation includes no authority for private-sector detailees, no mandate for sector-focused teams, and no alignment of incentives or bonus structures around catalytic capital or capital additionality.

Next, we recommended expanding the DFC’s technical assistance grantmaking to improve the investment readiness of local internet service providers (ISPs) and build deal pipelines. The new bill authorizes post-investment technical assistance through special projects, which is a meaningful and positive step. However, the focus is on execution after deals close rather than on readiness beforehand. Many high-potential connectivity projects will still require pre-investment support and training to become viable candidates for DFC-led financing.

Lastly, we recommended including dedicated demonstration capital for connectivity innovation to serve as proof of concept and attract greater private investment. The reauthorization does not include explicit authority for pilot or demonstration capital, relying instead on indirect enablement through a larger investment cap and expanded equity tools. This represents a missed opportunity to validate new connectivity models and lay the groundwork for a scalable investment approach. While Congress will likely be reticent to touch anything around the DFC so soon after passing the reauthorization, Congressional appropriators could and should include more funding and authority for the State Department to provide this kind of demonstration capital and technical assistance funding through a targeted increase in the Function 150 Account. 

What Needs to Happen Next

Congress has given the DFC significantly more capacity and several new tools that align well with building a credible alternative to Chinese digital infrastructure finance. This is an important and positive step. However, key gaps remain if the agency is to become fully fit for purpose in enabling the United States to compete with China in wiring the world.

Over the next few years, the best signal that the reforms contained in the reauthorization are translating into a credible alternative to Chinese connectivity finance would be progress on the following fronts:

• An increase in connectivity-focused deals, especially for last mile and middle mile infrastructure;
• The creation of a purpose-built connectivity investment vehicle(s) or specialized intermediaries using the new special projects/fund authority;
  • An increase in the number of DFC staff with connectivity finance expertise;
• The development of a robust pipeline of connectivity focused investment opportunities; and
• Establishing and meeting goals around capital additionality and catalyzing investments in global connectivity.

The DFC reforms contained in the reauthorization are a major opening. It gives the DFC more capacity and some of the right tools to become a leader in global connectivity finance. Whether it becomes a true counterweight to Chinese state-backed capital now depends on whether the US can translate these principles into action, expand its toolbox, and seize the moment through more dealmaking to finance the end of the digital divide.

Cite this story:

Kenton Thibaut and Jochai Ben-Avie, “DFC reauthorization is here: The good, the bad, and the next steps for connectivity,” Digital Forensic Research Lab (DFRLab), January 23, 2026.

The post DFC reauthorization is here: The good, the bad, and the next steps for connectivity appeared first on Atlantic Council.

The Gulf region is at a pivotal moment as global power dynamics shift from unipolarity to a decentered system of regional powers. While the United States remains the only true global superpower, China and Russia are regional powers with limited global influence. This creates a unique opportunity for Gulf leaders to shape their own political, economic, and security agendas, prioritizing stability and development.

The states of the Gulf Cooperation Council (GCC) are leveraging interest-based partnerships, maintaining strategic ties with China and Russia while deepening defense and economic relationships with the United States. Recent agreements, such as the 2023 US-Bahrain Comprehensive Security Integration and Prosperity Agreement, highlight the Gulf’s preference for the predictability of a rules-based international order. Despite their illiberal domestic systems, GCC leaders value the stability and market access provided by Western-led governance.

De-escalation remains a key priority for the Gulf, as demonstrated by initiatives like Saudi Vision 2030, the Abraham Accords, and the India-Middle East-Europe Economic Corridor (IMEC). However, regional tensions since October 2023 have disrupted progress, emphasizing the need for external powers to support Gulf stability and development agendas. While the United States is seen as an essential partner, there is growing potential for deeper Gulf-European collaboration.

This moment of transition in the global order presents both challenges and opportunities for Gulf leaders, who are shaping their region’s future amidst great-power competition.

This issue brief is the result of a collaboration between the Atlantic Council’s Scowcroft Middle East Security Initiative and the Konrad-Adenauer-Stiftung Regional Programme Gulf States, which set the stage for a series of Track II discussions in Qatar, the United Arab Emirates, and Saudi Arabia on the state of play of great power competition in the Gulf with regional, US, and European experts and policymakers.

Fellow

Jonathan Fulton

Nonresident Senior Fellow

Rafik Hariri Center & Middle East programs Scowcroft Middle East Security Initiative

China Chinese

MENASource Jan 22, 2026

Wang Yi’s MENA tour was long on messaging, short on outcomes

By Jonathan Fulton

Wang worked to position China as a defender of free trade and a reliable partner for the Middle East region.

China Geopolitics & Energy Security

MENASource Jun 3, 2025

India-Gulf relations are muted—but mobilizing

By Jonathan Fulton

The depth of Indian-Gulf relations creates a strong foundation for increased India-Middle East integration over the coming decades.

India Middle East

MENASource Sep 29, 2022

China in MENA: An EU Perspective

By Atlantic Council

Camille Lons joins us to discuss how Europeans and the EU see China as a rising global player in the geopolitics of the Middle East and North Africa.

China East Asia

The Scowcroft Middle East Security Initiative (SMESI) provides policymakers fresh insights into core US national security interests by leveraging its expertise, networks, and on-the-ground programs to develop unique and holistic assessments on the future of the most pressing strategic, political, and security challenges and opportunities in the Middle East. 

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The post The state of great power competition in the Gulf appeared first on Atlantic Council.

Bottom lines up front

• The collapse of Sudan’s democratic opening in 2021 amid US sanctions relief and economic engagement is a case study for Washington as it seeks to aid Venezuela’s economic development and post-Maduro transition.
• To be effective, US sanctions relief should be phased and require the Venezuelan government to meet conditions on political and economic reforms that are difficult to reverse.
• But sanctions relief alone is not enough; the United States should also provide incentives for US companies to invest in the country as well as targeted technical assistance to aid Venezuela’s economic redevelopment.

On paper, 2020 and 2021 should have marked the beginning of a new chapter for Sudan. Following the ouster of Sudan’s former authoritarian leader Omar al-Bashir in 2019, the United States removed the country from the State Sponsors of Terrorism (SST) list in late 2020. This ended nearly two decades of trade restrictions, giving Sudan access to support from international financial institutions such as the International Monetary Fund (IMF) and the World Bank, and opened up the prospect of much-needed foreign investment. The first Trump administration committed to a variety of economic sweeteners, including investment guarantees and development assistance conditioned on reform milestones. And in June 2021, Sudan qualified for debt relief under the Highly Indebted Poor Countries (HIPC) initiative. Under HIPC, Sudan became eligible for a more than $50 billion reduction in its public external debt—the largest HIPC debt relief operation ever undertaken.

The United States and its partners were cautiously optimistic that Sudan could finally right its long-mismanaged economy and make progress toward democratization. But in October 2021, Sudan’s moment of opportunity collapsed. The country’s fragile civilian-military governing coalition fell apart in the wake of a military coup, derailing hopes for an eventual democratic transition and leading to the indefinite suspension of its landmark debt relief program. Five years on, democracy remains elusive.

Today, Sudan is embroiled in a brutal civil war between military factions and suffers one of the worst humanitarian crises in the world. Sudan’s experience suggests that sanctions relief and promises of economic support following the removal of an autocratic leader do not automatically dismantle the patronage networks, security coalitions, and illicit economies that sustained the regime. Nor do they spontaneously regenerate the civic institutions and independent organizations destroyed over decades of authoritarian rule.

Sudan’s experience offers important lessons for the United States as it looks to stabilize Venezuela and rebuild its economy following the capture of Nicolás Maduro last month. To be sure, there are important differences between these two cases. Nevertheless, Sudan’s experience during its fragile political transition from 2019 to 2021 is a case study worth analyzing as the US forms its approach to Venezuela.

Both countries, for example, experienced dramatic economic deterioration under decades of authoritarian misrule, leaving poverty in their wake. In each case, natural resource wealth that should have benefited citizens was instead captured by regime-connected actors: Venezuela’s oil industry was gutted through politicization and purges of skilled workers, while Sudan’s gold and oil revenues flowed to military and paramilitary networks. Sudan and Venezuela also both suffered mass emigration crises, decimating their professional workforces. Both face the challenge of entrenched security apparatuses and criminal networks deeply embedded in state structures. And in both countries, decades of repression systematically hollowed out civil society and concentrated power in personalized patronage networks, leaving institutions severely compromised and unfit to constrain authoritarian actors or mobilize for democratic reform.

Sudan’s collapse demonstrates that sanctions relief and economic incentives alone cannot secure democratic outcomes without addressing deeper structural challenges. Drawing from Sudan’s experience, three policy approaches offer the United States a path to avoiding the same mistakes with Venezuela.

Pursue phased, conditional sanctions relief

Phased sanctions relief that conditions each tranche of relief on verifiable, irreversible institutional reforms offers the Trump administration its best leverage for lasting change. The United States removed key sanctions on Sudan in 2017 and rescinded the SST designation in 2020, leaving the United States with limited leverage when military leaders staged their October 2021 coup. In contrast, Venezuela remains under comprehensive sanctions targeting its oil sector, senior officials, and mining operations. This sanctions architecture carries significant weight, but only if deployed strategically. It is essential that the administration articulate specific benchmarks to the Venezuelan government and tie each category of sanctions relief to corresponding institutional changes.

Initial relief tranches could address humanitarian concerns and basic economic functions, conditioned on political prisoner releases and freedom of assembly guarantees. Subsequent phases could then target deeper structural reforms. Sectoral oil sanctions, for instance, would come off only after the establishment of independently audited mechanisms for petroleum revenue distribution that prevent capture by military or criminal networks. Financial sector sanctions relief, in turn, would be contingent on Venezuela establishing demonstrable central bank independence and ending its politicized monetary policy. And unfreezing official assets would be tied to concrete progress on electoral preparations with international observation.

Benchmarks are most effective when they represent institutional changes that are difficult to reverse, such as constitutional amendments, international monitoring mechanisms, or the integration of paramilitary forces into civilian-controlled military structures. Sudan’s experience demonstrates that front-loading sanctions relief without securing irreversible democratic gains creates a dangerous dynamic in which spoilers face no consequences for derailing transitions. Resisting pressure for rapid, comprehensive sanctions removal—and maintaining leverage throughout what will likely be a yearslong transition process—remains in the Trump administration’s clear interest.

Send a clear message to the private sector on sanctions relief

Sanctions relief will be most effective if it is paired with policies that actively facilitate private sector reengagement with Venezuela’s economy and financial system. Sudan’s experience following its 2020 SST delisting starkly illustrates this challenge: Despite formal sanctions removal, US companies remained reluctant to enter Sudan due to persistent political uncertainty, reputational concerns, extremely high levels of corruption and opacity, elevated compliance costs, and a weak and ineffective anti-money laundering and combating the financing of terrorism (AML/CFT) regime. Most critically, Sudan lacked the functioning correspondent banking relationships necessary for commercial transactions. Even as Sudan’s transitional government desperately needed foreign investment to demonstrate the dividends of democratic reform, the country remained largely disconnected from the international financial system. This undermined the country’s attempts at economic recovery, which might have provided political legitimacy to civilian leaders.

While major US energy companies have expressed near-term reluctance to restart operations in Venezuela, preparing the ground for eventual reentry requires directly addressing the structural impediments to commercial engagement. This could include detailed, sector-specific guidance from the US Treasury Department that provides safe harbors for permissible transactions, and reducing compliance uncertainty for companies and their legal counsel. This could also include high-level outreach to major correspondent banks—whose participation is essential for restoring payment channels—to rebuild relationships that have atrophied over years of sanctions. The US International Development Finance Corporation (DFC) could also consider establishing clear parameters for political risk insurance available to early-mover companies willing to invest in Venezuela’s reconstruction, explicitly protecting them against expropriation and political violence.

Finally, the Trump administration would benefit from making clear what actions from the Venezuelan government would trigger snap-back sanctions, allowing companies to conduct meaningful risk assessment rather than fearing arbitrary policy reversals. This strategy recognizes that sanctions removal, while necessary, is insufficient: Without deliberate efforts to rebuild commercial infrastructure and reduce transaction costs, Venezuela risks following a path similar to that of Sudan’s—remaining economically isolated even after formal sanctions are removed.

Deploy strategic economic incentives and technical assistance

Sudan’s experience is instructive: while the United States offered economic inducements, these arrived too slowly, at insufficient scale, and without a coordinated strategy to mobilize private capital and rebuild technical capacity in Sudan’s economic policymaking institutions.

In Venezuela, restoring the country’s institutional credibility requires deploying a comprehensive package combining economic incentives with technical assistance. This could include DFC guarantees for infrastructure investments, Export-Import Bank support for US equipment exports, and preferential access to reconstruction contracts for US companies willing to take the lead in a post-Maduro Venezuela.

The United States can also support a negotiated debt restructuring process with Venezuela’s creditors—the country faces roughly $150–170 billion in external obligations, with defaulted bonds alone estimated at $60 billion—and help enable access to resources from the IMF and multilateral development banks. (The IMF’s ties to Venezuela are currently suspended and Venezuela is in arrears to the Inter-American Development Bank). Paired with these mechanisms, addressing the absence of credible economic data and technical capacity remains a critical priority: Venezuela’s central bank and statistical agencies, politicized and hollowed out under the Chávez and Maduro regimes, have failed to produce reliable indicators on inflation, economic growth, employment, and fiscal balances. Technical assistance from the US Treasury Department will be essential to restoring monetary policy independence, implementing transparent foreign exchange mechanisms, and rebuilding capacity for credible economic data collection and reporting. The World Bank and IMF can also provide technical expertise for reconstructing Venezuela’s statistical agencies and establishing transparent budget processes that prevent resources from being diverted to spoiler networks.

Importantly, these incentives are most effective when coordinated with multilateral institutions. This would mean active support for Venezuela’s World Bank and IMF reengagement, coordination with the Inter-American Development Bank for reconstruction financing, and facilitating an international oil company consortium to comprehensively rebuild Venezuela’s state-owned PDVSA rather than allowing piecemeal asset-stripping. The scale and speed of economic support would need to be sufficient to demonstrate tangible benefits quickly enough that Venezuela’s population sees concrete rewards for supporting a democratic transition. This would provide opposition leaders with the political legitimacy to resist military encroachment and the other factors that ultimately destroyed Sudan’s fragile democratic opening.

The comparison between Sudan and Venezuela is imperfect but instructive. Venezuela enters its transition with clear advantages: extensive oil infrastructure, proximity to stable regional democracies, and a large, educated diaspora that could fuel reconstruction if given reason to return. But these strengths will matter little if the United States repeats some of the well-intentioned missteps in its policy toward Sudan—assuming that economic recovery will follow automatically from sanctions relief and disengaging before democratic institutions have time to solidify. Sudan showed how quickly a promising transition can collapse when economic statecraft is poorly timed or insufficient in scale. Venezuela offers a chance to demonstrate that the United States has learned these lessons.

The post Lessons from Sudan for US economic engagement with Venezuela appeared first on Atlantic Council.

Irrespective of the merits of this inflammatory justification—which many experts have questioned—it brought renewed attention to the illicit flow of drugs and money across the US-Mexico border and prompted both governments to intensify efforts to combat organized crime through financial measures. These efforts were punctuated in dramatic fashion by the February 22 killing of Jalisco New Generation Drug Cartel leader Nemesio “El Mencho” Oseguera Cervantes, carried out by the Mexican government with the assistance of US intelligence.

While moments like El Mencho’s killing generate newspaper headlines and are important in their own right, momentum in combating drug trafficking organizations will only translate into durable reductions in illicit drug flows if the United States and Mexico strengthen their cooperation in targeting the financial flows that sustain cartel activities. Achieving this will require targeted reforms and more effective communication between financial institutions and authorities.

Targeting the money behind the drugs

Illicit financial flows between the two countries are driven in large part by criminal organizations seeking to repatriate proceeds from drug trafficking. To do so, they rely not only on bulk cash smuggling but also on traditional financial channels and virtual currencies. Because access to financial resources is critical to sustaining these operations, disrupting such access has proven to be one of the most effective strategies for weakening organized crime. Targeting these illicit financial flows, however, requires close collaboration between the financial intelligence authorities of the United States and Mexico.

Recent leadership changes within Mexico’s financial authorities have generated new momentum for strengthening collaboration with US counterparts. On January 12, Mexico’s Financial Intelligence Unit (UIF) co-hosted the first meeting of a new Transnational Organized Crime Working Group with the US Financial Crimes Enforcement Network (FinCEN) and other foreign partners. This marks a notable departure from UIF’s previous reluctance to engage in international cooperation on transnational security challenges. Coupled with a leadership change at the national banking and securities regulator, the Comisión Nacional Bancaria y de Valores (CNBV), these developments point to a broader shift in Mexico’s approach to combating cross-border illicit finance.

The changes come at an opportune time, as the promise of the country’s security agenda will be limited without modern financial crime-fighting tools.

Mexico’s financial authorities need the tools to fight crime

While this renewed engagement is welcome, the Mexican government can take concrete steps to convert its new posture into more effective policy. The easiest challenge to identify—if not to fix—is the lack of resources at the institutions mentioned above. Mexico’s financial regulators were not spared by former President López Obrador’s austerity policies, and a tight budgetary environment, driven by the government’s fiscal priorities, continues to constrain them. Ideally, financial authorities would receive robust funding in future budgets to reverse years of disinvestment.

Even if the broader fiscal outlook remains unchanged, Mexico still has options to address resource constraints. For example, during the next budget process, the administration can take steps to empower CNBV. In some other G20 countries, including the United States, regulators charge fees to regulated entities and use the revenue to fund their budgets. While CNBV does charge those fees, it currently transfers the revenue to the national treasury before receiving a budget like any other agency. Thus, the source of funding and the mechanism for collection already exists, and Mexico can take the next step by granting CNBV greater budgetary autonomy in the next budget process.

Meanwhile, the UIF does not have enough resources to fully analyze the financial intelligence it receives. Then again, no financial intelligence unit in the world does. But there are ways to address this bottleneck. In the United States, law enforcement agencies have access to the suspicious activity reports FinCEN collects and can use the information to build cases. In Mexico, too much of the burden falls on the UIF. Mexico should design a system, tailored to its national context, to distribute responsibilities more effectively.

Some changes require significant capital; others demand significant political will. But talk is cheap. Both the Mexican government and the US administration can improve the effectiveness of anti–money laundering and countering the financing of terrorism (AML/CFT) efforts by improving communication with the private sector. In Mexico’s case, authorities could provide more actionable information to regulated entities. The most classic type of feedback would be a financial advisory, which outlines forms of illicit financial behavior—or “typologies” of interest—to the government. Another approach involves governments convening banks for closed-door discussions, sometimes with “safe harbor” protections to shield participants from the risks of sharing potentially derogatory information. Initial roundtables may be stiff and scripted. As relationships develop, however, information flows more freely. Both forms of feedback can create a virtuous circle of information-sharing that improves the quality of financial intelligence available to law enforcement.

US guidance can strengthen cross-border enforcement

Financial institutions on both sides of the border could also benefit from clearer signals from the United States. When the US government takes an enforcement action against a domestic or Mexican institution, other institutions—unsurprisingly—pay close attention. Information published alongside such enforcement actions can double as industry guidance—a “what not to do” message. This could include accompanying advisories with customer or transaction red-flag indicators, as well as details that give the public a clearer sense of the scale of negligence at penalized institutions and explain process failures. Public speeches and public-private dialogues could further reinforce these efforts.

In general, the more communication that accompanies a policy tool, the more effective that tool becomes. While most regulated entities benefit from clear guidance, in some sectors a more basic level of feedback may suffice. This is not the case in AML/CFT compliance, given the sheer volume and technical complexity of the data involved—and the fact that incomplete information is often dispersed across multiple actors. A malfunctioning information ecosystem can undermine policy goals. Generalized anxiety in the Mexican financial sector, combined with a scarcity of authoritative guidance, could raise banking costs without delivering the corresponding benefits from more precise targeting of illicit finance risks.

Mexico already has low financial penetration, with total loans and credit equal to just over 30 percent of gross domestic product in 2024—well below the average for a country of its level of development. While compliance costs are not remotely the primary cause of shallow financial depth, inefficient use of regulatory resources creates additional headwinds to financial sector deepening. This, in turn, could incentivize continued reliance on cash and informal financial channels, impeding efforts to monitor and combat illicit finance. The risk of backfire is real—but well-designed and clearly communicated reforms can help the financial sector become a more effective partner in addressing cross-border security challenges.

Phil Lovegren is a contributor to the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center and a former US Treasury attaché to Mexico and Central America.

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.

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As I have previously argued, global investors increasingly assess countries not just on their resources, but on credibility, predictability, and institutional coherence. Markets reward transparency and disciplined commercial execution because those qualities signal durability. Saudi Arabia’s development strategy is therefore not simply about attracting capital; it is about convincing global markets that its transformation is structural rather than cyclical. Saudi Arabia’s external position increasingly resembles that of a sovereign investor state rather than a traditional emerging-market borrower. Its foreign direct investment (FDI) inflows have risen sharply since 2021, increasing from roughly $3 billion in 2019 to a range of about $22–28 billion in recent years, with projections suggesting continued growth. This rise reflects investor confidence in reforms, infrastructure investment, and the expansion of non-oil sectors. Yet Saudi Arabia simultaneously deploys substantial capital abroad through sovereign and institutional channels.

Saudi Arabia’s outbound capital flows are crucial for its development. Economies dependent on foreign inflows often face instability when global liquidity tightens. Saudi Arabia, by contrast, engages global capital markets from a position of balance-sheet strength, supported by large sovereign assets and reserves. The central policy question is therefore not simply how to attract capital, but how to ensure that inbound investment complements domestic priorities and raises productivity. Thus, Riyadh’s challenge is not quantitative but qualitative.

An example of Saudi Arabia’s increasingly ambitious outbound investment was just illustrated last week, when Elon Musk’s xAI received a three billion dollar investment from the Saudi state-backed artificial intelligence (AI) company Humain. Shortly thereafter, Musk announced a merger between xAI and SpaceX, combining it into a single business worth more than one trillion dollars. The timing of this transaction could produce a very large financial return for Humain, as SpaceX is reportedly preparing for an initial public offering.

Yet capital alone does not determine long-term growth. The more decisive variable may be demographics. Saudi Arabia’s population stands at roughly 34.6 million, with one of the youngest profiles among the Group of Twenty (G20). About 23 percent of citizens are between ages ten and twenty-four, while about 75 percent fall within working age. Only 3 percent are age sixty-five or older. Demography, unlike capital flows, cannot be adjusted quickly by policy; it is a structural force that policymakers must either harness or be constrained by.

Larger numbers of young Saudis are entering the workforce, with a demonstratable increase in the number of Saudi women. And this is not an isolated surge. It reflects structural shifts in education, participation, and opportunity that will continue to expand the labor supply over the next decade. Saudi Arabia is entering a phase in which its workforce growth will exceed that of most advanced economies. 

This is where the true fork in the road emerges: Some economists describe this as a demographic dividend. History shows that youthful societies tend to follow one of two paths. They either translate demographic momentum into productivity, innovation, and rising living standards, or they struggle to absorb new entrants into the labor market, producing underemployment and unrealized potential.

Long-term development depends on deploying capital in ways that raise labor productivity. Investment that transfers knowledge, builds skills, and fosters innovation amplifies human potential. Investment that does not translate into capability risks producing only temporary gains.

This is why human capital must now sit at the center of the kingdom’s strategy. Human capital is not simply a social priority; it is a strategic asset. In a global economy increasingly shaped by AI, advanced manufacturing, and knowledge-intensive industries, the countries that cultivate and deploy talent most effectively will define the next phase of economic leadership. For investors, human capital also functions as a signal. Markets evaluate not just current performance, but trajectory. Indicators such as skills development, labor participation, and innovation capacity offer insight into whether growth will be sustained. In that sense, human capital development is a message to global markets about the durability of reform and the credibility of long-term strategy.

As the new minister of investment, Al-Saif must convince investors that long-term foreign direct investment in the Saudi enterprise centered on the kingdom’s human capital can produce and sustain a positive net present value. If done correctly, this demographic dividend of youth joining and adding value to labor inputs can create positive economic momentum for the kingdom.

The next phase of Saudi Arabia’s transformation will be judged by measurable improvements in productivity, skills alignment, innovation output, and entrepreneurial dynamism. The kingdom now stands at a pivotal juncture. Its financial resources, institutional reforms, and global partnerships have positioned it for a new stage of development. Yet the ultimate determinant of success will not be the volume of capital it mobilizes, but how effectively that capital is translated into human capability.

Khalid Azim is the director of the MENA Futures Lab at the Atlantic Council’s Rafik Hariri Center for the Middle East.

The post To harness Saudi Arabia’s demographic dividend, Riyadh must invest in human capital appeared first on Atlantic Council.

1. Will companies get refunds, and if so how? 

It is likely that importers of record will eventually get refunds for IEEPA tariffs they already paid. However, the Supreme Court did not address remedies, and the mechanics and timings of any eventual refund are uncertain. In general, it is prudent for companies to keep all options on the table, including administrative protests and filing a lawsuit at the Court of International Trade, to maximize the chances of getting a full refund. Yesterday, for example, FedEx filed a lawsuit against the US government for a “full refund” for the IEEPA tariffs it paid. 

—Brian Janovitz is a nonresident senior fellow with the Atlantic Council GeoEconomics Center and a national security and global trade partner at DLA Piper, where he advises on geostrategic risk, supply chain planning, US trade policy, and trade litigation. 

2. Will US consumers get refunds, and if so how? 

Refunds would be owed to the importer of record. In the absence of de minimis treatment for low-value goods, it is very rare that a consumer would ever be the importer of record. It is unlikely that consumers that absorbed the tariffs through increased prices, but did not pay the tariffs, would ever be reimbursed at any real scale. 

—Brian Janovitz

3. Which countries gain from the tariff changes?

Right now, Brazil, India, and, believe it or not, China, are the biggest winners from the change. That’s because those countries—along with a range of Asian nations including Vietnam, Malaysia, and Thailand—were facing IEEPA tariffs above 15 percent. Brazil was a particularly complex case, with the stacked IEEPA tariffs reaching 50 percent. But now, with the global rate down to 10 percent—though the White House says it is working on increasing it to 15 percent soon—these countries have at least a temporary reprieve. For China especially, this might mean a surge in exports to get ahead of potential future section 301 tariffs, which are certainly coming based on the new trade investigations the Trump administration opened this weekend. 

 —Josh Lipsky is the chair of international economics at the Atlantic Council and the senior director of the GeoEconomics Center. He previously served as an advisor at the International Monetary Fund.

4. Which countries are harmed by the tariff changes? 

On the other end of the stick is the United Kingdom and the European Union (EU). Because the Section 122 tariffs stack on top of most favored nation (MFN) tariffs, the EU countries could soon be paying above the 15 percent rate they agreed to in the Turnberry deal last year. For the United Kingdom, it’s not even close. The United Kingdom was proud to be the first one out of the gate with the 10 percent deal and said as much to most other nations. But now they are in the same 15 percent boat and must be asking what the value is of a deal that can change so quickly.

The administration is likely arguing behind closed doors that while its hands are tied temporarily, once it finishes the 301 investigations, it can resume a more country-by-country approach and ensure that the United Kingdom gets better treatment. But whether that kind of arrangement can work for British Prime Minister Keir Starmer and European Commission President Ursula von der Leyen has as much to do with domestic politics across Europe and the United Kingdom as it does with trade law.  

—Josh Lipsky 

5. How is the EU responding? 

The EU is responding to the announcement of new tariffs under section 122 by suspending the process of implementing its obligations under the US-EU bilateral agreement. It is seeking clarity about whether the new tariffs are contrary to the United States’ commitment to a 15 percent cap on reciprocal tariffs, since if MFN tariffs are added to the 10 percent levy, then rates for some EU products will exceed 15 percent.  

Look for the United States to clarify how these new tariffs will work, as well as a likely resumption of the EU’s implementation process. There has been a pattern of blanket and ambiguous announcements from the United States followed by more precise clarifications; there is little indication that this time will be different since both sides have an interest in maintaining the agreement.   

—L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center. He previously served as assistant US trade representative for Europe and the Middle East in the Office of the United States Trade Representative.  

6. Which countries will try to negotiate new deals? 

Countries that have not finalized deals with the United States, such as India, may want to consider delaying finalizing agreements until there’s more clarity from the United States. Already, we saw an Indian delegation temporarily postpone a trip, but they are now planning to reengage. So, much will depend on how clear the administration is on the new tariff rates and what its plans are for future tariffs.

—Josh Lipsky

7. What is happening with the de minimus exemption for goods under $800? 

The Trump administration had suspended the de minimis rule (under which duties are not collected on shipments valued at under $800) under IEEPA. After the Supreme Court invalidated the IEEPA tariffs, the administration continued suspending the de minimis rule under a separate executive order on February 20; the administration’s authority to do so is unclear and will likely be subject to further litigation.  

—L. Daniel Mullaney

8. How will the midterm elections play into Trump’s tariff calculations? 

The midterms won’t be as much of a factor as some think. It’s unlikely that Congress will be asked to vote on tariffs during the summer going into the elections. But regardless, Trump has made clear that he believes he has all the authorities he needs and has had little interest in asking Congress for more, despite Supreme Court Justice Neil Gorsuch’s opinion in the case, which made it clear that Congress was the answer the president is looking for. The bottom line is that the president believes in tariffs as economic policy. He will continue to wield that tool not just for the next year, but for the next three years. His ability to wield tariffs is more constrained now without IEEPA, but it is still a powerful economic lever. Those expecting certainty and stability on tariff rates will be looking in vain.  

—Josh Lipsky

The post Eight questions (and expert answers) on what’s next for US tariff policy  appeared first on Atlantic Council.

On the main stage, NATO Secretary General Mark Rutte underscored that bringing an end to the war in Ukraine will require sending more arms support to Ukraine and also placing sustained economic pressure on Russia. He highlighted the need to address China’s evasion of Western sanctions and its role in sustaining Russia’s wartime economy. The message was clear: Military resilience and economic pressure are two sides of the same coin.

The leaders gathering at MSC also discussed trade, highlighting how trade deals and tariffs have become geopolitical instruments. US Senator Thom Tillis (R-NC) argued that trade policy and national security are deeply intertwined, warning that if the United States creates an untenable trade environment for smaller economies, it risks driving them toward malign actors such as China and Russia. Economic policy, in other words, can either reinforce alliances or fracture them.

German Chancellor Friedrich Merz echoed this concern, pointing to the erosion of multilateralism. He warned that the world has entered an era defined by great-power politics above all else, and that in such an environment, some countries are increasingly deploying natural resources, technologies, and supply chains as bargaining tools. Smaller economies, he argued, must coordinate more closely to avoid being squeezed in the crossfire. In a world in which some weaponize economic interdependence, economic unity becomes a form of defense.

This convergence of economics and security was on display not only in Munich but also weeks earlier in Davos. The World Economic Forum has traditionally been a platform to discuss markets, business, and the state of the global economy, and while this continues to be the case, these conversations now require more consideration for geopolitical issues, which increasingly play a role in shaping markets. For example, US President Donald Trump’s remarks about Greenland, and the tariffs he placed on Europe, stole much of the spotlight, as did Canadian Prime Minister Mark Carney when he called on middle powers to band together in the face of coercive economic practices.

Geopolitical challenges are increasingly being tackled in the economic domain. Governments are deploying instruments of economic power and coercion such as sanctions, export controls, investment screening, tariffs, and control over critical mineral supply chains to confront adversaries. Governments are also using economic tools on allies and partners to create leverage in negotiating favorable trade agreements. The use of these tools has required governments to reflect on their longstanding geopolitical relationships and consider how and with whom they will need to work to defend their economic sovereignty and security.

In this moment, smaller trade-dependent economies will need to build coalitions among like-minded partners to preserve the multilateral institutions that maximize their agency. To avoid any vulnerability to coercion by larger powers, these smaller trade-dependent economies will need to invest in their collective resilience by diversifying their supply chains, coordinating sanctions, codifying shared standards, and forming trusted technology partnerships.

Additionally, countries will need to address persistent trade imbalances and perceived inequities in burden-sharing within alliances. If left unaddressed, these imbalances and inequities will continue to drive decision-making that prioritizes short-term economic leverage instead of long-term economic security strategies. Such strategies require sustained alignment between economic and security objectives, not episodic reactions to crisis.

Governments cannot meet the challenge of building economic resilience alone, since it is built in markets, supply chains, capital flows, and innovation ecosystems. As economic tools become central to foreign policy, the private sector increasingly sits at the tip of the spear of national security, implementing export controls, monitoring sanctions compliance, reconfiguring supply chains, and making investment decisions.

Our team at the Atlantic Council’s Economic Statecraft Initiative, in partnership with the United Kingdom House of Commons’ Business and Trade Committee, convened policymakers and business leaders in Munich in a discussion that illuminated the need to redesign globalization in this age of strategic competition, where the line between boardroom decisions and national security outcomes is increasingly blurring.

Economic security will depend on the private sector’s ability to implement governments’ foreign policy decisions, making a new level of public-private partnership essential. Governments must clearly communicate the rationale behind deploying economic tools and provide the private sector with consistent, clear, and sustainable guidance and signals through enhanced public-private partnerships and dialogue. Information sharing related to national security risks will also be vital. Furthermore, governments should seek out and incorporate private sector feedback into their foreign policy decisions to mitigate against unintended consequences in the economic domain.

The MSC has long been the premier forum for confronting hard security questions. This year’s convening made clear that economic security belongs squarely in that category. Thus, at future MSCs, expect to see more and more finance ministers, trade negotiators, sanctions envoys, and business leaders roaming the streets of Munich.

Kimberly Donovan is director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director.

Lize de Kruijf is a program assistant at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center.

Housed within the GeoEconomics Center, the Economic Statecraft Initiative (ESI) publishes leading-edge research and analysis on sanctions and the use of economic power to achieve foreign policy objectives and protect national security interests.

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Given last week’s reports that Lagarde could step down before her term ends in October 2027, these words take on added significance. They also raise a critical question—one that has received far less attention than speculation about what Lagarde’s early exit could mean for European politics and monetary policy: what will become of the digital euro? As one of the most advanced and closely watched central bank digital currency (CBDC) projects in the world, the initiative has been strongly tied to her tenure.

It was Lagarde who pushed the digital euro from research to a live policy effort, complete with a formal timeline and legislation now moving through Brussels. As she put it last year, “the digital euro is not just a means of payment; it is also a political statement concerning the sovereignty of Europe.”

So far, no final decision to issue the digital currency has been taken. Instead, the project remains in its “preparation phase,” meaning the next ECB president will inherit it midstream. The four rumored candidates for Lagarde’s succession, however, differ sharply in how—or how quickly—they intend to see it through.

Lagarde’s legacy and the current state of the project

The digital euro is a CBDC project pursued by the ECB. Initial research began in 2016, but momentum accelerated in 2019 after Facebook’s proposed Libra stablecoin raised concerns about monetary sovereignty across major central banks. Lagarde inherited the initiative in November 2019. Under her leadership, the ECB launched a formal investigation phase in 2021 and entered a preparation phase in 2023, making it one of the most advanced CBDC efforts among major central banks.

Lagarde consistently framed the digital euro as both a modernization of money project and a sovereignty project. Speaking at the Atlantic Council in 2024, she described it as “a digital backbone”—central bank money adapted for a digital economy. With European payments still fragmented and heavily reliant on Visa, Mastercard, and US-based platforms, she argued a digital euro would offer a fast, low-cost, sovereign alternative. This point has been echoed by others at the ECB, including executive board member Piero Cipollone, who recently warned that “Europe is significantly reliant on non-European payment systems and if we do not do anything this reliance will increase,” adding that payments infrastructure is “critical for the functioning of the economy.”

Over the past few years, the project has made concrete progress on technical and operational design. The ECB has mapped eleven potential use cases, including point-of-sale payments, peer-to-peer transfers, and offline transactions. It is also developing a rulebook to govern how the currency would work across the eurozone, has selected infrastructure providers, and is working with commercial banks and payment service providers that would distribute the currency to users.

Legislation remains the sticking point. The European Commission proposed a digital euro regulation in 2023, but the European Parliament has yet to pass it. Until the legal framework clears—which would establish legal tender status, holding limits, and privacy rules—the ECB cannot take a final issuance decision. Pilots are expected around 2027, with a commercial launch potentially following in 2029.

Whenever a new president does take office, they will inherit a project already at an advanced stage, with significant technical progress and regulatory momentum. Critical decisions on design, scope, and timing, however, remain unresolved. 

The candidates

None of the four frontrunners oppose the digital euro. However, their positions differ on pace, framing, and the risks they are most concerned about.

Joachim Nagel (president, German Bundesbank)

• Position: Strategically supportive and sovereignty-focused; presents the digital euro as essential to making the euro “fit for the future,” strengthening European independence, and maintaining resilient payments infrastructure. Skeptical of cryptoassets, describing Bitcoin as a “digital tulip,” while reinforcing a central bank–led digital money model. Emphasizes holding limits, no remuneration, and banking-system safeguards.
• Key quote: “I am convinced that the digital euro will be a success . . . The digital euro is an opportunity for Europe . . . [to] make Europe more independent and resilient.”—Bundesbank speech, January 2026
• If appointed ECB president: The digital euro would likely be elevated as a strategic necessity; one could expect timely implementation by 2029 alongside ambitious EU reform projects, including European joint assets and capital markets, to adapt to a fragmenting global landscape.

Pablo Hernández de Cos (general manager, Bank for International Settlements and former governor, the Banco de España)

• Position: Strong technocratic supporter; frames the digital euro as necessary to preserve the two-tier monetary system and ensure continued public access to central-bank money as cash usage declines. Generally cautious on cryptoassets, emphasizing regulatory oversight and financial stability.
• Key quote: “Without a digital euro, the public could lose access to central bank money as payments digitalise . . . which could weaken the ECB’s ability to deliver on its mandate under stress conditions.”—Bruegel Podcast interview, July 2025
• If appointed ECB president: The digital euro would likely be advanced as a responsibility to ensure the Eurosystem’s future viability, without overstepping established European safeguards and in close coordination with the financial industry.    

Klaas Knot (former president, Dutch Central Bank) 

• Position: Supportive but pragmatic and sovereignty-focused; emphasizes public access to central bank money and strategic autonomy rather than urgency or rapid adoption.
• Key quote: The digital euro will “provide us with a means of payment that is independent of non-European parties and that will also form a reliable backup in crisis situations. This will be an important addition to our payment infrastructure.”—DNB speech, April 2024
• If appointed ECB president: The digital euro would likely be framed as resilience infrastructure; the rollout would likely be cautious, risk-managed, and use-case driven.

Isabel Schnabel (member, ECB Executive Board)

• Position: Strategically supportive but technocratically cautious; frames the digital euro as part of European sovereignty and euro internationalization, while stressing legislative complexity, privacy safeguards, and infrastructure resilience. Portrays the digital euro as an initiative to counter big tech and stablecoins. 
• Key quote: “National sovereignty is also about payment . . . One way to further strengthen the international role of the euro is the digital euro.”—Sciences Po address, April 2025
• If appointed ECB president: The digital euro would likely be supported within the ECB’s mandate, but final responsibility would likely be left to the European Parliament, Eurogroup, and European data protection agencies.

None of the four leading candidates are explicitly “anti-digital euro,” but they diverge in how they view its purpose and urgency. Schnabel and Hernández de Cos present the project as structurally important to Europe’s monetary future: Schnabel emphasizes geopolitical sovereignty and the euro’s international role, while Hernández de Cos focuses on preserving the two-tier monetary system and maintaining public access to central bank money as payments digitalize. Nagel and Knot are broadly supportive but more cautious on pace and design: Nagel foregrounds financial-stability safeguards and banking-system protection, whereas Knot stresses demonstrable added-value use cases and a risk-managed rollout.

All four invoke European sovereignty, but the emphasis varies. For Nagel and Hernández de Cos, sovereignty is largely inward-facing, centered on safeguarding euro-area monetary transmission and the European banking architecture. Schnabel’s framing is more outward-looking and geopolitical, highlighting competition from dollar-backed stablecoins and the growing influence of US technology firms in payments infrastructure.

Whoever the next ECB president may be, they will inherit a project whose significance reaches far beyond Europe’s borders—and face decisions that could set the benchmark for central bank digital currencies worldwide. The path they chart will not only shape the future of the euro and the continent’s payments infrastructure but also decide whether Europe takes the lead in the digital currency revolution.  

Alisha Chhangani is the associate director for future of money at the Atlantic Council’s GeoEconomics Center.

Jacopo Pastorelli is a program assistant at the Atlantic Council’s Europe Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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Yet, there are forces in play this year that carry the potential of shaping—and reshaping—the continent. Many offer African countries opportunities to launch new partnerships that serve the continent’s interests and to more permanently carve out Africa’s role in geopolitics. Here are those forces and how they will likely impact the continent in 2026.

Elections

Africa is slated to have a busy election year, which already kicked off with Uganda’s general elections (with the contested re-election of President Yoweri Museveni) and Benin’s parliamentary elections. Benin will go back to the polls in April for presidential elections, with Finance Minister Romuald Wadagni looking to succeed President Patrice Talon, who has declined to seek a third term. Also in April, Djibouti will host presidential elections, with President Ismail Omar Guelleh pursuing a sixth term. In the Republic of Congo, President Sassou Nguesso is running to be reelected in March, serving in his role since 1997.

Ethiopia and South Sudan, which are still struggling to overcome the consequences of war, will hold general elections in June and December, respectively. Zambia will vote in August to elect its president and parliament, with President Hakainde Hichilema seeking a second term. Cape Verde is expected to hold parliamentary elections in April and a presidential election in October, aiming to reaffirm its democratic resilience. In South Africa, local elections are expected by November, while in neighboring Gambia, President Adama Barrow will seek a third term in December.

This electoral cycle shows how diversified Africa’s governance is. And given the profile of the countries going to the polls—some of them being African powerhouses—the future of the continent will be shaped by the elections that unfold.

Violence and peace in the DRC

The international community is closely watching the prospects for peace in the Democratic Republic of the Congo (DRC).

In June last year, Rwanda and the DRC signed a US-brokered peace deal promising to cease hostilities. The deal also cleared the way for US investment in critical minerals in the DRC. But the Rwanda-backed M23 militia, the group that has taken control of large areas in two eastern DRC provinces, was not part of the deal, and, according to the DRC, it continues to terrorize the area. Since the June signing, mediators across the globe, including Qatar, have worked to strike a peace deal between the DRC and M23, with recent talks producing a cease-fire mechanism—although analysts worry about its sustainability.

Following the June peace agreement, the United States and the DRC signed an expanded strategic partnership agreement in December, strengthening economic cooperation, particularly in the cobalt and copper sectors.

Several African actors had arrived at the scene before such mediation efforts and deals. For example, the African Union had convened a Panel of Facilitators last March and designated a lead mediator in April. So even as international actors make security commitments to countries such as the DRC, one can expect regional African organizations to more strongly assert their determination in guaranteeing the security of their people, wary of foreign troops or even private militias occupying African soil.

A Sudan wake-up call

Conflict continues to rage in Sudan between the Sudanese Armed Forces, led by General Abdel Fattah al-Burhan, and the Rapid Support Forces (RSF), under Mohamed Hamdan “Hemedti” Dagalo. Their clashes have caused the deaths of at least 150,000 Sudanese people since the civil war started in April 2023.

During his visit to Washington in November, Saudi Arabia’s Mohammed bin Salman sought to draw US President Donald Trump’s attention to the crisis, with the latter promising to take initiatives. Such initiatives, if taken, could be transformative for Sudan and the continent, seeing as a US initiative is really the best chance to end the war, with some of Washington’s Middle East partners more or less involved.

A realignment on the Sahel

Danger in the “three borders” area—straddling Mali, Burkina Faso, and Niger—continues to exhaust Sahelian populations, already drained after twenty years of terrorist violence, despite the show of security that the Alliance of Sahel States puts on. The leaders of these three countries, who came to power through military coups, offer little toward shaping democracy or attaining economic growth in these countries. The Alliance of Sahel States has been working on projects to solidify its grouping, including a common visa and a Sahelian currency.

Meanwhile, Guinea is returning to the Economic Community of West African States (ECOWAS), following the election victory of General-President Mamadi Doumbouya—also a former putschist—earlier this year. Nick Checker, the highest-ranking official in the US State Department’s Africa Bureau, attended Doumbouya’s inauguration and subsequently traveled to Bamako, signaling the Trump administration’s intention to reengage with this zone. Washington’s return to the Sahel could reshape the regional landscape by reconnecting Sahelians with the West and potentially even changing the course of local counterterrorism efforts.

The renewed attention surrounding the Guinean president likely stems from the fact that Guinea’s economy is projected to grow rapidly in 2026, with forecasted growth rates above 10 percent. The country possesses one of the world’s largest bauxite reserves and largest untapped iron reserves.

Surging growth

According to the International Monetary Fund, African growth in 2026 is expected to surpass that of Asia for the first time. That suggests African countries will finally overcome the economic consequences of the COVID-19 pandemic. The African Development Bank largely agrees with such projections, revising its 2026 growth forecast from 4 percent in May to 4.3 percent in November, following an increase in household consumption, the introduction of accommodative monetary policy, and the US dollar’s weakening. With that, the continent will be able to offer renewed investment opportunities, generating interest from actors both in Africa and abroad.

South Africa, Egypt, and Nigeria will likely remain the continent’s three largest economies in terms of their nominal gross domestic product. Some countries that have struggled with debt in recent years, such as Ghana, Ethiopia, and Zambia, appear to be gaining breathing room.

Nonetheless, Africa’s dramatic 170 percent increase in public debt between 2010 and 2024 highlights the scale of infrastructure needs, the high cost of responding to multiple recent shocks, and constraints in international financing. Additionally, the African Development Bank, in its 2026 Economic Outlook, warned of the risks of geopolitical fragmentation, trade restrictions, conflict, and climate-related shocks, saying that these risks intensify the urgency of deepening intra-African trade and prioritizing value addition on the continent, such as with the African Continental Free Trade Area.

A historic opportunity for Africa

In 2026, Africa’s opportunities in the emerging world order are becoming clearer. Those opportunities include carving out Africa’s role in addressing geopolitical turbulence, as the DRC and Liberia get settled in their seats in the United Nations Security Council. There is also an opportunity to redefine the rules that have thus far governed the world, including the rules of finance, development, and multilateralism—building off South Africa’s Group of Twenty presidency. And, finally, there are opportunities to relaunch partnerships on terms that serve the continent’s priorities.

African countries will need to work harder in 2026 to seize these opportunities. But doing so is well within their and the continent’s interests.

Rama Yade is the senior director of the Atlantic Council’s Africa Center.

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

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Call it DeLiberation Day. On Friday, the US Supreme Court ruled in a 6-3 decision that the US president does not have the power to unilaterally impose tariffs under the International Emergency Economic Powers Act (IEEPA), the authority Donald Trump invoked to impose tariffs on nearly every trading partner. Trump responded by imposing a 10 percent global tariff under other legal authorities. What will this mean for global trade and the tariff revenue that the United States has already collected? What should we make of the administration’s plan B? Our experts issue their rulings below.

• Josh Lipsky (@joshualipsky): Chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and former International Monetary Fund advisor 
• Barbara C. Matthews: Nonresident senior fellow at the GeoEconomics Center and former US Treasury attaché to the European Union 
• L. Daniel Mullaney: Nonresident senior fellow with the Europe Center and GeoEconomics Center, and former assistant US trade representative

How did the court rule?

• With today’s ruling, says Josh, the Supreme Court “told the president that the core pillar of his international economic agenda was unconstitutional.”
• The ruling, Barbara tells us, is “both clear and broad: no part of IEEPA can be construed to authorize the imposition of tariffs in response to any national emergency.”
• Dan believes this affirmation of the legislative branch’s authority over tariffs “may trigger a more assertive Congress, which has already been showing increasing, but cautious, impatience” with the Trump administration’s use of unilateral tariffs.
• Issuing the decision only “days before the Supreme Court sits in front of the president at the State of the Union address was a bold move”— one “perhaps intended to signal the independence of the court,” Dan adds.
• “The immediate financial impact” will be “muddled,” Josh predicts, as issues related to tariff refunds play out in lower courts and the Trump administration turns to other tariff authorities.

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How is the Trump administration responding?

• Today’s ruling “does not end Trump’s tariffs,” Josh tells us. “It just opens a new chapter.” Relative to the Trump administration’s first year, there will be “more uncertainty, more volatility for businesses to navigate, and more fraught trade deals for countries to negotiate.”
• This afternoon, Trump announced an immediate 10 percent global tariff under Section 122 of the Trade Act of 1974—though, as our Trump Tariff Tracker lays out, the law only allows such a tariff for 150 days unless Congress extends it. Trump also said there will be several new investigations of unfair trade practices under Section 301, which could lead to additional tariffs.
• That means, notes Barbara, that the administration “has announced its intention to comply with the Supreme Court decision and withdraw the IEEPA tariffs effective immediately.”
• “Trump’s tariff arsenal now must follow ‘regular order,’” Barbara explains, “which requires traditional findings of trade distortions by foreign countries” to justify tariffs against them, which she says is “a slow administrative process.”
• Dan tells us that there could be an upside for the White House in losing its favored tariff authority: Trump’s “sweeping tariffs have been problematic for the administration’s agenda in some key respects—resulting in numerous exclusions and unfulfilled threats—so a more tailored approach is probably called for in any case.”
• As Barbara notes, Trump also announced today his intention “to fight in court” against lawsuits from companies seeking refunds of the IEEPA tariffs, which add up to $175 billion. The White House seems to be interpreting the Supreme Court’s silence on “whether or how refunds should be provided” as “providing [it] maximum flexibility” in answering these questions.
• “Companies have a fiduciary duty to their shareholders,” which “means they need to sue to get refunds even if that risks the ire of the administration,” Josh observes. “But there is strength in numbers here, so expect those lawsuits to come in fast and furious over the coming weeks.”

 How will US trading partners respond?

• As Josh sees it, the incentive for US trade partners that already have made deals with the Trump administration “is likely to keep the deal you have” even if backup tariff authorities face legal challenges, “rather than risk unraveling an agreement which at least has provided some stability.” He expects Japan and the European Union to maintain their trade agreements with the Trump administration. However, Josh argues, countries still finalizing trade deals with the United States “will now have a little more leverage” after the ruling.
• And if trade partners do “choose to unwind or walk away from the 2025 deals,” Barbara warns, “the adverse impact on the US economy could be significant.”

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This is the sixth chapter in the Freedom and Prosperity Center’s 2026 Atlas, which analyzes the state of freedom and prosperity in ten countries. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

Evolution of freedom

Tunisia’s trajectory over the past several decades is often described as a story of rupture: an authoritarian stability that gave way to a singular democratic opening in 2011, followed a decade later by a dramatic reversal. The Freedom and Prosperity Indexes data help to clarify that narrative. They show that the post-2011 leap was overwhelmingly political and that legal and economic change was slower and more contested. This imbalance is central to understanding both the initial promise of Tunisia’s democratic transition and the depth of popular disillusionment that later emerged. The post-2021 turn was driven above all by the weakening of institutional constraints and judicial independence.

The presidency of Zine El Abidine Ben Ali, who ruled the country from 1987 to 2011, rested on institutional formalities and tight control. Tunisia held elections, maintained a parliament, and projected administrative capacity, but these mechanisms did not translate into meaningful competition or accountability. Political opposition was fragmented, repressed, or forced into exile, and civil society organizations operated under constant surveillance. This is reflected in the political subindex’s very low baseline prior to 2011. The country displayed an outer shell of formal politics while keeping the substance of political contestation closed, consistent with an electoral autocracy where procedural elements of democracy coexist with pervasive repression.

The pre-uprising period also explains why the 2011 revolution was propelled by the quest for dignity and fairness as much as for formal rights. Social grievances accumulated around the belief that opportunities were unequally distributed. Corruption was distorting markets and access. Regional disparities—between the more prosperous coast and the marginalized interior—had become entrenched. The tension occasionally erupted into localized protests, most notably the 2008 Gafsa mining basin uprising, which was violently suppressed and received little domestic media coverage at the time. Such episodes revealed social and economic cleavages that the authoritarian system was unable and unwilling to address, even as it succeeded in preventing large-scale political mobilization for many years.

The 2011 revolution marked a dramatic rupture in Tunisia’s political trajectory. The collapse of the Ben Ali regime triggered an unprecedented expansion of political freedom, clearly visible in the sharp rise of the political subindex after 2011. Elections became genuinely competitive, political parties proliferated, and civil and political rights were significantly expanded. The adoption of the 2014 constitution represented a high point, enshrining extensive civil liberties, protections for political pluralism, and formal checks on executive power. In comparative terms, Tunisia emerged as the most successful democratic transition to result from the Arab Spring, a status widely acknowledged by scholars and international observers over the decade that followed.

This political opening occurred despite an exceptionally challenging environment. Tunisia faced severe security threats, including terrorist attacks and instability along its border with Libya, which disrupted tourism and deterred investment. Economic performance remained weak, and unemployment persisted at high levels. Nevertheless, political elites repeatedly demonstrated a willingness to compromise in order to preserve the democratic process. In 2013, a deadlock in the “Troika” governing coalition brought the government to a dangerous edge, amid disagreements over the constitutional order and the role of Ennahda, an Islamist party, in the new system. The resolution was not a winner-take-all victory but a negotiated exit: the replacement of the governing coalition by a technocratic government, a path toward general elections, and the adoption of a new constitution in 2014 that was widely seen as liberal. This episode, in which a coalition of civil society organizations stepped in to mediate when politicians were deadlocked, reinforced the perception that Tunisia’s political class was committed to democratic consolidation, even at significant short-term political cost.

Yet the very mechanisms that stabilized the political system during this period also contributed to its longer-term fragility. After the 2014 elections, Tunisia entered a prolonged phase of grand coalition governance, most notably through the Carthage Agreement, which brought together former rivals in the name of stability and consensus. While this arrangement reduced polarization and prevented institutional paralysis, it blurred the distinction between government and opposition and weakened electoral accountability. For many citizens, political competition appeared increasingly disconnected from policy outcomes, reinforcing perceptions of elite collusion and political closure. A system designed to prevent authoritarian concentration can, if it becomes synonymous with permanent compromise among elites, generate a different kind of legitimacy problem.

Additionally, while political freedoms remained high throughout most of the post–2011 decade, improvements were not matched by parallel gains in the economic subindex or legal subindex. Rapid expansion of political freedom was not accompanied by substantive reforms capable of addressing structural economic problems or strengthening the rule of law. As a result, the lived experience of democracy for many Tunisians remained largely unchanged. Daily interactions with the state continued to be shaped by bureaucratic inefficiency, informality, and limited economic opportunity, which combined to erode confidence in the democratic system itself.

Security shocks deepened the sense of vulnerability. Tourism—an essential sector—was severely damaged by major terrorist attacks in 2015 at the Bardo Museum attack and at the resort area of Port El Kantaoui. The fallout was not only a temporary loss of revenue. It also affected employment, foreign exchange, and the confidence that sustains private initiative. Security, as reflected in the Freedom Index, was weaker than it had been before 2011. The unresolved struggle over corruption and transitional justice further complicated the path from political opening to effective governance. After 2011, expectations for accountability were high, including for business elites and networks associated with the old regime. Yet a major dispute emerged over whether to exclude and prosecute old networks or to pursue reconciliation to preserve investment and economic stability. A new network of young activists was formed under the name “I will not forgive (مانيش مسامح)” to demand accountability before reconciliation. The Truth and Dignity Commission, established in a 2013 law, became a focal point for these debates, and the broader dilemma—accountability versus “turning the page”—stoked public frustration when citizens saw that the most powerful actors often appeared to escape consequences. Tunisia’s institutional design also had a missing pillar: the constitutional court. Debated and delayed over many years, it was never established in a way that allowed it to play its intended role, leaving the system more exposed when executive power later expanded.

The growing gap between political openness and material outcomes contributed to widespread political disengagement. Voter turnout declined, trust in political parties fell, and frustration with parliamentary politics intensified. The 2019 elections revealed the depth of this disillusionment, producing a highly fragmented legislature and propelling Kais Saied, an independent candidate with no party affiliation, to the presidency. Saied’s campaign capitalized on popular resentment toward political elites, framing the post-2011 democracy as a system captured by self-serving parties and informal networks rather than a vehicle for genuine popular representation. On July 25, 2021—celebrated in Tunisia as Republic Day, marking the 1957 abolition of the monarchy—President Kais Saied dismantled key features of the post-2011 balance of power. Parliament was suspended and then dissolved, executive authority was re-centralized, and Tunisia moved toward a new constitutional framework.

Although elections continued to be held, their substance changed fundamentally. New electoral rules marginalized political parties, restricted meaningful competition, and transformed elections into largely individual, nonpartisan contests. Such a design undermines parties as channels of representation and reduces collective accountability, even if the formal mechanics of voting persist. It also reshapes how citizens can aggregate interests and how opposition can organize—core elements of pluralism that matter beyond the existence of polling stations.

The crackdown on the judiciary is central to the post-2021 reversal. After 2011, judicial independence increased dramatically according to legal subindex data—only to plummet again in 2021. One of the main institutional gains of Tunisia’s transition post-2011, the judiciary became one of the first targets of executive pressure. Judges and lawyers who opposed executive moves faced dismissal, prosecution, or detention, and the space for independent legal contestation narrowed. In a context where a constitutional court never materialized, this degree of pressure on the judiciary further reduced the system’s ability to provide institutional checks.

By 2024, Tunisia’s freedom landscape has dramatically deteriorated. While the civil liberties subindex shows a relatively steady trend through 2024, the aggregate data obscures the rapid changes that have eroded those liberties since the 2021 coup. For instance, recent evidence documents a sharp increase in arbitrary detentions, prison torture, and suspicious deaths in custody. Similarly, core institutional safeguards of democratic governance—constraints on executive power, a credible separation of powers, and an independent judiciary—have deteriorated markedly as shown by the other freedom subindexes. The Freedom Index data (with its subindexes) highlights the limits of political liberalization when it is not embedded in broader reforms of the state and the economy. Democratic transitions, like Tunisia’s, are revealed to be fragile in contexts where political institutions are not accompanied by social and economic reforms to sustain them.

From freedom to prosperity

The evolution of prosperity in Tunisia since 1995 provides a sobering counterpoint to the dramatic political changes captured by the Freedom Index. Unlike political freedom, which experienced sharp discontinuities after 2011 and again after 2021, the Prosperity Index reveals a far more muted and gradual trajectory. Income, education, health, inequality, and other components show limited responsiveness to political transformation, highlighting the structural constraints that have long shaped Tunisia’s development. The central lesson is not that the country made no social progress after 2011, but that prosperity did not accelerate in a way that matched the expectations unleashed by the political opening.

Income captures this dynamic directly. Economic performance under the Ben Ali regime was often portrayed as relatively strong by regional standards, yet this growth was unevenly distributed and heavily reliant on low-value-added sectors such as tourism and assembly-based manufacturing. Real income growth was modest, and job creation lagged behind demographic pressures. Inequality and regional disparities remained entrenched, particularly between coastal areas and the country’s interior.

In public debate, the revolution carried an implicit promise that political voice would translate into economic opportunity, especially for young people and marginalized regions. Nonetheless, the post-2011 period did not produce a decisive break with the previous pattern. Democratic transitions are often associated with short-term economic disruptions, but Tunisia’s stagnation persisted well beyond the initial adjustment period. Not only did the economy not show a clear acceleration in income growth or improvements in labor market outcomes, but economic uncertainty actually increased in the wake of the revolution, as security concerns, declining tourism revenues, and fiscal pressures constrained growth. Foreign investment remained subdued, and successive governments struggled to articulate and implement coherent economic reform strategies amid political fragmentation. When expectations are high, incremental prosperity gains can feel like stagnation, and the perception that democracy failed to deliver material benefits to the majority of citizens becomes politically consequential.

Education and health outcomes continued to improve gradually, but these trends largely reflected preexisting trajectories rather than new policy breakthroughs. Tunisia entered the post-2011 period with relatively strong human capital indicators compared to many peers in the region, and incremental progress continued despite fiscal constraints. However, these gains were insufficient to offset rising unemployment, especially among educated youth, which became one of the most visible and politically salient failures of the post-revolutionary order.

Similarly, inequality improved only modestly after 2011. The uprising was fueled in part by grievances about unequal access and regional exclusion, yet the prosperity data suggests that inclusion advanced gradually rather than decisively. Tunisia’s economic structure helps explain this. The country has long displayed a dualism between an internationally connected, often coastal economy and an interior that experiences weaker public services, fewer jobs, and less investment. Persistently high informality reinforces this dualism by limiting productivity growth and reducing the reach of social protection.

Tunisia has maintained a respectable environmental profile according to the Prosperity Index data, as the country avoided the extreme environmental degradation observed in some rapidly industrializing countries. For many citizens, the post-2011 decade was shaped more by jobs, prices, public services, and security than by environmental policy. Environmental performance matters, yet it does not substitute for the everyday pressures that drive political legitimacy.

The minorities component is where prosperity intersects most directly with the post-2021 political turn. The index shows improvement after 2011, consistent with a wider opening of civic space. But this progress reverses after 2021. The reversal aligns with an increasingly hostile discourse targeting sub-Saharan African migrants and Black Tunisians, including rhetoric drawing from a “replacement” narrative.

The path forward

Overall, Tunisia’s freedom and prosperity scores tell the unfinished story of the 2011 revolution—calls for freedom, dignity, and social justice remain partially unanswered. The path forward requires Tunisia to balance economic reforms with political liberalization. Freedom alone will not achieve prosperity, and prosperity alone will not guarantee freedom. While recent years have registered gradual increases in prosperity metrics, these numbers hide deep structural economic challenges: limited market integration, lack of investment, low buying power, and stagnation in technology and innovation.

Tunisia needs comprehensive economic reform that fundamentally addresses market structure. Breaking up concentrated market power and fostering genuine competition in key sectors must be prioritized. Competition drives innovation, efficiency, and ultimately the job creation that Tunisians desperately need. Without competitive markets, growth will remain anemic and unable to generate sustainable long-term development. New trade agreements, beyond monopolistic arrangements, will boost market access and competitiveness. Tunisia enjoys close proximity to European and African markets, and it is not fully exploiting this potential. The country must engage with new partners and expand its trade structure.

Investment also needs to reach its potential. As a Mediterranean hub with attractive potential across energy, tourism, and technology, Tunisia should nurture its private sector by encouraging domestic and foreign investment. The current legal framework and bureaucratic barriers deter new investors. The country should diversify its investment pool and position itself as a North African hub connecting Africa, Europe, and Asia.

Energy remains underrepresented despite its vast potential. Tunisia possesses exceptional solar energy capacity due to long days and abundant sunlight, yet it depends heavily on imported oil and gas while energy needs increase annually. Solar energy constitutes only a small fraction of total electricity production. In December 2025, a new solar panel project was initiated in the city of Kairouan to address this gap. More renewable energy projects are needed to reduce oil and gas dependency, satisfy citizen needs, and avoid the electricity outages that have become increasingly common during summer months. Wind energy could also be further developed to produce clean, sustainable power.

Another major barrier is low buying power among citizens, driven by high inflation, stagnant growth, high public debt, import dependency, and shortages of basic goods. In recent years, the country has faced significant medical supply crises, and several products are no longer available due to low foreign currency reserves and budget constraints. People with chronic conditions now lack basic medication or must wait for alternatives. Food prices remain high relative to incomes, and the country has experienced shortages in flour, sugar, coffee, and milk. If prices remain high and inflation persists, social unrest will intensify.

Tunisia once stood at the forefront of technological advancement but has fallen behind in digitalization, electronic transactions, and artificial intelligence. The country is not only failing to invest in new technologies but also losing its best engineers and researchers, who migrate elsewhere in search of better economic opportunities and political stability.

Yet economic reforms alone will prove insufficient without parallel political liberalization. Tunisia’s economy cannot reach its potential in an environment where property rights remain uncertain, contracts are unreliably enforced, and regulatory decisions lack transparency. Investors, both domestic and foreign, need confidence that there are legal protections for their investments, that courts function independently, and that political connections do not determine business success.

Strong state institutions that operate transparently and responsibly are prerequisites for sustained economic development. Absent these, reforms are merely cosmetic exercises that benefit connected elites instead of delivering broad-based growth. Economic rights, such as to own property, enforce contracts, and operate businesses without arbitrary interference, require robust legal frameworks and independent judiciaries to defend them.

Political freedom and economic development are not competing priorities but complementary necessities. When citizens can express grievances, participate in decision-making, and hold leaders accountable, economic policies better reflect genuine needs rather than narrow interests. Political openness creates pressure for responsive governance, reduces corruption, and builds the social trust necessary for economic cooperation.

The accumulation of unaddressed economic grievances breeds frustration that political repression cannot permanently contain. Tunisia needs a social contract where economic opportunities expand alongside political voice, where growth translates to improved living standards for ordinary citizens, not just elites. This means not only GDP growth but attention to employment quality, income distribution, and access to services. The country has witnessed increasing protests in 2025, with more occurring in early 2026, including a nationwide strike organized by UGTT, the country’s influential organized labor confederation. Tunisia’s future depends on finding the right balance between pursuing market reforms and global integration while strengthening democratic institutions and protecting fundamental freedoms. Only this combination can deliver sustainable prosperity that satisfies citizen aspirations and builds a stable foundation for long-term development.

Ameni Mehrez is an assistant professor of government at the College of William & Mary and a nonresident fellow at the Harvard Kennedy School’s Middle East Initiative program. She holds a PhD in political science from Central European University. Her main areas of expertise are public opinion surveys, political attitudes, electoral behavior, and party politics in the Arab-Muslim world. Currently, she serves as the co-principal investigator of the Arab Elections project.

The Indexes rank 164 countries around the world. Use our site to explore thirty years of data, compare countries and regions, and examine the subindexes and indicators that comprise our Indexes.

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2026 Atlas: Freedom and Prosperity Around the World

Against a global backdrop of uncertainty, fragmentation, and shifting priorities, we invited leading economists and scholars to dive deep into the state of freedom and prosperity in ten countries around the world. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

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2025 Atlas: Freedom and Prosperity Around the World

Twenty leading economists, scholars, and diplomats analyze the state of freedom and prosperity in eighteen countries around the world, looking back not only on a consequential year but across twenty-nine years of data on markets, rights, and the rule of law.

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2024 Atlas: Freedom and Prosperity Around the World

Twenty leading economists and government officials from eighteen countries contributed to this comprehensive volume, which serves as a roadmap for navigating the complexities of contemporary governance. 

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The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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The post Tunisia needs both bread and freedom appeared first on Atlantic Council.

In particular, the analyses focus on the widening gap between strong productivity growth in the United States and near stagnation in the EU. Their policy recommendations emphasize structural reforms to make Europe’s economy more flexible and dynamic, foster a risk-taking culture similar to that in the United States, and encourage innovation and its commercial applications, thereby boosting productivity and economic growth.

While such recommendations are reasonable, it is important to recognize that structural reforms are difficult to implement and tend to face resistance from vested interests. Moreover, reforms take time to yield results and usually produce near-term pain, fueling popular backlash. These factors explain why the EU has made limited progress in implementing Draghi’s recommendations since September 2024. Nonetheless, if Europe wants to preserve its strategic autonomy or sovereignty, especially amid heightened geopolitical contention, it must seriously undertake such reforms.

In the foreseeable future, Europe should also aim to facilitate the diffusion of highly productive business practices already demonstrated by many high-tech firms, particularly in the United States, to domestic businesses. Such an effort could produce tangible results, helping improve economic performance. This challenge mirrors that facing the rest of the US economy, which lags behind the information technology (IT) and artificial intelligence (AI) sector in productivity performance.

Europe struggles to keep pace with US productivity

Since 2000, real GDP annual growth has averaged 1.3 percent in the EU, less than half that of the United States. Factors explaining this underperformance include rigid and burdensome regulations, fragmented markets for services and capital, high energy costs, slow labor-force growth amid population aging, and inadequate investment, including in research and development, particularly in IT and AI sectors. Against that backdrop, EU labor productivity has slowed—falling from 1.5 percent per year between 1999 and 2008 to 1.0 percent between 2010 and 2019 and 0.4 percent since then. By comparison, US labor productivity has averaged 1.5 percent per year over most of the post-2000 period, rising to 2.4 percent in the past two years.

Overall, the productivity gap favoring the United States over the Eurozone has grown to 41 percentage points—more than making up for the period from the end of World War II to the 1980s, when many European countries grew faster than the United States.

The tech sectors behind US success

The better productivity performance of the United States compared with the EU has been driven mainly by the IT sector and later reinforced by AI activities. Indeed, between 1988 and 2023, the cumulative total factor productivity growth in the IT sector exceeded 178 percent while remaining only 12 percent for non-IT sectors. As investment in the IT and AI sectors has outpaced overall capital expenditure, these activities have contributed increasingly to US economic growth.

In 2025, IT- and AI-related expenditures, adjusted for imported equipment, accounted for up to 25 percent of US GDP growth (estimated at 2.2 percent), despite comprising only 4.5 percent of the economy. Excluding the IT and AI sectors, the rest of the US economy would have grown by 1.65 percent in 2025—no different from the EU, estimated at 1.6 percent.

Why high-tech gains don’t reach the broader economy

It is not only in the United States that the IT and AI sectors—and, more broadly, the high-tech sector—enjoy stronger productivity growth than the rest of the economy. In fact, this phenomenon holds true across the member states of the Organization for Economic Co-operation and Development (OECD). According to OECD data, high-tech firms that have embraced technological advances in IT and AI are at the frontier of productivity, growing at an annual rate of 3.5 percent. By comparison, non-frontier firms have recorded a meagre 0.5 percent productivity growth, dragging down aggregate productivity figures.

Recent examples of non-frontier firms include those that have failed to embrace technological innovations, such as digital transformation and electric mobility trends. This includes many German automobile companies, which are now under intense pressure in their home market from Chinese competitors and have lost market share in China from 25 percent to 14 percent in recent years. Similarly, about 70 percent of US firms have failed in their digital transformation efforts due to a lack of a clear strategy, poor change management, and employee resistance—thus joining the ranks of laggards. More generally, non-frontier firms tend to be small and medium-sized enterprises, forming the backbone of the US and EU economies, employing the largest share of workers in sectors such as retail, construction, and traditional manufacturing.

The lack or slow pace of technology diffusion from high-tech frontier firms has left much of the US and EU economies populated by laggard firms in terms of adopting technologically enabled productivity improvements. This kind of slow diffusion of new technology isn’t new. For example, it took sixty years for the steam engine, thirty-two years for electricity, and fifteen years for personal computers and the internet to be widely adopted.

Several factors contribute to this phenomenon, including high fixed costs of investing in new technology, workforce training, and organizational restructuring to reap the benefits of innovation. Investment in intangible assets such as workforce training often produces a technology J-curve effect: productivity may dip initially as firms and employees adapt, before accelerating once the new methods are mastered. There is hope that AI technology diffusion might occur faster than in the case of the aforementioned examples, though adoption remains demanding, particularly in terms of the high costs of implementation hurting short-term profitability.

Learning from frontier firms

Instead of waiting for AI technology to naturally diffuse to the rest of the economy, policymakers, business leaders, and investors should actively facilitate, incentivize, and reward laggard firms to adopt productivity-enhancing practices demonstrated by frontier firms. Specifically, these measures should address barriers to technology diffusion. By doing so, laggard firms would improve their productivity, thereby boosting aggregate productivity and supporting stronger economic growth.

For the EU, encouraging laggards to catch up with frontier firms, both domestically and in the United States, could produce measurable results in the near term. But meanwhile, the EU and United States should continue to implement long-term structural reforms to develop the whole innovation ecosystem—including fostering a risk-taking culture to promote innovation and commercialization.

Importantly, for both the EU and the rest of the US economy, shortening the technology diffusion lag carries high stakes—failure would entrench the already dominant frontier firms, weaken market competition, and make it harder for other companies to catch up. This would keep large parts of the US and European economies in slow-growth lanes, exacerbate economic inequality, and fuel social divisiveness.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a senior fellow at the Policy Center for the New South, a former executive managing director at the Institute of International Finance, and a former deputy director at the International Monetary Fund.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post To bridge the transatlantic productivity divide, Europe needs structural reforms—and AI appeared first on Atlantic Council.

Bottom lines up front

• At an informal summit in Belgium, EU leaders acknowledged that sluggish growth and industrial decline require urgent action beyond single market tweaks and trade deals.
• France has proposed major joint EU debt issuance to fund strategic investments, but its domestic political paralysis and fiscal strains weaken its credibility.
• A “Sovereign Europe” push led by the European Commission could potentially link industrial policy, strategic autonomy, and even France’s nuclear deterrent to deepen integration.

BRUSSELS—You’ve heard the joke: Heaven is where the police are British, the cooks are French, the mechanics are German, the Italians . . . are in charge of romance, and it’s all organized by the Swiss. The punchline makes hell a place where these roles are redistributed in a less ideal way, where the mechanics are French and the romantics Swiss. Outdated as the joke may be, it does offer some slight reassurance. Europe is a continent of many talents and can stay ahead if everyone plays their part.

Last week, in a Flemish castle that gives the best châteaux a run for their money, the European Union’s (EU’s) heads of state and government gathered in Limburg, Belgium, for an informal summit on competitiveness. Sluggish growth and Europe’s dwindling share of export markets have imposed a sense of urgency. The summit didn’t end with a joint statement given its informal nature, but the message carried by most leaders on their way in was that tinkering with the single market and new trade deals will not be enough to jumpstart European competitiveness.

Europe’s problems are clear. In April 2024, former Italian Prime Minister Enrico Letta’s report for the European Commission outlined what afflicted the single market. In September of that year came former European Central Bank President Mario Draghi’s report on European competitiveness. Both reports point to needed reforms, but these will take time. More immediately, action is needed to protect Europe’s industrial capacity, which has fallen by 9 percent in the important chemicals sector since 2022. Shoring up what remains of this capacity demands lower energy prices, with targeted subsidies by national capitals and an EU-wide loosening of the Emissions Trading System. Even protective measures might be necessary.

It is commonplace to assume Europe isn’t up to the challenge. Europe currently appears weak because the geopolitical and economic certainties that it has relied on have been disrupted by Russia, China, and lately the United States. On occasions when it hasn’t remained a spectator, it has managed to shift things: on Greenland, with modest deployments of soldiers and the threat of tariffs, and on Ukraine, with money and intelligence-sharing to backfill the United States’ contributions. But addressing the EU’s economic weakness is more challenging; the results are measured in euros and jobs. The need for “quick wins” smashes against the big dichotomies that define the bloc, where economic sovereignty can be pooled but not national security, and talk of a “fiscal union” remains a red flag to the electorates of the less-indebted member states.

Nonetheless, European leaders now appear to be moving with a welcome sense of urgency. The situation is not without its irony: Predominantly French ideas—strategic autonomy engineered by a degree of industrial policy—have been vindicated by events, but now France itself appears paralyzed by political dysfunction. 

French President Emmanuel Macron’s main message ahead of the Limburg summit was a call for €1.2 trillion annually in new debt taken on by the whole EU, in addition to member-state borrowing. The projects this debt would fund might indeed be valuable, such as boosting infrastructure resilience and preparing Europe for quantum computing. But there’s a lingering sense that this plan will allow Paris to delay its efforts to raise the retirement age in France and, more broadly, to avoid addressing the sustainability of its social model. When the embattled French Prime Minister Sébastien Lecornu undid some of Macron’s pension reforms to secure a parliamentary majority for the 2026 budget, the spread between French and German debt went down, not up, as a reward for short-term stability. The early resignation of Banque de France Governor François Villeroy de Galhau, who plans to step down in June—allowing Macron to appoint his successor before the 2027 French elections—adds to a sense that the French elites feel the political extremes are ever more likely to win power. Few mainstream French politicians will want to increase the extreme parties’ odds by forcing through unpopular reforms before the next election. 

If even the markets can’t be expected to discipline France, then Paris will remain a poor advocate for joint debt issuance. After the Munich Security Conference, for instance, German Foreign Minister Johann Wadephul said that France would have to make more of an effort on updating its social model to have a credible path to meet the new NATO defense and defense-related spending goals of 5 percent of gross domestic product by 2030.

This means that the push for joint debt issuance will have to come from unusual voices, starting with Germany. Joachim Nagel, president of the Bundesbank, said recently that common European debt instruments deserve serious discussion—a signal that would have been unthinkable from Frankfurt even three years ago. Berlin is also engaging more constructively than in the past with the French Group of Seven (G7) presidency’s ambitious agenda to create a roadmap toward moderating macroeconomic imbalances that stem from uneven trade flows. A cynic would say this is because China has surpassed Germany as the main current account surplus powerhouse. The more charitable view is that—through its push for military spending—Berlin is now behaving the way imbalances experts would have wanted ten years ago. 

All the issues at hand are complex, yet the demand for “quick wins” by smaller member states is not misplaced given the very real prospect of more industrial capacity disappearing. Seeking one such win, several Central European states have focused on lowering energy prices. The recently returned Czech prime minister, Andrej Babiš, even said that all other measures would be futile if this isn’t addressed. The loosening of the Emissions Trading Scheme, which Germany and Italy had put forward earlier in the year (before Berlin played this down), is proving popular, although it won’t allow member states to match France’s low electricity prices for heavy industry, the result of (you guessed it) coordinated infrastructure spending and subsidies over decades.  

Beyond energy prices, the EU needs a larger push toward simpler regulation. To achieve this, EU policymakers will need to determine which regulations are genuinely strangling industry and which can be actively wielded to protect the single market from competition that is over-subsidized, dirty, or both. The Carbon Border Adjustment Mechanism and the Emissions Trading System are cases in point. Both have come under fire from industries looking for relief, but they will actually prove useful in the coming months as Europe uses their frameworks to justify barriers against Chinese overcapacity.

The ball is now back in the European Commission’s court ahead of the European Council meeting in March. On my recent tour of European capitals, even the most adamant supporters of the European project grumbled that European Commission President Ursula von der Leyen failed to seize an opportunity this past April, when uncertainty in the United States gave European assets a new appeal and a sense of a “European moment.” Facing a similar set of circumstances, several officials told me, her predecessor Jacques Delors would have found a unifying banner and a deadline under which to ram more awkward compromises through, just like the single market, which was launched on January 1, 1993. 

It isn’t too late for von der Leyen to push for a similarly large move. Call it “Sovereign Europe 2028.”

Europe has grown since 1993, and member states will need the option to not take part in some new policies. It shouldn’t be a surprise that “enhanced cooperation” between member states is being talked up as an alternative to taking every step as a bloc. Overall, one must hope that every member state can bring its own unique contribution to the competitiveness drive. From Czech pragmatism on energy prices to the Belgian prime minister’s consistently good jokes, Europe is showing it is capable of taking a hard look at its contradictions and overcoming them. The clear political dysfunction in France and even Germany can be slightly offset by stability where it used not to exist, such as Greece and even Italy (though Prime Minister Giorgia Meloni’s domestic reforms have been somewhat lacking). 

A new “Sovereign Europe” banner might also make the more existential compromises seem less outlandish. Headlines this week are focusing on Berlin’s frustrations with the Franco-German-Spanish Future Combat Air System (FCAS). There is enough blame to go around. France is trying to pool the cost of developing a new fighter jet which responds to its strategic priorities, including on nuclear warheads. Germany is pretending to be discovering this only now. A sense of direction is needed to help lift Europe out of long-standing skirmishes.

There is some excitement ahead of Macron’s upcoming speech on the role of France’s nuclear deterrent in Europe. This may include commitments to the whole of the EU. In return, could German acceptance of a modest common safe asset become more palatable? If, for example, the United States wound down its commitment to Europe, France’s nuclear umbrella might be the only credible European deterrent on offer, and the contours of a deal might then emerge that could oil the machine and deliver results.

Wait—now you want the French mechanics? 

The post Can Europe finally deliver on competitiveness? appeared first on Atlantic Council.

In this episode, host Juliette Matos brings you a timely conversation from December 2025 with US Trade Representative Jamieson Greer on the Trump administration’s trade strategy. As debate intensifies over the upcoming review of the United States-Mexico-Canada Agreement and reports suggest President Donald Trump may withdraw from the trade pact, Greer discusses whether a US withdrawal remains “on the table” and whether there’s a possibility of renegotiation.

In conversation with The Wall Street Journal’s Greg Ip, Greer also addresses tariffs, domestic manufacturing and the future of the global trading system.

Watch the full event and read the complete transcript here: US Trade Representative Jamieson Greer on one year of a new global trade system.

Listen to The AC Front Page Podcast wherever you get podcasts

The AC Front Page Podcast, hosted by Juliette Matos, brings you exclusive conversations with heads of state and government, senior US officials, CEOs, and global decision maker—recorded live at the Atlantic Council’s headquarters in Washington, DC, and on stages around the world. From geopolitics and national security to technology and the global economy, this podcast will keep you updated and informed on the policy debates driving today’s headlines.

Listen wherever you get your podcasts. Full videos and transcripts of our events are available at AtlanticCouncil.org/ACFrontPage.

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Econographics Jan 15, 2026

What to watch as China prepares its digital yuan for prime time

By Alisha Chhangani

The changes China is implementing around the e-CNY signal a more mature phase for the digital yuan—and an overall shift toward a much broader geopolitical ambition.

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How Donald Trump remade global trade

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The US president has smashed the system, but the speed and scale of the smashing owes to a system that had been growing increasingly brittle for years. 

Economy & Business Macroeconomics

Mar 12, 2025

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

AC Front Page harnesses the convening power and expertise of the Council’s sixteen programs and centers to spotlight the world’s most prominent leaders and the most compelling ideas across sectors. The premier platform engages new audiences eager for nonpartisan and constructive solutions to current global challenges. This widely promoted 45-minute program features the Council’s most important guests and content serving as the highlight of our programming.

The post Inside the Trump trade strategy with USTR’s Jamieson Greer appeared first on Atlantic Council.

In this special episode of Guide to the Global Economy, Josh Lipsky and Sophia Busch test the GeoEconomics Center’s predictions for the 2026 global economy with Goldman Sachs Chief Economist Jan Hatzius.

The conversation explores where politicians and economists may be talking past each other when it comes to trade, AI, China, and the broader global outlook.

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Guide to the Global Economy is your go-to podcast for navigating the increasingly busy intersection of global economics, finance, national security, and geopolitics. Through interviews with leading experts and behind-the-scenes insights from the Atlantic Council’s GeoEconomics Center, we break down the storylines that matter most for the global economy—from major news everyone’s talking about to developments few have noticed. These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Guide to the Global Economy Podcast

These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Dispatches Jan 13, 2026

Five trends to watch in the global economy in 2026

By Josh Lipsky

In 2025, markets tried to see past the immediate news of economic shocks. That paid off; but 2026 may look very different.

China Economy & Business

Econographics Feb 4, 2026

Understanding the vibe shift on the dollar

By Daniel McDowell, Bart Piasecki, Jessie Yin

Gold prices surged to record highs last week, driven by trade tensions, tariffs, and dollar uncertainty. For some, the rally signals rising skepticism about the greenback’s stability—even as policymakers insist the US remains committed to a strong dollar.

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Mar 12, 2025

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Econographics Feb 12, 2026

Despite US exemptions, the show goes on for a global minimum corporate tax

By Jeff Goldstein

The United States may have carved out protections for its multinationals, but the global minimum tax continues to move forward. With more than sixty-five countries implementing the OECD framework, policymakers are betting imperfect progress will prevent a relapse into corporate tax competition.

Economy & Business Europe & Eurasia

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The post 2026 Predictions: Washington vs. Wall Street appeared first on Atlantic Council.

The move to permit Ukrainian arms exports has been a long time coming, with defense tech companies arguing that they have spare production capacity due to the Ukrainian state’s limited purchasing power. With foreign sales now on the agenda, potential participating companies must make sure they are in a position to make the most of the emerging opportunities.

Since the onset of the full-scale Russian invasion in February 2022, Ukraine’s defense tech sector has proved itself in the most demanding conditions imaginable. Ukrainian companies, many of them young, resource-constrained, and operating under constant attack, have designed, adapted, and deployed weapons systems at a pace rarely seen in peacetime industries.

Crucially, these firms have been able to produce and refine innovative products in combat conditions based on real-time battlefield feedback. In practice, this has meant development cycles that can often be measured in days or weeks, rather than the multi-year acquisition cycles typical of traditional defense procurement.

The performance of Ukraine’s defense tech industry has generated significant international interest and a spate of early seed investments. As the war continues and the Ukrainian government moves to open up foreign markets, ambitious defense sector companies will need to focus on maximizing their export readiness.

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

In the context of the Ukrainian defense tech industry, export readiness refers to a company’s ability to navigate the complex legal, regulatory, and compliance frameworks governing the international sale of defense and dual-use technologies. This includes securing the necessary export licenses from the Ukrainian authorities, understanding and complying with destination country import controls, adhering to multilateral export control regimes, implementing robust end-use monitoring and supply chain security, and demonstrating transparency in ownership and governance to satisfy due diligence requirements of foreign buyers and investors.

For Ukrainian companies, export readiness also means turning battlefield innovation into compliant, scalable products for global markets and converting their tactical advantage into strategic economic growth. The Ukrainian businesses building these weapons systems and the investors backing them must begin this work now, not after the first export opportunity appears. Waiting until a deal is on the table could result in losing momentum, credibility, and valuation.

International defense markets operate under strict and unforgiving rules. Compliance with frameworks such as the US International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), the EU’s Dual-Use Regulation, and related NATO-aligned regimes is not optional.

These rules apply not only to finished products, but also to components, software, technical data, and even the nationality of personnel involved in development. Under the incorporation principle, foreign-origin controlled parts integrated into Ukrainian products can subject the final system to external jurisdiction and re-export restrictions.

Some US export rules allow limited flexibility when controlled components are only a small part of a system. ITAR does not. Even minor integration of ITAR-controlled items can trigger full US export licensing obligations. Companies that treat export controls as an afterthought often discover too late that they have painted themselves into a regulatory corner.

A critical but often underestimated component of export readiness is supply chain integrity. Many modern defense and dual-use systems rely on electronics, sensors, chips, and subcomponents sourced through global markets.

Supply chains with hidden or poorly documented tails that run back to China or other high-risk jurisdictions can quietly disqualify an otherwise competitive product from Western export markets. In some cases, these dependencies can trigger outright prohibitions; in others, they impose licensing requirements so onerous that customers walk away.

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Export readiness also requires institutional maturity inside companies. This includes appointing dedicated export control and compliance officers; implementing comprehensive trade compliance policies and procedures that govern every stage of the product lifecycle from design and procurement to production, marketing, and after-sales support; and building internal capability to identify, classify, and manage controlled items and technologies.

Ukrainian companies need to understand which products fall under which regulatory regimes, which export markets are realistically accessible, and what licensing pathways exist. Filing for licenses proactively, engaging early with national authorities, conducting internal compliance audits, and mapping obligations in advance can prevent costly delays, enforcement actions, and reputational damage that investors, partners, and customers alike are increasingly unwilling to tolerate.

Mistakes can be costly, with the compliance failures or unauthorized exports of a single private company capable of triggering diplomatic incidents, sanctions, or restrictions that jeopardize market access and credibility for Ukraine’s entire defense industrial base. This makes institutional discipline a matter of national security, not merely corporate risk management.

The implications are equally clear for international investors. As capital becomes more selective and diligence more rigorous, shareholder value will increasingly favor Ukrainian defense companies that are compliant, transparent, and forward-looking. Funds that encourage early investment in governance, compliance infrastructure, and supply chain resilience are not being overly cautious; they are protecting downside risk and enhancing upside potential. In future funding rounds and exit scenarios, export readiness will be a differentiator that directly affects valuation.

There is also a broader strategic dimension. Ukraine’s integration into Western defense and industrial ecosystems will depend not only on political alignment, but also on regulatory compatibility. Companies that are export-ready today will be in a position to participate in joint development programs and contribute to trusted supply chains tomorrow.

Ukraine’s defense sector has already demonstrated enormous battlefield credibility. The next phase is commercial and institutional credibility. Companies and investors who act now by auditing supply chains, implementing compliance frameworks, and preparing for regulated exports will be the ones best placed to lead the global defense market.

Michael Druckman is the founder and managing director of Trident Forward.

Further reading

UkraineAlert Feb 7, 2026

Death by cold: Russia is attempting to freeze millions of Ukrainian civilians

By Kristina Hook

Russia is methodically bombing Ukraine’s power and heating infrastructure amid arctic weather conditions in a bid to freeze millions of Ukrainian civilians and make much of the country unlivable, writes Kristina Hook.

Conflict Drones

UkraineAlert Feb 12, 2026

Vladimir Putin is trapped in a war he cannot win but dare not end

By Peter Dickinson

As the fourth anniversary of Russia’s full-scale Ukraine invasion approaches, Vladimir Putin finds himself trapped in a war he cannot win but dare not end for fear of entering Russian history as the man who lost Ukraine, writes Peter Dickinson.

Conflict Disinformation

UkraineAlert Feb 12, 2026

Ukraine says lifting football ban would risk legitimizing Russia’s invasion

By Mark Temnycky

Ukraine’s Sports Minister Matvii Bidnyi has slammed calls for Russia’s return to international football and warned that any attempt to reinstate the Russians would risk legitimizing the country’s ongoing invasion of Ukraine, writes Mark Temnycky.

Conflict Corruption

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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UkraineAlert is a comprehensive online publication that provides regular news and analysis on developments in Ukraine’s politics, economy, civil society, and culture.

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The post Ukrainian defense tech companies must prepare for export opportunities appeared first on Atlantic Council.

Bottom lines up front

• Media organizations are increasingly treating prediction markets as authoritative signals, but many are thin and easily influenced.
• US adversaries and foreign terrorist organizations could exploit these markets by pairing strategic trades with coordinated information campaigns or cyber intrusions.
• Given the national security implications, policymakers should view prediction markets as dual-use infrastructure requiring deliberate guardrails.

WASHINGTON—Prediction market platforms are rapidly moving from niche curiosities to fixtures of mainstream media coverage, yet their implications for information security and democratic resilience remain underexamined. As mainstream news organizations begin to integrate prediction market data into their reporting as quasi-authoritative “signals,” they risk opening a new vector for influence operations by foreign adversaries. This emerging ecosystem blurs the line between genuine probabilistic forecasts and engineered narratives, creating a fertile environment for the manipulation of public opinion, markets, and trust in core institutions.

From odds to “truth”

How might this risk play out? To begin with, prediction markets present themselves as neutral aggregators of dispersed information, implying that prices reflect the collective best guess about future events rather than the preferences of a narrow set of participants with varied motivations. When media outlets adopt this framing by pointing to market prices on issues ranging from elections and recessions to wars and major sporting events, they elevate those prices and the associated narratives from mere data points to perceived arbiters of reality.

In practice, however, these markets are often thin, sometimes dominated by a relatively small pool of sophisticated bettors, enthusiasts, and speculators. Treating their movements as transparent reflections of public belief risks granting disproportionate narrative power to actors with both the capital and the incentive to shape prices for reasons that may have little to do with forecasting accuracy. This dynamic is particularly concerning when the topics at stake intersect with homeland security, national security, or cybersecurity.

A widening attack surface

The logic of narrative manipulation via markets is already visible in benign commercial contexts. Consider a prediction market on whether a blockbuster film will exceed a $100 million opening weekend. A studio could rationally allocate a portion of its marketing budget to buy the “yes” side to move the price upward, and then cite that movement to entertainment reporters as evidence of strong anticipated performance. The market becomes both a promotional tool and a self-referential signal that justifies its own engineered optimism.

In sports, similar dynamics apply. If newsrooms begin to lean on prediction markets the way they rely on performance analytics, then those markets become attractive tools for agents or teams seeking to influence awards or contract-linked incentives. A concentrated position in a market related to a “most valuable player” award, paired with a coordinated media push, could subtly shape perceptions among voters and fans. While such behavior may resemble traditional public relations and be within the bounds of the law, it expands the surface area on which questions of fairness, integrity, and legitimacy can be raised.

From sports integrity to national security

These seemingly narrow examples matter because they help normalize skepticism about the fairness of outcomes in domains that have historically served as relatively apolitical spaces of shared experience. If fans repeatedly encounter allegations—substantiated or not—that betting lines, awards, or game outcomes are being manipulated, their baseline trust in the integrity of sport erodes. That erosion is not easily contained. It can spill over into attitudes toward other large-scale events and institutions, including elections, financial markets, and government processes or geopolitical maneuvering. You don’t have to look any further than the recent case in the Israeli military. In February 2026, at least two people were indicted on charges of using classified national security intelligence to place wagers on Polymarket to reap as much as $100,000 in profits. To its credit, the Israeli security forces acted swiftly with a first-of-its-kind legal action to maintain civic trust in the military.

Foreign adversaries have already demonstrated the capacity to pair cyber intrusions with information operations, exploiting stolen data to shape narratives for strategic effect. In a world where liquid prediction markets exist on sensitive geopolitical topics—such as regime stability, military escalation, or sanctions decisions—access to privileged information and the ability to move markets provide powerful tools. For example, an intelligence service that has compromised a Fortune 500 firm’s email system or a government agency’s internal communications could simultaneously profit from and weaponize that information by taking positions in relevant markets and then amplifying the resulting price movements as “evidence” of impending events.

Cyber-enabled financial and narrative operations

Even in the absence of cyber espionage, adversaries can use capital and content to similar effect. For example, a thinly traded market on whether a particular regime will fall by a given date could be meaningfully shifted by a single six-figure trade. Once the price moves, coordinated networks of accounts and media proxies might then point to the market as an apparently neutral indicator that the regime’s stability is in serious peril. This approach turns a small financial outlay into a lever for shaping news coverage, investor sentiment, and public expectations.

The same model applies domestically. Markets tied to divisive social or political issues could be used to amplify polarization, with foreign actors selectively moving prices and then framing those moves as proof that “everyone knows” a certain controversial outcome is likely or inevitable. When combined with cheap artificial intelligence–generated content—audio, video, or text—these efforts could be supplemented by fabricated “evidence,” such as manipulated footage further undermining confidence in institutional neutrality.

Policy, governance, and security responses

The goal is not to abolish prediction markets (or sports wagering), which can offer genuine informational and economic value, but rather to recognize and mitigate the security risks they introduce. As these markets proliferate and integrate more deeply into the information environment, policymakers, regulators, and industry leaders should treat them as dual-use infrastructures that require deliberate guardrails.

Several lines of effort merit consideration:

First, media organizations should adopt transparent standards for when and how prediction market data are cited, emphasizing that prices reflect the beliefs and incentives of a limited set of participants rather than objective truths. CNBC, for example, has added a disclosure of its investment in Kalshi when it reports on the platform both on its website and on air.

Second, regulators and platforms should develop disclosure requirements for large or coordinated positions in markets linked to elections, major national security events, or systemically important firms, along with enhanced scrutiny of foreign participation in such markets. 

Third, prediction platforms should invest in robust market integrity monitoring, including mechanisms to detect anomalous trading patterns that coincide with coordinated information campaigns. 

Fourth, homeland and cybersecurity authorities should incorporate prediction markets into broader threat assessments of the information environment, recognizing that the same tools that can improve forecasting can also be weaponized to erode trust in the fairness and legitimacy of core democratic processes.

The post Weaponizing the odds: Prediction markets as a new vector for foreign influence appeared first on Atlantic Council.

What does it take to build a comprehensive AI infrastructure and policy environment for widespread adoption? Last month, the Atlantic Council GeoTech Center, the Internal Telecommunication Union, and Access Partnership convened a roundtable titled “Laying the Digital Foundations” to address this question. For many countries, the answer carries significant geopolitical weight. It can narrow gaps between the Global North and Global South when it comes to the ability to adopt and benefit from AI technologies. It can also create space for transatlantic cooperation on ensuring the AI models of the future are embedded with human-centered values.

The discussion touched on several main areas: energy supply, data centers, cultural-specific models, network equipment, data authentication regimes, and other innovative technologies that could shape infrastructure choices over the next several years. The consensus was that AI readiness does not mean building an “AI Stack” that can be easily copied and pasted from country to country, because the enabling conditions for AI readiness in each country often vary significantly. Instead, it will require a set of interoperable choices that must be adapted to local conditions. Below are more takeaways from last month’s roundtable, which should be top of mind for policymakers as they convene for the AI Impact Summit in New Delhi, India, from February 16 to 20.

Electricity is becoming a binding constraint

The growing demand for data centers arising from AI is creating immediate pressure on electricity grids. Demand for data centers globally could triple by 2030. This means that even if governments can’t add power capacity, they will struggle to keep pace with demand even if they have strong policy ambitions. Finding ways to decentralize the power supply from the grid without destabilizing local systems may be a critical pathway to supporting and connecting a larger number of data centers.

At the roundtable, there was cautious optimism that AI can support parts of the energy transition over time, including by improving system efficiency and accelerating pathways for renewable energy sources such as nuclear fusion and geothermal energy. Yet, these pathways have little to no impact on near-term delivery dependence, and novel and efficient approaches are needed to reduce the current bottlenecks.

Infrastructure patterns are diversifying beyond data centers

Building data centers may not be the only answer, as such facilities cannot realistically be built everywhere. Distributed AI infrastructure that can overcome data latency or disconnection may be within reach. Edge devices, such as smartphones, tablets, smart cars, and smart glasses, have been seen as emerging tools to complement data centers by distributing workloads away from centralized data infrastructure. These devices can reduce latency for data transmission and optimize output. Edge devices don’t just distribute data; they also create new data and analyze it in real time. Such “inference on the cloud”—running a trained machine learning model on the cloud to generate data close to or at the source—is on the rise with the proliferation of generative AI on smart devices. China has been developing a competitive market for edge devices; enterprises are also bringing data to on-premises facilities rather than relying on centralized data centers. This is a good reminder that capability is not defined by one layer alone. A comprehensive strategy for transatlantic and Global South tech diplomacy must consider multiple options, including data centers, edge devices, and on-premises services to shape the global AI ecosystem.

Connectivity still determines who benefits

Beyond data center considerations, connectivity for populations in lower- and middle-income countries remains a critical determinant of access. Online access is still a prerequisite for using AI. Investing in the right kind of networks beyond data centers or edge devices matters. A key issue is modernizing network equipment, as outdated equipment not only hinders users from being digitally connected effectively but also creates security risks. Governments must identify, segment, or replace that equipment for it to remain secure. Network access and security are also increasingly confronted with another issue: the rise of AI agents. The market for agentic AI is expected to reach $103.28 billion by 2034. Some participants stressed that governments would need to adapt to the new challenges from agentic AI with its always-on capabilities, which allow it to constantly make automatic decisions for systems and users.

Data governance, sovereignty, and the cooperation problem

The discussion surfaced a set of geopolitical tensions underlying infrastructure decisions. There was concern at the roundtable about global data governance being shaped by the European Union. The bloc’s regulatory environment for data, as well as its ambition for AI sovereignty, could complicate transatlantic cooperation. At the same time, fragmentation of data sharing remains a barrier to building and improving systems across border—a clear area of need for mutual cooperation. Respecting user rights continues to be a critical part of discussions of transatlantic AI governance. Meanwhile, middle powers, such as India, are caught in the middle of these pressures. That is because India faces the question from partners of whether to adopt US or Chinese AI models, even as its domestic priorities focus on services for the most economically vulnerable communities, language inclusion, and data ownership.

Six pathways to lay the digital foundations for AI

Participants at the roundtable proposed six practical pathways that policymakers can treat as general rules for 2026.

1. Treat financing as infrastructure policy. Governments and the private sector should restructure financing approaches that support data center construction and related capacity. This should include making permitting more predictable and providing clearer incentives for construction where appropriate.  
2. Reduce grid pressure through practical energy planning. As data center demand grows, decentralizing parts of the power supply, where feasible, can help reduce the energy burden on the grids and speed connections for new loads.
3. Plan for multiple deployment models. Beyond centralized data centers, policymakers should also invest in edge devices and on-premises services to widen adoption pathways and reduce latency.
4. Modernize networks as a core AI requirement. Closing connectivity gaps and upgrading network equipment is essential for performance and security, especially as automated and persistent systems increase baseline network demand.
5. Build content governance alongside infrastructure. Governments should enact policies to ensure that AI models reflect local cultural context and language, support standards for the verification of AI-generated content, and strengthen media literacy to protect information integrity.
6. Cooperate on cross-border data rules that protect rights and reduce fragmentation. Governments should develop practical approaches for cross-border data sharing that preserve user rights and accountability while enabling legitimate access for system improvements and public interest use cases.

What to watch in the year ahead

In the year ahead, expect to see AI infrastructure gain momentum as more countries move beyond the simplistic debate around innovation versus regulation and adopt more pragmatic approaches to AI competitiveness. Several global fora this year, such as the AI Impact Summit, the Group of Seven (G7), Group of Twenty (G20), and the United Nations General Assembly, will also dedicate time to understanding what it will take to build more AI infrastructure. It is important to keep in mind that there is still no consensus on what a “complete AI stack” includes, and that is partly because it spans both physical and digital layers. Policymakers would do well to opt for flexibility, whether it is policy frameworks, physical and digital requirements, or end users, rather than adopting a one-size-fits-all approach. However, following the steps above can allow nations to strengthen their AI infrastructure muscles, allowing them to become not just AI-ready, but AI-competent—able to deliver systems that work, earn trust, and can endure real-world conditions.

Ryan Pan is a program assistant at the Atlantic Council GeoTech Center.

Coley Felt is an assistant director at the Atlantic Council GeoTech Center.

Raul Brens Jr. is the director of the Atlantic Council GeoTech Center.

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

Learn more

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MIAMI, FLORIDA — FEBRUARY 13, 2026 — The Atlantic Council’s Adrienne Arsht Latin America Center (AALAC), in partnership with Florida International University, will host the inaugural US–Caribbean Maritime and Ports Forum in Miami on February 20, 2026, convening senior government officials, port authority leaders, private sector executives, and financial institution representatives to advance cooperation, investment, and policy coordination across the US–Caribbean maritime space. The Forum will take place at the Fontainebleau Miami Beach from 9:00 a.m. to 11:30 a.m. 

Launching a new, long-term platform under the Atlantic Council’s Caribbean Initiative, the Forum will focus on the strategic role ports play in trade, energy security, tourism, and public safety throughout the Caribbean. As global supply chains evolve and regional priorities shift, the Forum will examine how closer US–Caribbean collaboration can strengthen port infrastructure, enhance maritime security, expand workforce capacity, and unlock sustainable investment across the region. 

“The inaugural US-Caribbean Maritime and Ports Forum establishes a clear recognition that the Caribbean stands among the United States’ most strategic partners,” said Jason Marczak, vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center. “Maritime and port cooperation shape how that partnership delivers results. Through the Caribbean Initiative, we are creating a sustained space to elevate regional priorities, deepen US engagement, and connect public and private sector leaders around the investments and policies needed to drive trade, security, and long-term economic resilience.” 

The Forum builds on momentum from the 2025 CARICOM Heads of Government meetings and will bring together decision-makers from across the public and private sectors to identify practical solutions that support resilient, competitive, and secure maritime systems in the Caribbean. 

Confirmed speakers include: 

• Adrienne Arsht, Executive Vice Chair, Atlantic Council; Founder, Adrienne Arsht Latin America Center 
• The Hon. Matthew Samuda, Minister of Water, Environment and Climate Change, Jamaica 
• General Laura Richardson (Ret.), United States Army; former Commander, US Southern Command 
• Patricia Francis, Nonresident Senior Fellow, Caribbean Initiative, Adrienne Arsht Latin America Center, Atlantic Council 
• Jeffrey Hall, CEO and Vice Chairman, Pan Jamaica Group Limited; Group Managing Director, JP; Chairman, Kingston Wharves Limited 
• Tim Martin, President and CEO, Tropical Shipping 
• Wazim Mowla, Senior Fellow, Jack D. Gordon Institute for Public Policy, Florida International University 
• Captain Gus Andersson, Associate Vice President, Port Development and Marine Operations, Royal Caribbean Group 
• Lilia Burunciuc, Country Director for the Caribbean Countries, World Bank 
• Dion Bethell, President and CFO, Nassau Container Port, Bahamas 
• Erik Bethel, General Partner, Mare Liberum Capital 
• Felipe Ezquerra, Head of Transport, Infrastructure and Energy Division, IDB Invest 
• Adam Carter, Managing Director and Head of Investment Banking, FX and Derivative Sales, CIBC FirstCaribbean International Bank 
• Andrew Clutz, Head of Economic Development, Tractus Asia 

The US–Caribbean Maritime and Ports Forum is the first in a planned series designed to sustain dialogue, deepen partnerships, and drive action on maritime cooperation between the United States and the Caribbean. 

The Forum is held in partnership with Acero Capital, FGS Global, PortMiami, and Tropical Shipping, which also provided support to bring the Forum to fruition.  

To register as a participant at the US–Caribbean Maritime and Ports Forum and to view all confirmed speakers and the agenda, please visit here.  

Media wishing to attend in person should reach out to Salome Ramirez Vargas at sramirezvargas@atlanticcouncil.org to request accreditation. Media wishing to participate virtually through the event livestream should visit here.  

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Bottom lines up front

• As Central Asian states become more geopolitically significant and open to Western investment, there are expanding opportunities for greater US engagement with the region.
• In recent months, Kazakhstan has been expanding its diplomatic profile and showing an openness to foreign investment in the mining, energy, and transport sectors.
• The B5+1 forum in Bishkek demonstrated that Kyrgyz businesses are eager to attract trade and investment from US firms. 

ASTANA and BISHKEK—Earlier this month, while Washington, DC, was enduring its most frigid two weeks in decades, I traveled to Astana, Kazakhstan, where bone-chilling temperatures are the norm this time of year. This was my first stop on the way to the B5+1 Forum in Bishkek, Kyrgyzstan, the business counterpart to the C5+1 diplomatic platform that most recently convened leaders from the five Central Asian states in Washington in November.

Increasing contact between Central Asian citizens, governments, and businesses in the past couple of years has resulted in dynamism unprecedented in the five countries’ modern histories. That buzz is being matched internationally, as Central Asia’s geopolitical importance grows as a hub for trade and critical minerals. That has created opportunities but also spiked uncertainty as the region grapples with this newfound attention.

Kazakhstan: A greater role on the geopolitical stage

Both abroad and at home, Kazakh President Kassym-Jomart Tokayev is moving with urgency and ambition. Several of his administration’s moves are already raising Kazakhstan’s profile on the global stage.

Since November 2025, Tokayev has announced the country’s intention to join the Abraham Accords, signed onto US President Donald Trump’s Board of Peace, and received an invitation to participate in the 2026 Group of Twenty (G20) summit in Miami. Kazakhstan also signed a $1.1 billion mining deal with a US firm. This active engagement with the United States prompted additional diplomatic attention from Russia and China, Kazakhstan’s two largest neighbors. Russian President Vladimir Putin gave Tokayev a lavish reception on the back of the Kazakh president’s November trip to Washington, suggesting that the Kremlin wanted to show that it, too, assigns great importance to its relations with Astana.

While it’s nice to be wanted on the world stage, the Kazakh government faces sticky challenges at home. Inflation continues to run above 12 percent. Prolonged outages at Kazakhstan’s main oil export hub have eaten into state revenues. And many analysts see the country’s economic growth slowing in the next few years. At the same time, Tokayev has proposed a new constitution that, among other changes, will condense the bicameral legislature into a unicameral body and institute a vice-presidential position, a rarity among personalized Central Asian governments.

A national referendum on the changes is now scheduled for March 15. That rushed timeline has raised fears among some observers that Tokayev could use what he has described as “a complete reboot” of the current constitution—which was only updated in 2022—to extend his term as president. While the new changes do not mention the presidential term specifically, few of the experts and media people I spoke with in Astana could explain exactly why these changes were necessary. More optimistic experts, however, see the proposed changes as a means of trimming a bloated state that would allow Kazakhstan to pursue its sovereign interests more efficiently.

Despite some economic and political uncertainty, Kazakhstan is clearly open for business. Small- and medium-sized enterprises, especially tech companies, have been allowed room to grow and partner with international firms. From conversations in Astana and in Washington, the government appears to be doing an effective job of engaging potential investors in new projects, mainly in the mining, energy, and transport sectors. The next challenge will be to see if it can expand this investment to other industries.

Kyrgyzstan: The challenge of attracting investment

Then it was off to Bishkek for the B5+1 Forum. The organizers of the event—the Center for International Private Enterprise—billed the conference as a “public-private dialogue between Central Asian and American businesses and governments,” essentially a feedback loop for the private sector and government agencies to address business environment challenges.

Ambassador Sergio Gor, Trump’s point man for Central Asia, led the US government delegation to Bishkek, underlining Washington’s newly energetic approach to engaging Central Asia. In his remarks, Gor emphasized US support for regional connectivity and “win-win” deals, before departing to advocate for US companies in meetings with Kyrgyz President Sadyr Japarov and foreign ministry officials.

Back at the conference, it was clear that Kyrgyz officials were looking to make the case for greater economic engagement from the United States. But the cautious tone and tenor of their remarks belied the twin insecurities of government officials: uncertainty about how to advocate for their country’s interests to an international audience and wariness of overstepping the bounds of their state duties.

In fairness, Kyrgyzstan has not had much practice attracting Western investment. While its northern neighbor Kazakhstan negotiated oil deals with Western majors in the 1990s, Kyrgyzstan was largely handed financial and infrastructure grants in the 2000s in exchange for US military basing rights as US forces fought in Afghanistan. In the decades that followed, the country used its status as the “island of democracy” in a region of tightly managed regimes to attract US attention and government funding. That dynamic began to take hits with serious domestic upheavals in the late 2000s and collapsed in 2020, when a disputed parliamentary election led to mass unrest. In the turmoil, Japarov, who had been convicted of orchestrating the kidnapping of a provincial governor, was busted out of prison by his supporters and in January 2021, won a snap presidential election. Since Japarov came to power, Kyrgyzstan’s political processes have become more tightly managed and pressure on civil society has grown.

This political consolidation has affected the country’s ability to attract investment. Take the critical minerals industry, for example: Foreign companies are now required by law to give the state-owned mining enterprise a 30 percent stake in any new projects and investors cannot buy land, only rent it.

In theory, the Japarov government instituted these measures to ensure that the Kyrgyz people benefited from mining profits. In practice, however, Kyrgyz and international entrepreneurs I spoke with say these policies degrade the quality of investors willing to do business in the country. Smaller outfits desperate for a mining license may agree to such terms, but major mining companies will simply look for a better deal elsewhere.

Japarov’s grip appeared to tighten further in the week following my visit when he abruptly fired security services chief Kamchybek Tashiyev—widely seen as the country’s unofficial co-president—along with a slew of his deputies. Tashiyev is widely seen as a patron of Kyrgyzstan’s south, while Japarov is a northerner; the dramatic purge may be a move to wipe away the carefully balanced regional split that had held the Japarov government together.

But as in Kazakhstan, Kyrgyzstan’s private sector offers reason for optimism. Tech incubators and e-residency programs have succeeded in both growing indigenous information technology startups and attracting international firms. As panelists at the forum noted, agricultural business associations are piloting logistics regimes aiming to sell organic produce in the United States and Europe. And an international machinery retailer with regional offices is helping to bring top Western brands to farmers and construction firms.

Opportunities for the United States

The US government appears to have settled on a sound two-track approach to Central Asia based on commercial engagement. The first track focuses on promoting US businesses in the region through direct investments, joint ventures, local retail, and exports. This is the task of Gor and high-level figures in the Trump administration. The deals they seek can be made easier by loosening requirements for the Development Finance Corporation and Export-Import Bank to support large-scale projects, which are often strategic ventures such as mining and transport that can use government backing to buy down risks.

The second track is engagement with and technocratic support for the Central Asian business community through initiatives such as the B5+1. Facilitating constructive business-to-government contacts can help increase capacity in both the private and public sectors and lead to common sense reforms with widespread buy-in. This dynamic is crucial for Central Asian governments seeking social stability, businesses seeking regulatory certainty, and Western partners seeking long-term regional growth.

But one element missing from the US strategy is policy consistency. Several of the business leaders and officials I spoke with in both capitals cited two hurdles to more meaningful engagement with Washington: shifting US visa restrictions and requirements and the persistence of the Jackson-Vanik amendment, which prevents normal trade relations with the Central Asian states.

If the Trump administration and Congress can iron out these issues, it will go a long way toward building a more energetic and coherent Central Asia strategy that advances US interests in the region. Turning genuine US interest in Central Asia into mutually beneficial projects will take effort and flexibility from governments and businesses alike. Fortunately, my week in Astana and Bishkek demonstrated that there is enough enthusiasm and business activity on both sides to keep momentum going.

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Bottom lines up front

• The US president is reportedly musing about the possibility of exiting from the United States–Mexico–Canada Agreement, a trilateral trade pact up for review this summer.
• Mexican officials and business leaders are concerned about the implications of a US withdrawal but are more focused on ironing out key irritants in the current agreement.
• While talk of a US exit might continue, ongoing negotiations in a US midterm election year, with a Mexican administration on good terms with the White House, favor a deal.

MEXICO CITY—The pressure is mounting in Mexico’s capital as the country faces a summer deadline that will captivate world attention. For locals in Mexico City, that means the impending June 11 deadline—just four months away—when the World Cup kicks off with an opening match at the iconic Estadio Azteca. This is why crews are working around the clock for a much-needed remodeling of the Mexico City International Airport and why other repairs are being done across the city.

But pressure is mounting, too, on Mexican business and policy leaders, who are also working full-time ahead of the July 1 deadline for the mandatory review of the United States–Mexico–Canada Agreement (USMCA), the trilateral trade pact US President Donald Trump struck in his first term. These officials and private-sector leaders are devising options for addressing US concerns about the agreement, as well as putting forward their own suggested fixes. The lead-up to that deadline, which falls during the World Cup’s round of thirty-two, is unlikely to capture the world’s attention as much as the major quadrennial sporting event, but it will nonetheless have far-reaching consequences for the economies of countries in North America and beyond. By July 1, the three parties must decide either to extend the trade deal or trigger annual reviews that could lead to its termination.

So, what is the reaction to reports that Trump is considering withdrawing from the agreement? During my visit to Mexico City this week, I sensed concern about the implications of termination but minimal anxiety that this may be the road ahead. Both countries continue to have fluid, regular dialogue around the USMCA. And similar comments have been made previously. There’s also a recognition that the US president is quite adept at making statements that elicit media attention as part of his broader negotiating tactics. Most of all, recent musings are a clear signal from Trump that—like any other deal—nothing is off the table.

Rewind to December, when both Trump and US Trade Representative Jamieson Greer each noted in different circumstances that the USMCA review could yield a number of possible outcomes. This past December 3, Trump said in reference to the USMCA, “We’ll either let it expire, or we’ll maybe work out another deal with Mexico and Canada.” A week later, Greer said at the Atlantic Council that the agreement’s future is far from certain, noting: “So, you know, could it be exited? Yeah, it could be exited. Could it be revised? Yes. Could it be renegotiated? Yes. I mean, that is the purpose of that clause. And all of those things are on the table.” The US trade representative added that “it makes sense to talk about things separately with Canada and Mexico.”

Mexican officials I have spoken with are focused less on the scenarios around agreement termination and instead prioritizing how to address issues such as the Section 232 steel and aluminum tariffs, which were increased to 50 percent this past June with the removal of previous exemptions. Their attention is also on increasing the competitiveness of the auto industry and ensuring overall predictable enforcement of the USMCA. At the same time, US concerns range from curtailing the rise of Chinese investment in Mexico (including ensuring that rules of origin are not bypassed and that Mexico is not a back door into the US market) to energy access and auto rules of origin. 

Another lingering question is how to resolve broader USMCA questions in a context in which Trump and Mexican President Claudia Sheinbaum have established a good working relationship, but the same cannot be said for Trump and the leader of the United States’ northern neighbor. Relationships matter, and Trump’s relationship with Canadian Prime Minister Mark Carney is fraught. And for Mexico, the United States is the more important USMCA partner. In 2024, for example, more than 80 percent of Mexico’s goods exports went to the United States, and more than 40 percent of imports to Mexico came from its neighbor to the north. The same year, just 3 percent of Mexico’s exports went to Canada. So Greer’s discussion at the Atlantic Council of the possibility of bilateral deals is welcome news for many in Mexico. It’s a path forward to avoid Mexico getting embroiled in the more challenging US-Canada disputes.

The USMCA review is a potential game-changer in the commercial world. It’s a unique mechanism to make an agreement work better without having to go completely back to the drawing board. But it also creates uncertainty as the review deadline approaches. Trump will likely continue to question the utility of the USMCA throughout the spring as negotiators seek to get the best deal. Ultimately, however, with Mexico accounting for 15 percent of US exports, and with the US economy—as it usually does—figuring prominently in midterm elections this year, expect the White House to negotiate the best adjustments to the agreement to benefit US interests, but also to do so with the notion that economic certainty will be increasingly important in this election year.

Just like with the World Cup matches, you will need to watch to the very end to see the final result of the USMCA negotiations. But unlike on the pitch, all the participants can come out as winners and have something to celebrate—if negotiations succeed.

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The most common barrier to artificial intelligence (AI)-enabled economic growth is not the failure of the AI models themselves, but the failure to adopt them at scale. Research indicates that as much as 30 percent of generative AI projects are abandoned after proof of concept. Technically successful pilots often fail to reach production because staff lack trust in the systems, accountability structures remain unclear, and organizations run parallel processes rather than integrating new capabilities.

The AI Impact Summit in New Delhi, India, which will be held from February 16 to 20, presents an opportunity to shift the conversation from frontier capabilities to AI adoption at scale. The AI Impact Summit should bring together tech companies, government agencies, researchers, civil society, and funders to work together in a sustained way. Instead of supporting small, one-off AI projects, this group should invest in shared national and regional infrastructure that helps countries build and sustain their own AI capabilities, learning from experiences in contexts similar to their own.

A logic model for AI adoption

Frontier AI capabilities are gradually becoming more accessible, albeit only in pockets. For instance, Anthropic announced in November that it has partnered with the Rwandan government on an initiative aimed at making a Claude-enabled learning assistant available to thousands of people across Africa. Similarly, OpenAI announced last month that it’s collaborating with the Gates Foundation to deploy AI capabilities for health in low-resource environments across Africa.

However, ensuring that AI diffusion is inclusive on the scale of entire populations requires a coordinated strategy. Most of the developing world remains in what could be called AI pilot purgatory. Reaching the next billion people—including populations living in villages, small towns, and low-connectivity regions, as well as those operating in informal economies—demands a deliberate shift from isolated experiments to systemic orchestration. Such an approach will require emerging “middle powers” such as India to demonstrate new pathways of collaboration that support sovereign needs while not relying on building duplicative infrastructure at prohibitive costs.

AI adoption does not follow a simple linear model. Rather, it follows a matrix structure, consisting of “vertical” uses and “horizontal” enablers. Verticals include sector-specific applications: for instance, precision rain advisories for farmers or maternal health decision support. Horizontals make these verticals viable at scale. They consist of capabilities, such as multilingual models, voice interfaces, data pipelines, safeguards, and affordable compute.

Without these shared horizontals, every vertical initiative is forced to rebuild the same foundations. The resulting duplication is expensive and ultimately limits scale. But when horizontals exist as open, interoperable layers, the cost of innovation drops sharply, and the pace of adoption increases. For instance, AI voice interfaces remove barriers surrounding literacy and device access, multilingual models can become shared resources, and safety benchmarks improve through shared feedback. Crane AI Labs, a Ugandan startup, built a finetuned version of Gemma 3 1B, a Google model, using its own hybrid datasets, which include synthetically generated text, checked by Swahili experts. Crane AI then built a Ugandan Cultural Context Benchmark, a technical standard that became part of the UK government’s official AI evaluation library. With such open and interoperable models, thousands of public and private applications can then build on top of existing layers without having to recreate the basics each time.

This is the same logic that powered digital transformations in countries such as India, Uganda, Singapore, and Estonia. Once the digital public infrastructure was built, the ecosystem expanded rapidly and governance improved through real-time feedback loops with users. When the horizontals are in place, vertical solutions in agriculture, health, education, and governance can scale quickly.

Moreover, successful use cases can leave behind reusable assets that become digital public goods for AI. AI4Bharat, an open-source research lab based in the Indian Institute of Technology, Madras, created open-language speech models and datasets for twenty-two Indian languages, significantly lowering the barrier to entry for voice and language-first AI applications. Both AI4Bharat’s language models and Crane AI Labs’ initiatives represent vertical use cases that also created open-source infrastructure, which makes AI adoption easier for subsequent implementers.

However, no single institution, whether a government, a large tech company, a university, or philanthropy, can build all the shared horizontals while also deploying vertical use cases, with safeguards, across diverse sectors and countries. Rather, it takes networks of organizations collaborating on specific problems to bring the right capabilities together at the right moment.

From summit to impact

The AI Impact Summit in New Delhi offers a rare opportunity to move from an AI ecosystem made up of fragmented experiments to a purposeful, more collaborative diffusion architecture. The summit’s greatest potential lies in catalyzing the organizational structures that enable scalable adoption.

To achieve this, the summit’s participants should bring together developers, government agencies, researchers, civil society, and philanthropies so they can work in coordination on diffusion. These stakeholders should align investments in shared building blocks (such as multilingual models, safety standards, and data systems) so efforts reinforce each other instead of being duplicated. Over time, this collaborative effort could set common standards and share knowledge with countries that are earlier in their AI development journey.

These shared pathways can be documented in the form of a digital public infrastructure-AI playbook that documents AI adoption pathways, highlighting how governments, private sector actors, or other stakeholders have built shared “horizontals” and how these have supported AI use cases. The playbook would illustrate concrete tools and frameworks showing what worked, what failed, and how others can adapt proven strategies to their own contexts.

A real commitment to scaling up AI adoption should involve:

1. Collaboration: Multiple institutions are needed to collaborate to build safe, scalable diffusion for use cases.
2. Shared infrastructure: A digital public infrastructure approach creates compounding, reusable assets upon which other organizations can build use cases.
3. Shared pathways: The gap between a promising demo and a durable system isn’t more technology, it’s the full adoption pathway—operating models, incentives, governance, data readiness, evaluation, procurement, training, and incident response.

The next billion AI users, primarily from developing countries in Asia, Africa and Latin America, do not need more headline-grabbing AI breakthroughs. They need practical infrastructure that is open, affordable, and reliable, backed by partnerships and governance systems that build trust rather than demand it.

Trisha Ray is an associate director and resident fellow at the Atlantic Council’s GeoTech Center.

Keyzom Ngodup Massally is is director of the AI Hub for Sustainable Development and head of digital at the United Nations Development Programme’s Chief Digital Office.

Shalini Kapoor is chief strategist, data and AI, at Ekstep Foundation.

The GeoTech Center champions positive paths forward that societies can pursue to ensure new technologies and data empower people, prosperity, and peace.

Learn more

The post The AI Impact Summit must focus on pathways, not pilots, to scale up AI adoption appeared first on Atlantic Council.

This is the fifth chapter in the Freedom and Prosperity Center’s 2026 Atlas, which analyzes the state of freedom and prosperity in ten countries. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

Evolution of freedom

The trajectory of Syria’s freedom over the past quarter century can be understood as a story of three phases: an early period of managed optimism and limited reform that ended in disappointment and repression; a second phase of tightening control and economic capture that eroded confidence even before the 2011 uprising; and a third phase of comprehensive collapse in political, legal, and economic freedoms during the long war that followed. The Freedom Index data traces these transitions clearly: a mild rise in the early 2000s, an economic dip before 2011, and an abrupt institutional implosion thereafter. Yet, behind the data lies a deeper pattern that continues to shape Syria’s current transition—an enduring struggle between the promise of modernization and the persistence of a centralized, personalized, and coercive power.

2000–07: Managed optimism and early contradictions

The first years of Bashar al-Assad’s rule unfolded against nearly four decades of Ba’athist and Assad-led authoritarianism. The Ba’ath Party’s 1963 coup had militarized politics and subordinated civilian institutions to a one-party state; his father Hafez al-Assad’s 1970 intraparty coup then consolidated this system into personalist rule, fusing state, party, and ruler. Within this entrenched structure, the younger Assad’s accession in 2000 generated cautious hope—not because the system had changed, but because many believed a younger leader might soften and modernize it. Some Freedom Index components—particularly economic openness and property-rights protection—showed mild improvement, reflecting initial confidence in the language of reform and the introduction of a “social-market economy.” Yet the momentum soon faltered. By the mid-2000s, Index data already registered dips in investment freedom and property rights, a signal that reform rhetoric was colliding with entrenched patronage.

Behind those numbers lay an experiment in modernization without inclusion. The regime’s selective liberalization opened markets but not competition. Licensing remained opaque; access depended on political connections; and the same families who had prospered under the command economy swiftly adapted to dominate the market economy. Political openings were equally brief: The Damascus Spring of 2000–01, with its independent salons and petitions, ended in arrests and renewed surveillance. The early 2000s thus offered Syrians a glimpse of change without the institutions to sustain it. The indices captured this ambivalence—a brief uptick followed by regression—mirroring a public mood of anticipation that gave way to mistrust.

2007–11: Capture, control, and the erosion of trust

Investment Law No. 8 of 2007 briefly attracted foreign capital, but regime-adjacent conglomerates and the president’s relatives soon moved to dominate the very sectors opened by the law. In the ensuing years, Syria’s reform narrative hardened into a coerced-partnership economy. Foreign and domestic investors faced pressure to surrender shares to insiders; profitability again depended on proximity to power. The Freedom Index captures this shift: Between 2007 and 2010, the economic subindex declined, led by property rights and investment freedom, while legal subindex and political subindex stagnated.

Simultaneously, new urban-redevelopment laws expanded the state’s authority to rezone and clear “unregulated districts,” or informal settlements. The combination of vague statutes and deep-seated corruption convinced many Syrians that these projects were vehicles for dispossession. Anxiety was especially acute in lower-middle-class informal neighborhoods, where decades of tolerance for these settlements collided with new administrative discretion. Because many of these districts were Sunni-majority, fears of expropriation intersected with a sense of demographic vulnerability. Whether or not demographic engineering was the intended outcome, the very perception that it was exposed sectarian tensions that had been long suppressed but never resolved. 

The growing dominance of Assad’s relatives and a narrow crony elite in business mirrored the earlier capture of the military and security apparatus. When protests began in 2011, early slogans denounced corruption and “the cousins,” in reference to the president’s extended family members and cronies, before calling for Assad’s removal. What appeared in the data as stagnation was experienced socially as exclusion. Even though the Prosperity Index’s inequality component remained flat during these years—a statistical artifact of missing data—the lived reality was one of widening disparities. Liberalization without competition concentrated wealth among insiders, while provincial regions and informal labor markets stagnated. For many Syrians, upward mobility increasingly depended on connections, not effort; corruption shifted from a tolerated survival mechanism to a symptom of structural injustice. Thus, the erosion of trust that would fuel the 2011 uprising was already well underway, even if the dataset does not fully capture it.

2011–present: Collapse and authoritarian adaptation

The 2011 uprising pushed Syria’s long deterioration into a systemic collapse. The regime’s decision to pursue a military solution removed any prospect of negotiated reform, triggering an immediate plunge in civil liberties, political participation, and legislative oversight from what was already a low baseline. As violence escalated, the rule of law quickly fell apart: Judicial independence fully dissolved, bureaucratic discretion replaced predictability, and state institutions morphed into rent-extraction networks. The economic subindex also crumbled as productive capacity disintegrated, trade routes fractured, and the war economy—with its intermediaries controlling checkpoints, fuel distribution, smuggling routes, and later the narcotics trade—became the dominant source of revenue.

Sanctions dating back to 1979, expanded in 2004, and tightened after 2011, culminating in the Caesar Act in 2019, deepened isolation and contributed to sharp declines in trade freedom. The regime’s workarounds—barter arrangements and selective contracting with Russia and Iran—kept some sectors afloat but entrenched discretionary governance rather than promoting reform. By the late 2010s, many political, legal, and economic subindexes had dropped to their statistical floor, offering a deceptive appearance of stability that masked continued decay. For citizens, the state functioned less and less as an arbiter of law and more as a gatekeeper of favors until political repression, institutional breakdown, and economic predation converged into a single authoritarian survival strategy.

An exception appears in women’s economic freedom. Modest improvements in 2010 and 2019 stem from statutory reforms—Labor Law 17 banning gender discrimination and amendments to the Personal Status Law expanding women’s mobility—but these changes coincided with collapsing enforcement. War thrust millions of women into economic roles without legal protection, widening the gap between the law and their lived reality. The indices record formal progress while women, in practice, felt its absence.

Across all three phases since 2000, Syria provides evidence that the erosion of freedom precedes crises. Economic and legal subindexes were already falling by the mid-2000s, long before the uprising. Freedom did not collapse because of war; war revealed the cumulative effects of its earlier absence. The same forces that hollowed freedom—capture, mistrust, and legal decay—also undermined prosperity. Economic contraction, institutional breakdown, and the flight of human capital followed the same trajectory. The next section examines how the collapse of freedom translated into material impoverishment, and why rebuilding prosperity will depend as much on legitimacy and rule-based governance as on physical reconstruction.

Evolution of prosperity

The decline of prosperity in Syria mirrors the earlier erosion of freedom, and it follows the same three-phase rhythm: brief optimism, structural stagnation, and collapse. Prosperity, not only as material welfare but also as the capacity to convert freedom into opportunity, proved as fragile as the institutions meant to sustain it. The data shows that even before 2011, prosperity indicators were already plateauing, with income gains narrowing, education and health progress stalling, and income inequality rising. War then amplified those hidden weaknesses into outright devastation. Syria’s Prosperity Index dropped precipitously after 2011, reflecting the combined effects of conflict, sanctions, displacement, and the collapse of productive capacity. Yet the flattening of many post-2016 indicator time series—driven largely by missing data—should not be mistaken for stability. As with the freedom indicators, the real picture is worse than the charts can show.

The income component indicates a steep fall from 2011 onward, coinciding with the collapse of the Syrian currency, the destruction of infrastructure, and the disintegration of trade routes. The Freedom and Prosperity dataset registers a sharp contraction in real output; still, these numbers likely underestimate the true scale of decline. There is no reliable, published GDP data for Syria after 2010, or when informal economies—smuggling, remittances, and war profiteering—became dominant following the onset of civil war in 2011. What little production continued was concentrated in government-held areas and in a few rent-generating sectors such as fuel procurement and distribution—run by regime-connected intermediaries—and the burgeoning narcotics trade.

Health indicators reveal the same paradox present in the freedom data: an apparent mid-2010s increase that likely reflects statistical noise, not genuine improvement. Hospitals operate at a fraction of pre-war capacity; medicine supply chains remain disrupted by sanctions and infrastructure damage; and millions of Syrians rely on under-qualified private clinics or humanitarian relief. In the northeast, unregulated oil extraction and generator fumes have sharply increased respiratory illness, while fuel shortages elsewhere limit heating and sterilization.

Education was once one of Syria’s equalizers; it is now one of its deepest dividers. The early-2000s reforms that legalized private universities generated modest competition and raised standards from a low baseline—progress that is reflected in an uptick in the Education Index before 2011. The war erased those gains. School bombings, teacher flight, and long-term displacement closed thousands of educational institutions. Entire cohorts of students have missed years of schooling, particularly in the north and east. Literacy and attainment gaps are now intergenerational, with ripple effects on productivity and social mobility.

The Prosperity Index’s “treatment of minorities” component measures equal access to services and opportunities rather than formal rights. Syria’s scores here declined gradually after 2011, reflecting uneven governance across fragmented territories. Before the war, religious minorities were not systematically disadvantaged, while Arab-nationalist policy subjected ethnic Kurds to long-standing discrimination. The conflict changed or inverted many of these hierarchies. In the northeast, Kurdish self-administration improved service access for some communities but created new barriers for Arabs and ethnic minorities in the region; elsewhere, minority enclaves under government protection retained some services while majority-Sunni rural areas collapsed. The result is a map of geographic inequality that cuts across identity lines. The welfare of communities has come to depend less on who they are than where they live and which authority governs them. This fragmentation complicates measurement: The Prosperity Index’s national average flattens differences because it treats Syria as one unit, when in reality it is fractured into multiple zones of control. 

The Prosperity Index’s inequality components remains low and almost flat throughout the series—a statistical artifact of missing data, not evidence of equity. As noted in the Freedom Index section, this calm surface conceals the turbulence below. Before 2011, economic opening without competition had already concentrated wealth among regime insiders. After 2011, the war economy multiplied disparities: Commanders, brokers, and smugglers accumulated fortunes while public-sector wages cratered. Access to basic goods increasingly depended on connections—fuel, medicine, and even humanitarian aid were under the control of loyalty networks.

The path forward

Syria’s next chapter begins under conditions fundamentally different from those that shaped the early 2000s. When Assad assumed power, he inherited an intact authoritarian system and experimented briefly with controlled openings that were soon reversed. Since the regime’s collapse, I have returned to Syria repeatedly, most recently arriving right before the first anniversary of its fall, now commemorated by Syrians as Liberation Day. In streets filled with flags, music, and portraits of the revolution’s martyrs, the relief of emancipation coexists with a quiet unease about what comes next. It is within the tension between celebration and apprehension that the questions in this section take root.

Today’s transitional moment is not an echo of Assad’s accession: The state has been fractured, society transformed, and the political landscape irreversibly altered. Yet the experience of that earlier period offers a cautionary insight: Periods of optimism can generate movement but also instability and, without institutional safeguards, early progress may falter. The question now is not whether the current transition will replicate past cycles—it will not—but whether it can avoid the structural traps that undermined reform efforts and contributed to systemic collapse. This distinction is essential because Syria’s post-war trajectory will not follow a linear path. Transitions in deeply damaged states rarely do. They move forward unevenly, shift abruptly, and sometimes regress before stabilizing. Early improvements—whether in governance, service delivery, or the investment climate—may be evidence of hope more than durable change, just as setbacks may represent adjustment rather than failure. Assessing Syria’s progress, therefore, requires patience and multidimensional judgment: an approach that interprets fluctuation not as contradiction but as the normal rhythm of transition.

To navigate this complexity, I propose a three-pronged framework: stabilization, economic consolidation, and democratization. These are not sequential steps but overlapping phases of state-building that unfold simultaneously, even if each advances at a different speed. What matters is not only the tempo of reform but its substance: whether rules, institutions, and trust can come to replace coercion, discretion, and fear. The measure of Syria’s transition rests on whether predictability takes hold in administration, whether rights and responsibilities become rule-based, and whether meaningful participation—formal or informal—emerges as a stabilizing force. The remainder of this section examines what such a transition requires, the risks that could derail it, and the practical choices facing the government of Ahmed al-Sharaa as it attempts to move the country from mere survival toward accountable governance and inclusive prosperity.

The al-Sharaa government’s greatest early achievement has been institutional endurance. Ministries reopened, salaries resumed, and central agencies continued to function despite fiscal exhaustion and territorial fragmentation. Partial electricity improvements revived basic services, while the exemption of industrial machinery from customs duties and the reactivation of more than 1,500 factories signaled the first wave of Syria’s industrial recovery. Aleppo and rural Damascus led this rebound, benefiting from eased licensing procedures and the lifting of long-standing state monopolies. Together, these steps stabilized daily life and signaled that the state still existed.

Stability, however, does not constitute transformation. The real challenge is to turn functionality into legitimacy. With roughly half the population displaced and infrastructure drastically degraded, national elections cannot anchor stability. What can anchor stability is a rules-first reset—predictable administration, impartial security provision, and credible remedies for everyday predation. Electricity, water, and education are not merely utilities; they are the daily symbols citizens use to determine if a state has truly returned. When the lights come on predictably, people infer that authority functions. Service delivery reforms—metered electricity, local water management, transparent teacher recruitment—can demonstrate fairness more convincingly than political declarations. Over time, reliability in these domains begins to rebuild the social contract, shifting public perception of the state from coercion to provision.

The al-Sharaa administration has tried to make this link explicit by prioritizing the rehabilitation of power grids and the partial restoration of domestic production in reopened factories. These steps, modest but visible, have reintroduced a sense of continuity in daily life. Yet progress remains uneven, constrained by power shortages, financing gaps, and opaque contracting. Until public trust in hospitals, schools, and oversight mechanisms is restored, Syria’s institutions will remain nominally functional but substantively fragile. Without a minimal legal core—clear rules, enforcement, and functioning courts—investment will not return and social tensions will fester, regardless of political rhetoric. This sequencing aligns with what Syrians themselves emphasize: security, rule of law, and the restoration of basic services. The judiciary, local police, and municipal offices must become predictable entities rather than instruments of discretion. Every contract enforced and every property dispute resolved fairly will do more for legitimacy than a hundred speeches.

The early months of the al-Sharaa government have already revealed how fragile stabilization can be when inclusion and accountability lag behind coercion. In early 2025, violence in the coastal region—primarily targeting Alawites—exposed the inability of new security structures to protect citizens regardless of identity or locale, with investigators documenting murders, abductions, and property destruction in what they described as “widespread and systematic” attacks. In Sweida, clashes between Druze armed groups, Bedouin tribes, and government forces left hundreds dead and tens of thousands displaced. For minorities, these events underscored a central concern: not simply whether services return, but whether the state protects all communities equally and whether security is exercised as reassurance rather than predation.

Without credible investigations, equal enforcement of law, and inclusive local administration, rebuilding the infrastructure will not mend the social fabric. Syria’s challenge, therefore, is dual: restoring the state’s capacity while reconstructing a shared sense of belonging. Hyper-centralization, once justified by security concerns, eroded both legitimacy and responsiveness. Durable recovery requires decentralization within national frameworks—empowering municipalities, strengthening fiscal transparency, and guaranteeing that central oversight is procedural rather than political. In practice, this means allowing local administrative units to manage water, sanitation, and education budgets, while central ministries set national standards. The balance between authority and autonomy will determine whether new institutions can sustain both order and inclusion. The government’s newly created directorates for anti-smuggling and anti-corruption are a direct response to the previous regime’s entrenched culture of corruption. Enforcement has improved in curbing border smuggling but remains uneven in administrative corruption and procurement oversight. Under Assad, corruption evolved from grand theft by elites to everyday extortion within public offices; that legacy persists. Rooting out corrupt practices requires professional administration, digital tracking, and transparent contracting. The more promising path is systemic reform rather than episodic purges.
 
The abuses on the coast and the violence in Sweida illustrate how incomplete control and fragmented authority undermine claims to national coherence. Nowhere is this tension clearer than in the northeast. What began as a negotiation with the Syrian Democratic Forces (SDF) has become a coercive effort to absorb territory, resources, and fighters into a centralized framework. Recent fighting, the loss of large swathes of SDF-controlled territory, and demands for individual—rather than unit—integration into the national army have transformed the issue from accommodation to consolidation. The outcome will hinge not only on restoring territorial control but also on whether Damascus can convert reunification into legitimacy—addressing fears of exclusion, ensuring equal protection across communities, and defining whether authority is exercised as domination or the foundation of a new social contract.

Stabilization will also falter if the security apparatus remains fragmented. The transformation from militia networks to accountable institutions is central to both freedom and prosperity. Priorities include unified command structures, professional training, and civilian oversight. Integrating vetted former combatants into national forces, while demobilizing others through economic reintegration programs, can reduce predation and restore public trust. Rule-bound policing—applied equally in the capital and on the periphery—will mark the difference between security as repression and security as reassurance.

Rebuilding Syria requires basic statistical capacity—not as a technocratic exercise but as a safeguard against arbitrariness. Reviving the Central Bureau of Statistics and digitizing government records would replace speculation with verifiable information and allow citizens, investors, and local officials to track progress. Reliable data—on prices, services, and reconstruction—will be essential to designing policy and restoring trust. Transparency in numbers, and public access to them, is fundamental to the institutional reconstruction Syria never experienced.

Economic recovery in Syria will depend primarily on credibility. Investors still remember the coerced partnerships, opaque privatization, and arbitrary taxation of the late 2000s. This is why dozens of memorandums of understanding since 2024 have yielded little tangible action. Capital will not return without enforceable property rights, transparent licensing, and reliable adjudication. In Syria, the strongest commitment device is an independent court, not a contract-signing ceremony. The new anti-corruption effort acknowledges how distorted the system had become, but enforcement remains uneven. Property restitution relies on clear rules and independent claims boards; procurement requires public tenders and published outcomes; and credit access must shift from patronage to rule-based lending. Democratizing these economic processes means opening them to professional associations, municipal councils, and public audits so that opportunity depends on rules, not connections.

Regional partners have shifted from aid to investment logic, making policy predictability Syria’s real currency. The 2025 renewable-energy law is a promising step, but implementation is hampered by financing gaps and missing technical standards. Household solar adoption shows ingenuity but also risk—from fires and battery hazards to toxic waste. A credible green transition requires regulation and institutional capacity. Environmental “improvements” in the data often reflect reduced industrial activity, not genuine resilience.

Reentry into regional political and economic frameworks can anchor reform if it is tied to measurable progress in governance and transparency. External partners can help raise the cost of backsliding by linking investment and aid to institutional benchmarks. The Syrian diaspora, meanwhile, represents an immense reservoir of skills and capital. The goal should be reconnection, not mere repatriation. Flexible arrangements such as remote participation, temporary return programs, joint research, and business ventures can channel expertise without overburdening domestic absorption capacity. Educational recovery inside Syria must complement these efforts to prevent a permanent skills divide between returnees and residents. Academic openness will be essential here: Universities must once again become spaces of inquiry, not ideology.

Foreign assistance should build capacity, not substitute for it. Donor programs that channel funds directly into ministries without transparency risk entrenching old habits. Effective aid requires performance benchmarks, local participation, and open reporting. International actors must coordinate to prevent parallel governance structures and align aid flows with national reform sequencing. 
 
With half the Syrian population displaced and institutions fragile, the only viable path toward pluralism is a gradual one. The first tests of democratic involvement will appear not in national elections but in the integrity of local governance, freedom of speech, and the openness of information. In the absence of attainable national elections, freedom of speech is more than a moral principle; it is a practical test of how power is exercised: Dissent must be permitted, reporters must be able to work freely, and academics must be allowed to collaborate without political constraint. These conditions are measurable, captured in the Freedom Index through media independence and civic participation, and they create the necessary environment for accountability to take hold. As power configurations shift, durable stabilization demands visible protections for minorities and sanctions for discriminatory behavior by officials or armed actors. Equality of access—to services, employment, and opportunity—will matter more than symbolic inclusion. Local participation mechanisms below the national-election level can channel grievances constructively while broader political frameworks mature. 

Roughly six million Syrian refugees and an equal number of internally displaced persons (IDP) cannot simply “return home.” Rapid, concentrated return to a few livable cities would overwhelm services and risk new unrest. A phased, voluntary, and service-first approach is essential: Prioritize resettlement of internally displaced populations, restore local infrastructure, and guarantee security before large-scale returns. The Syrian government has begun preliminary mapping of viable districts for IDP return, but it lacks the financing and legal clarity for property restitution. International partnerships should condition support on safety, compensation mechanisms, and livelihood readiness to prevent a second displacement wave. Managing this process transparently will also generate data critical to humanitarian planning. Addressing war-era abuses is politically sensitive but indispensable. Pragmatic sequencing begins with documentation and administrative reform, not mass prosecutions. Vetting security personnel, publishing detention records, and clarifying property ownership can signal the emergence of a new legal order. International support should focus on building evidentiary systems and judicial capacity so that accountability mechanisms strengthen rather than destabilize governance. Every credible dataset—on detainees, missing persons, or property claims—will serve both justice and institutional learning.

The al-Sharaa administration has kept the state standing—a significant achievement after years of disintegration—but endurance alone cannot define success. The next test is whether stabilization evolves into accountable governance and inclusive prosperity. Progress will not be linear. Early statistical improvements may reflect optimism more than lasting reform; later regressions may signify adjustment rather than failure. Recognizing this rhythm will be necessary for a realistic assessment. Each credible budget, each open dataset, and each fair court ruling can become a milestone. International observers will watch less for declarations than for data: how many schools reopen, how many licenses are issued transparently, and how many cases are adjudicated without interference.

These numbers—absent for over a decade—will be Syria’s new vocabulary of reform. Freedom and prosperity will advance together only when opportunity is governed by rules rather than favors. The Atlas of Freedom and Prosperity will register this evolution as data returns to the public domain. A functioning state is measurable; a free one is verifiable. In that sense, information is both the mirror and the maker of liberty. The underlying lesson of the past two decades remains constant: Prosperity cannot emerge from arbitrary power. Syria’s new trajectory depends on embedding predictability into law, equality into administration, and restraint into politics. Whether under transitional arrangements or long-term governance, durable freedom will stem less from proclamations than from institutions that work—and that are seen to work.

Ibrahim Al-Assil is a senior research fellow at Harvard University’s Middle East Initiative at the Belfer Center for Science and International Affairs, where he serves as project lead of the Syria Transition Lab. He is also a nonresident senior fellow at the Atlantic Council. His work examines geopolitics and political transitions in the Middle East.

The Indexes rank 164 countries around the world. Use our site to explore thirty years of data, compare countries and regions, and examine the subindexes and indicators that comprise our Indexes.

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2026 Atlas: Freedom and Prosperity Around the World

Against a global backdrop of uncertainty, fragmentation, and shifting priorities, we invited leading economists and scholars to dive deep into the state of freedom and prosperity in ten countries around the world. Drawing on our thirty-year dataset covering political, economic, and legal developments, this year’s Atlas is the evidence-based guide to better policy in 2026.

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2025 Atlas: Freedom and Prosperity Around the World

Twenty leading economists, scholars, and diplomats analyze the state of freedom and prosperity in eighteen countries around the world, looking back not only on a consequential year but across twenty-nine years of data on markets, rights, and the rule of law.

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2024 Atlas: Freedom and Prosperity Around the World

Twenty leading economists and government officials from eighteen countries contributed to this comprehensive volume, which serves as a roadmap for navigating the complexities of contemporary governance. 

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The Freedom and Prosperity Center aims to increase the prosperity of the poor and marginalized in developing countries and to explore the nature of the relationship between freedom and prosperity in both developing and developed nations.

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The post A year into its post-Assad era, Syria needs a ‘rules-first’ reset appeared first on Atlantic Council.

This is why, since 2016, there has been a global effort to establish a minimum corporate tax—an internationally agreed-upon minimum rate on corporate income. Progress has not been steady, and over the past months, the continued fraying of long-standing alliances and economic relationships—or “rupture,” as Canada’s Prime Minister Mark Carney recently described it in Davos—has put global cooperation under strain.

Yet the initiative has not stalled. On the contrary, despite a series of technical and political obstacles, it has continued to advance.

The years-long push for a new corporate tax regime

In 2021, the Biden administration helped broker a global minimum corporate tax deal as part of the Base Erosion and Profit Shifting (BEPS) initiative, launched by the Organisation for Economic Co-operation and Development (OECD). Since then, over sixty-five countries have begun implementing the framework. Upon returning to office for his second term, however, US President Donald Trump argued that this deal did not apply to the United States, and his administration threatened retaliatory taxes against countries that taxed US companies under the new parameters.

On January 5, under pressure from the Trump administration, 146 countries joined the United States in amending the 2021 agreement. As a result, the global minimum corporate tax framework will now continue, but with one notable change: US multinational corporations (MNCs) will be exempt from the agreement’s country-by-country undertaxed profits rule (UTPR).

The UTPR was meant to work as follows: if a company’s profits are taxed below the agreement’s minimum 15 percent threshold in a country of operation, a top-up tax can be applied by the company’s home country—or by other jurisdictions where the company operates if its home country does not act—to reach the 15 percent rate. The Trump administration viewed this mechanism as an infringement on US sovereignty and unfair, because the United States already imposes a minimum corporate tax on foreign income.

Under Trump, the US has reshaped but not derailed global corporate tax reform

By exempting US MNCs, the update will result in a less effective global minimum corporate tax than the original 2021 agreement. US MNCs must still pay a 14 percent tax rate on foreign profits under the US Net CFC Tested Income (NCTI) rule; however, the update matters more than the one-percentage-point difference in rates. The OECD agreement calculates its global minimum corporate tax on a country-by-country basis, while the NCTI uses a worldwide average, allowing MNCs to blend profits from low-tax and high-tax countries to stay below the 14 percent minimum.

With this change, the amended OECD deal is clearly not as comprehensive or consistent as it could be, but its passage remains a meaningful step forward for several reasons.

First, this outcome preserves a multilateral framework more robust than any previous effort. Major economies around the world and most low-tax countries have implemented it. While not impossible, it will now be harder for MNCs to lower their tax burdens through global profit shifting. This framework is no longer just theoretical; it is already impacting MNC‘s balance sheets. Without a deal—and with US retaliatory taxes derailing the initiative—the global community would be back at square one in a race to the bottom, with no floor for corporate taxation.  

Second, for this type of technical and complex policy, the unknowns are vast. Tangible experience and stakeholder engagement are crucial to getting the policy right. By moving forward, public and private stakeholders will become familiar with the system in practice. Eventually, it will become the default. Policymakers will gain hands-on experience in coordinating and collaborating on the system’s features. Without the compromise deal, political and policy focus in this area could stall, and the next push to reform the global corporate tax regime would face the same uncertainty.

Third, implementing an unprecedented global policy apparatus was always going to be difficult, but once in place, it is far easier to adjust rates or make technical refinements. Future policy lessons, political dynamics, and technological advancements will inevitably drive changes in how the OECD agreement operates. Optimizing outcomes is much easier with a framework in place than starting from scratch.

Progress over perfection

Exempting large and profitable US MNCs from the UTPR is not ideal, but incentives for participating countries to stay aligned remain strong. By instituting domestic minimum top-up taxes, they can still collect more revenue from US MNCs operating in their jurisdiction and confidently avoid being undercut by significantly lower rates elsewhere. At the same time, the United States clearly shares the widespread interest in avoiding a race to the bottom on corporate taxation, which is part of the reason why the first Trump administration enacted the NCTI—then known as the Global Intangible Low-Taxed Income rule—and other international tax reforms.

In many areas of international economic policy, global collaboration is far more challenging than in recent decades, and in some cases it is breaking down. The global minimum corporate tax, however, demonstrates that progress is still possible. The broader lesson for policymakers is this: don’t let perfect be the enemy of good. Let momentum build, focus on substantive technical details, and find common incentives.

It will still be a long journey for the global minimum corporate tax to reach a stable and effective equilibrium, but with this compromise, there is now an open road ahead.

Jeff Goldstein is a contributor to the Atlantic Council’s GeoEconomics Center. During the Biden administration he served as the senior advisor for investment activities and director of strategy implementation in the CHIPS Program Office at the US Department of Commerce. Earlier in his career, he was the deputy chief of staff and special assistant to the chairman of the White House Council of Economic Advisers in the Obama administration. Views and opinions expressed are strictly his own.

The post Despite US exemptions, the show goes on for a global minimum corporate tax appeared first on Atlantic Council.

One major clue may be that the news broke on Bloomberg less than one week after Qiushi, a leading Chinese Communist Party journal for disseminating official views, published a 2024 speech by President Xi Jinping calling for the internationalization of China’s currency. Either development coming to light at this particular moment could be coincidental, but both surfacing within a single week are too conspicuous to ignore—especially amid what’s currently happening in Washington and New York.

Financial market turbulence

Markets have been unsettled by US President Donald Trump’s pursuit of Greenland, the unpredictability of US tariffs coupled with the Supreme Court’s impending ruling on their legality, and uncertainty over the administration’s dollar policy. Over the past month, the so-called debasement trade—selling or hedging dollar assets and buying precious metals—has gained momentum. Trump’s own comments seemingly endorsing a weaker dollar have added to the volatility.

Beijing has likely been watching closely how these developments fit into its long-term strategy. Over the past several years, China has been reported to be reducing its holdings of US Treasuries, falling from the largest sovereign holder to the third largest, behind Japan and the United Kingdom, although some of those sales may simply reflect assets transferred to other Chinese financial institutions and custodians in countries like Belgium. Other governments—including India and Brazil—have also been selling Treasuries.

At the same time, China is actively pursuing the internationalization of its own currency—a strategy aimed at reducing over time the US dollar’s central role as the primary global reserve currency. In a speech this summer, the Governor of the People’s Bank of China, Pan Gongsheng, explicitly stated that multipolarity was the government’s goal, with the dollar no longer playing such an outsized role in both the global economy and the use of financial sanctions. His deputy, Lu Lei, went a step further in December when he doubled down on China’s new cross-border payment systems, which are designed to operate outside Western networks.   

A pointed message to Washington

Against this backdrop, how should one read the Chinese policy shift and its recent leak? Amid financial market turbulence, the Chinese government’s outreach to private financial institutions may have been primarily a reminder of the need to hedge at a moment of heightened uncertainty. It may also have been aimed at reinforcing policy guidance as Chinese exporters seek to invest the dollars they have amassed from the country’s massive export surge.

But it’s also possible the leak was intended as a message to Washington—or, more precisely, to Treasury Secretary Scott Bessent—in the wake of his recent comments about China. At a February 5 congressional hearing, Bessent spoke about “rumors of Chinese digital assets,” possibly backed by gold, that could be used to “build an alternative to American financial leadership.” Then, in a February 8 appearance on Fox News, he appeared to blame the current gold price volatility on China. “The gold move thing—things have gotten a little unruly in China,” he said.

Chinese investors have indeed been buying gold aggressively as they seek alternatives to the country’s decimated property market and rock-bottom interest rates. At the same time, the Chinese government has been a net purchaser of gold for the past fifteen months as it diversifies away from dollar-based assets. But China has hardly been alone in stocking up on bullion: JP Morgan estimates that global demand by central banks and investors for gold will average 585 tons per quarter this year.

Bessent’s decision to single out China may not have landed well in Beijing—especially coming so soon after meetings in Davos with his Chinese counterpart, He Lifeng, which reportedly went well. On February 9, Bessent announced “continued constructive engagement between both sides.” If this includes further talks with He Lifeng, they would likely take place ahead of the Trump-Xi summit in April.

But wherever the dust settles in the near term, the longer-term trajectory seems clearer. China’s ambitions to reduce reliance on the dollar will continue, and the Chinese government will keep finding ways to make life a little more difficult for the United States—and the dollar—wherever it can.

Jeremy Mark is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center. He previously worked for the International Monetary Fund and the Asian Wall Street Journal.

Josh Lipsky is chair of international economics at the Atlantic Council and the senior director of the Council’s GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post China’s warning on US Treasuries—and why its timing matters appeared first on Atlantic Council.

Recently, Washington has been buzzing with news of the dollar, specifically concerns around a weaker dollar. But what does a “weak dollar” actually mean? And what are the implications for a trade-focused administration and for international investors?  

Joined by Dan McDowell, senior fellow at the Atlantic Council’s GeoEconomics Center and professor at Syracuse University, this episode breaks down how a sustained dollar depreciation could impacttrade, investment, national security, and the average consumer, as we try to answer the question: Is a dollar vibe shift underway? 

Listen to The Guide to the Global Economy wherever you get podcasts

Guide to the Global Economy is your go-to podcast for navigating the increasingly busy intersection of global economics, finance, national security, and geopolitics. Through interviews with leading experts and behind-the-scenes insights from the Atlantic Council’s GeoEconomics Center, we break down the storylines that matter most for the global economy—from major news everyone’s talking about to developments few have noticed. These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Guide to the Global Economy Podcast

These days, if you don’t get economics, you don’t get Washington. From tariffs to crypto to sanctions and beyond, our team is here to guide you. Watch and listen wherever you get your podcasts.

Econographics Feb 4, 2026

Understanding the vibe shift on the dollar

By Daniel McDowell, Bart Piasecki, Jessie Yin

Gold prices surged to record highs last week, driven by trade tensions, tariffs, and dollar uncertainty. For some, the rally signals rising skepticism about the greenback’s stability—even as policymakers insist the US remains committed to a strong dollar.

Dollar Dominance Economy & Business

Econographics Feb 4, 2026

What the data shows—and doesn’t show—about the future of the dollar

By Hung Tran

Is there genuine demand to “sell America,” or does the recent dollar weakness fall within historical fluctuations? More data will be needed to answer that question.

Dollar Dominance Economy & Business

Mar 12, 2025

Trump Tariff Tracker

The second Trump administration has embarked on a novel and aggressive tariff policy to address a range of economic and national security concerns. This tracker monitors the evolution of these tariffs and provides expert context on the economic conditions driving their creation—along with their real-world impact.

Dec 11, 2023

Dollar Dominance Monitor

This monitor analyzes the strength of the dollar relative to other major currencies. The project presents interactive indicators to track BRICS and China’s progress in developing an alternative financial infrastructure.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post Is a dollar vibe shift under way? appeared first on Atlantic Council.

Executive summary

In an era defined by technological advancement and strategic competition, African critical minerals are central to US economic competitiveness and national security. The continent holds approximately 30 percent of the world’s known mineral reserves, including inputs vital to defense systems, energy technologies, and the digital economy. This geological endowment places Africa at the nexus of the global supply chain and energy security.

Current US dependence on adversarial nations—particularly China—for processed critical minerals creates strategic exposure that African partnerships can mitigate. Since launching the Belt and Road Initiative in 2013, Beijing has established significant economic inroads through billions of dollars of investments in transportation, infrastructure, and energy across the continent. The US response must prioritize not only access to raw materials but also the development of processing infrastructure, transparent governance frameworks, and equitable partnerships that deliver mutual prosperity. Logistic corridors and processing hubs are key to this approach.

The successful development of the Lobito Corridor linking Zambia and the DRC to Angola’s port of Lobito over the past three years has demonstrated that collaborative partnerships between the US government and African development finance institutions (DFIs) can deliver transformative infrastructure, unlock mineral wealth, and promote regional integration.

This model can be replicated through four additional mining corridors and hubs. These include the proposed Liberty Corridor connecting Guinea’s iron ore belt to Liberia’s coast; the Northern Corridor linking Kenya’s port of Mombasa to landlocked East African states and eastern DRC via a multimodal network; the Nacala Corridor, which connects northern Mozambique to Malawi and Zambia through rail, road, and the Port of Nacala; and Morocco’s emergence as a near-term mineral processing and manufacturing hub, particularly for battery supply chains. Together, these projects have the potential to deepen US-Africa partnerships, strengthen supply chain resilience, counter Chinese influence, and advance sustainable development.

By applying lessons from the Lobito Corridor and pursuing corridor-based strategies in resource-rich African markets, the United States can position itself as the partner of choice for infrastructure development while securing access to the critical minerals needed for long-term economic competitiveness and national security.

Report Sep 23, 2025

The critical minerals boom is an opportunity to integrate public health into mining operations

By Connor Gregory, Ciara M. Weets, and Rebecca Katz

Africa is central to the global push for cleaner energy, including the continent’s stocks of critical minerals that power green-energy technologies. But a race to extract more minerals poses public health risks, from the occupational hazards miners suffer to new disease outbreaks in mining camps. There’s a better course for investors and African governments.

Africa Critical Minerals

Report Oct 14, 2025

Responsible stewardship models can transform Africa’s mineral wealth into prosperity

By Mamadou Fall Kane

As investors race to secure access to Africa’s supplies of critical minerals, African nations should invest some of the proceeds in sovereign wealth funds that can manage mineral revenue transparently, protect African economies from price volatility, and secure the benefits of finite resources in a sustainable way.

Africa Critical Minerals

Issue Brief Sep 11, 2025

DFC 2.0: A blueprint for a bigger, faster and more strategic agency

By Aubrey Hruby

With the DFC’s reauthorization this year, Congress and the Trump administration have an opportunity to refine the tools, deepen partnerships, and expand expertise in order to make the investments at the scale and with the flexibility needed to strengthen US national security and enhance global competitiveness.

Africa Economy & Business

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

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Welcome to the fifth edition of Global Foresight. Produced by the Atlantic Council’s Scowcroft Center for Strategy and Security, home to one of the world’s premier strategic foresight shops, Global Foresight gathers the best thinking about how the coming decade could unfold.

In this year’s installment, a part of the Atlantic Council Strategy Papers series, our experts analyze exclusive new findings from a survey of leading strategists and foresight practitioners around the world on how human affairs could unfold over the coming decade across geopolitics, diplomacy, the global economy, technological disruption, changing Earth systems, and other domains. Our team scans the horizon for hidden or under-the-radar phenomena—which we call “snow leopards”—that could have significant consequences in the future. And the Atlantic Council’s best tech minds take a critical look at how artificial intelligence could reshape not only the future, but our ability to predict it.

Welcome to 2036

What the world could look like in ten years, according to nearly 450 experts

To survey the future, we polled geostrategists and foresight experts on our most burning questions about the biggest drivers of change over the next decade. Check out their forecasts on everything from the future of NATO to the rise of cryptocurrency.

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Six snow leopards to watch for in the decade ahead

The underappreciated phenomena that could have outsize global impact

Receiving relatively little attention in the press, these phenomena can be hard to spot as drivers of change. Yet just like the stealthy big cats, they could sneak up and vividly remind us of their power.

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AI and the future

Can artificial intelligence predict global affairs?

Our experts on the ability of artificial intelligence to forecast the decade ahead—and how AI itself will change over that time.

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Interact with Global Foresight 2036

We’ve partnered with BanterBox, an artificial-intelligence platform that creates interactive reading experiences, to produce a special edition of Global Foresight 2036 tailored to you. Ask questions, dig deeper, and explore what you’re most interested in.

Launch the adaptive briefing

Meet your expert guides to the future

Full survey results

Atlantic Council Strategy Paper Series

Feb 10, 2026

The Global Foresight 2036 survey: Full results

In the fall of 2025, the Atlantic Council’s Scowcroft Center for Strategy and Security surveyed the future, asking leading geostrategists and foresight experts around the world to answer our most burning questions about the biggest drivers of change over the next ten years. Here are the full results. 

Africa China

Strategy Paper Editorial Board

Executive editors

Frederick Kempe
Alexander V. Mirtchev

Editor-in-chief

Matthew Kroenig

Editorial board members

James L. Jones
Odeh Aburdene
Paula Dobriansky
Stephen J. Hadley
Jane Holl Lute
Ginny Mulberger
Stephanie Murphy
Dan Poneman
Arnold Punaro

More from our expert guides

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The transformative power of kelp: Global Foresight 2036

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Will China attempt to invade Taiwan in the next ten years?

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Is cryptocurrency going to replace the dollar?

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The post Global Foresight 2036 appeared first on Atlantic Council.

By Mary Kate Aylward, Peter Engelke, Uri Friedman, and Paul Kielstra