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What did not happen at the G7 Summit in Canada (and why it matters)

Atlantic Council experts — Wed, 18 Jun 2025 00:22:13 +0000

What didn’t happen sometimes matters more than what did. On Tuesday afternoon, the Group of Seven (G7) summit in Alberta, Canada, concluded, but US President Donald Trump had left the day before, jetting back to Washington as the war between Israel and Iran intensified. Trump’s attendance for the full two-day summit was not the only thing that didn’t go as planned—several expected meetings and outcomes were canceled as well. Below, Atlantic Council experts examine four things that did not happen and what each nonevent reveals about the relevant issue.

1. The G7 did not release a joint communiqué

The absence of a joint communiqué at this week’s G7 summit starkly illustrates the deepening policy divisions among leaders of the world’s most powerful economies. While policymakers debate what the G7 can accomplish amid growing US-European tensions, a more fundamental question has emerged: Is the G7 itself equipped to address today’s complex geopolitical landscape?

The summit exposed significant rifts between G7 members and the United States on critical international issues. Trump’s assertion that ejecting Russia from the former Group of Eight (G8) was a strategic mistake amplified tensions over Russia’s war in Ukraine. While the G7 did endorse a statement calling for “de-escalation of hostilities, including a ceasefire in Gaza,” watered down statements like this underscore the challenges in achieving consensus. These parallel conflicts reveal not only internal G7 divisions but also the growing disconnect between G7 positions and broader global sentiment, especially when it comes to Israel and Gaza.

The lead-up to the Kananaskis summit highlighted another critical question: Can the G7 remain relevant while excluding major global players? Pressure from G7 leaders ultimately compelled Canadian Prime Minister Mark Carney to extend an invitation to Indian Prime Minister Narendra Modi, despite ongoing diplomatic tensions over last year’s killing of a Khalistani separatist in British Columbia. This last-minute inclusion underscores an emerging reality—as one of the world’s largest economies, a crucial node in global supply chains, and a key player in Indo-Pacific security, India’s absence from major G7 discussions would render many outcomes meaningless.

Perhaps most troubling is the weakening of the shared democratic values that supposedly bind the G7 together. The transatlantic relationship faces unprecedented strain as the Republican Party, under the leadership of Trump and Vice President JD Vance, increasingly views liberal European societies through a harsh cultural lens. While the United States frames China as the primary geopolitical challenge of its time, today’s Republican Party often sees European societies as equally divergent from American values and interests. This ideological drift threatens the very foundation upon which the G7 was built.

These developments raise existential questions about the G7’s future relevance. A forum designed for the world’s democratic economic powerhouses now struggles to produce basic agreements, while excluding nations essential to global stability and prosperity. Today, the G7 risks becoming an increasingly irrelevant talking shop, much like the United Nations Security Council, unable to address many of the defining challenges of the twenty-first century.

—Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center.

***

Trouble was brewing even before Trump’s early departure from the leaders’ summit on Monday evening and the absence of a communiqué on Tuesday. Trump’s trade policy had already effectively resulted in a G6+1—a coalesced European, Canadian, and Japanese front against the United States. But the fracture in the G7 has only become more evident this week. At the time of its formation fifty years ago, the group was created as a channel for economic coordination between the world’s largest economies. In recent years, the conflict between Ukraine and Russia had energized the G7, which had functioned as the hub for sanctions coordination and strategizing on supporting Ukraine. This energizing, and in some ways defining, achievement of the G7 in the past decade was put into question by Trump’s assertion on Monday that Russia should be brought back into the G8 fold, laying bare the misalignment between him and the other leaders.

There are issues that could have possibly aligned G7 leaders, such as responding to Chinese economic influence, including Beijing’s manufacturing overcapacity. But what ultimately binds the group and makes it different from the Group of Twenty (G20) and the United Nations Security Council is broad agreement on democratic values, free and open markets, and a belief in working together with allies. A fracturing G7 puts these foundational tenets under scrutiny. Trump’s early departure also snubbed partners beyond the G7; India and Mexico were looking forward to their respective bilateral meetings that could have furthered trade negotiations.

It’s clear that on its fiftieth anniversary, the G7 is in the middle of a geopolitical crisis, as the Israel-Iran conflict plays out, and an existential crisis, exacerbated by the United States’ strained relationship with the rest of the group. What lies ahead as France will take on the presidency in 2026, and whether the G6+1 break will continue, depends on how much value Washington sees in collaborating with its closest allies on economic issues.

—Ananya Kumar is the deputy director for future of money at the GeoEconomics Center.

2. Trump did not meet with Ukraine’s president

Trump did himself no favors at the G7 Summit toward his goal of achieving a durable peace in Ukraine. Trump has set out a tough approach to achieve that peace. He has asked for serious concessions from both Ukraine and Russia and said that he would exert pressure on the side(s) blocking progress. Since then, Ukraine has accepted every proposal Trump has offered since mid-March, and Russia has rejected them all except for one that it violated immediately. It is clear which side is obstructionist.

Trump had an excellent chance to use the G7 Summit to put needed pressure on the Kremlin. The G7 was poised to lower the price cap for a barrel of Russian oil from sixty dollars to forty-five dollars, which would put pressure on the Russian oil revenues enabling its aggression in Ukraine. But the United States vetoed the proposal last week—Trump’s first gift to Russian President Vladimir Putin at this G7 Summit.

The second gift came after his arrival in Canada. The US president repeated his criticism of the G7 for kicking Russia out of the group because of its conquest and “annexation” of Crimea in 2014. (Trump had done the same in his first term.) Since Putin is blocking his peace efforts, why would Trump provide this offering to the Russian dictator at this time? It is also true that by departing the summit early to deal with the ongoing crisis in the Middle East, Trump missed a planned side meeting with Ukrainian President Volodymyr Zelenskyy. No harm, no foul there, but achieving a real peace in Ukraine will remain a distant wish if the White House continues to treat the aggressor to bouquets.

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

3. Trump did not meet with Mexico’s president

After much anticipation, the first face-to-face meeting between Trump and Mexican President Claudia Sheinbaum did not take place due to the US president’s early departure. Perhaps unexpectedly, the leaders have had an amicable and constructive relationship so far, with mutual praise often being shared between the two and at least seven phone calls taking place since Trump’s election in 2024.

The meeting in Kananaskis, however, would have offered neutral ground for both leaders to further discuss the actions Sheinbaum has taken to address US security concerns while also addressing the thornier aspects of the bilateral relationship. This includes Mexico’s refusal to accept the involvement of US troops in its strategy against the illegal drug trade and cartels. It also includes Mexico’s concern about a proposed 3.5 percent tax on remittances currently moving through the US Senate. (Remittances to Mexico represent roughly 3.7 percent of the country’s gross domestic product.)

A three amigos-style meeting of Trump, Sheinbaum, and Carney was off the table even before the summit. But the presence of all three newly minted North American leaders and their confirmed bilateral meetings on the sidelines of the G7 Summit had nonetheless raised hopes across the region that a tangible agenda to discuss next steps for the United States-Mexico-Canada Agreement (USMCA) would be set. Now, just over a year before the sunset clause is activated in July 2026, the private sector across all three countries will be left craving certainty about the future of the trade deal, especially against the current backdrop of continuously changing trade conditions and recently doubled steel and aluminum tariffs.

So what comes next? US-Mexico communication lines remain open. Mexico has an ally in Christopher Landau, a US deputy secretary of state and a former US ambassador to Mexico who met with Sheinbaum last week. The United States should now continue to signal its willingness to engage with Mexico to find solutions to shared challenges by setting a date for Secretary of State Marco Rubio’s announced visit and pave the way for a Trump–Sheinbaum tête-à-tête.

—Valeria Villarreal is a program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center.

4. No momentum was generated going into the NATO Summit

The G7 presents two cautionary tales for next week’s NATO Summit in The Hague. First, if Zelenskyy’s presence at the G7 contributed to Trump’s early departure, then this would serve as a reminder for NATO allies to tread lightly on signaling too much support for Ukraine in The Hague at the risk of alienating the US administration. Second, Trump’s comments in Canada suggesting that Russia should rejoin the G8 are also a warning to NATO. While allied leaders were already unlikely to raise costs on Russia at the summit for its ongoing war in Ukraine, Trump’s comments highlight that even tough language on Russia in the expected summit communiqué could exacerbate tensions while Trump is in The Hague.

Ignoring the threats Russia poses to the Alliance and the importance of maintaining support for Ukraine comes with different (and I would argue more problematic) risks. But if NATO’s goal in The Hague is to project Alliance unity and avoid a dust-up with Trump, then the Alliance should stay focused on securing a new defense spending pledge and go home. All the hard work, for better or for worse, will fall after the summit.

—Torrey Taussig is the director of and a senior fellow at the Transatlantic Security Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security. Previously, she was a director for European affairs on the National Security Council.

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What comes next in the Iran-Israel war, from a US response to energy impacts

Katherine Golden — Tue, 17 Jun 2025 21:37:22 +0000

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As the 2025 Global Energy Forum convened on Tuesday in Washington, DC, just blocks away at the White House, national security officials were mulling over the US response to the war between Israel and Iran.

“Right now, Iran has a choice,” Brett McGurk, distinguished fellow at the Atlantic Council and former White House coordinator for the Middle East region, said at the Forum.

“The White House offered a deal to Iran about six weeks ago . . . Iran not only did not really respond to that; it actually escalated its nuclear program in the face of this,” McGurk said, pointing to activities at the Fordow nuclear site.

For McGurk, if Iran accepts the nuclear deal, “this crisis would be over.” But if it doesn’t, it would be “looking at the possibility of a US strike on Fordow.”

When it comes to escalation in the Middle East, Helima Croft—global head of commodity strategy and MENA research at RBC Capital and a member of the Atlantic Council Board of Directors—said that “the risk of this spilling over into energy is low. But it’s not zero.”

Below are more highlights from the conversation, moderated by William F. Wechsler, senior director of the Rafik Hariri Center & Middle East programs at the Atlantic Council, where Croft and McGurk also talked about the United States’ response options and the region’s future.

The objectives

McGurk said that if he were in the Situation Room, he would list three objectives for the commander in chief: The first is to protect Americans and defend Israel—which would involve “surging defense interceptors.” The second is to “contain this to Israel and Iran” and “avoid a broader regional escalation.” The third, McGurk explained, is to work with Israel on succeeding in their objectives: “dismantlement of the nuclear program and the missile program.”

McGurk said that what happens in the next week “is potentially quite decisive,” because it could weaken Iran’s influence in the region. That, he said, would set “conditions for a much more peaceful, integrated Middle East that we all want.”

“You talk about a decisive historical period: We’re living in it,” he said.

The options

McGurk said that a military response has previously had “massive risk” associated with it, but “Iran has made a series of fateful strategic miscalculations” since October 7, 2023, reducing those risks.

One such risk was the possibility of retaliation from an Iranian proxy group, such as Hezbollah; but that is “no longer a threat,” McGurk said, with Hezbollah indicating that it does not want to be involved in this latest exchange of strikes.

Another risk was Iran’s air defense, including its use of Russian air defense systems, but that risk has faded as “Israel has complete air supremacy” over Iran. “So the window of availability for a military option is now very open,” McGurk said.

He added that he could see the US administration using the threat of this military option to “try to get a deal.” But if that deal does not come to fruition, “then we have to be prepared to actually do the strike,” McGurk added. “And I think you do have to back it up.”

“The worst case here would be to leave Iran with that Fordow [site] and ten cascades [of advanced centrifuges] intact,” McGurk said. “So it’s a deal or it’s a military strike.”

The impact

Croft said that the market is “very sanguine” about the energy risks associated with the conflict. “We have ample supply on the market right now,” she noted.

If the United States decides to launch an attack on Fordow, Croft said, there would be “a little pop” in prices. But the bigger concern among market players is whether Iran plans to “internationalize” the costs of this war, such as by rallying its proxy groups in targeting tankers and shipping corridors such as the Strait of Hormuz.

That could yield some temporary disruption. “I don’t think the market would be prepared for the export infrastructure being struck,” she said.

She added that there is also concern “about risks to other countries’ energy facilities where they may not have taken the necessary steps to fortify those facilities.”

Until the war inflicts a massive impact on oil supply, Croft said she would not expect a “preemptive surge” of barrels from the Organization of the Petroleum Exporting Countries (OPEC). “They are already unwinding a voluntary cut,” she said. “OPEC has made it pretty clear: They’re not going to fill a gap in the market until one emerges.”

Croft added that there is much at stake in achieving a stable, prosperous Middle East region, as governments continue to build more resilient societies and to diversify their economies. “Having a stable security environment is so important for the millions of young people in the region whose futures really rest on everything that these governments are trying to undertake,” she said.

Katherine Golden is an associate director on the Atlantic Council’s editorial team.

Editor’s note: RBC Capital Markets is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

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Putin’s Kyiv blitz sends message to G7 leaders: Russia does not want peace

Peter Dickinson — Tue, 17 Jun 2025 20:52:00 +0000

As G7 leaders attended a summit in Canada on Monday, Russia unleashed one of the largest bombardments of the Ukrainian capital since the start of Moscow’s invasion more than three years ago. The overnight Russian attack on Kyiv involved hundreds of drones and missiles targeting residential districts across the city. At least fifteen Ukrainian civilians were killed with many more injured.

While this latest Kyiv blitz was by no means unprecedented in a war that has been marked by frequent Russian attacks on Ukraine’s civilian population, the timing is unlikely to have been coincidental. Like a mafia boss ordering elaborate killings to send coded messages, Putin has repeatedly scheduled major bombardments of Ukraine to coincide with international summits and gatherings of Western leaders. For example, Russia bombed Kyiv, Odesa, and other Ukrainian cities on the eve of NATO’s 2023 summit, and conducted a targeted missile strike on Ukraine’s biggest children’s hospital as NATO leaders prepared to meet in Washington DC last summer.

Bombing raids have also taken place during high-profile visits of international dignitaries. In spring 2022, Russia launched an airstrike on Kyiv while UN Secretary General António Guterres was in the Ukrainian capital. At the time, Ukrainian President Volodymyr Zelenskyy said the attack was a deliberate attempt by the Kremlin to “humiliate” the United Nations. Two years later, Russia subjected Ukrainian Black Sea port Odesa to intense bombardment as Greek PM Kyriakos Mitsotakis visited the city.

The massive bombardment of Kyiv and other Ukrainian cities during this week’s G7 summit is the latest example of Putin’s penchant for sending messages with missiles. On this occasion his message could hardly have been clearer: Russia does not want peace. On the contrary, Moscow feels increasingly emboldened by growing signs of Western weakness and is more confident than ever of securing victory in Ukraine.

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Russia’s rejection of US-led peace efforts is equally evident in the diplomatic arena. While Ukraine agreed to US President Donald Trump’s call for an unconditional ceasefire more than three months ago, Russia still refuses to follow suit. Instead, the Kremlin has engaged in obvious stalling tactics while creating a series of obstacles aimed at derailing any meaningful progress toward peace. At one point, Putin even claimed the Ukrainian authorities lacked the legitimacy to negotiate a settlement and suggested the country be placed under temporary UN administration.

The recent resumption of bilateral talks between Moscow and Kyiv has provided further confirmation of Russia’s commitment to continuing the war. Putin personally initiated these talks but then chose not to attend and sent a low-level delegation instead. In the two meetings that have since taken place, Russian officials have presented a list of ceasefire conditions that read like a call for Kyiv’s complete capitulation.

The Kremlin’s demands include Ukraine’s withdrawal from four partially occupied Ukrainian regions that the Russian army has so far been unable to fully occupy. This would mean handing over dozens and towns and cities while condemning millions of Ukrainians to the horrors of indefinite Russian occupation.

Moscow also wants to ban Ukraine from any international alliances or bilateral security partnerships, while imposing strict limits on the size of the Ukrainian army and the categories of weapons the country is allowed to possess. In recent days, Russia’s Deputy Foreign Minister Alexander Grushko has underlined Moscow’s insistence on Ukraine’s total disarmament by calling on the country to destroy all Western weaponry provided since 2022.

Putin’s punitive peace terms are not limited to sweeping territorial concessions and harsh military restrictions. The Kremlin also expects Ukraine to grant the Russian language official status, reinstate the Russian Orthodox Church’s legal privileges, rewrite Ukrainian history in line with Russian imperial propaganda, and ban any Ukrainian political parties that Moscow deems to be “nationalist.”

The Kremlin’s negotiating position envisions a postwar Ukraine that is partitioned, disarmed, internationally isolated, and heavily russified. If imposed, these terms would allow Russia to reestablish its dominance over Ukraine and would deal a fatal blow to Ukrainian statehood. In other words, Putin wants a Ukraine without Ukrainians.

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Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

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Donald Trump’s talk of peace through strength succeeded in generating considerable optimism during the early months of 2025, but it is now time to acknowledge that this was largely based on wishful thinking. Since Trump returned to the White House, the Russians have significantly escalated their air war against Ukraine’s civilian population. On the battlefield, Putin’s troops are now engaged in the early stages of what promises to be a major summer offensive. Meanwhile, Kremlin officials continue make maximalist demands at the negotiating table that no Ukrainian government could accept. These are not the actions of a country seeking a pathway to peace.

In both words and deeds, Putin is sending unambiguous signals that he has no interest whatsoever in ending his invasion and remains determined to achieve the complete subjugation of Ukraine. This uncompromising stance will not change unless Western leaders can convince Putin that the most likely alternative to a negotiated peace is not an historic Russian triumph but a disastrous Russian defeat.

The steps needed to bring about this change and create the conditions to end the war are no secret. Sanctions measures against Russia must be tightened and expanded to starve the Kremlin war machine of funding and weaken the domestic foundations of Putin’s regime. Countries that currently help Moscow bypass international sanctions must be targeted with far greater vigor. In parallel, Western military aid to Ukraine must be dramatically increased, with an emphasis on providing long-range weapons and financing Ukraine’s rapidly growing domestic defense industry.

All this will require a degree of political will that is currently lacking. It would also be expensive. Indeed, during this week’s G7 summit, Trump balked at the idea of imposing new sanctions, saying they would “cost us a lot of money.” This is dangerously shortsighted. Trump and other G7 leaders need to urgently recognize that if Putin is allowed to succeed in Ukraine, the cost of stopping him will skyrocket.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Al Jaber, who is also the head of national oil company ADNOC and the renewable energy company Masdar, spoke at the opening of the 2025 Global Energy Forum, hosted by the Atlantic Council’s Global Energy Center.

“The race for AI is not just about code . . . it’s about gigawatts,” he said, explaining that one query on ChatGPT uses ten times as much energy as a Google search.

“Over the next five years, the US alone will need anywhere between 50 and 150 gigawatts of new installed capacity,” Al Jaber noted. “Meeting this demand is not just a technical challenge,” but a “once-in-a-generation” opportunity, he added.

At the same time, Al Jaber noted that AI can help “unlock its own energy challenge,” by helping energy grids optimize their efficiency and power generation.

Below are more highlights from his remarks, which also touched upon energy policy reforms and the widening conflict across the Middle East.

An engine of peace

Speaking as the conflict between Israel and Iran continues to escalate, Al Jaber called upon “all parties” to “show restraint.” He also pushed for “peace over provocation, calm over confrontation, and progress through partnership—and only partnership.”
“Moments like these remind us that energy is not just the engine of progress,” he said. “It is a cornerstone of peace, stability, and ensuring prosperity.”

Shift into hyperdrive

Meeting AI’s energy demand, Al Jaber argued, will require a “systemwide shift” that brings the energy, technology, finance, and policy sectors “in sync.”
It will also require an effort to “hyperscale” energy, by creating a “reliable base load” of energy sources such as gas, renewables backed by energy storage, and nuclear breakthroughs, Al Jaber said.
He added that such an effort would also require placing a “pragmatic pause” on the early retirement of existing power plants, to help ensure constant supply while energy leaders work to bring nuclear back into the mainstream.

Power to the people

“Power generation is only half of the story, though,” Al Jaber said. “Getting the power to the end user is the other half, and . . . it’s the more complex part of that equation.”
He added that solving the equation—updating the energy grid in the United States—would require “an investment surge” of $300 billion annually. “You can’t run tomorrow’s technology on yesterday’s grid,” he added.
Al Jaber announced that ADNOC would be increasing its US energy investments, issued through ADNOC’s XRG arm, from $70 billion to $440 billion over the next ten years. “The United States is not just a priority. It is more of an investment imperative,” he said.
But beyond investment, policy can also help, he added, pointing to measures that de-risk capital investments and fast-track permitting.

Katherine Golden is an associate director on the Atlantic Council’s editorial team.

Editor’s note: ADNOC and XRG are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

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Anonymous shell companies pose a threat to US national security. Here is how to address it.

Julie Brinn Siegel — Tue, 17 Jun 2025 16:18:51 +0000

On March 26, the Department of the Treasury scrapped critical federal rules that would have made most anonymous shell companies illegal. The rules would also have prevented them from being abused by drug cartels, human traffickers, foreign adversaries like Iran and China, terrorist groups, and other bad actors. Instead of strengthening the implementation of the Corporate Transparency Act (CTA), once backed by President Trump, the Treasury decided to exempt all domestic firms and domestic owners from its requirements. At least 99 percent of companies are excluded from reporting their owners, essentially allowing illicit actors to structure their business around the requirements.

By assenting to the continued abuse of corporate structures and short-circuiting the establishment of a database of the people who own and control real businesses operating in the United States—or “beneficial owners”—the Treasury has made the American financial system, and Americans, less safe. But that outcome wasn’t inevitable and is reversible.

The first Trump White House supported the CTA in a 2019 statement of administration policy, writing that the law “will help prevent malign actors from leveraging anonymity to exploit these entities for criminal gain… strengthening national security, supporting law enforcement, and clarifying regulatory requirements.” Other supporters included the US Chamber of Commerce, federal prosecutors, international human rights non-governmental organizations, financial institutions, police, sheriffs, faith-based groups, national security experts, and more than a hundred other organizations.

The persistent risk of anonymous shell corporations

Despite the passage of the CTA in 2020, anonymous shell companies remain a risk to the US financial system. Drug traffickers, terrorists, and nation state adversaries, including China, use our opaque corporate structure to harm Americans. In the CTA, Congress found that malign actors use US corporate law to facilitate “money laundering, the financing of terrorism, proliferation financing, serious tax fraud, human and drug trafficking, counterfeiting, piracy, securities fraud, financial fraud, and acts of foreign corruption, harming the national security interests of the United States and allies of the United States.”

High profile prosecutions demonstrate the roles that anonymous shells continue to play. For example, a Shanghai-based international drug trafficking organization used domestic Massachusetts shell companies as a US base for its operation to distribute fentanyl to customers across the country, resulting in multiple deaths before being shut down by the Department of Justice (DOJ) in 2018. Similarly, a February 2024 DOJ indictment revealed a scheme where a Chinese national used a US front company to launder Iranian oil into China, the proceeds of which funded Iran’s Islamic Revolutionary Guards Corps, a designated foreign terrorist organization in the United States.

The enduring danger that shady corporate structures present creates an imperative to act. It may also put Treasury Secretary Scott Bessent’s rollback strategy in legal peril, as long as the CTA is on the books. By statute, in order for a court to uphold the new rule, the rule must demonstrate that eliminating anonymous shell corporations: “(1) would not serve the public interest”; and “(2) would not be highly useful in national security, intelligence, and law enforcement agency efforts to detect, prevent, or prosecute money laundering, the financing of terrorism, proliferation finance, serious tax fraud, or other crimes.” The Treasury makes little attempt to achieve this impossible showing. Given this shaky legal foundation, the new rule is likely to end up in court.

Building a beneficial ownership system with less burden

If Secretary Bessent’s true objective is to ease the burden on small businesses and banks, a better way forward is to determine what went wrong in the first round of implementation and fix it, eliminating uncertainty, confusion, and unnecessary compliance burdens. Secretary Bessent has spoken fondly about how the new technology expertise at the Treasury can bring our “Blockbuster-style government in a Netflix world.” He should deploy it to ease the pain points of the first round of implementation.

For example, technology can significantly ease the compliance burden on companies who are required to report their beneficial ownership information. Reporting companies are the smallest of small businesses—by statute, only companies with fewer than 20 employees are required to report. These firms usually only interact with the federal government to file taxes. With time and resources, Treasury could collaborate with the Internal Revenue Service to allow small businesses to opt in to submitting their beneficial ownership information alongside their tax information.

Secretary Bessent could also rationalize the beneficial ownership and customer due diligence (CDD) systems, which already require financial institutions to collect beneficial ownership information from their customers. Initial implementation froze the status quo for banks and built an entirely separate—and barebones—beneficial ownership database at Treasury. There must be a better way where financial institutions and Treasury join forces to collect, maintain, validate, and deploy data jointly. They should share the costs so that the American people can enjoy the formidable national security and public safety benefits of securing our financial system against illicit actors. This could functionally reduce compliance burdens of banks without reducing the quality of information available to law enforcement.

As long as the CTA remains law, Treasury is obliged to accurately implement and enforce it. Perhaps more importantly as long as anonymous shell corporations endanger our national security and safety, the US government should mitigate the grave threat they present. Following the money remains one of the most potent tools we possess to solve crimes and protect our national security. We must not disarm.

Julie Brinn Siegel is a contributor at the Atlantic Council, former Deputy Chief of Staff at the US Department of the Treasury, and former Deputy Federal Chief Operating Officer.

Issue Brief Apr 28, 2025

Modernizing the tools of economic statecraft to meet the challenges of today

By Lesley Chavkin, Eitan Danon, Kimberly Donovan, Andrew Gallucci, and Caroline Hill

As the current administration revisits the functions and mechanics of government, near-term steps can be taken, under existing statutory authorities, to modernize how the United States uses its economic strength to combat national security threats and promote American interests.

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By Samantha Sultoon

Should the Trump administration choose to use the FTO designation on major Mexican cartels, it may have impacts that have not been fully evaluated.

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Did Trump effectively nationalize US Steel with his ‘golden share’?

Sarah Bauerle Danzman — Mon, 16 Jun 2025 21:42:28 +0000

Steelmaking takes iron and carbon, and now some gold, too. On Friday, US President Donald Trump approved the long-in-limbo merger of US Steel with Japanese company Nippon Steel, which had been held up for months by the US government on national security concerns. A breakthrough only came after the companies agreed to give the US government veto power over certain aspects of corporate governance, US production, and trade. “We have a golden share, which I control,” Trump explained on Thursday, adding that it would give him “total control” over relevant US Steel business decisions.

Over the weekend, new details emerged about how the share is intended to work, provoking some comparisons with nationalization schemes in other countries. Below, Sarah Bauerle Danzman, a resident senior fellow with the GeoEconomics Center’s Economic Statecraft Initiative, delves into where exactly this deal lands between free enterprise and state control—and what it might mean for other US businesses.

A golden share typically refers to a special class of ownership stake in a publicly traded company reserved for a government. The golden share confers substantial shareholder rights that would otherwise be atypical given the size of the ownership position.

For instance, the Brazilian government has a golden share in Embraer, its national aviation champion, that amounts to an approximately 5 percent equity stake in the previously state-owned company. The arrangement also provides the government substantial governance rights, such as the ability to direct the company’s strategic director or veto a takeover or joint-venture arrangement involving the company.

The United Kingdom has used golden-share arrangements extensively to retain influence over strategically important companies, such as BAE (a major defense contractor) and NATS (its air traffic control provider) after they were privatized.

Reporting suggests that the US government’s golden share is in US Steel rather than in Nippon Steel. This distinction is important because it means that the US government’s formal influence over Nippon will only relate to its US business (called US Steel) and not to its business operations in other locations. By tying the golden share to US Steel, the US government has also ensured that it will be able to fully control any future sale of the company.

2. Does this deal amount to the nationalization of US Steel?

The golden share is “noneconomic,” meaning that it did not require the US government to make an investment in the company, and it also does not provide the United States with an equity stake in the company. This means that the US government will not be earning an economic return on its share, nor would it be eligible to accrue dividends. Additionally, the United States is not going to be involved in the day-to-day operations of US Steel. Because of this, and because the United States is not taking equity stakes away from owners, this is not a nationalization.

However, the golden share gives the US government an extraordinary amount of control over the company. The company’s governance documents will outline the areas of strategic and operational decision making over which the US president will now have veto authority. US Steel may not be state-owned, but it is certainly now controlled by the US government.

3. How will it be enforced?

The golden share will require presidential approval for a range of strategic and operational decisions, including capital allocation and investment decisions. Plainly, Nippon has agreed to an arrangement in which it would need to seek presidential approval if market conditions changed, and it decided it could not fulfill its commitment to invest another fourteen billion dollars into US operations over the next several years.

This raises several questions: How will these requirements be enforced? What if Nippon reduced investments even without presidential approval? How would the US government compel Nippon to increase investments to its promised amount? The enforcement options of the US government are relatively weak here, especially if Nippon finds itself in a fragile economic position. A golden share gives the government substantial strategic control on the cheap, but the US government may find that some elements of its authority would be hard to enforce in a soft economy.

4. What wider implications could this have for US businesses?

A golden share reduces the economic value of the company for other investors, even if the government only takes a “noneconomic” position. That is because the government is reducing the ability of equity shareholders to control the strategic and operational decision making of the company, which could generate costs and inefficiencies for the corporation. If golden shares were ubiquitous, then financing costs would increase and the attractiveness of the United States and US businesses as investment opportunities would decline.

5. How can the US government mitigate these concerns?

The Committee on Foreign Investment in the United States, known as CFIUS, and the president should release more guidance as quickly as possible to make clear the circumstances under which CFIUS would seek to mitigate national security risks through a golden-share arrangement. These should be very rare cases, and the government should make clear its commitment to restraint. Otherwise, what is to stop the US government from always taking a golden share in any cross-border merger of interest?

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Ullman in the Hill on how the simultaneity of crises threaten US national security

bgalicia — Mon, 16 Jun 2025 20:05:02 +0000

original Source

On June 16, Atlantic Council Senior Advisor Harlan Ullman published an op-ed in the Hill warning of a potential “crisis point” for the US government if domestic immigration protests intensify while tensions escalate in the Middle East. He argues that convergence of crises at home and abroad could overwhelm policymakers and stain the US government’s ability to respond effectively.

International Advisory Board member

Harlan Ullman

Senior Advisor

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How the US can reduce the risk of wider war in the Middle East

Caroline Zier — Mon, 16 Jun 2025 19:45:01 +0000

Israel has again demonstrated an uncanny ability to rewrite the regional playbook with a multi-pronged, multi-day attack on Iran’s nuclear program, air defenses, and military leadership. The first phase of attacks in particular—strikes at the heart of Iran’s nuclear and missile programs, the decapitation of the Islamic Revolutionary Guard Corps’ (IRGC) Quds Force leadership, and nuclear scientists—caused many to marvel at the boldness of David against Goliath.

As the Trump administration navigates this chapter, the key will be to contain and defuse the situation as the regional players sort through the changed landscape. De-escalation in the near term is not a foregone conclusion. It will require heavy lifting from the US military, which remains indispensable in times of crisis.

Details of the battle damage are still emerging, and Israel, Iran, and the United States do not yet fully know what these attacks mean for Iran’s defensive and counter-strike capabilities. Israeli Prime Minister Benjamin Netanyahu’s objectives may not be static: As he sees additional opportunities to set back Iran’s nuclear and missile programs, his campaign may expand and go on far longer, as was the case in the operations against Hamas and Hezbollah. Iran may be on its back foot, but it will likely be compelled to respond with its remaining capabilities, as it began to do over the weekend with its waves of missile strikes across Israel.

Usually, the United States has greater leverage and sway with its allies and partners than its adversaries, born from the military, economic, and diplomatic threads that each ally can pull to compel the other toward an outcome. In this friendly tug-of-war over national interests, the heavyweight United States pulls toward its preferred outcomes. However, in the unique case of Israel, the smaller partner may outpace US efforts to de-escalate if additional deliberate steps are not taken.

Washington does have some leverage over a weakened Tehran. Iran does not want an all-out war with the United States. For this reason, Iran has historically relied on its proxy network of Hezbollah, Hamas, the Houthis, and Shia militia groups for indirect and small-scale attacks on US forces and interests. This helps explain why Israel wants to link arms with the United States now, signaling to Iran that an attack on Israel is an attack on the United States. Iran’s Supreme Leader Ayatollah Ali Khamenei and Iranian officials have played along, stating that the United States is complicit. That may be directed toward Iranian domestic audiences—and a warning for the United States to rein in Israel.

Regardless of Iranian intent, the situation requires the US military to be in position to defend and respond to Iranian aggression. How then should the White House manage this spiral of escalation to avoid a wider regional war? Five initial steps are needed.

1. Set the theater to defend US forces and Israel

The United States should continue to set the theater for Iranian responses—and it should telegraph how it is doing so. Ballistic missile defense-capable destroyers in the Eastern Mediterranean, more interceptors for air defense systems across the region, and additional air power in the Gulf and the Indian Ocean island Diego Garcia will position the US military for defending US forces and Israel, as well as providing options to strike Iran if necessary. Forces that have been deployed for extended periods should be backfilled with ready forces, and additional units can be placed on prepare-to-deploy orders. The force movements and heightened alert status, combined with clear messaging, can communicate to Iran that the price of attacking the United States is extraordinarily high, particularly given Iran’s significantly degraded proxy network and air defenses. Internally, there should be a conditions-based approach to redeploying the forces once the situation settles down.

The United States must also continue to help defend Israel itself, which is the clearest path to stabilizing the region. Surging additional US capabilities into the theater may embolden Israel to launch additional strikes on Iran, but the greater risk is not being in position to defend against attacks on US forces and blunt Iran’s subsequent attacks on Israel.

2. Move from authorized departures to ordered departures

The White House should accelerate what it put in motion through voluntary departures from State Department facilities last week by moving to ordered departures at those same locations. Temporarily reducing the number of nonemergency personnel and dependents can reduce the demands on US forces to defend and evacuate those locations later. It also signals to the region that the price of escalation is a diminished US presence, which many US partners do not want, and it provides an incentive for these partners to work toward de-escalation.

3. Refresh the plans for noncombatant evacuations (NEOs) from Israel and Jordan

The NEO plans have been refreshed repeatedly since October 7, 2023, though the in-extremis conditions that would precipitate large-scale evacuations have never been met. These worst-case scenario plans should be dusted off again, and US government officials should discuss internally what the trip wires would be to execute the NEOs, such as commercial airports losing functionality. The United States should also discuss NEO plans with allies and partners, who often expect assistance with their evacuations but too often do not communicate their assumptions about US assistance until late in the game.

4. Prepare to strike Iran if Iran attacks the United States

The United States will need to strike forcefully if Iran does attack US forces or bases. To that end, the US military should refresh and expand response options that would exploit Iran’s newest vulnerabilities, such as military sites that are now without adequate air defenses or exposed headquarters that serve as nerve centers for IRGC operations. The Trump administration can choose how and when it responds, and some of the steps taken to set the theater for defense will help facilitate going on the offensive.

5. Pace the crises across time and space

Any administration can only juggle a handful of crises at any given time. The Trump administration should consider which departments have comparative advantages in navigating which crises, given the finite bandwidth of senior leaders and high-demand US forces. The US military is uniquely and singularly manned, trained, and equipped to reduce the chance of a larger regional war that could have devastating human and economic costs for the United States—and the entire region. The White House should therefore prioritize de-escalating quickly in order to focus on other theaters and priorities.

With steady, cool-headed leadership at this heated moment, the United States can reduce the possibility of a wider regional war that could spin out of control.

Caroline Zier is a nonresident senior fellow in the GeoStrategy Initiative within the Atlantic Council’s Scowcroft Center for Strategy and Security. She has over fifteen years of experience in national security and defense at the Department of Defense, most recently serving as the deputy chief of staff to former Secretary of Defense Lloyd Austin.

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Kroenig quoted in Time on Israel’s strikes on Iran

ssherry — Mon, 16 Jun 2025 15:14:31 +0000

ORIGINAL SOURCE

On June 13, Matthew Kroenig, Atlantic Council vice president and Scowcroft Center senior director, was quoted in Time on the motivations behind the airstrikes Israel directed at Iranian nuclear sites, as well as its military leaders and scientists.

This really was done as a last resort. They were out of time. The best estimates were that Iran’s dash time to one bomb’s worth of weapons grade material was down to about a week.

Matthew Kroenig

Staff

Matthew Kroenig

Scowcroft Center for Strategy and Security

China Defense Policy

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Lipsky cited in Politico on expectations for the upcoming G7 summit

bpiasecki — Mon, 16 Jun 2025 13:58:36 +0000

Read the full article here.

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US global leadership in the age of electricity

Robert F. Ichord, Jr. — Mon, 16 Jun 2025 12:00:00 +0000

The international system is experiencing a period of significant realignment, shaped by shifting geopolitical relationships, economic tensions, and evolving security challenges. Within the broader context of global uncertainty, President Donald Trump’s initial foreign policy actions during his second term, for example on trade, support for Ukraine, and foreign assistance, have contributed to questions among allies about the future trajectory of US global leadership and engagement.

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This shake-up has important implications for global energy security, which has come into sharp focus since the full-scale Russian invasion of Ukraine. Considering the Trump administration’s renewed focus on an “energy dominance” agenda, including an emphasis on furthering US oil and gas production and exports, one should not overlook the equally important geopolitical aspects of the electricity sector. Increasingly relevant to global affairs, the electricity sector has experienced rapid global demand growth of 4 percent per year—often placing new energy systems at the heart of geopolitics.

As the world enters an “age of electricity,” decisions made during this second Trump administration will have far-reaching consequences impacting the future of international conflict, competition, and cooperation around the world.

Security, growth, and innovation

A dominant geopolitical feature impacting the electricity landscape is Russia’s military aggression against Ukraine, which has sharpened the confrontation between the West and a coalition of authoritarian states that have in various ways supported Russia’s war effort, including China, Iran, and North Korea. The conflict has illustrated and heightened the priority of electricity security, as the executive director of the International Energy Agency (IEA) recently emphasized to European Union (EU) leaders. The EU, with major help from US liquefied natural gas (LNG) exports, reduced its dependence on Russian gas for electricity, ramped up renewable energy to 47 percent of total generation, began to replace Russian nuclear fuels with Western sources, and disconnected the Baltic states from the Russian power grid.

Meanwhile, outside of the EU, the rest of the world saw record levels of electricity demand growth in 2024, especially in Asia, with China accounting for about half of the increase. Although the International Monetary Fund (IMF) forecasts slower world economic growth given the impact of uncertainty given ongoing trade pressure from Trump’s tariff strategy, the IEA still projects substantial electricity growth over the next three years.

Partly fueling this expected rise in demand is the explosion of digital information, along with the artificial intelligence (AI) systems to analyze this data. This trend is revolutionizing the electricity sector and creating growing demands for reliable, flexible, secure, and resilient electricity supplies for data centers and in other key civilian and military spheres. More complex and interconnected national and regional electricity grids are growing in almost all regions of the world. But these large digital systems are increasingly vulnerable to cyberattacks, especially from malign actors such as China and its Volt, Flax, and Salt Typhoon threat teams. Electricity security is therefore a vital component to national security in this new age.

This growing demand has set off a race to innovate and deploy new energy technologies. One critical strategic area is the development of advanced nuclear power systems, with designs under development to meet needs for electricity, industrial heat, desalination, military systems, district heating, data centers, hydrogen production, and shipping. There has been a resurgence of interest in nuclear power around the world—at COP28, leading countries pledged a tripling of nuclear power by 2050 from 2020 levels.

Competition for electricity markets

Against this complex backdrop, the Trump administration’s expanded use of tariffs has added new dimensions to global economic competition that is affecting relationships both allies and opponents alike. These measures have also introduced added strain on already fragile electricity supply chains, including those of power transformers, switchgear, and meters. This added pressure for the West and Western-aligned countries gives China, the world’s largest exporter of electric power equipment and electronics, an opportunity to expand further its global market presence, especially in emerging markets and developing economies (EMDEs). EMDEs generate about two thirds of the world’s power and are projected to account for 85 percent of global electricity growth over the next three years.

Moreover, over the past decade as the costs of solar and wind have dropped, EMDEs have pursued a transition to renewable energy. Although renewables supplied only 26 percent of EMDE generation in 2023, they now provide over 75 percent of new EMDE generation capacity outside of China. China’s dominance in renewables gives it significant market—and geopolitical—influence. Global installed solar photovoltaic (PV) capacity increased by 30 percent in 2024, and Chinese companies are poised to continue flooding the market with solar PV systems and components.

EMDE natural gas demand for power, which can complement intermittent renewables and improve grid reliability, and for industry is also growing. This creates space in EMDE electricity markets for a growing US role. As the world’s largest LNG exporter, the United States is looking to increase export capacity and access markets in India, Southeast Asia, and other EMDEs. Some countries may commit to increasing US LNG imports in their trade negotiations with the Trump administration to address trade imbalances and reduce tariffs. In 2024, US volumes went to 20 EMDEs and represented about 30 percent of total US LNG exports.

In the past five or so years, the United States has made significant progress in the development of advanced nuclear power systems, some of which are now beginning construction. This has placed the United States in a strong position to compete for new nuclear contracts in EMDEs, particularly to build small and micro reactors. These systems offer the prospect of lower total capital costs, faster construction times, and more appropriate sizes for the smaller grids in many of these countries than large 1000-MW reactors. Russia has dominated the international new-build market with Rosatom constructing large VVER 1000/1200 reactors in India, Bangladesh, Egypt, Turkey, Iran, and China and beginning a small modular reactor (SMR) project in Uzbekistan. China has the largest number of reactors under construction (30 domestically) and is working to expand exports of its Hualong I large reactor beyond the completed units in Pakistan as well as developing several types of SMR systems. South Korean, European, and Canadian companies are also eyeing foreign markets and nuclear supply chains for new reactors are linking companies from these regions.

Recognizing the critical role nuclear can play in meeting US electricity demand growth, the Trump administration, with bipartisan cooperation, is supporting advanced reactor development and demonstration as well as domestic uranium mining, enrichment, and fuel production efforts. Trump recently signed an executive order targeting an increase in US nuclear capacity from 100 to 400 gigawatts by 2050. Domestic growth in the sector would enable the administration to export both large AP-1000s and SMRs, with at least a dozen projects and cooperation in the works not only in advanced economies, like the United Kingdom, Canada, Poland, Romania, Bulgaria, but also with EMDEs like Ukraine, India, Ghana, Kenya, the Philippines, Indonesia, and Vietnam. Interest in SMRs is at play in most of these countries and US companies could achieve of a sizeable share of the IEA’s projected SMR global market of 120 GW by 2050.

National security and global engagement

Given its broad-based excellence in the electricity sector and emerging digital and AI technologies, the United States is well positioned to engage with allies on the adoption of technologies that advance grid reliability, flexibility, and resilience. US involvement in these growing overseas markets, valued at over $2 trillion annually, is vital to its commercial, technological, and national security interests and to restoring trust and confidence in the United States as a reliable partner.

In this effort, the United States should leverage its strengths as the largest producer of both natural gas and nuclear power to help other countries build out firm, baseload, and peaking power, helping reduce dependence on Chinese solar and battery systems in an age of electricity. But US investment both at home and abroad in renewables, energy efficiency, carbon capture, hydrogen, and other technologies is also critical to US influence in the world.

As the Trump administration reconfigures US foreign policy, it is important to forge a new partnership with industry to enhance US energy leadership and coordinate deployment of key diplomatic and economic tools—including technology and commercial agreements, policy and regulatory assistance, capital allocation, and trade and investment promotion—in a package that can be tailored to the energy needs of individual countries. In addition to bilateral efforts, successful US global leadership will require close cooperation with allies in supporting sound multilateral financial and technology cooperation mechanisms, Western-oriented regional electricity markets, and secure supply chains.

The age of electricity is coming. Will the United States step up and recognize that being a global leader in this sector is critical to its national security?

Robert F. Ichord Jr. is a nonresident senior fellow at the Atlantic Council Global Energy Center.

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Why tariffs on AI hardware could undermine US competitiveness

Joseph Webster, Jessie Yin — Sun, 15 Jun 2025 11:00:00 +0000

How can the United States maximize its international competitiveness in the development of artificial intelligence (AI)? To begin with, it can take additional steps to strengthen domestic chip fabrication capacity and friend-shore supply chains. Washington could also tighten export controls on some semiconductors and other technologies. But imposing new tariffs on essential dual-use, militarily relevant AI components from friendly partners risks having the opposite effect.

The Trump administration has launched an investigation under Section 232 of the Trade Expansion Act into the impact of semiconductor imports on national security, a step toward imposing tariffs. But if it moves ahead with tariffs on all semiconductor imports, the United States would raise hardware costs for US AI firms, punish important partners such as Mexico and Taiwan, and lower prices for Chinese competitors. Tariffs targeted at China have their uses in the US-China tech competition, but they shouldn’t be applied haphazardly to US allies and partners.

Semiconductors and dual-use imports

Today, the United States and like-minded allies and partners are competing with China in AI, or what AI entrepreneur Dario Amodei and former US Deputy National Security Advisor Matt Pottinger have described as possibly “the most powerful and strategic technology in history.” AI-related imports enable US AI companies to access cost-effective inputs and continue to outpace Chinese competitors. Since AI is an emergent technology with such large potential utility and consequences, it would be a mistake to allow China to define the rules of engagement.

Components are a key cost driver for training AI models. Key AI-related component imports include processing units, such as graphics processing units (GPUs) and central processing units (CPUs), and printed circuit assemblies (PCAs), all of which could be targeted by Section 232 tariffs. GPUS are one of the most popular computing technologies to run AI models due to their ability to train massive models and speed up inference at scale; they’re also used on board autonomous vehicles. Similarly, PCAs are critical because they house and interconnect critical components like GPUs, CPUs, memory, and networking chips inside servers and data center infrastructure. AI is a critical source of demand, although chips and printed circuits are also used by a variety of non-AI applications, including cars, computers, washing machines, routers, etc. Imports of processing units and PCAs have surged in recent months due to both AI-driven demand and companies seeking to get out ahead of tariffs.

PCA unit imports have more than quintupled since 2021, with no productivity changes to explain the jump—pointing to greater hardware needs. Consequently, if PCA prices rise due to tariffs, the US AI buildout could slow.

Two economies are prominent partners of dual-use technology, with both military and civilian applications, for the US AI sector. The first, Taiwan, not only ships leading-edge GPUs to the United States, but the Taiwan Semiconductor Manufacturing Company has committed to investing a cumulative $165 billion in the US tech sector. The second, Mexico, is the largest single aggregate supplier to the United States of GPUs and CPUs, as well as PCAs, by value. Tariffs on semiconductor inputs would punish US partners while limiting the access of US firms to the global market.

Indeed, hardware is a significant cost driver for US AI. Researchers for Epoch AI and Stanford University have found that AI accelerator chips and other server component costs comprise about half of all costs for training and experiments of machine language models. Moreover, building AI models is highly capital intensive: hyperscalers committed $200 billion in twelve-month trailing capital expenditures in 2024; Morgan Stanley projects hyperscaler capital expenditures could reach as high as $300 billion in 2025. Significantly, since hardware acquisition costs are “one to two orders of magnitude higher than amortized costs,” higher prices via tariffs could deter new AI entrants, slow adoption, and stymie dynamism.

Unintended tariff consequences on the Chinese tech sector

While heavy tariffs would harm the US tech sector, they are unlikely to impede China in the AI race. In fact, tariffs could indirectly encourage tech transfer to China by pushing other countries, especially in Southeast Asia, to work more closely with Beijing. In mid-April, after US President Donald Trump’s announcement of global “reciprocal” tariffs and the subsequent ninety-day pause, Chinese President Xi Jinping visited Vietnam, Malaysia, and Cambodia, saying he would “safeguard the multilateral trading system.” China left these meetings with several memorandums of understanding on investment and trade, including a call to increase AI cooperation with Malaysia.

The mention of AI cooperation was striking and potentially significant. Export controls of US-designed semiconductors to China have been leaky: There is some evidence of GPU transshipment to China through Southeast Asia, notably Malaysia. The Wall Street Journal also reports that Chinese engineers are using Malaysian data centers to train AI models. Meanwhile, the export of GPUs and other computer hardware containing semiconductors from Taiwan to Malaysia reached $307 million in April (more than half the value of the same exports for all of 2024). Remarkably, Taiwan’s GPU and CPU exports to countries in the Association of Southeast Asian Nations (ASEAN) hit a record high in April—surpassing exports to the United States by value for the first time on record.

The increase in Taiwan’s semiconductor exports to ASEAN does not, by itself, demonstrate transshipment to China: Malaysia is becoming an increasingly popular spot for international data centers because of the country’s cheap real estate and its proximity to Singapore. It’s possible that the GPUs and CPUs were consumed in the domestic market. Still, it’s worth noting that recent data center entrants in Malaysia include Chinese firms. If US tariffs make countries like Malaysia more willing to work with China, that could increase the risk of US export controls being violated.

If not tariffs, then what?

Given that non-China tariffs appear likely to harm the US tech sector and could strengthen Chinese tech firms via technology leakage, US policymakers should consider alternative tools.

The United States has been able to slow the Chinese tech sector by imposing a series of bipartisan export controls that limit Beijing’s access to high-end semiconductors. Last month, the Bureau of Industry and Security rescinded the AI Diffusion Rule, which strengthened chip-related exports. Some criticize the framework for casting too wide of a net, while others hold that export controls are a crucial economic statecraft tool for protecting US national security interests and preventing technological acquisition by strategic rivals.

Export controls are vital and necessary, but they are not a silver bullet. To outcompete China, the United States must strengthen its own capabilities, including by incentivizing manufacturing and know-how in semiconductors and other strategic technologies. This is precisely the rationale for the bipartisan CHIPS and Science Act, which was signed into law in August 2022. Tariffs alone do not provide enough support to incentivize foreign investment and domestic capacity in chip technologies. While Congress and the White House should make adjustments to the CHIPS and Science Act where appropriate, the program’s overall aims should be maintained.

No one should be unclear on the stakes, amid the global race toward artificial general intelligence (AGI)—or artificial intelligence equal to or exceeding human capabilities. Whether the race is a sprint, a marathon, or something else entirely, the technology’s productivity gains will likely prove sizable. AGI also holds obvious potential risks, but it is in the United States’ best interest to be at the forefront of setting standards and developing the regulatory environment. Accordingly, it is important for the United States to maximize its chances of obtaining this technology and integrating it before China does by securing vital, high-end semiconductors ahead of its rival.

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.

Jessie Yin is an assistant director at the Atlantic Council’s GeoEconomics Center. This article reflects their own personal opinions.

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Kroenig quoted in the Wall Street Journal on Trump’s potential framing of Israel’s strikes on Iran

ssherry — Sat, 14 Jun 2025 20:15:00 +0000

ORIGINAL SOURCE

On June 13, Matthew Kroenig, Atlantic Council vice president and Scowcroft Center senior director, was quoted in the Wall Street Journal on how President Trump may choose to present Israel’s strikes on Iranian military and nuclear installations, as well as its military leadership, in light of his “peacemaker” pledge.

I think he can go to the traditional Reaganites and say, “Peace through strength, we’re not letting evil regimes build nuclear weapons”…But he can also go to the MAGA folks and say, “No Americans were killed, we didn’t do this, and allies are stepping up and taking care of security threats for us.”

Matthew Kroenig

Staff

Matthew Kroenig

Scowcroft Center for Strategy and Security

China Defense Policy

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Trump promised peace through strength. When will he use US strength to bring peace to Ukraine?

John E. Herbst — Sat, 14 Jun 2025 01:36:47 +0000

This is part of a series of regular assessments of the efforts, spearheaded by the Trump administration, to achieve a negotiated end to Russia’s war on Ukraine. Read last week’s edition here.

It’s not always the weeks with the most activity that reveal the most. After several consecutive weeks of news-making developments in Russia’s war in Ukraine, this past week seemed quieter. Yet upon closer inspection, it did feature some public musings by US President Donald Trump that sadly suggest a certain unwillingness to confront a painful reality. It also saw the administration decide to redirect a shipment of thousands of counter-drone missiles that were originally intended for Ukraine. Taken together, these rhetorical and policy choices only encourage Russian President Vladimir Putin to continue his war of conquest and make it harder for Trump to reach his stated goal of establishing a durable peace in Ukraine.

The painful reality is that the Kremlin does not want peace in Ukraine. It wants, as former Russian President Dmitri Medvedev said publicly, victory. The proof, of course, is that Russia has rejected multiple Trump peace proposals that Ukraine has accepted. Confronted by this, as early as April 24, Trump has acknowledged that Putin might be stalling and said then, and again on April 27, that he would know in “two weeks” if that were so and, if so, he would put some form of pressure on Russia.

Trump has been talking about a two-week deadline for nearly two months and has said on several occasions over this period that he might have to impose sanctions. Yet he continues to dither. Why does he keep bringing up sanctions if he is not acting on his threats to impose them? The obvious answer is that he is under regular criticism—including from Republicans in Congress—for not living up to his stated promise to achieve a stable peace by putting pressure on the side obstructing progress. Members of both parties in the Senate for nearly three months have been working on a major sanctions bill against Russia. It now has eighty-four cosponsors, which means that a large majority of Republican senators are on board. House Speaker Mike Johnson is also an advocate. In the past two weeks, Trump has asked the Republican senators both to weaken the bill’s provisions and to delay its introduction. They are still heeding his request, but impatience is growing, as evidenced by a June 12 statement from US Senator Lindsay Graham (R-SC), the bill’s original sponsor. Trump’s posturing—floating the idea of sanctions even while he refrains from imposing them—helps the White House manage this pressure, but this can continue indefinitely.

Trump’s public musings on Russia also betray his unwillingness to take the strong steps that might persuade Putin to seriously negotiate. Last week, Trump characterized Russia and Ukraine as two brawling boys, rather than as aggressor and victim. This week, he said that he thought it strange that many American observers have a positive view of Japan and Germany, whom the United States fought in World War II, and a negative view of Russia, a US ally in that war—with no reference to Russia’s savage aggression in Ukraine or to the fact that Moscow considers the United States its principal adversary.

As the latest two-week deadline passed this week with the Kremlin still firmly opposed to US peace proposals, Trump commented that Putin does not care about the human costs of war, but added that he was frustrated by both Russia and Ukraine.

While the president postures inconsistently, his administration is making decisions that disadvantage Ukraine. A case in point is the Defense Department’s decision to divert US counter-drone weapons from Ukraine to the Middle East. This decision was likely not taken with the goal of weakening Ukraine, but that was certainly the result. Such a decision can only be taken because the administration is not operating on the common-sense understanding that if it wants a durable peace in Ukraine, it must make it much harder for Putin to seize more of the country.

The Trump administration’s position in the preparation for the Group of Seven (G7) Summit in the coming days also highlights its peculiar interest in accommodating the Kremlin. The G7’s members have decided not to release a joint communiqué, unlike last year, in part, I suspect, because previous G7 statements have included sharp criticism of Kremlin aggression. The White House, meanwhile, has avoided language critical of the Kremlin since February in the G7, NATO, and the United Nations.

Trump’s concessions to Russia on this language, his efforts to obscure the perception that Russia alone is blocking his peace initiative, and the decision to take weapons away from Ukraine have not made the Kremlin more reasonable. These measures only encourage Putin to expect that the United States will detach itself from Ukraine and that a Russian victory awaits. The Biden administration’s weakness in Afghanistan invited Putin’s full-scale invasion of Ukraine. Trump promised peace through strength. When will he start to deliver?

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

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The strategic reserve and the Israel-Iran conflict

Joseph Webster, Landon Derentz — Fri, 13 Jun 2025 21:29:31 +0000

Note: This is an update to a New Atlanticist article from October 2024 on the US Strategic Petroleum Reserve. Given the policy urgency surrounding Israel’s strikes on Iran, the authors have updated the previously-published work with the latest data and developments.

The US Strategic Petroleum Reserve (SPR) of crude oil is well-stocked, expanding policymakers’ optionality in the crisis in the Middle East.

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After accounting for fifty-two-week averages of imports and exports, as well as current inventory levels, the SPR’s net import cover is historically high, holding 23.8 weeks’ worth compared to the 17.1-week average since 2009. Over 107 million barrels from the SPR could be released without falling below post-2009 historical levels of net import cover. Fatih Birol, Executive Director of the International Energy Agency (IEA), issued a statement noting there are over 1.2 billion barrels of emergency oil stocks in the IEA oil security system.

The United States’ SPR has shifted since the early 2010s, when it held nearly 730 million barrels, covering roughly 11.5 weeks of crude net import demand, at fifty-two-week averages. With rising US oil production and exports, the SPR’s net import cover gradually increased over the early and mid-2010s.

As the United States rapidly became a major crude oil exporter, inventory management strategy shifted. Congressionally mandated sales from the SPR occurred from 2017 through the first days of the COVID-19 pandemic, as the barrels in inventory declined from around 695 million barrels at the beginning of 2017 to around 635 million barrels in April 2020. Inventories were further reduced between 2022 and 2023, as the United States and its allies worked to combat Russia’s full-scale invasion in Ukraine and its effects on energy markets. Since mid-2023, the United States began slowly restocking the SPR and inventories currently stand at over 402 million barrels.

While SPR inventories are near their lowest absolute levels in over three decades, the stockpile is very well-placed to meet its mission, which is to “reduce the impact of disruptions in supplies of petroleum products and to carry out obligations of the United States under the international energy program.” That’s because while the SPR’s crude oil inventory levels have fallen, US imports needs have receded, even as US exports have surged. Accordingly, US net crude oil imports stand at just over two million barrels per day, down sharply from ten million barrels per day in 2007, or eight million barrels per day in 2017.

The rise in US crude exports and the drop in net imports have bolstered US oil security. However, challenges remain. US refineries are optimized for specific crude grades, many of which still need to be imported. Shifting light, sweet crude exports to domestic use could, for example, disrupt refineries optimized for heavier, more sulfuric crude grades.

Despite these limitations, SPR inventories are at elevated levels, allowing the United States to cover about 23.8 weeks of demand. Net crude oil import cover is sharply higher than before the shale boom, or even immediately before the COVID-19 pandemic.

Finally, US crude oil production and consumption are projected to remain stable in 2025 and 2026. Technological improvements and—critically—the removal of energy infrastructure bottlenecks are supporting domestic crude production. The recently inaugurated Matterhorn Express natural gas pipeline, which runs west-to-east across Texas, has removed a key takeaway constraint from the Permian basin, improving US oil production fundamentals and sending domestic output higher. The EIA’s latest forecast holds crude oil net imports will remain flat or decline modestly, enabling the United States to draw down inventories even further while still maintaining net import coverage.

The United States’ strategic petroleum reserves and substantial domestic oil production leave it well-positioned to weather a crisis in the Middle East, barring major, prolonged outages to Gulf oil production.

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.

Landon Derentz is senior director and Morningstar Chair for Global Energy Security at the Atlantic Council’s Global Energy Center. He previously served as director for energy at the White House National Security Council and director for Middle Eastern and African affairs at the US Department of Energy.

This article reflects their own personal opinions.

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Zier in Military Times analyzes US military deployment at southern border

bgalicia — Fri, 13 Jun 2025 11:06:01 +0000

On May 28, Caroline Zier, nonresident senior fellow in the GeoStrategy Initiative, was published in the Military Times examining the Trump administration’s policy of using miliary personnel at the US southern border. Zier argues that the military’s “unprecedented” role at the border diverts time and resources from national security operations that “only the military can perform” like deterring China in the Indo-Pacific.

Previous administrations have […] supplemented Department of Homeland Security missions with [Department of Defense] support. But the US military’s role in border security has historically been extremely limited, for important reasons.

Caroline Zier

Fellow

Caroline Zier

GeoStrategy Initiative Scowcroft Center for Strategy and Security

Defense Policy Security & Defense

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Why the World Bank just gave nuclear power a surprising boost

jcookson — Thu, 12 Jun 2025 20:06:18 +0000

GET UP TO SPEED

It’s causing a big reaction. On Wednesday, World Bank President Ajay Banga announced that the development bank’s board has lifted its longstanding ban on funding nuclear energy projects. The decision could surge funding for the emissions-free power plants in developing countries, and it comes amid a broader shift in attitudes toward atomic energy around the world. Below, the Atlantic Council’s top nuclear energy policy experts get to the core of the matter.

TODAY’S EXPERT REACTION BROUGHT TO YOU BY

Jennifer Gordon: Director of the Nuclear Energy Policy Initiative and the Daniel B. Poneman chair for nuclear energy policy at the Atlantic Council’s Global Energy Center.
Lauren Hughes: Deputy director of the Nuclear Energy Policy Initiative.

The decision

“This is not the bank’s first foray into nuclear power as a means of promoting sustainable economic growth and shared prosperity,” says Lauren. In 1959, the bank issued a forty-million-dollar loan to help finance construction of Italy’s first nuclear reactor.
The 2011 Fukushima Daiichi accident contributed to the World Bank enacting a de facto ban on funding for nuclear power, Lauren explains. This ban was then reiterated in 2013, when the bank said that “safety of nuclear facilities and non-proliferation are not in the [World Bank Group’s] areas of expertise.”
This week’s reversal “follows a number of other similar decisions on nuclear energy,” Jennifer tells us, including the Declaration to Triple Nuclear Energy that more than twenty countries signed in December 2023, as well as recent decisions by the European Investment Bank, Germany, and Canada to boost nuclear power. Taken together, these decisions “indicate that nuclear is coming back into favor and being recognized for its ability to provide reliable baseload power.”

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The impact

“Many emerging-market countries are interested in developing nuclear energy projects that could be prohibitively difficult to realize without financing,” Lauren explains, noting that upfront costs to build a power plant can run into the billions of dollars
Lauren calls the bank’s decision a “pragmatic approach toward nuclear energy,” which recognizes “that the demand for reliable, affordable, clean energy will only increase in the coming decades” as populations grow in Sub-Saharan Africa, India, and Southeast Asia.

The frontier

For the United States, the World Bank’s move “may indicate an eagerness to engage with the Trump administration on policy issues that the administration has indicated are at the top of its agenda,” Jennifer says. In late May, for example, the White House unveiled new executive orders on deploying advanced reactor technologies.
Lauren adds that World Bank financing could help the United States “be more competitive against state-backed financing offers, especially from Russia and China.” By extension, the World Bank could reinforce the efforts of agencies such as the Export-Import Bank of the United States, the US International Development Finance Corporation, and the US Trade and Development Agency that are involved in nuclear projects in developing countries, she notes.
For Jennifer, the bank overturning its ban should be “viewed as the next frontier in unlocking funding to support new nuclear builds and leveling the playing field with Russia and China.” However, she adds, it’s “not the final frontier, because it could send a signal to other international financial institutions that they should follow suit and also support nuclear projects.”

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June 17-18, 2025

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Seven charts that will define Canada’s G7 Summit

Atlantic Council — Thu, 12 Jun 2025 17:01:47 +0000

It’s a high-stakes summit among the high summits. Leaders from the Group of Seven (G7) nations are set to convene in the Rocky Mountain resort of Kananaskis, Alberta, Canada, from June 15 to 17. This year also marks the group’s fiftieth meeting. In 1975, the newly created Group of Six (G6) held its first meeting in France amid oil price shocks and financial fallout from then US President Richard Nixon’s decision to remove the dollar from the gold standard. In recent years, the G7 has coalesced around coordinating sanctions on Russia, supporting Ukraine’s reconstruction, and responding to Chinese manufacturing overcapacity. But 2025 comes with new challenges, including an ongoing trade war between G7 members, which will test the resolve and the raison d’etre of the grouping.

Here’s a look inside the numbers that will frame the summit.

The G7 was formed fifty years ago so the world’s advanced-economy democracies could align on shared economic and geopolitical challenges. But what happens when the cause of instability is coming from inside the G7? That’s the question confronting the leaders as they assemble this week in Kananaskis.

US President Donald Trump is still getting to know some of his new colleagues, including German Chancellor Friedrich Merz, UK Prime Minister Keir Starmer, Japanese Prime Minister Shigeru Ishiba, and the summit’s host, Canadian Prime Minister Mark Carney. Trump will try to coordinate the group against China’s economic coercion. But the rest of the leaders may turn back to Trump and say that this kind of coordination, which is at the heart of why the G7 works, would be easier if he weren’t imposing tariffs on his allies. The chart above shows the friction points heading into one of the most consequential G7 summits in the organization’s history.

—Josh Lipsky is the chair of international economics at the Atlantic Council, senior director of the GeoEconomics Center, and a former adviser to the International Monetary Fund (IMF).

Originally created as an economic coordination body, the G7 began to put foreign policy and national security on its agenda in the 1980s, as the Soviet Union’s political influence was waning. Soon after, Russia attended its first G7 Summit as a guest in 1991, formally joined in 1998, creating the Group of Eight (G8), and then was suspended in 2014 due to its annexation of Crimea.

In the years since, new geopolitical rivals have entered the fray: Since the COVID-19 pandemic, G7 summits and declarations have attempted to address China’s role in the global economy. Last year’s leaders’ communiqué was especially harsh on China—which was mentioned twenty-nine times—on everything from its material support to Russia’s war against Ukraine to Beijing’s malicious cyber activities. But China was once a guest at the forum, first joining in this capacity in 2003.

Other members of the G7+5, an unofficial grouping of large emerging markets—India, Mexico, Brazil, and South Africa—have been invited as guests in recent years. If that sounds familiar, it is because India, Brazil, and South Africa, along with Russia and China, are the founding members of the BRICS group of emerging economies, which some would consider a representation of the geopolitical and economic competition the G7 faces today.

This year, Australia, Ukraine, South Korea, Brazil, Mexico, and India were invited to attend as guests. These invitations are a signal of broad alignment among the G7 and its guests. These invitations demonstrate the importance of the guests’ economic might on the global stage, even though India has shifted away from the G7 quite significantly in the last fifty years, as seen in the graph above. In 1992, when Russia first attended the G7 as a guest, its gross domestic product (GDP) was less than 1 percent of the world’s GDP, and the combined economies of the five founding BRICS countries made up less than 9 percent of global GDP. At the time, the G7 represented 63 percent of the world’s GDP. Today, the G7’s share is now 44 percent of the world’s GDP and the founding BRICS members’ share has more than doubled to almost 25 percent.

—Ananya Kumar is the deputy director for future of money at the Atlantic Council’s GeoEconomics Center.

In 2024, G7 countries attracted over 80 percent of global private artificial intelligence (AI) investments, led primarily by the United States. In ten years, private AI investments have grown almost fifteen-fold. This month, the US Department of Commerce rebranded its AI Safety Institute as the Center for AI Standards and Innovation (CAISI)—shifting away from an emphasis on “safety” and toward promoting rapid commercial development.

Carney has said that he plans to put AI at the top of his agenda at the upcoming G7 Leaders’ Summit. He has been a long-standing advocate of AI—dating back to his 2018 presentation on AI and the global economy while he was governor of the Bank of England.

But while the United States leads in AI innovation and investment, Europe continues to set the pace on regulation, and China strategically develops its own AI models. All this leaves Canada asking where it fits in.

That may be why Carney hopes to lead on this issue. The G7 presidency offers Canada a unique opportunity to convene democracies to work together on AI. Rather than trying to outspend the United States or out-regulate Europe, Canada can focus on building connections—creating shared standards, developing trusted public-private data hubs, coordinating strategic investments, and outlining guidelines for common learning and collaboration across borders.

—Alisha Chhangani is an assistant director at the Atlantic Council’s GeoEconomics Center.

Ten years after the first G6 meeting took place in France, another landmark meeting took place at the Plaza Hotel in New York, in September 1985. At the meeting, then US Treasury Secretary James Baker convinced his counterparts from West Germany, France, the United Kingdom, and Japan to support a significant devaluation of the US dollar—what became known as the Plaza Accord.

Today, the dollar’s value relative to its G7 counterparts is on the rise again, fueled by tight monetary policy and expansionary fiscal spending. Although the current appreciation is milder than the surge seen in the early 1980s, the Trump administration may use the G7 Summit to raise concerns about the burden of being the world’s reserve currency, especially when it comes to export competitiveness. In late 2024, the current chair of Trump’s Council of Economic Advisers, Stephen Miran, proposed a “Mar-a-Lago Accord” as an updated version of the Plaza Accord, though no real progress on this is apparent. Moreover, this time a key global player is absent from the conversation—China.

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

The finance ministers and central bank governors of the G7 already held their meeting last month in the Canadian Rockies, emerging with a consensus on tackling “excessive imbalances” and nonmarket policies. While the G7’s finance ministers and central bank governors’ communiqué didn’t call out China by name, it’s clear that’s who they were referring to. Simultaneously, the US-UK trade deal called for the United Kingdom to meet US requirements on the security of supply chains, which infuriated Beijing.

Washington wants coordinated economic security partnerships to help counter China and encourage more investment in the United States. But the United States has been calling for allies to divest from China for a while now. In response, G7 counterparts could point to the data above and ask: How much more do we need to give?

Over the past five years, nearly every G7 country, with the exception of Canada, has scaled down their investments in China and scaled up their investments in the United States. For example, Japan has reduced foreign direct investment in China by 60 percent over the past decade, including shuttering a major Honda plant in Guangzhou. Meanwhile, the Japanese carmaker pledged to put $300 million into a plant outside of Columbus, Ohio. This has been the trend as the United States’ G7 partners reassess their economic dependencies on China. But amid ongoing trade wars, how much are they willing to coordinate more closely with the United States?

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

Foreign aid, or official development assistance (ODA), from G7 countries dropped sharply in 2024, and early projections through 2025 and 2026 suggest even steeper declines ahead for most nations. The United States has exhibited the most drastic retreat, following the effective dismantling of the US Agency for International Development. But European countries have also scaled back development budgets and are redirecting funds toward defense and domestic economic issues. While ODA briefly surged in response to the COVID-19 pandemic and the war in Ukraine, that uptick masked a longer-term downward trend in traditional development funding as a percentage of G7 countries’ economies.

Most G7 nations have failed for years to meet the United Nations Sustainable Development Goals Target 17.2, which called for allocating 0.7 percent of gross national income to ODA. As of 2024, none of them has reached this benchmark. This retreat is particularly troubling given today’s fractured geopolitical and economic landscape. In such times, investing in global partnerships and life-saving aid through ODA is not just a moral imperative—it’s also a strategic one.

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

A major focus heading into the G7 Summit will be how Carney handles his latest meeting with Trump. The two managed to have a cordial meeting in May, and Carney’s announcement this week that Canada will increase its defense spending could help to placate Trump, who has long complained about Canada’s lagging defense spending.

But Canada is also looking beyond its southern neighbor. Carney has invited the leaders of Australia, Brazil, India, Indonesia, Mexico, South Korea, South Africa, Ukraine, and Saudi Arabia to join him in Alberta. Under former Prime Minister Justin Trudeau, Canada’s relationships with both Saudi Arabia and India reached diplomatic low points. By inviting these leaders, Carney is demonstrating a willingness to reengage partners. In no area is Carney more likely to pursue new partnerships than in the defense sector. Canada stated its desire to join the ReArm Europe Initiative and has signed a major deal for an Australian radar system. Expect Carney to seek new partners as Canada rebuilds its defense capacity, potentially with some of the countries invited to this year’s G7.

—Imran Bayoumi is an associate director at the Atlantic Council’s Scowcroft Center for Strategy and Security.

Canada’s hosting of the G7 Summit in Alberta carries exceptional significance amid escalating tensions with the United States. Trump’s attendance, which will mark his first G7 Summit since 2019, signals renewed engagement with Canada. This could spark talks on renegotiating the United States-Mexico-Canada Agreement (USMCA) ahead of the trade deal’s first joint review in July 2026. The timing of the G7 Summit coincides with heightened Canadian nationalism and intense public focus on Canada-US relations, particularly around tariff disputes affecting sectors such as steel.

The Trump-Carney relationship differs markedly from previous dynamics between Trudeau and Trump, potentially enabling more productive G7 cooperation when US foreign policy dominates global conversations. The trilateral presence of Mexican President Claudia Sheinbaum, Trump, and Carney creates an opportunity for preliminary USMCA discussions. However, critical questions emerge: Will Mexico and Canada align against the Trump administration? Will Canada prioritize repairing bilateral US relations over Mexico-Canada ties? The summit’s outcome is likely to significantly shape hemispheric trade relationships and regional diplomatic strategies.

—Maite Gonzalez Latorre is a program assistant at the Adrienne Arsht Latin America Center and Caribbean Initiative.

Sophia Busch, Ella Wiss Mencke, Ethan Garcia, and Miguel Sanders contributed to the data visualizations in this article. The data visualization titled “US jobs rely on Mexico and Canada more than any other trade partner” originally appeared in an article by Sophia Busch published on January 16, 2025.

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The objectives of transatlantic financial services regulation and the future of international cooperation

Matthew L. Ekberg — Thu, 12 Jun 2025 16:09:51 +0000

Much has been written in recent weeks about heightened geopolitical tensions and the impact of policy changes concerning international trade on global markets. Less has been said about the growing shift in focus on both sides of the Atlantic—and across the English Channel—on the next stage of development for financial services regulation. With recent leadership changes in both the United Kingdom (UK) and the United States, along with a newly constituted European Commission and European Parliament, the contours of policy towards banks and non-bank financial institutions are becoming ever clearer, with implications for economic growth, development, and stability in particularly volatile times.

Factors will depend, however, on evolving political circumstances coupled with the effects of a continuing shift toward more fragmented policy making across borders. This issue has long been on the minds of government and industry alike, but it may become more complicated in the near to medium term. It is timely to examine these trends to better understand the direction of travel between the UK, European Union (EU), and United States, and how this will impact markets and economies globally.

First, in the UK, the government’s Financial Services Growth and Competitiveness Strategy will be published this July. It will focus on five priority growth opportunities—sustainable finance, asset management, fintech, insurance, and capital markets. The Prudential Regulation Authority and the Financial Conduct Authority will be at pains to continue emphasizing that the primary objectives of consumer protection and systemic stability will not be compromised through any changes. However, it will be important to reflect on how issues such as the Basel III Endgame implementation will be addressed in light of these priorities, considering the approach of other jurisdictions (especially the United States) to the future of this global prudential package.

Second, in the EU, the European Commission has similarly affirmed that it will increasingly focus on growing financial market activity and ensuring the bloc can adequately compete with other world actors in financial services. This will likely lead to further discussions on, inter alia, sustainability standards, financial risk rules, and closer market integration. Though there is consensus on the need to make the EU more competitive, concerns have already been raised, for example, by Frank Elderson, vice-chair of the European Central Bank supervisory board that increasing competitiveness should not be pretext for watering down regulation and potentially increasing instability.

Further complicating matters is the issue of how, or if, the bloc will respond to any escalation of punitory trade measures by the US administration. Though the pace of recent trade talks has accelerated, questions remain in the near term about the potential application of the EU Anti-Coercion Instrument if negotiations fail, and what that may mean for the imposition of restrictions on financial services activity from third countries.

Third, in the United States, a more complex picture is emerging. The economic implications of White House trade policy will have to be weighed against the general deregulatory bent of the administration, but a few themes have come to light. There is a clear indication that the US Treasury will play a greater role in financial services regulation. Treasury Secretary Scott Bessent is on record stating that lending policies should better match the risk of financial firms, and that bank regulation has not taken economic growth into account. Federal banking agency rulemaking will also likely shift. Federal Reserve (Fed) vice chair for supervision, Governor Michelle Bowman, has indicated that supervisory reform, the promotion of innovation, and a pragmatic approach to regulation will be prioritized. The objective of cost-benefit analysis being applied toward regulation will affect how the Fed addresses the outstanding issue of the Basel III Endgame implementation, alongside an expected review of the supplementary leverage ratio and its impact on the US Treasury market.

Lastly, how the United States approaches international regulatory initiatives is also expected to be gauged by how they align with updated US regulatory policy objectives and the America First approach of the administration. SEC Commissioner Hester Peirce recently questioned the agendas of the international standard setters in light of calls for increased domestic control over policy. Secretary Bessent has also raised the issue of US reliance on these bodies. Such interventions will be important to monitor considering the wider gap between national and international rhetoric on cooperation geopolitically.

This is certainly a non-exhaustive snapshot of trends across three major economies, but it raises the question of where the rest of the world stands. How will international cooperation on financial stability evolve with this more domestic-minded focus on growth and competitiveness? This question is coupled with potential disputes on international trade in goods spilling into reciprocal action against the services sector.

On the first point, cooperation will likely continue around topics of consistent mutual concern at the Basel Committee, the Financial Stability Board, the Committee on Payments and Market Infrastructures, and the International Organization of Securities Commissions. Areas of focus will include oversight of the non-bank financial institution sector, modernizing cross-border payments, and addressing issues for operational resilience and cyber security. In his April letter to the Group of Twenty finance ministers and central bank governors, outgoing Financial Stability Board Chair Klaas Knot emphasized the importance of vigilance and international cooperation to address emerging risks and ensure the continued resilience of the financial system. Bilateral and multilateral regulatory collaboration is also continuing in the crypto currency space. The United States and the UK, in particular, are working together to support the responsible growth of digital assets.

However, the prospect is significant for increased fragmentation in regulatory approaches to capital, liquidity, and financial risks related to climate, among other issues. Cross-border financial institutions will potentially have to navigate a much more complicated and disparate set of requirements, which ultimately may impact systemic safety and soundness.

On the second point, the Bank for International Settlements recently warned that geopolitical tensions between countries reduce cross-border bank lending between them. The specter of retaliatory responses in reaction to punitive trade policies seeping into the regulation of financial services can exacerbate this concern. This is particularly acute in the regulation and supervision of foreign banks. Trapping capital and liquidity can have a specific negative impact on the provision of domestic financial services products, hurting the very objectives of growth and competitiveness that appear the ubiquitous watchwords of national policymakers.

There is still a strong case to be made for an interconnected global financial services system where regulatory authorities collaborate on the best means to ensure stability and security across borders. Doing so is not mutually exclusive with objectives for increased domestic growth and competitiveness. It can, in the case of cross-border capital flows, contribute to achieving those goals. An important area of reflection for both the public and private sectors in the coming months is how cooperation can be activated to prioritize economic development while maintaining stability with consistent global standards.

Matthew L. Ekberg is a contributor at the Atlantic Council and former Senior Advisor and Head of the London Office for the Institute of International Finance (IIF).

Econographics Apr 30, 2025

US-EU sanctions divergence would spell trouble for multinational companies

By Jesse Sucher

The fracturing of traditional alliances carries significant consequences for companies facing multijurisdictional compliance obligations, meaning an already complex situation will become more chaotic.

Economic Sanctions Economy & Business

New Atlanticist Apr 29, 2025

Nasdaq CEO Adena Friedman on how technology can be used to tackle financial crime

By John Cookson

Artificial intelligence and other new technologies are needed to address the problem of illicit funds in the global financial system, Nasdaq CEO Adena Friedman told the Atlantic Council on April 25.

Economy & Business Financial Crimes & Illicit Trade

EconoGraphics May 13, 2025

Basel III endgame: The specter of global regulatory fragmentation

By Hung Tran

Diverging timelines for Basel III implementation are fragmenting global financial regulation. As major economies delay or dilute reforms, coordinated oversight erodes—posing renewed risks to international financial stability.

Economy & Business Financial Regulation

Economic Statecraft Initiative

Listen to the podcast here

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Lipsky quoted in The President’s Daily Brief Podcast on US-China Trade Negotiations

bpiasecki — Thu, 12 Jun 2025 13:00:00 +0000

The post Lipsky quoted in The President’s Daily Brief Podcast on US-China Trade Negotiations appeared first on Atlantic Council.

Carney’s ‘hinge moment’ is about more than just Canadian defense spending. What does that mean for Washington?

Imran Bayoumi — Wed, 11 Jun 2025 19:35:15 +0000

It’s not just the money. On Monday, Mark Carney gave his first major defense and security speech as Canadian prime minister. In the speech, Carney pledged that Canada would reach the NATO benchmark of spending 2 percent of gross domestic product (GDP) on defense this year, well ahead of the previous government’s 2032 deadline. While this announcement garnered headlines, less attention went to Carney’s reasoning for the increase, which included both an unraveling international order and an increasingly unreliable United States. What might Carney’s view of the current moment and of Washington mean for the United States? Below, Imran Bayoumi, an associate director with the GeoStrategy Initiative in the Scowcroft Center for Strategy and Security, puts the new spending in its full context.

Why is Carney calling for changes now?

Speaking at the University of Toronto, Carney described the current era as a “hinge moment” in Canada’s history. As “threats from a more dangerous and divided world are unraveling the rules-based international order,” Carney is doing what many leaders of all political stripes in Canada have pledged and failed to do—increase military and defense spending.

Recognizing the increasingly volatile international security environment that Canada finds itself in, Carney announced sweeping plans for the government of Canada to increase its defense spending to the NATO target of 2 percent of its GDP by March 2026, ahead of the goal set by the government of former Prime Minister Justin Trudeau. Canada’s lagging defense spending has long drawn the ire of the United States and other NATO allies and served as a target for US President Donald Trump earlier this year. Carney likely timed this announcement for this weekend’s G7 Summit, during which Trump will travel to Alberta, and in advance of the NATO Summit in the Hague later this month.

Aside from addressing short-term priorities with this month’s summitry, Carney also framed his announcement around the threats to Canada at this moment in history, stating, “a new imperialism threatens. Middle powers must compete for interests and attention, knowing that if they’re not at the table, they’re on the menu.”

What exactly is Canada doing on defense spending?

Canada currently spends 1.37 percent of its GDP on defense, but the low spending numbers do not tell the full story of Canada’s defense woes. Ottawa only has one operational submarine, out of four, and only half of the Canada’s maritime and land vehicles are operational.

Questions surround Canada’s ability to ramp up its domestic defense production at a scale needed to meet Carney’s new goals. The equipment used by the Canadian Armed Forces and Canada’s broader defense production as a whole are closely integrated with the United States. Despite this, Carney has pledged to diversify future defense spending away from an overreliance on the United States and look towards new partners, including Europe, as well as boosting its own capacity for domestic production.

Where will this increased spending go?

In fiscal year 2025-26 alone, the Carney government will invest an additional $6.5 billion across the Department of National Defence (DND), the Canadian Armed Forces, and the Communications Security Establishment (Canada’s signals intelligence agency). The Canadian government aims to increase the number of full-time armed forces members and reservists alongside investing in the civilian workforce. Part of the spending increase will also come from moving the oversight of Canadian Coast Guard from the Ministries of Fisheries and Oceans to the DND. The investment strategy calls for further modernizing Canada’s military capabilities with a focus on the Arctic, such as Canada’s recent acquisition of a new over-the horizon radar system from Australia. To further Canada’s domestic defense production and innovation, the government plans to establish BOREALIS, the Bureau of Research, Engineering, and Advanced Leadership in Science, which will focus on focus on furthering research in frontier technologies such as artificial intelligence and quantum computing.

How should the United States view Canada’s plans?

Washington has already welcomed Ottawa’s announcement, with US Ambassador to Canada Pete Hoekstra posting on X that the plan is “an important step toward strengthening the Alliance and reinforcing our shared security.” However, a key part of Carney’s strategy is to diversify Canada’s defense investments and partnerships away from the United States. The purchase of the JORN radar system from Australia was Canberra’s biggest ever defense export and took the United States by surprise. Ottawa is considering bids from both South Korea and a joint German and Norwegian bid to purchase new submarines. Canada’s planned purchase of eighty-eight F-35 fighter jets from the United States is also being reconsidered, with the DND now potentially looking toward European suppliers.

While Washington will welcome Ottawa’s clear, if long-delayed, commitment to investing in its national defense and security, the era when Canada buys heavily from the United States is likely over. As Carney stated, “it is time for Canada to chart its own path and assert itself on the international stage,” and Washington should not take for granted its potential role in Canada’s defense future.

The post Carney’s ‘hinge moment’ is about more than just Canadian defense spending. What does that mean for Washington? appeared first on Atlantic Council.

Many nuclear experts agree that the US needs new capabilities. Now they need to convince the Pentagon.

Paul Amato — Wed, 11 Jun 2025 18:02:38 +0000

When it comes to nuclear weapons, does the United States need more or different nuclear capabilities than already planned? For decades, nuclear experts have debated and disagreed over the details of the US nuclear arsenal. But the past eighteen months have seen a growing convergence among nuclear deterrence experts around what is being called a “new American nuclear consensus.”

Citing the 2023 Final Report of the Congressional Commission on the Strategic Posture of the United States (SPC), the nuclear experts in this “consensus” camp posit that there is broad support for a host of actions regarding the future of the US nuclear arsenal. In their telling, this includes support for delivering the full existing nuclear modernization program, increasing warhead capacity within the legacy and the modernized nuclear force, and further adding both nonstrategic and strategic capabilities to the future force. These experts call for Washington to dispense with another policy review and start implementing the actions.

Many within the nuclear policy community, both Republican and Democrat, see this as a moment of agreement and resolve. In August 2024, former Acting Assistant Secretary of Defense for Space Policy Vipin Narang said that the United States’ “current nuclear force posture and plan[ned] modernization program is necessary but may well be insufficient in the coming years.” However, it is not clear that the Trump administration, Pentagon policymakers, or the American people in general have bought into a commitment for additional nuclear capabilities.

Put me in the camp that believes more nuclear capabilities are needed—both in terms of quality and quantity. The United States and the West face a revisionist Russia that is a peer nuclear power, as well as a China that seeks to displace the United States as the leading world power and is on the path to equaling or exceeding the size of the US deployed nuclear force. Moreover, Washington cannot sleep on Pyongyang, which is continuing its nuclear buildup, posing unique deterrence challenges to the United States, South Korea, and the region.

It is imperative that those outside of the nuclear expert community understand why the United States needs new or different nuclear forces to confront these threats. First, any crisis or conflict with either Russia or China will immediately put the United States at risk of strategic deterrence failure against one and potential opportunistic aggression from the other. Second, to credibly deter an adversary from nuclear escalation, the United States needs more flexibility in its available responses than it has with its current and anticipated nuclear arsenal. Third, with the expected growth of China’s nuclear arsenal, the United States will need sufficient capabilities, both qualitatively and quantitatively, to continue to simultaneously deter Russia and China in the decades to come.

This is not the first time the United States has had to consider significant new nuclear investments. When US President Ronald Reagan took office in 1981, a perceived decline in US strategic capabilities relative to the Soviets led him to announce—and then Secretary of Defense Caspar Weinberger to develop—a comprehensive plan to revitalize the entire strategic deterrent force. But there was little doubt at that time that the Reagan administration was intent on expanding US nuclear capabilities based on presidential campaign rhetoric and the administration’s early actions.

How broad is the new consensus?

The Trump administration has so far not indicated that it supports significant new nuclear investments. Although complying with congressional direction to pursue a nuclear sea-launched cruise missile (SLCM-N), the Trump administration has not publicly advocated for expanding the existing nuclear modernization program of record. In February, US President Donald Trump said “There’s no reason for us to be building brand new nuclear weapons. We already have so many.” And in March, US Secretary of Energy Chris Wright said, “So what we need to do now is just modernize. We don’t need to grow our nuclear stockpile but modernize our weapons.” Moreover, the pending presidential budget request is flat for the base defense budget. Any uptick in funding would likely come from the so-called reconciliation bill, which is more likely to be a one-off spending increase than the sustained support needed over years for new nuclear capabilities.

Moreover, it is not clear that nonnuclear experts and decision makers support the nuclear consensus. The National Defense Strategy (NDS) Commission generally endorsed the findings of the SPC in a July 2024 report, stating that “it is existential for U.S. national security that [the nuclear] modernization programs continue at pace to preserve the strategic deterrent.” However, not only did the commission not endorse additional nuclear capabilities, it stated that the modernization effort should not “come at the expense of modernizing and expanding the Navy and Air Force conventional forces.”

Perhaps the biggest hurdle to the new consensus is the fact that most Department of Defense (DoD) officials with responsibility for Pentagon strategy, force development, and budget decisions are generally not steeped in nuclear deterrence issues. These officials are less likely than many nuclear experts to see the risk of two simultaneous or near-simultaneous nuclear wars as realistic. They also tend to believe that the United States already has enough nuclear capabilities to deter multiple adversaries. Some may see any increase in US nuclear capabilities as license for Russia and China to further grow their forces, and many simply prioritize modernizing, expanding, and diversifying the nation’s nonnuclear capabilities.

When budgets are tight and it comes time to spend the next incremental dollar on military capabilities, one cannot count on the nuclear consensus to guarantee that it will be spent on new nuclear capabilities. Strengthening nuclear deterrence, therefore, will require convincing officials responsible for strategy, force development and budget decisions across the US government of the risk of nuclear deterrence failure and the need to prioritize, as appropriate, nuclear over nonnuclear expenditures.

Making the case

Three overlapping audiences must be convinced. First, there are nonnuclear strategists in the Pentagon and those who have primary responsibility for formulating the DoD’s annual budget requests, particularly the military services. Second is the Office of Management and Budget, which sets administration funding priorities. Third, there are senior administration leaders, including the secretary of defense and the president.

Arguments familiar to nuclear strategists must be recalibrated to convince these decision makers of the need for additional investment in nuclear capabilities critical to the United States’ overall deterrence and defense posture. To reach these audiences, nuclear experts should focus on three core arguments.

1. Nuclear weapons have a critical role from the start of a crisis

The first use of nuclear weapons, in the words of renowned strategist Herman Kahn, “is likely to be less for the purpose of destroying the other’s military forces or handicapping its operations” than to influence adversary decision makers. Thus, nuclear escalation will be a concern from the moment Washington confronts a nuclear-armed adversary in a crisis or conflict. Since any conflict between the United States and either Russia or China will most likely grow from a regional spark, their perceived stake in the conflict will likely be existential from the moment it begins. Both nations have developed doctrines and capabilities to match their anticipated stake in a regional conflict, including nuclear capabilities. They recognize that, when war comes, defeat along their periphery could be devastating to the future viability of their polity. Thus, from the conflict’s inception, nuclear capabilities are on the table. US leaders need to recognize this, as US success in conventional conflict will tempt adversary escalation, potentially earlier than anticipated.

2. The nuclear arsenal underpins the US ability to conduct conventional operations

If an adversary is tempted to escalate its way out of a failed or failing conventional conflict, it is critical that the president have at his disposal forces that provide him the tools needed to deter such behavior. To quote a phrase attributed to Victor Mikhailov, a senior official in the Soviet Union’s nuclear weapons program during the Cold War, “Russia has a nuclear scalpel for every military problem in Europe.” As described in the SPC Report, such diverse nuclear capabilities offer “options to deter adversaries, control the escalation of potential hostilities, and counter U.S. and allied conventional forces.” The United States needs a similarly flexible—though not identical—toolkit so that the president has the ability to credibly and effectively deter Russia (or China, which is expanding its own nuclear surgical kit) from using one of their nuclear scalpels. And, if deterrence does fail, the president needs flexible tools to restore deterrence without making a general nuclear exchange inevitable.

The United States does not have that flexibility today—nor is it likely to have it once the nuclear modernization program is complete, even with the eventual deployment of SLCM-N. This should matter to nonnuclear strategists, as the goal is to deter adversary nuclear employment in the first instance and, if deterrence fails, to expeditiously restore deterrence in a way that preserves for regional commanders the freedom of action necessary to prosecute their conventional plans to a successful conclusion. Said another way, nuclear weapons underpin the United States’ ability to successfully conduct conventional operations.

3. China’s growing nuclear arsenal changes what the US needs

In a face-off against one nuclear-armed peer, there is a risk that the second will take advantage of a distracted United States to pursue its own regional objectives through military aggression. Should this occur, the United States will be faced with the challenge of simultaneously deterring two adversaries from conducting strategic attacks against the homeland during a time of war—adversaries whose forces pose an existential threat to the United States. As long as damage limitation and imposing intolerable costs remain central tenets of US nuclear strategy, the United States must maintain a credible capability to hold at risk what Russia and China value most, including their strategic forces.

But the United States’ ability to do so is on track to dissipate due to the growth of China’s arsenal and the fact that the number of US weapons available for counterforce targeting in the 2030s and 2040s is likely to be smaller than it is today. With a reduced ability to credibly deter adversary attacks on the US homeland, US decision makers may be hesitant to rigorously defend US global interests against nuclear-backed conventional threats, rendering any future US conventional superiority chimerical.

Each of these arguments demonstrates the importance of nuclear forces that are qualitatively and quantitatively sufficient to enable freedom of military action in a confrontation with a peer nuclear-armed adversary in the coming decades. Such a nuclear force is not what the United States fields today, and it is not the force that Washington will have when the currently planned modernization program is complete. To get there, more and different US nuclear capabilities are needed, which will require convincing the broader defense community of the importance of additional nuclear investments.

Paul Amato is the former director for nuclear deterrence policy in the Office of Secretary of Defense for Policy. He is a retired Marine infantry officer with twenty-eight years of active and reserve service. Before his government service, he was a practicing lawyer in the private sector. The views expressed in this article are his own.

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Complex energy systems face low-tech threats

Travis Nels — Wed, 11 Jun 2025 17:06:40 +0000

The dramatic destruction of parked Russian strategic bombers through a daring operation of the Ukrainian intelligence service has once again shone a spotlight on the power of asymmetric warfare. After initial reactions of delight in the West at seeing Russian aircraft burn, such feelings quickly turned to concern that similar events could relatively easily happen here as well.

The fact that cheap, low-end systems could wreak havoc on advanced military forces is indeed fear inducing—and unfortunately, that risk extends beyond jets parked on an airfield apron.

The electrical grid has been described as “the world’s largest machine.” In terms of defending it, a better mental model is that of a very complex supply chain. Electrons are produced from molecules pulled from the ground, atomic reactions, or the movement of wind, water, or sun. Those electrons are transported through a vast network of wires to their ultimate end use.

Notably, that end use—whether light, warm or cold air, artificial intelligence inference, or a Netflix movie—is all that matters. The electrons in an intermediate form or location are useless to a human being, so disruptions anywhere along the supply chain are functionally equivalent.

Attacking energy infrastructure has long been recognized as a useful combat tactic because those electrons are a precursor to many legitimate military end uses. Attacking electric power can also terrorize civilian populations, best evidenced in Ukraine by thousands of Russian attacks against the grid by high-end cruise missiles and guided weapons.

The number of global actors with access to cruise missiles is, thankfully, limited. But that does not reduce the risk to the grid. Being able to disrupt end use anywhere along the electron supply chain is a boon to the asymmetric attacker, who can find plenty of choke points along that chain. They can look for targets with the greatest impact at the lowest cost in time, resources, and risk.

To combat these threats, discussion of asymmetric risk vectors has increasingly focused on cybersecurity vulnerabilities. Recent revelations that the global supply chain for solar power inverters has been compromised by Chinese manufacturers is another reminder of the sector’s cyber vulnerabilities. The North American Electric Reliability Company (NERC), through its Critical Infrastructure Protection (CIP) program strives to address these risks through compliance activity, and players in the electric power ecosystem have invested heavily in software and processes to defend against cyberattacks.

Beyond cyber, attention is often focused on physical risk to the generation end of the electron supply chain. Certainly, it is easy to envision both attacking and defending a large, fixed piece of infrastructure like a power plant from an asymmetric attacker’s drones. The same applies to substation infrastructure. But what if one were to push the imagination a little further?

Electric utilities across the United States must constantly deal with outages from technical challenges, weather, animals, and even mylar balloons, which have disrupted utility services for years.

Listings on Amazon and Alibaba show that approximately 10,000 mylar balloons could be filled and released for less than $15,000 (with 95 percent of that being the cost of helium). Given that electric transmission and distribution infrastructure is in fixed, known locations—often highly visible and open to the air—it is acutely vulnerable to aerial attack.

Such an attack wouldn’t require smuggling drones and explosives, clandestinely attaching them to trucks in an action worthy of a Hollywood spy thriller—it would just require waiting for a delivery from the attacker’s e-commerce provider of choice. Think less of a spy thriller, and more of a dark remake of Up.

Infrastructure risk is increasing on two fronts—from the diffusion of high-end digital technology and from an evolving understanding that high-end energy systems can be threatened by cheap and low-tech weapons, or weaponized commercial products.

To counteract this threat landscape, policymakers are trying to support infrastructure owners and operators in protecting the grid. In addition to NERC CIP measures for infrastructure security, there is legislation pending that would hold states to the same federal standard as interstate transmission infrastructure, or elevate the US Department of Energy’s leader responsible for emergency response to a Senate-confirmed position.

This is not a call to action to ban mylar balloons—though some states are trying. Instead, infrastructure stakeholders must realize that the threat environment is broadening at both the high and low ends of the spectrum. After watching videos of burning Russian bombers, the sinking feeling that society is more vulnerable today than it was yesterday extends far beyond the military domain.

Travis Nels is a Veterans Advanced Energy fellow with the Atlantic Council’s Global Energy Center and the vice president of planning, analytics, technology, and transformation at AES Corporation in Arlington, Virginia. The views and ideas expressed in this article are his own.

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Lipsky quoted in Reuters on the US-China trade talks in Geneva

achhangani — Wed, 11 Jun 2025 15:08:31 +0000

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House quoted in Axios on regulatory gaps in the Clarity Act

bpiasecki — Tue, 10 Jun 2025 13:18:26 +0000

Read the full article here.

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Carole House testifies to House Financial Services Committee on the gaps and opportunities for digital asset regulation

Carole House — Mon, 09 Jun 2025 19:24:32 +0000

On June 6, Senior Fellow Carole House testified to the House Committee on Financial Services at a hearing titled, “American Innovation and the Future of Digital Assets: From Blueprint to a Functional Framework.” Below are her prepared remarks.

Full Written Testimony

Thank you Chairman Hill, Ranking Member Waters, and distinguished members of the Committee for holding this hearing continuation and the honor of the invitation to testify on the future of digital assets. I applaud your leadership in convening the Committee on this important issue and continuing the years-long efforts of this Committee across several Congresses to evaluate and build legislation around a clear, comprehensive, and competitive cryptocurrency regulatory framework. I hope my testimony will be helpful in considering some of the most important aspects of frameworks needed to drive innovation in a secure, competitive, safe, and sound digital finance ecosystem that reinforces national security interests, defends consumers, and preserves personal liberty.

I have spent my career working at the intersection of national, economic, and technological security. I have spent two tours at the National Security Council (NSC) leading cryptocurrency initiatives; led crypto and cybersecurity policy at the US Financial Crimes Enforcement Network (FinCEN), the US anti-money laundering and countering financing of terrorism (AML/CFT) regulator; and served on advisory boards for the US Commodity Futures Trading Commission (CFTC), the Idaho Department of Finance, and the New York Department of Financial Services (NYDFS). Over recent years, I have observed massive growth, collapses, experimentation, exploitation, and innovation across the digital asset market. Of course, innovation and exploitation in finance are not unique to digital assets, and the risks and benefits of one blockchain system are not equivalent across all assets — they depend significantly on the design and features of specific systems. To make best use of the benefits and mitigate the critical risks, we need to ensure that technology, operations, and policy are aligned along critical safeguards and also with driving competitive and liquid US markets.

That brings us to this critical juncture – the current alignment and implementation of protections in digital assets is not working. The status quo has not benefited consumers, markets, or national security. As just one example, the largest heist in history just occurred in February of this year targeting this sector, perpetrated by North Korean actors as part of their revenue generation to fund activities like their proliferation program. This incident also was not in a vacuum but instead was yet another cyber theft as part of a years-long building trend in this industry exploiting both pervasive cybersecurity and AML/CFT vulnerabilities. This is just one example, which sits alongside highly volatile markets that have lost trillions and defrauded consumers, but also an environment that is reportedly set to drive the best developers abroad rather than inspiring them to stay here and build to agreed upon guardrails. Inaction by both government and industry will not achieve desired outcomes for protecting consumers or businesses.

I applaud Congress for continuing to elevate the issue of digital asset legislation to ensure appropriate regulation in the United States. Despite calls from some to avoid regulation of digital assets that may seemingly legitimize an immature sector, I maintain that regulation is critical to give a north star that demands legitimate and responsible activity within an industry with many actors who aim to bring positive evolutions in finance and cryptocurrency. Regulation also provides legitimate authorities and levers to supervisors and enforcement agencies to hold accountable illicit actors that seek to defraud consumers, launder criminal proceeds, and undermine the integrity of the US financial system. As I have testified to previously, clear and comprehensive guardrails are necessary to protect consumers, national security, and US competitiveness in financial innovation. While timely progress is critical after several Congresses being unable to establish a comprehensive approach, these frameworks must also be deliberate, thoughtful, and comprehensive of the real and present risks, as well as opportunities, that we have observed in the digital asset ecosystem and broader financial system.

The stated goals of the Digital Asset Market CLARITY Act of 2025 (the “Clarity Act”) to help address regulatory gaps and to provide clarity for an industry seeking it are laudable. Unfortunately, the tenets of the proposed legislation as drafted appear to be overly complex, forging notable gaps for coverage under consumer and market protections rather than closing them; leave insufficiently or unaddressed key areas like meaningful implementation and enforcement measures, countering illicit finance, and cybersecurity; and depart from the long bipartisan-stated principles of technology-neutrality that would enable regulations to persist in the face of technological innovations.In my testimony, I briefly offer opportunities for addressing those issues and preserving a framework built on the key pillars of sound market regulation and national security interests. I draw many of these recommendations from the groundbreaking work of the Commodity Futures Trading Commission (CFTC) Technology Advisory Committee (TAC), where I co-chaired a group of 19 incredible industry, government, and academic experts to produce a first-ever comprehensive review of risks and opportunities in decentralized finance (DeFi), with outlined steps for policymakers to take build the framework for DeFi. I encourage legislators to consider these measures especially where existing digital asset market structures differ from traditional financial market structure, and urge you to be extremely deliberate when choosing to depart from long-tested principles needed to preserve integrity of markets, such as consumer protections, resilience against exploitation and shocks, and addressing separations of functions and conflict of interests.

Regulatory gaps and potential for confusion

As I mentioned above, seeking to provide regulatory clarity, in both authority and application, are important at this critical juncture. It will establish clear rules of the road for responsible actors to engage and innovate in the space as well as ensure strong footing for regulators and enforcement agencies to oversee markets and investigate wrongdoing. A clear framework will also (finally) help level the playing field for US firms that have long been more compliant than many foreign-operating cryptocurrency businesses that exploited their savings in non-compliance as a competitive advantage against more responsible US companies.

The Clarity Act as currently written attempts to provide clarity through defining regulatory jurisdictional bounds between the Securities Exchange Commission (SEC) and CFTC as well as defining key terms of assets to establish scope of coverage as securities versus digital commodities. The bill also includes some important protection measures, specifically around areas like segregation of customer assets, limited disclosures such as around token structure and conflicts of interest, and registration requirements.

However, the Clarity Act is still absent many important protections that we have observed to be critical to protect consumers and markets in the wake of a crisis. Within the 236 pages of the bill are confusing and ambiguous definitions and missing elements that pave the way for regulatory arbitrage and exploitation:

No clear non-securities spots market authority: This bill does not appear to clearly outline authority over spots markets for assets that are not securities. The definition of “digital commodity” may be restrictive insofar as to only cover a limited set of tokens, which would leave potentially hundreds of tokens unregulated and/or without clear guidance on its applicability even if they function as financial assets.
Unclear definitions and impacts on securities laws: There are various definitions in the bill whose challenges with clarity may subvert the drafters’ intent to provide clarity and defend against regulatory arbitrage. Some definitions may be seen to be crafted to frame large exemptions from responsibility decentralized finance, such as in defining concepts like groups and common control in a a “decentralized governance system,” which in the bill is a system where participation (not even active involvement, just the pretext of participation) is “not limited to or under the effective control of, any person or group of persons under common control.” In another example, the bill treats assets called “investment contract assets” as digital commodities, though “investment contracts” have generally been a key element of securities laws.
Conflating decentralization and maturity: The test for decentralization in the bill is described as a test of blockchain maturity. In a sector where projects that are (or at least claim to be) decentralized are being targeted and exploited for weaknesses in their code, cybersecurity, and irrevocability of mistakes or illicitly acquired assets, it is confusing on why a greater extent of decentralization — a concept that is also vague in the bill — inherently means maturity rather than other markers of good governance and operations. The decentralization test also introduces some confusion that may challenge real-world implementation, and is unclear on how such a feature impacts an asset functioning like a commodity versus a security. Current and former regulatory leadership has warned against arbitrary carve-outs of protections like under securities laws simply based on complex issues like decentralization that so far have largely been met with convoluted definitions that risk exemption significant amounts of high-risk investment-related activity. This also threatens potentially creating the opposite of a future-proofed regulatory approach that cannot keep up with future technological innovation.

National security and the critical role of enforcement

n the wake of serious national security threats like billion+ dollar hacks by rogue nations, growing integration of cryptocurrency as a tool for transnational organized crime, market manipulation and fraud that can threaten system integrity and stability, as well as pressure from adversarial nations seeking to develop and leverage alternative financial systems to weaken and circumvent the dollar, it is clear that strong safeguards, including for US competitiveness, are needed. This framework also demands we ensure policy and enforcement approaches both domestically and internationally create a level playing field for US firms – often the most compliant firms in the world – to be able to compete fairly. Otherwise, the foundation we build these systems on risk faltering, with the potential to not only reap significant harms but also prevent us from harnessing the greatest positive potential that is possible from a secure and innovative digital finance ecosystem.

There is limited discussion of either illicit finance or cybersecurity in the Clarity Act—many more pages are honed on establishing large regulatory carve-outs than on establishing expectations, driving needed industry standards or sponsoring research and development, or appropriating necessary resources to ensure appropriately scaled and timely enforcement of these critical requirements. Also important to note, especially in light of recent changes in enforcement posture—beyond just creating the policy framework, the government and industry must work to apply and enforce the framework. A policy that isn’t enforced or implemented does nothing to benefit consumers nor US firms with stronger compliance programs that have been operating at higher costs and less competitive advantages than many foreign-operating firms.

I have testified previously to the critical needs for strengthening AML/CFT and sanctions authorities in the cryptocurrency space, which generally have been suggested to be saved for “comprehensive market legislation.” Such enhanced protections like appropriations for skilled enforcement and investigative personnel, sharpening tools like 9714/311 designation authorities, ensuring extraterritorial application of regulations and/or through designations of entities of high national security risk, creation of an enforcement strategy to scale timely enforcement against the most egregious violators, or resourcing public-private partnerships like the Illicit Virtual Asset Notification (IVAN) program are missing from the legislation but could be easily added in to help strengthen the holistic cryptocurrency framework. In the face of disbanding of the Department of Justice (DOJ) National Cryptocurrency Enforcement Team (NCET)14 and significant downsizing and weakening of enforcement offices and personnel across the US Government, the legislation could help ensure that tools are being honed to better address the worst actors in the space. Only with meaningful enforcement can policy be truly impactful and can we reward the best actors in the space, which are typically American companies.

An alternative approach for consideration – Joint, targeted, adaptable, and balanced

I support calls for a legislative solution that enables nuance and distinct treatment across various assets based on their economic function and which will ensure persistent clarity and flexibility for regulators to address significant risks of fraud, manipulation, and investor exploitation that we have seen in the space. The legislation should also guide regulators with key principles, many of which are similar to those outlined in the Clarity Act, and should be done in full view of the benefits that some aspects of digital assets uniquely provide, such as an unprecedented level of market transparency for on-chain financial activity to enable greater market surveillance and oversight.

An alternative approach may help meet the intent of the drafters while giving time for greater exploration and experimentation while meeting near-term calls for the most beneficial transparency needs of the market, which I have observed to most consistently be calls for a clear pathway to registration. I encourage policymakers to consider a much more streamlined approach if a more complex bill proves too difficult to reconcile:

Dual rulemaking: Similar to efforts undertaken in the wake of the 2008 Financial Crisis and pursuant to the joint rulemaking efforts directed in Title VII of Dodd Frank, Congress could again direct the SEC and CFTC to jointly develop a framework and rulemakings to give greater specificity and adaptability to approaches to ensure appropriate coverage but at least one of the markets regulators.
Mandate for sandboxes and clear registration pathways: In the interim while the SEC and CFTC craft their approach, Congress could direct a near-term establishment via sandboxes, provisional registrations, and other requirements with clear guardrails to help ensure clear near-term coverage while giving the time needed to thoughtfully evaluate the more complex issues like dual-registered entities, defining tokens, defining the jurisdictional hand-off, and how to address DeFi. Policymakers should consider looking to the United Kingdom’s current joint efforts between the Bank of England and the FCA under the Digital Securities Sandbox for inspiration.
Clarify commodity spots market authorities: The legislation should specify clearly authority to the CFTC over commodity spots markets, or at a minimum digital commodity spots markets.
Explicit appropriations and mandate for additional AML/CFT and cybersecurity initiatives: The legislation would also optimally integrate near-term resourcing, not just authorizations, to ensure the ability to effectively police bad actors in the system, which should include the earlier-referenced initiatives like expanded targeting authorities, appropriations, public-private partnerships, and cybersecurity and information sharing standards.
Undertake steps to address the regulatory perimeter and controls with DeFi: Finally, legislators should direct the SEC and CFTC to jointly undertake the steps recommended by the CFTC TAC in evaluating how to evolve market structure in addressing issues like the unique constructs in DeFi. These steps include mapping ecosystem players, processes, and data; assessing compliance and requirements gaps; identifying risks; evaluating options, benefits, and costs of changes to the regulatory perimeter, and surging research and development and standards partnerships.

With guardrails established and more consistent oversight by Congress, this approach, implemented through administrative procedure and thoughtful regulation with public engagement, I think is likely the best way to achieve a comprehensive and enduring framework.

In closing, I’d like to again underscore my gratitude for the honor of the opportunity to speak with you all today. It is critical that the United States make timely progress on establishing and implementing cryptocurrency regulatory frameworks, which should leverage years of effort on defining critical holistic protections that also reinforce the central role in the financial system and as a leader in technological innovation.

Thank you.

Fellow

Carole House

GeoEconomics Center

Cybersecurity Digital Currencies

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.

Vice President and Senior Director, Scowcroft Center for Strategy and Security

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Kroenig featured in Times Radio segment on ‘a new nuclear age’

Atlantic Council — Mon, 09 Jun 2025 14:35:45 +0000

Original Source

On June 4, Matthew Kroenig, vice president and senior director of the Scowcroft Center for Strategy and Security, was featured in a Times Radio segment discussing the ‘new nuclear age.’ Kroenig stated that China’s massive nuclear buildup, alongside Russia’s arsenal, marks the dawn of a new and more dangerous nuclear age.

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Scowcroft Center for Strategy and Security

China Defense Policy

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

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Armenia’s ‘crossroads’ offers the US and Israel a rare opportunity

Sheila Paylan — Mon, 09 Jun 2025 12:00:00 +0000

For decades, Armenia and Azerbaijan’s conflict over Nagorno-Karabakh has kept the South Caucasus in a gridlock of historic animosities, closed borders, and economic stagnation. But with the conflict now effectively over, Armenia has launched its “Crossroads of Peace” initiative, envisioning itself as a central Eurasian transit hub.

The project aims to revive long-defunct transport routes—once important arteries of Soviet-era trade—that were severed after Azerbaijan and Turkey closed their borders with Armenia in 1991 and 1993, respectively, thereby isolating it. Restoring these routes would reconnect Armenia with its neighbors and link broader corridors from the Persian Gulf to the Black Sea and from the Caspian Sea to the Mediterranean, facilitating trade between major economies in Asia, Europe, and the Middle East. For both the United States and Israel, supporting this initiative offers a strategic opportunity to enhance regional stability, expand economic influence, and counterbalance adversarial powers like Iran, Russia, and China.

Armenia’s Prime Minister Nikol Pashinyan and Azerbaijan’s President Ilham Aliyev attend a meeting of heads of the Commonwealth of Independent States (CIS) in Ashgabat, Turkmenistan, on October 11, 2019. Sputnik/Alexei Druzhinin/Kremlin via REUTERS

This vision, however, ultimately depends on the successful conclusion of the peace treaty between Armenia and Azerbaijan, which remains stalled largely due to Azerbaijan’s shifting and escalating demands—including calls for constitutional amendments and the dissolution of the OSCE Minsk Group—despite diplomatic consensus over the treaty text and Armenia’s expressed readiness to sign it. Another major underlying issue is Azerbaijan’s insistence on an extraterritorial so-called “Zangezur Corridor”, which would connect it to its exclave Nakhchivan through southern Armenia, but bypassing all Armenian oversight, customs, and security. Armenia, while supportive of connectivity, unequivocally rejects any surrender of sovereignty over its territory.

Nevertheless, Crossroads of Peace still offers Baku significant economic and geopolitical benefits. By reconnecting regional transport networks, including access to Turkey through Armenian territory under Armenian jurisdiction, Azerbaijan could achieve many of its logistical objectives without the contentious demand for a sovereign corridor. This cooperative model would provide Baku with more trade routes to Nakhchivan and beyond, while also gaining international legitimacy and investment through a mutually beneficial and multilateral framework.

Why engagement serves US interests

The entry of US President Donald Trump’s second administration offers an opportune moment for the United States, and potentially Israel, to play an active role in securing a high-profile peace agreement by pushing Azerbaijan to sign the treaty with Armenia. While brokering such a deal would be a diplomatic win in itself, its real payoff lies in unlocking the Crossroads of Peace and thereby delivering meaningful strategic and commercial gains.

By facilitating new trade routes through a Western-friendly, post-conflict South Caucasus, the United States could establish a firmer presence in a region it has long neglected, challenge the dominance of rival powers, and generate economic returns through infrastructure partnerships and transit revenue.

For Washington, the Eurasian transport network represents a unique opportunity to establish a foothold in a region vital to global trade and geopolitics. It offers a Western-aligned alternative to transport networks increasingly dominated by Russia and China while opening the door to US commercial participation in logistics, infrastructure, and technology.

The Eurasian transport network, comprising mainly the Northern Corridor, Middle Corridor, and International North-South Transport Corridor (INSTC), moves millions of tons of freight worth billions of dollars each year. These corridors, which cut across Central Asia, the South Caucasus, and Eastern Europe, are economic battlegrounds where Moscow and Beijing seek to maintain influence, and the West attempts to create alternatives to Russian and Chinese-controlled infrastructure. In this fiercely contested region, controlling trade routes means shaping the future balance of economic and geopolitical power.

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Despite the strategic importance of these corridors, the United States currently has a very limited regional presence and lacks an integrated strategy or infrastructure footprint, offering only modest support limited to diplomatic engagement and technical assistance for the Middle Corridor, led by Kazakhstan, Azerbaijan, Georgia, and Turkey. However, this corridor faces significant challenges, including limited infrastructure capacity, high costs, and a lack of integration, which undermine its efficiency and deter large-scale, reliable trade flows. It is also partially aligned with China’s Belt and Road Initiative (BRI), with parts of the Middle Corridor physically overlapping with and increasingly integrated into the BRI, drawing it into Beijing’s sphere of influence.

China’s growing interest and investment in the Middle Corridor thus further complicates its appeal for Western stakeholders. Chinese influence is now poised to grow even further with the Anaklia Port—a deep-sea project in Georgia—having been awarded to a Chinese-led consortium. Meanwhile, most freight still flows through Russia via the Northern Corridor, maintaining Moscow’s dominance over Eurasian transport. The INSTC—connecting India, Iran, Russia, and Europe—offers some diversification, but it presents “double trouble” for Washington’s involvement by relying heavily on both Iranian and Russian networks, two countries under sweeping US sanctions.

From a purely economic standpoint, the potential of Crossroads of Peace is substantial. Much of Eurasia’s overland trade currently bypasses Armenia, relying instead on Georgia’s politically sensitive routes and the broader Middle Corridor. Diversifying transit through Armenia would strengthen regional connectivity and unlock new channels for investment, trade, and employment. By investing early in Crossroads of Peace, the United States can counterbalance Moscow and Beijing’s regional footprints while creating entry points for American firms in sectors such as construction, energy, digital infrastructure, and logistics. While comprehensive feasibility studies have yet to be publicly released, the Armenian government has indicated that the project could generate significant economic returns by restoring dormant transit infrastructure and linking key regional corridors. Institutions like the Asian Development Bank have expressed support, and the US-Armenia Strategic Partnership Charter highlights the initiative as a priority area for cooperation.

Moreover, given the Trump administration’s emphasis on economic partnerships and tangible returns, Armenia’s proposal aligns well as a concrete opportunity to advance US financial interests. Infrastructure projects, particularly railways and highways, could generate significant returns through tolls, tariffs, and transit fees, benefiting US investors, US-backed development institutions, and potentially the US federal government if linked to initiatives like an External Revenue Service.

However, the precise mechanisms through which the United States would realize these returns—such as specific investment structures, revenue-sharing agreements, or operational roles—require further elaboration. Detailed financial modeling and bilateral agreements would be necessary to quantify and actualize these benefits. The US International Development Finance Corporation (DFC) could help drive this effort by providing early-stage support and risk mitigation for targeted investments in Crossroads of Peace that lay the groundwork for a sustainable US economic footprint across the South Caucasus. This approach would also dovetail with Trump’s broader ambitions to fund government expenditures through foreign-derived revenue rather than domestic taxation. Investing in Crossroads of Peace could therefore fit neatly into this vision, turning geopolitics into a profitable enterprise benefiting the American taxpayer.

The potential for this initiative to succeed under US sponsorship could redefine Washington’s legacy in the South Caucasus and position the Trump administration as the indispensable peace broker in a region historically dominated by rival powers. Given Trump’s record of bold diplomatic efforts, from Ukraine-Russia negotiations to mediation between Rwanda and the Democratic Republic of Congo—conflicts still far from resolution—brokering peace between Armenia and Azerbaijan would be a comparatively easy win. It would take little more than a decisive push from Trump to “close the deal” and get Azerbaijan to sign onto terms it has already effectively agreed to, delivering a swift and tangible diplomatic victory.

Why engagement serves Israeli interests

Israel, too, has strong incentives to support the finalization of peace and the development of Armenia’s transit ambitions. Azerbaijan is a close Israeli ally, particularly in terms of energy and security cooperation. Helping to solidify peace with Armenia could deepen these ties while promoting broader regional stability. With trade between Israel and Gulf states, particularly the United Arab Emirates, growing rapidly under the Abraham Accords, Israel could benefit from overland corridors like Crossroads of Peace that improve access to Persian Gulf markets, bypass Iran, and create new logistics, infrastructure, and technology cooperation opportunities. This would enhance Israel’s economic outreach and reduce its exposure to Tehran’s influence in regional supply chains.

Additionally, Israel has historic and cultural ties with Armenia, notably through the Armenian Quarter in Jerusalem, home to one of the oldest continuous Armenian diasporas in the world. A peaceful, economically integrated South Caucasus could open new avenues for Israeli trade, diplomacy, and investment across the region.

Furthermore, a secure peace agreement between Armenia and Azerbaijan would significantly reduce Armenia’s dependence on Iran, which has become one of its few trade and energy lifelines due to closed borders with Turkey and Azerbaijan. Armenia’s pragmatic relationship with Iran stems more from necessity than ideological alignment. Opening new trade routes through Azerbaijan and Turkey would enable Armenia to break this dependence and accelerate its Westward pivot.

This shift would directly serve Israel’s interests by further isolating Iran economically while allowing Israel to maintain its foothold in Azerbaijan as a counterweight to Iranian threats. Armenia remains one of Iran’s few accessible and expanding trade partners, with Iranian exports to Armenia reaching nearly 600 million dollars in 2023, including petroleum gas, iron, and other industrial goods. The two countries also maintain strategic energy exchanges—notably under a “Gas for Electricity” agreement—and Armenia is Iran’s only direct link to the Eurasian Economic Union. Reducing Armenia’s dependence on Iran through regional normalization would therefore help close a critical commercial and geopolitical corridor for Tehran. At the same time, a more connected and less Iran-dependent Armenia—at peace with its neighbors and increasingly aligned on common regional security concerns—could adopt a more collaborative stance toward Israel’s interests. Turkish officials have made clear, however, that normalization with Azerbaijan is a necessary precondition for reopening the Turkey-Armenia border.

To this end, leveraging Azerbaijan’s growing interest in joining the Abraham Accords could be instrumental. Although Baku has long maintained strong security and energy relations with Israel, formalizing those relations within the Abraham Accords would significantly elevate its international standing. US Special Envoy Steve Witkoff recently indicated that Armenia, too, could be a candidate for future accession—a development that would further reinforce a regional climate of normalization, mutual recognition, and cooperation. Building on this momentum, US-Israeli joint mediation could help encourage Azerbaijan to soften its stance toward Armenia, facilitating the conclusion of a peace agreement that respects Armenia’s sovereignty while satisfying Azerbaijan’s strategic objectives.

Seizing the opportunity

Finalizing peace between Armenia and Azerbaijan offers Washington and Jerusalem a rare chance to tilt the balance of power in one of the world’s most critical yet contested regions. Investing in this moment and helping to overcome the last obstacles to a peace deal—through targeted diplomacy, infrastructure support, and principled mediation—can help secure new trade corridors, weaken adversaries, and build lasting influence at the crossroads of Europe and Asia. Armenia’s Crossroads of Peace is not merely a reconstruction project but a strategic gateway to a more stable, prosperous, and Western-aligned South Caucasus.

That said, a Westward pivot is not without geopolitical risks. Armenia’s deep historical ties with Russia and Iran could make this realignment contentious, especially if viewed as a zero-sum loss by Moscow or Tehran. To mitigate this, the United States and its allies should pair their investment and mediation efforts with clear security and economic guarantees to Armenia, ranging from energy diversification and trade facilitation to defense cooperation and institutional integration. Framing Crossroads of Peace as a shared regional gain, rather than a Western encroachment, will be essential to ensuring its sustainability.

But this opportunity will not remain open for long. It must be seized now.

Sheila Paylan is a human rights lawyer and senior legal consultant with the United Nations.

* The views expressed herein are her own and do not necessarily reflect those of the United Nations.

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Ullman in the Hill on importance of strategic innovation for US military superiority

bgalicia — Mon, 09 Jun 2025 11:13:55 +0000

On June 9, Atlantic Council Senior Advisor Harlan Ullman published an op-ed in the Hill on lessons the US can learn from Ukraine’s “Operation Spiderweb.” He argues that future success against adversaries will depend on the US military’s ability to use innovative tactics and remain agile.

International Advisory Board member

Harlan Ullman

Senior Advisor

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Lipsky quoted in Bloomberg on the resumption of US-China trade negotiations in London

bpiasecki — Sun, 08 Jun 2025 17:32:13 +0000

Read the full article here.

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A German leader’s D-Day lesson for Trump

Frederick Kempe — Sun, 08 Jun 2025 12:00:00 +0000

Set aside for the moment the mud wrestling between the world’s most powerful and richest men, Donald Trump and Elon Musk. This weekend, let’s focus on an insufficiently noticed exchange that goes more to the heart of the United States’ enduring and endangered purpose.

On the eve of the eighty-first anniversary of D-Day, the Allied invasion at Normandy that marked the beginning of Europe’s liberation from Adolf Hitler, newly elected German Chancellor Friedrich Merz brought a message to the White House that no American should ignore.

Merz made reference to the anniversary, in the context of Russia’s ongoing war in Ukraine, as marking a day “when the Americans once ended a war in Europe.”

Caught off-guard, the US president quipped that D-Day wasn’t a pleasant day for Germany.

“Well, in the long run, Mr. President,” Merz replied calmly, “this was the liberation of my country from Nazi dictatorship.”

Trump paused to digest what he’d just heard, a good German thanking Americans for defeating a criminal one, then he answered, “That’s true. That’s true.”

What came next was the most significant message US allies could send to the Trump administration as another criminal regime tests allied resolve.

“And we know what we owe you,” Merz went on. “But this is the reason why I’m saying that America is, again, in a very strong position to do something on this war and ending this war.” Merz asked Trump to talk about what they could do jointly “for more pressure on Russia,” placing the war’s blame unambiguously where it belongs.

It’s worth calling out that Merz-Trump exchange, which came in the twenty-seventh minute of their Oval Office session with reporters, after Trump comments on his travel ban, prospects for a China trade deal, his relationship with his erstwhile adviser Musk, and the presidential protocol of when to use an autopen signature.

Given the Ukraine war’s gravity and Merz’s reference to World War II, Trump’s comments that followed must have been disconcerting to Merz. The German chancellor was well enough rehearsed not to show it. When asked by a reporter when he would impose more sanctions on Russia, Trump talked about his over two-hour conversation with Putin, during which he compared the war to “two young children fighting like crazy . . . Sometimes you’re better off letting them fight for a while and then pulling them apart.”

With nearly a million and a half casualties already in this schoolyard brawl, a reporter asked Merz whether he agreed with the analogy.

Merz was at his best. He said both Germany and the United States agree on how terrible war is, and both are looking for ways to stop it soon. “And I told the president before we came in,” said Merz, “that he is the key person in the world who can really do that now by putting pressure on Russia.”

As Merz spoke of the children Russia has kidnapped from Ukraine, Trump described disturbing satellite pictures of the war—“bodies, arms, heads, legs all over the place. You’ve never seen anything like it. It’s so ridiculous.” Merz then added, “And this is only by Russian weapons against Ukraine. This had never happened with [Ukrainian] weapons against Russia, never . . . So, this is the difference, and that’s the reason why we are trying to do more on Russia.”

In the past two weeks, Trump has appeared to be losing patience with Putin, suggesting that he knows Putin is playing him for time and wondering whether Putin’s relentless attacks on civilians demonstrate that the Russian president has “gone absolutely CRAZY.” Beyond that, Trump has been quoted as calling Ukraine’s drone attacks last weekend on Russian strategic bombers “badass.”

All that history will remember, however, is whether Trump was the US president who contributed to Putin’s defeat and brought Ukraine a lasting peace—or whether he stood by as Putin escalates further, targeting civilians and their infrastructure. In all the news noise of a typical Trump administration week, it is worth listening closer to the German chancellor’s D-Day appeal that it will take much more US pressure on Russia to end this European war.

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X: @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

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Ukraine’s drone strikes offer four big lessons for US nuclear strategists

Mark J. Massa — Fri, 06 Jun 2025 22:09:40 +0000

In the days since Ukraine’s brazen special forces attack inside Russia, analysts have breathlessly argued that the operation, captured in spectacular detail in videos, significantly changed the character of military conflict—or even “rewrote the rules of war.”

Maybe so. There were plenty of novel elements to Ukraine’s “Operation Spiderweb,” which destroyed a dozen or more large Russian military aircraft—including bombers capable of carrying nuclear weapons—across the length and breadth of Russia, using drones launched from containers positioned near Russian airfields.

But in my field of nuclear deterrence, the attack was enlightening in another way: It reinforced principles that have been hiding in plain sight for years. For US nuclear strategists, the attack yielded at least four crucial lessons.

1. The risk of nuclear escalation over conventional attacks is exaggerated

Ukraine’s drone strikes were a blow to the widely held belief that nonnuclear military attacks on nuclear-relevant facilities or assets will lead automatically to uncontrollable nuclear escalation.

As I have argued previously, too many analysts of nuclear affairs appear to overweight the risk that if a nuclear-armed country is facing attacks on nuclear-relevant locations or assets by conventional weapon systems or dual-capable ones (systems relevant to both nuclear and conventional missions), then that country will feel overwhelming pressure to escalate to the use of nuclear weapons, perhaps even before assessing the extent of the attacks. This logic looks convincing. But it is empirically unsupported.

Russia may yet respond to the Ukrainian attack. But Russian nuclear retaliation in Ukraine seems unlikely, even after Russia lowered its stated threshold for nuclear use in September 2024. Ukrainian drone strikes on multiple Russian bomber bases would seem to be exactly the sort of attack that would trigger Russia’s lower threshold for resorting to nuclear weapons. Yet no such use has materialized.

To be clear, nuclear-armed states may well resort to nuclear use to coerce an end to military operations that could lead to unacceptable costs, such as the destruction of a large portion of that state’s nuclear arsenal. But last weekend’s operation is further evidence that attacks falling short of this threshold are not likely to trigger a major nuclear exchange.

2. Nuclear forces are only as dependable as their defenses

Ukraine’s attacks vividly illustrated the vulnerability of the US bomber fleet, which is often sitting on the tarmac. Drone threats are just one of a variety of air and missile threats to the US homeland, though certainly one that has received less attention in the strategic forces community. The 2023 Congressional Strategic Posture Commission Report and a recent Atlantic Council study on missile defense both concluded that the United States must enhance its air and missile defense. In particular, it must pay attention to countering coercive attacks on civilian and military infrastructure, as well as on US nuclear forces.

Reflecting on the Ukrainian attacks, General Thomas Bussiere, the commander of US Air Force Global Strike Command, said at an Atlantic Council event on June 5 that the Air Force already deploys counter-drone systems around strategic air bases. The strikes on Russia this past weekend underscore that these efforts should improve and expand, perhaps under the aegis of the Trump administration’s proposed “Golden Dome.” This active defense must be completed by improved sensing, better coordination among responsible agencies, and the advancement of passive measures, such as the use of hardened shelters in peacetime, as well as air alerts and backup airfields in conflict or crisis.

3. Drones should be factored into nuclear-capabilities planning

There’s another truism in nuclear affairs rendered all the truer by last weekend’s operation: Advanced and emerging technologies can powerfully complement nuclear weapons in holding an adversary’s strategic nuclear forces at risk.

This possibility is especially tantalizing as US nuclear strategists grapple with the fact that China’s nuclear-weapons arsenal is expected to reach near-parity with the US nuclear arsenal in the mid-2030s. Because holding at risk an adversary’s nuclear weapons is an important part of how the United States deters nuclear war, the growth in China’s nuclear arsenal puts pressure on the United States to increase the size of its own nuclear arsenal. Advanced conventional weapons might complement these forces or even reduce the extent to which the United States will need to expand its nuclear forces. Perhaps drones could play a part in that equation.

4. Special forces should be at the center of major power competition

As my Atlantic Council colleagues have argued in recent reports, US special operations forces, which have been occupied with counterterrorism and counterinsurgency in the Middle East for two decades, can play an important role in US competition with major powers such as Russia, marking a return to their Cold War-era roots. Ukraine’s attack on Russian bombers is best understood in the context of a long history of operations behind enemy lines to disrupt airfields.

Ukraine’s Operation Spiderweb was certainly daring and will reduce the capacity of Russia’s long-range aviation for some time. More than marking a new chapter in the history of warfare, however, the strikes should spur the US government to address the vulnerabilities and opportunities that nuclear strategists have focused on for years.

Mark J. Massa is the deputy director for strategic forces policy in the Forward Defense program of the Scowcroft Center for Strategy and Security at the Atlantic Council.

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Dispatch from Kyiv: Ukraine is putting new pressure on Russia. Will Trump follow?

John E. Herbst — Fri, 06 Jun 2025 20:25:48 +0000

This is part of a series of regular assessments of the efforts, spearheaded by the Trump administration, to achieve a negotiated end to Russia’s war on Ukraine. Read last week’s edition here.

KYIV—I arrived in Ukraine’s capital on June 1, several hours after news broke of the country’s successful destruction of advanced Russian bombers—TU-22s and TU-95s—and Russia’s most advanced intelligence plane, the A-50. Over the next two days, I had numerous meetings with senior Ukrainian officials, politicians, and civil society activists. The strike was a major morale boost across the board, though some of the Ukrainians I spoke with still worry whether the Trump administration will continue to supply military intelligence and equipment to Ukraine; others are optimistic that Trump will not let Russian President Vladimir Putin bamboozle him.

In the near term, the spectacular Ukrainian operation will have a major impact on Russia’s ability to strike from the air at Ukrainian civilian and military targets. It has also bolstered the nuclear security of the United States and its allies by taking out as much as 34 percent of Moscow’s nuclear-capable bomber force. But perhaps the greatest impact of the strike extends to the diplomacy to end the war, and in particular to the calculations of the Trump administration. That is because the strike undermined the common perception, including in the White House, that time was on Putin’s side and Russia would ultimately overwhelm Ukraine.

How has that big idea played out this week? It is notable that the only immediate reaction to the strike from Trump world came from outside actors, many of whom have shown little understanding that the Kremlin considers the United States to be its principal adversary. Some in this cohort have even naively argued that the United States has no stakes in its aggression against Ukraine. Trump allies Steve Bannon and Mike Flynn, for example, claim that Kyiv’s strike undermines Trump’s diplomacy to end the war. It is therefore time, in Bannon’s phrase, for the United States to “pull all support” for Ukraine. It should be noted that this was not a reflection of Trump’s policy. It was an attempt by some in his circle to influence that policy.

But Trump has not moved in that direction. In fact, the White House reaction to the audacious operation has been notably nuanced. The first word from the White House—almost a day after Ukraine’s “special military operation”—was that Ukrainian President Volodymyr Zelenskyy had not informed Trump of the impending action. There was no real comment on the action itself.

Reading between the lines with Putin and Merz

The next step was Trump’s June 4 phone call with Putin. In a Truth Social post afterward, Trump noted that it was a good call, but the Russian president was very angry about Ukraine’s attack and would have to retaliate. Trump critics understandably complained that there was no indication that the US president had tried to dissuade Putin from doing so—although the next day, the Washington Post reported that Trump claimed to have told Putin not to retaliate. In any case, Trump chose not to characterize the Ukrainian action.

That task was left to Trump’s special envoy for Ukraine, Keith Kellogg, who in a terse public statement on June 4 noted that the attack on Russia’s nuclear strike capacity could be considered escalatory. This was essentially a performative smack on the knuckles for Kyiv. More relevant indications of Trump’s reaction and inclinations were leaked to the press on background. While expressing to his staff his frustration with both Putin and Zelenskyy, Trump also recognized the audacity of the Ukrainian operation, calling it “badass,” according to Axios. Still, Trump reportedly lamented that it would slow down movement toward a cease-fire.

Further indications of Trump’s outlook came June 5, when he met with Friedrich Merz, the new German chancellor. Merz’s objective, of course, was to strengthen Trump’s resolve to maintain support for Ukraine (and to maintain the US commitment to NATO, including keeping US troops in Germany). In that meeting, Trump said it seems that Putin wants all of Ukraine, an important sign that he is finally understanding that the Russian leader himself is the obstacle to the administration’s efforts to end the war.

All of this is of far greater importance to the diplomacy surrounding the war than the second meeting of Ukrainian and Russian negotiators in Istanbul on June 2. That meeting went as expected. On the plus side, there was another agreement on a limited prisoner exchange. On the question of a cease-fire, the Russian side finally presented its formal terms. Those terms are for a vindictive, victor’s peace. Ukraine would be required not just to declare neutrality and demilitarize; it would also have to hand over to Russia all the territory in the eastern Ukrainian oblasts—including areas currently controlled by Kyiv. Moscow’s terms were likely on Trump’s mind as he discussed Putin’s policy toward Ukraine with Merz.

Whither the sanctions bill?

Trump’s clearer understanding of the Putin problem and his new respect for Ukraine’s military capabilities—“badass” being a backhanded but clear compliment—is a plus. But it has yet to yield a stronger policy from the White House.

Restive Republicans in Congress have been chafing for months at Trump’s reluctance to do what he promised: to bring pressure on the side blocking peace. Taking a leading position on this, Senator Lindsey Graham (R-SC) along with Senator Richard Blumenthal (D-CT) proposed a sanctions bill in early April with fifty cosponsors. That bill now has eighty-two cosponsors. Last week, Graham said that he thought the bill would move forward in the Senate this week. House Speaker Mike Johnson supports the effort for tough sanctions. Strong national security Republicans seem to believe that Ukraine’s successful June 1 strike is making it more likely that Congress will move on the sanctions bill and that the United States will help supply Ukraine with additional military equipment. Deft Ukrainian diplomacy on Capitol Hill this week—led by Zelenskyy’s chief of staff, Andriy Yermak—has further encouraged this sentiment.

Yet it is still not clear that the administration will move. The Wall Street Journal reported on June 6 that the White House asked for the sanctions bill to be watered down, and Trump indicated in his meeting with Merz that he is considering, for some unknown reason, sanctioning both sides. This means, at a minimum, some delay as Graham, Johnson, and other advocates try to work out their differences with the White House. It might also mean that Trump cannot bring himself to punish Putin.

That can only strengthen Putin’s conviction that Trump will eventually allow Russia to gobble up Ukraine. Reports that the Pentagon, with a leadership that is energetically trying to diminish ties with Ukraine, is transferring desperately needed anti-drone technology from Ukraine to US forces will also be read in the Kremlin as a sign of US weakness.

Ironically, Trump’s success at reaching a sustainable end to the war in Ukraine depends on the efforts of those advocates for pressure on Russia. Kellogg seemed to be making this point in a June 6 statement that the Ukrainian special operation could be a forcing function for peace. If, as Trump admitted, Putin’s goal is not a durable peace but to seize Ukraine, then the only real way to end the fighting is to make it very uncomfortable for Putin to continue fighting. Ukraine’s June 1 attack was a step in that direction. Strong US action in the form of sanctions and military supplies can drive that point home. Without that, the US president does not keep his long-stated promise to bring a stable peace to Europe.

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

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The search for safe assets

Hung Tran — Fri, 06 Jun 2025 17:56:40 +0000

The search for safe assets has become acute amidst economic uncertainty and financial market stresses triggered by the tariff war and heightened geopolitical tension. High-quality government bonds have played an important role as anchors in the portfolios of central banks’ reserve assets, as well as other large and long-term institutional investors such as pension funds and insurance companies. High-quality government bonds have also been in demand to serve as collateral in credit transactions, in part because Basel III financial regulations have incentivized banks to lend against collateral to reduce risk weights when calculating their capital requirements.

At the same time, the quality of government bonds issued by developed countries, mainly the United States, has been questioned. Developed countries face fiscal pressures reflecting demands for higher government spending on defense, infrastructure, and other needs, while their budget deficits and government debts are already at high levels.

The ensuing search for safe assets has come up against the fact that there are no obvious alternatives to US Treasuries. Efforts to deal with the problems of fiscal deterioration in major countries by diversifying safe asset portfolios could lead to market volatility, posing a risk to global financial stability.

US dominance in the global bond market

The global bond market is estimated to be about $140 trillion, dominated by the United States, which amounts to $55 trillion—or 39.3 percent of the total. The bulk of the US bond market is made up of US Treasury securities marketable to the public. These securities are worth $28.8 trillion, and amount to the biggest and most liquid bond market in the world. A total of $9 trillion, or 31.2 percent are held by foreigners and $4.2 trillion, or 14.6 percent, are held by the Federal Reserve. Together with intragovernment holding of US Treasuries totaling more than $7 trillion, US government debt has reached $36 trillion, or 124 percent of US gross domestic product (GDP)—doubling the debt-to-GDP ratio of 62 percent posted in 2007 prior to the global financial crisis.

Moreover, the US fiscal outlook has worsened. The administration’s budget package—named the One Big Beautiful Bill Act—has been approved by the House, and is currently under the Senate’s consideration. It makes the 2017 tax cuts permanent and, if enacted, would increase the $1.8 trillion budget deficit in 2024 by $2.4 trillion between 2026 and 2034. These estimates, provided by the Congressional Budget Office, would raise the amount of government debt in the process. The United States’ deteriorating budget deficit trajectory has prompted international investors to share concerns about the sustainability of US public finance, which could lead to upward pressure on yields to compensate for the higher perceived risk. This has been manifested by the fact that, since recent stock market turmoil following the announcement of reciprocal tariffs on April 2, 2025, yields on US Treasuries have risen by forty basis points. The US dollar also weakened by 4.2 percent. If international investors flock to US Treasuries as safe havens, Treasury yields would have risen and the US dollar would have become stronger.

No good alternatives to US Treasuries

The deterioration of the US fiscal outlook has put international investors, especially foreign central banks, in a quandary. There is no good alternative to US Treasuries as safe reserve assets. Other major countries have also been burdened with high budget deficits and public debt levels—albeit generally less acute than the United States. Those markets that have lower deficits are smaller and less liquid than the US Treasury market, making them less attractive as reserve assets.

The euro has been frequently mentioned as an aspirant to compete with the dollar—a point recently emphasized by Christine Lagarde, president of the European Central Bank (ECB). However, the public bond markets dominated by the euro are fragmented and collectively smaller than the US Treasury market. They are able to supplement but not replace US Treasuries.

The European Union (EU) has launched three programs to issue joint Eurobonds within its budgetary authority: SURE, a program to support employment during Covid-19, for up to €100 billion; NextGenerationEU, a stimulus package to grow Europe’s economy, for up to €712 billion; and the European Financial Stability Mechanism, which provides assistance to member states in financial distress, for up to €60 billion. To date, about €468 billion ($533 billion) worth of Eurobonds are outstanding—just big enough to be an attractive niche market segment.

The euro area (EA) member states have a combined government bond market of more than €10 trillion ($11.4 trillion), of which about 35 percent is held by the ECB and 22 percent is held by foreigners. Trading, especially by hedge funds, has concentrated on the German, French, Spanish, and Italian markets. However, the EA market is fragmented into national markets, each of which is shaped by different and often divergent domestic economic and fiscal circumstances.

The UK government (gilt) bond market is fairly substantial at £2.6 trillion ($3.5 trillion), with about 30 percent held by foreigners.

The Japanese Government Bond (JGB) market amounts to $7.8 trillion or 250 percent of Japan’s GDP. The Bank of Japan (BOJ) holds 52 percent of the JGB market due to its massive JGB purchases, though the BOJ has been scaling back its purchasing volume while Japan emerges from deflation. Along with prospects of substantial borrowing needs by the Japanese government, this has pushed up yields and stymied demand from foreign investors who already account for only 6.4 percent of the JGB market. Finally, the Chinese bond market—at $21.3 trillion—is the second biggest in the world after the US market. However, the bulk of the public bond segment of $14.4 trillion is in bonds issued through local government financing vehicles, which are fragmented and illiquid. Central government bonds only account for $3 trillion. Foreign investors take up only 7 percent of the Chinese government bond market. Overall, the lack of free convertibility of the renminbi and the closed capital account have rendered Chinese government bonds not completely suitable as safe assets for global central banks.

Some central banks have purchased substantial amounts of gold in recent years to hedge against economic uncertainty and geopolitical tension. This has helped push the price of gold up 42 percent over the past year to record highs around $3,300 per ounce. As a result, the average share of gold at market values in global centeral bank reserves has reached 15 percent. It’s unlikely that this share will continue to rise much further in future, given the limited supply of gold. The costs of holding it also include lack of interest earnings, storage and transportation costs, and the inconvenience in using gold as means of settling international transactions.

Conclusions

The deteriorating fiscal outlook of major countries, especially the United States, has made safe assets more difficult to find. Going forward, there will likely not be an effort to replace US Treasuries with other government bonds—there is simply no viable alternative. Instead, a trend toward diversification to better manage heightened sovereign and credit risks on what used to be thought of as risk-free assets is probable. More frequent portfolio restructuring and the substitution necessary for diversification measures would add to market uncertainty and volatility, at a time when both measures have already been elevated by the tariff war and geopolitical tension. This trend would increase risk to global financial stability.

In particular, the share of the US dollar and US assets, such as Treasury securities in global safe asset portfolios, will likely decline gradually over time as international investors move to diversify their portfolios. When looking at the composition of global central bank reserves, this development is consistent with the gradual decline of the dollar from 72 percent in 1999 to 57.8 percent in the fourth quarter of 2024. The trend was not in favor of any other major currency such as the euro, whose share has been stable around 19.8 percent in recent years, but to a variety of nontraditional reserve currencies. If the world’s central banks were to maintain a neutral allocation to US Treasury securities in their reserves portfolios, that would be 36 percent—the share of US Treasuries in the global government bond market totaling $80 trillion.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s Geoeconomics Center and senior fellow at the Policy Center for a New South; and former senior official at the Institute of International Finance and International Monetary Fund

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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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G7 leaders have the opportunity to strengthen digital resilience. Here’s how they can seize it.

Sara Ann Brackett, Coley Felt, Raul Brens Jr. — Fri, 06 Jun 2025 17:10:35 +0000

The 2025 Group of Seven (G7) Leaders’ Summit in Kananaskis, Alberta, Canada, on June 15-17 will take place amid a growing recognition of the importance of digital resilience. This is especially apparent in Canada, the summit’s host country and current G7 president. Following his election win, Canadian Prime Minister Mark Carney announced the creation of a new Ministry of Artificial Intelligence and Digital Innovation. This bold step positions Canada to champion a digital resilience agenda at the summit that unites security, economic growth, and technological competitiveness while strengthening the resilience of its partners and allies.

The G7 must seize this opportunity to advance a coherent, shared framework for digital policy, one that is grounded in trust, reinforced by standards, and aligned with democratic values. To do so, it can build on some of the insights from the Business Seven (B7), the official business engagement group of the G7. The theme of this year’s B7 Summit, which was held from May 14 to May 16, in Ottawa, Canada, was “Bolstering Economic Security and Resiliency.” The selection of this theme emphasized the importance of defending against threats and enhancing the ability of societies, governments, and businesses to adapt and recover.

In the spirit of that theme, the Atlantic Council’s GeoTech Center, in partnership with the Cyber Statecraft Initiative and the Europe Center, convened a private breakfast discussion alongside the B7 in Ottawa on May 15. The roundtable brought together government officials, business leaders, and civil society representatives to discuss how digital resilience can be strengthened within the G7 framework. The participants laid out foundational principles and practical approaches to building digital resilience that support economic security and long-term competitiveness. As G7 leaders gather for the summit in Kananaskis later this month, they should consider these insights on how its member states can work together to bolster their digital resilience.

1. Develop a common language for shared goals on digital sovereignty

When developing a common framework, definitions (or taxonomy) are critical. Participants emphasized that shared vocabulary is a prerequisite for meaningful cooperation. Discrepancies in how countries define concepts such as digital sovereignty can lead to fundamental misunderstandings in critical areas such as risk, which creates friction and confusion.

For example, a G7 country might frame sovereignty in terms of national control over infrastructure while another country, such as China, defines it as regulating the digital information environment. In that case, this misalignment will hinder cooperation from the outset. Specifying precise definitions of each government’s goals, including “trust,” “resilience,” and “digital sovereignty,” would enable governments and industry to align on priorities and respond more effectively to emerging standards. This definitional clarity is crucial for policymaking and a prerequisite for compliance, implementation, and interoperability across borders.

2. Build on existing multilateral and regional frameworks

Participants stressed the importance of building on existing progress toward digital resilience, both in and out of the G7, rather than discarding it in pursuit of novelty. The G7 and its partners already possess a strong foundation of digital policy initiatives. Key milestones such as the Hiroshima AI Process, launched under Japan’s 2023 G7 presidency, established International Guiding Principles and an International Code of Conduct for the development and use of artificial intelligence (AI) systems, which included frontier models. Prior to the Hiroshima AI Process, several consecutive G7 Summits committed to developing the data free flow with trust framework, which prioritizes enabling the free flow of data across borders while protecting privacy, national security, and intellectual property.

Beyond the G7, participants cited European Union (EU) partnerships as examples of forward-leaning policy environments that balance innovation with safeguards. These included the EU AI continent action plan, which aims to leverage the talent and research of European industries to strengthen digital competitiveness and bolster economic growth, as well as Horizon Europe, the EU’s primary financial program for research and innovation.

With these partnership frameworks already in place, G7 leaders should build on existing work and avoid seeking to design unique solutions that may become time-consuming—particularly when it comes to gaining political buy-in. Even in areas like AI and the use of data, where policymakers have observed rapid changes since last year’s summit, the B7 discussion participants emphasized that governments can leverage work they’ve already completed in designing and implementing existing standards. If prior technical standards and regulations are inapplicable or insufficient, policymakers can still learn lessons from an in-depth assessment, including by taking note of where they’ve fallen short of their goals.

3. Start new initiatives with small working groups and pilot projects

Ensuring digital resilience requires managing inevitable trade-offs between national security, economic vitality, and open digital ecosystems. As one participant remarked, “the digital economy is the economy,” so policies shaping cyberspace must consider both national security and economic impacts. The G7 provides a platform for frank discussions among allies and partners about how to get these trade-offs right. But waiting for buy-in from all like-minded partners risks missed opportunities in the short term.

Participants noted that by starting with smaller forums, policymakers can build consensus that can lead to real progress. Pilot projects and working groups among smaller clusters of G7 countries could build momentum and inform scalable solutions. Participants emphasized that despite the contentious nature of some of the issues surrounding digital resilience, such as protectionism and market fragmentation, G7 governments are operating with a shared set of values. These values can motivate collaboration across the G7 on the many areas of common ground they already share, but they can also provide the basis for projects among smaller groups within the G7 to get new ideas off the ground.

A pivotal summit for digital resilience

As G7 leaders meet in Kananaskis and work toward a common framework that balances digital security and economic growth, a few key lessons can be garnered from this B7 meeting. G7 member states should prioritize developing a common taxonomy and building on the progress made on digital resilience both inside and outside the G7, all while remaining responsive to shifting geopolitical dynamics.

Disagreements among member states should be viewed not as a barrier, but as evidence of a maturing policy landscape. Constructive tension can drive refinement so long as partners are clear about their priorities. The G7’s unique value lies in its ability to forge alignment among diverse actors. False consensus only delays progress. It will take transparency, specificity, and trust to move the digital resilience agenda forward.

Sara Ann Brackett is an assistant director at the Atlantic Council’s Cyber Statecraft Initiative.

Coley Felt is an assistant director at the Atlantic Council’s GeoTech Center.

Raul Brens Jr. is the acting senior director of the Atlantic Council’s GeoTech Center.

Keeping China at bay and critical minerals stocked: The case for US-Africa defense collaboration

Aleksandra Gadzala Tirziu — Fri, 06 Jun 2025 15:02:47 +0000

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The United States is ill prepared to confront the challenges of an increasingly hostile global strategic environment. A coordinated coalition of adversarial states is working to dismantle the US-led global order, seeking to replace it with one defined by their ambitions and autocratic principles. At the forefront of this effort is China, which is rapidly accelerating its military capabilities and expanding its defense industrial base (DIB) to field sophisticated weapons systems designed to deter the United States globally and secure its goal of national rejuvenation. Aligned with China are Russia, Iran, and North Korea—forming an increasingly unified axis of authoritarians steadily advancing toward this objective. Compounding these challenges are increasingly frayed traditional US security alliances, notably in Europe, that leave the United States further exposed.

The most effective strategy to contend with this evolving threat landscape is through robust preparedness—both immediate and long term. Against this background, US and allied attention has increasingly turned to Africa. Africa holds one-third of the world’s known mineral reserves, including 80 percent of platinum and chromium, 47 percent of cobalt, and 21 percent of graphite.

Of the fifty minerals identified as critical by the US Geological Survey (USGS), thirty-two are found in Africa. US policymakers have therefore begun to explore partnerships with African countries to secure these resources. Yet, despite several promising initiatives, the United States still lacks a coherent and comprehensive policy for engagement—particularly one that can compete with the entrenched influence of the axis of authoritarian states, notably Russia and China, in the continent’s mining industry.

By supporting African nations in the development of their domestic mineral processing capabilities, the United States could enable them to retain a greater share of their mineral wealth and build self-sufficiency in defense. Such efforts could also diminish China’s influence across the continent. For the United States, developing these capabilities could secure a reliable source of critical minerals.

This report begins to lay the groundwork for such an effort by:

Identifying the defense capabilities the United States should prioritize to remain competitive in the evolving global strategic environment and the critical minerals necessary to support them.
Charting Africa’s critical mineral resources relevant to US defense needs and assessing the shifting defense postures of African nations, particularly where the development of their weapons systems and security objectives aligns with US interests.
Underscoring the importance of US support for building Africa’s mineral processing infrastructure, while addressing the structural barriers that have hindered progress so far.
Advancing targeted recommendations for US policymakers to operationalize such efforts and redefine US-Africa relations for today’s global challenges.

View the full report

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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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Even as courts step in, Trump still has plenty of tariff options. US trading partners should intensify negotiations.

Brian Janovitz — Fri, 06 Jun 2025 14:58:33 +0000

US President Donald Trump’s tariff regime hit a legal stumbling block last week, with rulings by the US Court of International Trade in New York and the US District Court in Washington, DC. The rulings invalidated tariffs Trump has imposed under the International Emergency Economic Powers Act (IEEPA), though those tariffs remain in place for now after the court injunctions were stayed.

Some US trading partners may be tempted to celebrate and retreat from or slow the pace of negotiations with the United States, perhaps to wait and see how appellate courts rule. But these US partners should not breathe easy, as Trump can impose substantial tariffs under other authorities that are less susceptible to legal attack—with Section 301 of the Trade Act of 1974 likely foremost among these authorities. And, importantly, if tariffs are imposed under this authority, then they will be more difficult to reduce or remove in response to positive negotiations. Therefore, trading partners should see the recent court decisions as an opportunity to reach a more stable agreement with perhaps a more eager counterpart, rather than a justification to escape engagement with the Trump administration.

When Trump announced IEEPA tariffs in early April on imports from nearly every country around the world, virtually all of them lined up to seek an agreement with the United States that would reduce or eliminate these “reciprocal” tariffs. They joined Mexico and Canada, who had already been engaging on separate IEEPA tariffs that were announced in early February in response to drug trafficking. Since then, the United States and United Kingdom have announced a high-level framework, and substantial progress reportedly has been made with India, Vietnam, and others. More difficult conversations with the European Union are ongoing. And after a series of escalations, China too reached a temporary truce, reducing the reciprocal tariffs on China-origin goods to 10 percent for the time being. Goods from Mexico and Canada also received a reprieve of sorts, with the Trump administration quickly exempting goods entitled to preferential treatment under the rules of the US-Mexico-Canada Agreement (USMCA).

The president’s use of IEEPA to impose tariffs, which two courts ruled unlawful, was novel. While IEEPA is frequently invoked to institute sanctions, it had never previously been used to impose tariffs. But other congressional delegations of authority exist—namely, Section 301 and Section 232 of the Trade Expansion Act of 1962—and legal challenges to their use to impose tariffs have largely been unsuccessful.

During his first term, for example, Trump imposed broad-based tariffs on China-origin goods under Section 301, following an investigation into China’s unfair intellectual property-related trade practices, including forced technology transfer. US President Joe Biden expanded those tariffs, and they remain in place today. Trump also imposed tariffs under Section 232 on steel and aluminum from around the world during his first term. Those tariffs remained throughout the Biden administration with some country-specific modifications or product-specific exclusions, and Trump strengthened and expanded those tariffs in the early days of his second term.

The Trump administration likely will use Section 232 as the basis for some sector-specific tariffs. Already, the Department of Commerce is conducting Section 232 investigations on a hefty list of imports, from timber and lumber to copper and trucks; from semiconductors and semiconductor manufacturing equipment to pharmaceuticals and pharmaceutical ingredients; and from processed critical minerals and derivative products to commercial aircraft and jet engines. But I will focus on Section 301 because that is the more likely authority if Trump is looking to replicate the IEEPA tariffs, or more precisely, the leverage those tariffs afforded his negotiators.

How does Section 301 work?

Section 301, implemented by the US Trade Representative (USTR), investigates whether acts, policies, or practices of a particular country are unjustified, unreasonable, or discriminatory, and burden or restrict US commerce. By statute, the investigation must conclude within one year, but there is no minimum amount of time it must take. In the past, USTR has published a detailed report outlining its findings and evidence. This helps legitimize the findings and aids in discussions with allies and partners around the world by socializing and substantiating the concerns. But it is not required, and it could be slimmed down or scrapped in pursuit of speed.

There are, however, limits to how quickly a Section 301 investigation can proceed. USTR must take public notice and comment on the substance of the investigation and hold a hearing if requested. If there is an affirmative finding, USTR must also subject any proposed remedial actions (e.g., tariffs) to public notice and comment. And, under a 2022 CIT ruling that such determinations are subject to the Administrative Procedures Act, USTR must take the time to provide in writing its reasoning for rejecting substantial lines of argument raised by commenters. Once implemented, Section 301 tariffs can be modified if “appropriate,” a largely untested but no doubt expansive standard that suggests courts will show a great deal of deference to the USTR. But any proposed modifications too must be subjected to a notice and comment process. Trump almost certainly opted for IEEPA in the first place because it obviates the need for such a time-consuming process.

Moreover, unlike the global framing of Trump’s IEEPA tariffs and Section 232 findings, Section 301 focuses on the acts, policies, or practices of one particular country. There are two ways to broaden its scope to approximate the more far-reaching impact of the invalidated IEEPA tariffs. First, USTR could simply initiate a series of parallel Section 301 investigations into a common concern among several countries, as it did in 2020 with respect to digital services taxes of eleven different jurisdictions. Second, although it has never been used, Section 301 includes a provision that allows for remedies to apply on a “nondiscriminatory basis”—that is, globally—even though the investigation focused on the acts, policies, or practices of one particular country.

So, while Section 301 may entail more process and certain constraints, it provides a relatively straightforward pathway to broad-based tariffs. Notably, the statutory objective of remedies under Section 301 is the elimination of the investigated acts, policies, or practices. The statue explicitly states that the USTR is authorized to take action “against any goods or economic sector . . . without regard to whether or not such goods or economic sector were involved in the act, policy, or practice that is the subject of such action.” Thus, regardless of which unfair practices the USTR chooses to investigate, an affirmative finding would unlock broad powers to tariff any goods. And it closely resembles the “leverage” justification for tariffs that the CIT rejected as insufficient in the IEEPA context.

What Section 301 tariffs would mean for bilateral negotiations?

Trump has demonstrated a clear determination to alter terms of trade, and he has been equally committed to using tariffs not just as policy, but to shape and respond to negotiating dynamics. Should certain bilateral negotiations prove unsatisfactory, it is very likely that the Trump administration would pursue tariffs under a different authority like Section 301. US trading partners would be wise to try to avoid that result.

The speed that IEEPA enabled for imposing or increasing tariffs is a two-way street, meaning that the Trump administration could quickly employ removals, decreases, or exceptions in response to positive momentum in negotiations. Some may welcome the added process around Section 301 because it could slow the pace of change. But that same process would make Section 301 tariffs stickier once imposed. It could also create difficulty in comprehensively pulling down tariffs against a particular country should that partner make concessions the administration finds valuable but are not germane to the investigated acts, policies, or practices. The Section 301 and Section 232 tariffs from Trump’s first term have proven very durable.

What about other authorities to impose tariffs?

While Trump may proceed with sector-specific tariffs under Section 232, they are not a good fit for replicating the IEEPA tariffs because they focus on threats to national security from particular products. That makes it hard to tariff a broad range of products and limits flexibility to alter the scope or rate of tariffed products as negotiations and economic dynamics shift.

The CIT opinion pointed to Section 122 as an option to rectify goods trade deficits, but Section 122 tariffs are capped at 15 percent and can remain in effect for only 150 days. Those limitations severely undermine the leverage Trump covets.

Finally, the administration could attempt to invoke Section 338 of the Tariff Act of 1930 (often referred to as the Smoot–Hawley Tariff Act), which authorizes tariffs in response to a foreign country’s discrimination against US goods or the commerce of the United States. Section 338 not only predates the World Trade Organization, it predates the General Agreement on Tariffs and Trade (GATT), which first established the principle of most favored nation treatment in 1947.

Section 338 imposes no temporal limitation on tariffs, but it does provide for a maximum tariff rate of 50 percent. While it appears to require no real time-consuming investigation, it has never been used, and there are virtually no mentions of it anywhere in the public record after the establishment of the GATT. Thus, there is uncertainty from novelty, which is what did in IEEPA, at least for the time being. Moreover, the administration would need to make sense of how mechanically to apply this previously unused, nearly century-old authority. Given these uncertainties, the Trump administration may favor using this authority as a tacit threat in negotiations, but not actually invoking it and inviting judicial scrutiny.

The bottom line remains that Trump still has many tariff tools at his disposal and, if implemented, they may prove harder to pull back. Therefore, US trading partners would be better served to treat the recent court rulings as an opportunity to drive ongoing discussions to their conclusion. The uncertainty created by the court decisions, the time required to reasonably replicate a large swath of tariffs through other authorities such as Section 301, and the procedural constraints those other authorities impose on the president’s flexibility, should make the administration more eager to reach deals it approves of and that allow it to avoid those difficulties. Where trading partners remain engaged and determined, the urgency on both sides presents the best opportunity for a mutually agreeable deal, which will provide greater near-term predictability that all can celebrate.

Brian Janovitz is a partner at DLA Piper. He previously served as director for international economics at the National Security Council and National Economic Council and chief counsel for trade enforcement strategy and competitiveness at the Office of the US Trade Representative, where he led the Biden administration’s comprehensive review of Section 301 tariffs.

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.

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Trump’s Russia policy must be rooted in realism

Agnia Grigas — Thu, 05 Jun 2025 20:50:06 +0000

US President Donald Trump has recently changed his tone toward Russian president Vladimir Putin, suggesting that he has “gone crazy” and is “playing with fire.” This highlights the ongoing difficulties of negotiating with the Kremlin. While the Trump administration broadly favors a realist approach to international relations, a more pragmatic assessment of Russia’s capabilities and objectives could better equip the US to achieve its stated goal of bringing the war in Ukraine to an end.

Almost three months ago, Ukraine accepted a US proposal for a thirty-day unconditional ceasefire. So far, Russia has refused to do likewise. Instead, the Kremlin continues to demand a series of preconditions. Meanwhile, Russia has intensified its missile and drone strikes against Ukrainian civilian targets. When Trump recently backed Putin’s proposal for direct negotiations between Russia and Ukraine, the Russian leader then boycotted the subsequent Istanbul talks, sending only a lower-level delegation.

Within the Trump administration, key figures such as Vice President JD Vance, Secretary of State Marco Rubio, and Secretary of Defense Pete Hegseth have all articulated their support for a realist view of international relations. This implies sidestepping abstract ideological objectives and focusing on tangible power factors such as economic size, population, geography, and military strength.

The realist viewpoint is reflected in Hegseth’s assertion that Ukraine returning to its pre-2014 borders is “unrealistic.” It can also be seen in Trump’s statements that Ukrainian President Volodymyr Zelenskyy “does not have the cards” in negotiations with Russia, an assertion that seems far less certain in the wake of Ukraine’s successful recent strikes on Russia’s long-distance bombers.

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Some advocates of foreign policy realism argue that the US should seek to accommodate Russia, even at Ukraine’s expense. However, this approach tends to exaggerate Russia’s strengths, while underestimating the importance of the Kremlin’s imperial objectives and the relevant fact that Russian national security doctrine identifies the US as its principal adversary. A more comprehensive realist analysis of Russia reveals that, despite its assertiveness, Moscow’s power is in fact often overstated, while its appetite for compromise is limited.

Compared to the United States, Europe, and NATO, Russia simply does not “hold the cards,” to use Trump’s phrase. Its $2 trillion economy ranks outside the world’s top ten, trailing behind the US, China, Germany, Japan, India, and others. Although Russia has weathered sanctions, the prolonged war since 2022 has left its economy overextended and vulnerable.

The Russian population of 145 million is shrinking and ranks ninth globally, far behind the US and the collective European Union. Militarily, Russia’s large conventional forces have under-performed during the invasion of Ukraine while sustaining heavy losses. Russia’s $146 billion military budget, though substantial relative to neighboring states, pales in comparison to the $968 billion US budget in 2023, or even the collective defense spending of EU member states.

Russia remains a formidable nuclear power and frequently reminds the international community of this fact. Since the very first days of the Ukraine invasion in February 2022, Putin and other Kremlin officials have engaged in regular nuclear saber-rattling. But while Russia is the only nuclear power to make such threats, Putin has repeatedly failed to act when his red lines have been crossed by the Ukrainians, and has been publicly warned by his Chinese allies not to cross the nuclear threshold.

Since 2022, Russia has lost much of its energy leverage and is no longer Europe’s key energy supplier. Meanwhile, the United States has consolidated its position as a leading global energy exporter, particularly in liquefied natural gas (LNG). This is enabling Europe to diversify away from Russia while starving the Kremlin of vital revenue and geopolitical influence.

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In realist terms, Russia’s power surpasses that of its immediate smaller neighbors but falls well short of the US or the European Union as a whole. Countries in Northern, Central, and Eastern Europe view Putin’s ambitions through a realist lens based on centuries of painful experience with Russian imperialism. They understand that Putin’s current goal of reasserting Moscow’s dominance over the territories of the former Soviet Union and Russian Empire is deeply rooted in the Kremlin’s perception of Russian national interests.

President Trump should not fall into the same trap as his predecessors. Past US administrations, from George W. Bush onward, have sought to normalize relations with Moscow but have consistently underestimated Russia’s enduring imperialist objectives. In 2001, Bush famously called Putin “trustworthy” and said he has been able to “get a sense of his soul.” And yet before the end of Bush’s second term, Putin had become increasingly hostile to the West and had invaded Georgia. US President Barack Obama then pursued a “reset” in relations with Russia, only for Putin to invade Ukraine in 2014.

US President Joe Biden initially adopted a similarly optimistic stance toward Moscow, emphasizing the importance of predictable relations with Russia. In May 2021, Biden canceled sanctions on the Kremlin’s Nord Stream II gas pipeline. The following month, he met Putin in Geneva for a bilateral summit that was widely viewed as a further concession to the Russian leader. Less than a year later, Putin launched the full-scale invasion of Ukraine.

Looking back, it is clear that US policy toward Russia has often been shaped by the optimism of incoming administrations rather than a sober, realist understanding of Moscow’s longstanding ambitions. A deeper grasp of Russia’s objectives and capabilities could help the Trump administration, alongside European leaders, to negotiate a ceasefire in Ukraine and achieve a durable peace. Approaching the Kremlin from a position of strength, through the implementation of new sanctions on Russia and sustained military support for Ukraine, would be essential tools in securing that peace.

Agnia Grigas is senior fellow at the Atlantic Council and author of “Beyond Crimea: The New Russian Empire.”

Immediate steps that Europe can take to enhance its role in NATO defense

Franklin D. Kramer, Kristen Taylor — Thu, 05 Jun 2025 20:34:11 +0000

Key takeaways

Despite its three-year war against Ukraine, Russia has significantly reconstituted its forces and could pose a formidable threat to Europe in the near and medium term.
Europe needs to undertake a massive buildup of unmanned vehicles, has too few forces on the borders with Russia, cannot marshal the forces necessary to gain sea control without US support, and is highly vulnerable to cyberattacks on military-critical infrastructure.
Even if European nations commit to boost defense spending dramatically at the 2025 NATO summit, Europe needs to take immediate actions to strengthen deterrence while waiting for bigger investments to come online.

There are four steps that European nations should undertake in the near and medium term to enhance NATO’s deterrence and defense capabilities against the prospect of Russian aggression.

As the European Commission’s plan for strengthening European defense stated, “Russia will remain a fundamental threat to Europe’s security for the foreseeable future,” and one which requires a timely response inasmuch as “Russia has made it clear that according to their understanding they remain at war with the West.” Accordingly, as part of enhancing NATO defense, Europe needs to take prompt action to significantly increase:

the effectiveness of forces at its borders with or near Russia,
its capability for sea control,
the resilience of critical infrastructures necessary to defense operations, and
its defense industrial capabilities.

The importance of Europe taking such actions arises from a confluence of three factors: first, Russia’s willingness as demonstrated by its actions in Ukraine to undertake “major mechanized high-intensity warfare” to achieve its geopolitical aims; second, the challenges facing the United States military with the potential for conflict in the Indo-Pacific that could require resources that heretofore have been focused on Europe; and, third, decades of defense underinvestment by European nations that have left their militaries and defense industrial bases ill-prepared to engage in a sustained conventional conflict.

These concerns are significantly heightened because Russia, despite its more than three-year, ongoing war against Ukraine, has nonetheless been able to reconstitute its land forces and has fully maintained its air, naval, cyber, and space capabilities. In recent testimony to the Senate Armed Services Committee, Gen. Christopher Cavoli, NATO’s supreme allied commander, described Russia’s continuing reconstitution of its military forces:

Despite extensive battlefield losses in Ukraine, the Russian military is reconstituting and growing at a faster rate than most analysts had anticipated. In fact, the Russian army, which has borne the brunt of combat, is today larger than it was at the beginning of the war—despite suffering an estimated 790,000 casualties. . . . Within its air and maritime capabilities, Russia has sustained only minor losses in Ukraine. The Russian Aerospace Force currently retains over 1,100 combat-capable aircraft that include Su-57 stealth fighters and Tu-95 and Tu-160 strategic bombers. Aside from some losses in its Black Sea Fleet, the Russian Navy remains intact, with over 60 submarines and 42 surface vessels capable of launching nuclear-tipped Kalibr cruise missiles.

Moreover, in addition to maintaining its force structure, Russia has substantially enhanced its defense industrial capabilities. Again, per Cavoli:

Russia has expanded its industrial production, opened new manufacturing facilities, and converted commercial production lines for military purposes. As a result, the Russian defense industrial base is expected to roll out 1,500 tanks, 3,000 armored vehicles, and 200 Iskander ballistic and cruise missiles this year. (Comparatively, the United States only produces about 135 tanks per year and no longer produces new Bradley Fighting Vehicles.) Additionally, we anticipate Russia to produce 250,000 artillery shells per month, which puts it on track to build a stockpile three times greater than the United States and Europe combined.

Moscow is also marrying its expanded industrial prowess with more sophisticated technological capabilities. For example, Russia is investing significantly in, and having early success with, unmanned vehicle swarming capabilities.

Most significantly, Russia’s threatening activities are not limited to Ukraine. One key concern is that Russia has been building up its infrastructure near the borders of Finland and the Baltic states. As one report describes:

Some 100 miles east of its border with Finland, in the Russian city of Petrozavodsk, military engineers are expanding army bases where the Kremlin plans to create a new army headquarters to oversee tens of thousands of troops over the next several years. Those soldiers, many now serving on the front lines in Ukraine, are intended to be the backbone of a Russian military preparing to face off with the North Atlantic Treaty Organization, according to Western military and intelligence officials. The Kremlin is expanding military recruitment, bolstering weapons production and upgrading railroad lines in border areas. . . .

Most of the manpower expansion will take place in the Leningrad district, which faces Estonia, Latvia and Finland. Smaller brigades will nearly triple in size to become divisions of around 10,000 troops, according to Western military and intelligence officials. . . . Russia is planning to build new barracks and training grounds and to upgrade arsenals and railroad lines to accommodate the swelling troop numbers in and around Petrozavodsk.

It is not clear, of course, whether Russia would choose to attack NATO countries. But what is clear from Cavoli’s testimony is that “Russia’s willingness to employ brutal means in pursuit of its goals,” and that the “Russian regime has refashioned its military, economic, and social structures to sustain what it describes as a long-term confrontation with the West—systemic changes that illustrate Russia’s intention to confront us into the foreseeable future.”

Estimates vary as to when Russia could sufficiently reconstitute from its conflict with Ukraine to undertake an attack against NATO. The uncertainty is rooted in the fact that the duration of the Russia-Ukraine war is itself uncertain, with substantial efforts as of this writing being taken by the United States to bring the fighting to a halt. In that event, a report from Bruegel stated: “A significantly more challenging scenario for Europe would be an unlikely peace deal accepted by Ukraine. In such a scenario, Russia is likely to continue its military build-up, creating a formidable military challenge to all of the EU in a very short period, given current Russian production. The EU and allies including the UK and Norway would need to accelerate their military build-ups immediately and massively.

Specific predictions as to the time needed for full Russian reconstitution generally range from two to five years. Norway’s senior commander has stated that two to three years would suffice; Jack Watling of the United Kingdom’s Royal United Services Institute (RUSI) has noted the importance of “ensuring that the UK’s Armed Forces are contributing to a credible deterrence posture alongside European NATO allies by the end of 2027.” Other estimates fall into a three-to-five-year window.

Timing uncertainties—even at the higher end—should provide little comfort. As retired Maj. Gen. Gordon “Skip” Davis, a former deputy assistant secretary general at NATO, has warned, if Russia is given “two, maybe three to five years” to rebuild its forces while Europe fails to rearm at the same pace, European forces “would be at a significant disadvantage in a high-intensity fight.”

Such a scenario of NATO fighting at a substantial disadvantage is entirely plausible if Europe fails to take action. Most obviously, Russia is fully capable of large-scale warfare with its current capabilities. If full-scale conflict in Ukraine were to end, many of those capabilities could be directed against NATO—perhaps for a relatively limited operation such as against one of the Baltic countries, combined with nuclear threats to dissuade NATO from launching an effective response, or, with longer preparation, possibly a full-scale attack. Moreover, if the United States were facing or actually engaged in a conflict in the Indo-Pacific—keeping in mind that China’s President Xi Jinping has told his forces to be ready to succeed in a conflict against Taiwan by 2027—European nations should have the necessary capabilities to respond effectively against Russian aggression.

European nations are, of course, alert to these issues. As a consequence of the Russian threat, and amid growing concern over US commitments to the North Atlantic alliance, their combined defense budgets (including Canada) are now equal to just over 2 percent of their aggregated gross domestic product. Multiple nations are planning further increases: Poland expects to spend 5 percent of GDP in 2025; Germany recently voted to exempt defense spending from its “debt brake,” and the government announced support for defense spending (including relevant infrastructure and cyber capabilities) of 5 percent of GDP; France has set a target of 3.5 percent; and the United Kingdom has established a target of 2.5 percent of GDP by 2027 and 3 percent thereafter. For its part, the United States has called for “adopt[ing] a new 5-percent-of-GDP Defense Investment Plan,” which will be a central topic at the NATO summit in June.

Additionally, the European Union has determined to become a significant player in the defense arena. There is a newly created Commissioner for Defence and Space, and the EU is undertaking to provide 150 billion euros to member countries for defense. Further, the EU is planning to authorize countries to “trigger an emergency clause allowing them to make defense investments that push them over the bloc’s budgetary spending limits.” Exactly how much additional spending this would generate is not clear since, as of this writing, only twelve of the twenty-seven EU countries plan to use the emergency clause, and three of the larger countries—France, Italy, and Spain—do not plan to. Nonetheless, reporting on the European Commission’s tracking of member states’ defense plans indicates: “The European Commission is sticking to its estimate that member states could spend up to €650 billion on defence over the coming four years despite just half of governments requesting more fiscal headway to boost investments in the sector in time.”

As valuable as these actions are, it is important to recognize that even the most expansive budgetary plans do not translate into prompt, actual military capabilities. Initiatives must be transferred into actual budgets. Budgets must be approved by parliaments and then provided to defense ministries. Ministries must sign contracts. And companies with contracts must undertake production that often requires the scaling up of facilities.

Europe has a very long way to go on defense spending and capability requirements, with NATO asking “alliance members to raise their military capability targets by 30% as the organization seeks to boost its force posture, according to the [Supreme Allied Commander Transformation] in charge of defense planning at the 32-nation alliance.” Accomplishing these upgrades—to achieve a military posture credible and sufficient enough to offset Russian capabilities—demands a strategic approach that can be accomplished in a timely fashion and with a laser-like focus on the most critical and implementable capabilities. European nations are in a race against the clock and, consequently, must prioritize actions in the near and medium term to deliver capabilities that provide the greatest deterrence or, if necessary, actual military defense against a Russian threat.

To achieve this goal, NATO should focus on the four key challenges it currently faces. First, Europe has too few forces on the borders with Russia. Second, Europe, without US support, cannot marshal the forces necessary to gain sea control. Third, European nations are highly vulnerable to cyberattacks on infrastructure that is critical for sustained, effective military operations. Fourth, Europe’s defense industries lack the capacity to provide substantial amounts of effective weaponry in the near and medium term.

The NATO summit in June offers a forum for the alliance, and its constituent members, to adopt the necessary actions in response to these concerns. The required steps are set forth below.

I. Europe needs to promptly boost the efficacy of forces at its borders with or near Russia

As described above, Russia is in the process of enhancing its capabilities near the Baltic states and Finland. Doing so will provide the infrastructure and forces necessary for a conventional attack. But deterring or defeating such an attack—and especially repelling not expelling an attack—requires an effective NATO forward force posture. However, as Cavoli has stated:

Deterrence is most challenging in the land domain. Russia continues to reconstitute its conventional forces, and possesses advantages in geography, domain, and readiness. A conventional fight with Russia will be decided on land, and it would likely begin with a comparatively large Russian force positioned on a NATO border in order to negate traditional U.S. and NATO advantages in, and preferences for, long-range, standoff warfare. Therefore, NATO, including USEUCOM, must be postured to blunt Russia’s ability to rapidly mass numerically superior land forces.

To establish the necessary posture that Cavoli envisions, European nations should take the following actions, all of which can be accomplished in the near and medium term and all within existing or planned budgets. These actions should be undertaken irrespective of any decisions by the current US administration regarding American forces for Europe.

First, NATO European nations need to undertake a massive buildup of unmanned aerial vehicles. The use of drones has completely changed the nature of battle—as demonstrated by their role in the Russia-Ukraine war: Drones now kill more soldiers and destroy more armored vehicles in Ukraine than all traditional weapons of war combined, including sniper rifles, tanks, howitzers and mortars, Ukrainian commanders and officials say.

Just as the United States is planning for extensive use of unmanned vehicles in the Indo-Pacific should there be a conflict over Taiwan, and as Ukraine has done in its own defense, NATO needs to have a large and effective unmanned vehicle inventory available for use in the event of war with Russia. Ukraine is utilizing millions of unmanned vehicles. NATO needs a comparable supply. (A large-scale capacity for ammunition production is also needed—and discussed below in the defense industrial section.)

Second, NATO nations that border Russia and Belarus must establish effective obstacles—including land mines—to blunt a Russian attack. Useful lessons can be drawn from the Ukraine conflict, where mines have been utilized by both sides, and from the Korean context, where the defense of South Korea is supported by mines. Five Baltic nations—Finland, Estonia, Latvia, Lithuania, and Poland—are in the process of withdrawing from the Ottawa Treaty, which bars the use of anti-personnel mines (anti-vehicle mines are allowed). The sooner mines are emplaced on the borders with Russia and Belarus, the stronger NATO deterrence and defense will be.

Third, some European forces should move forward on NATO’s eastern flank. Germany is planning to have a brigade stationed in Lithuania by 2027. The United Kingdom should position one of its brigades currently in England to Estonia, where the UK already has a brigade headquarters leading a multinational force. In Latvia, where Canada leads a multinational force, France could bring forward a brigade. There could be arrangements other than mobilizing UK or French forces, but the key point is to add forward forces ready for a conflict if necessary. These actions will be necessary to meet the requirements of the NATO Force Model calling for “well over” 100,000 forces in up to 10 days and 200,00 in 10–30 days.

Fourth, equipment for European forces needs to be prepositioned in or near the Baltics and Poland to be readily available in the event of conflict. Prepositioning could be on land—as the United States currently does in several places in Europe—or the equipment could be placed on maritime prepositioning ships, again following the US approach which worldwide includes seventeen prepositioning ships.

Fifth, Europe needs to establish an equivalent to the US Civil Reserve Air Fleet (CRAF) pursuant to which US airlines “contractually commit to . . . augment Department of Defense airlift requirements in emergencies when the need for airlift exceeds the capability of military aircraft.” Creating a European equivalent would be particularly valuable for moving personnel to fall in on prepositioned equipment as recommended above.

In terms of the proposed prepositioning and the European version of CRAF, it is worth noting that while mobility by rail and motor vehicle has long been identified as a challenge for NATO, and while the European Union has undertaken a mobility initiative that has reduced a certain amount of bureaucratic obstacles, little has been accomplished to meaningfully enhance physical mobility. For just one example, the “completion of Rail Baltica, an alternative 870km (540 miles) north-south railway link [through the Baltic states], has been postponed from 2025 to 2030 and is facing massive cost overruns.”

II. Europe needs to enhance its capability for sea control

In the event of a conflict in the Indo-Pacific, United States naval forces would play a major role, thereby calling on much or all of those forces for the European theater to be engaged in that arena. European maritime forces would therefore need to make up the resulting gaps in NATO’s four seas—Baltic, Black, Mediterranean, and North—as well as in the Atlantic and in the Barents Sea. European navies have excellent capabilities, including, for example, French and UK aircraft carriers and submarines from multiple countries extending beyond France and the United Kingdom to Norway, Sweden, and Germany, among others. As an illustration of European maritime capabilities, Cavoli testified that NATO operations in spring 2025 relied solely on approximately 20 European ships, and he had “zero U.S. ships working for [him] as SACEUR.”

The issue for NATO maritime forces, therefore, is not so much one of upgrading capabilities but rather one of mass. European navies are relatively small. That challenge is susceptible to solution, however, by utilizing unmanned maritime vehicles as part of NATO’s maritime operations. The value of unmanned surface vehicles has been demonstrated by the United States through Task Force 59 operations in the Gulf and Windward Stack (now transitioned to Southern Spear) operations in Latin America, where USVs have provided highly effective surveillance capabilities critical to maritime domain awareness. More dramatically, Ukraine has utilized USVs successfully to attack and neutralize the Russian Black Sea Fleet.

NATO itself has recognized the value of unmanned capabilities and has begun operations with unmanned surface vehicles through its Baltic Sentry activity: “NATO launched Baltic Sentry, a new military activity in the Baltic Sea which aims to improve Allies’ ability to respond to destabilising acts. The activity brings together Allied navies, maritime surveillance assets, and private sector operators to ensure real-time situational awareness and rapid response capabilities across the Baltic Sea’s vulnerable zones.”

According to media reports, approximately twenty USVs are taking part in Baltic Sentry, and NATO has established Task Force X to further these capabilities. In a conflict, much larger numbers of unmanned vehicles would be required just for maritime domain awareness—and even larger numbers would be necessary if lethal capabilities were to be included, as Ukraine is successfully doing in its conflict with Russia. Accordingly, NATO must urge nations to substantially increase their unmanned surface fleets and to add unmanned lethal capabilities to the existing surveillance capabilities.

III. Europe needs to enhance the resilience of critical infrastructures fundamental to defense operations

NATO’s military capabilities are reliant on the effective operations of key critical infrastructures, including the electric grid, pipelines, transportation capabilities (rail, seaports, and airports), and information and telecom systems. Those systems, however, are susceptible to Russian cyberattack. As the recent US Annual Threat Assessment of the Intelligence Community states: “Russia’s advanced cyber capabilities, its repeated success compromising sensitive targets for intelligence collection, and its past attempts to pre-position access on U.S. critical infrastructure make it a persistent counterintelligence and cyber attack threat. Moscow’s unique strength is the practical experience it has gained integrating cyber attacks and operations with wartime military action, almost certainly amplifying its potential to focus combined impact on U.S. targets in time of conflict.”

While the assessment focuses on US infrastructure, comparable vulnerabilities exist in Europe. Moreover, given the “no limits” relationship between Russia and China, it is entirely possible that China’s very formidable cyber capabilities could be used in support of a Russian attack against NATO.

To be sure, in a conflict, cyberattacks are unlikely to be definitive in and of themselves. Ukraine has sustained many such attacks and has continued its defense against Russia. The operational technologies running critical infrastructure are resilient in the sense that they generally get disrupted but not destroyed by a cyberattack—and so can be reconstituted.

Still, disruption can have far-reaching and even catastrophic consequences—especially in the early days of a conflict when NATO would be engaged with bringing the necessary forces into place to repel a Russian attack. Critical infrastructures companies like port or railway operators do not have the expertise to respond to a high-level cyberattack on their own. A coordinated public-private set of actions would be required.

There are currently three overlapping sets of activities intended to bring about the necessary resilient cybersecurity for European private sector infrastructures:

NATO formally recognized the importance of cyber as an operational domain in 2016 and has undertaken a variety of initiatives since then. At the 2023 “Vilnius Summit, Allies . . . committed to more ambitious goals to strengthen national cyber defences as a matter of priority, including for critical infrastructures.” Most recently, NATO has said it will establish the NATO Integrated Cyber Defense Center to combine NATO’s existing cyber efforts and to engage industry partners from across the alliance as well. But this activity is not expected to be complete until 2028, and it is far from clear what degree of effort it will be undertake to ensure the resilience of key critical infrastructures.
Twenty-three of the thirty-two NATO nations are members of the European Union and therefore subject to the EU requirements on cybersecurity. EU regulations require that “essential and important entities should adopt a wide range of basic cyber hygiene practices, such as zero-trust principles, software updates, device configuration, network segmentation, identity and access management or user awareness, organise training for their staff and raise awareness concerning cyber threats, phishing or social engineering techniques.”
NATO nations have national cybersecurity programs, illustrated by France’s National Cybersecurity Agency [ANSSI] and the United Kingdom’s National Cyber Defence Centre. Each of these (and the other national cyber agencies) undertakes to provide support to private sector entities, though the specifics vary according to the country. For example, the NCDC “support[s] the most critical organisations in the UK, the wider public sector, industry, SMEs as well as the general public. When incidents do occur, we provide effective incident response to minimise harm to the UK, help with recovery, and learn lessons for the future.”

A recent analysis set forth a series of key actions required to protect critical infrastructures necessary for NATO military operations. None of those actions should wait until 2028 for NATO’s establishment of its Integrated Cyber Defense Center. Most crucially: “NATO ultimately needs a mechanism for planning and implementing cyber operational collaboration among alliance members and with the private sector.”

In establishing such collaboration, NATO should “prioritize involving private sector entities that have a key operational role, including unique insights that could support operational activity as well as direct operational capabilities.” Key aspects of such collaboration would include:

identifying and engaging the highest-priority infrastructure assets to ensure that they are sufficiently investing in resilience and have the highest level of government support in order to protect national security and economic productivity; and
establishing “sector-specific councils or working groups that include representatives from member states, industry partners, and relevant NATO bodies. These groups could facilitate the exchange of threat intelligence and best practices, enhance collective defense capabilities, and streamline coordinated responses to cyber incidents affecting multiple NATO countries.”

Additionally, a focus on technological capabilities will be important. As the report states, “New innovations can help to provide visibility into both operational and information technology, using artificial intelligence to quickly learn what normal activity looks like and detecting anomalous behavior.”

Beyond the foregoing recommendations, four further actions will be important:

NATO networks as well as key critical infrastructures should all strictly adhere to the requirements for “zero trust architectures” that reduce the abilities of adversaries to compromise network capabilities. As noted above, the EU’s NIS 2 standard calls for zero trust, but it will be critically important to ensure that this requirement is being effectively put in place (including for non-EU nations). Achieving that goal will require a certification system backed up by red teaming to determine whether the particular system is in fact highly capable.
NATO should be ready to undertake an expanded effort akin to the United States’ “Hunt Forward” activity, which works with allies and partners to identify and eliminate malware in key cyber systems.
It will be necessary for NATO not only to focus on cyber defense but also to undertake to disrupt the offensive cyber capabilities that Russia would utilize against the alliance. As previously described: “The actual implementation of NATO’s cyber offensive capabilities is by nations through a process described as the ‘sovereign cyber effects provided voluntarily by allies.’ . . [Utilizing] this approach allows allies to support NATO commanders with cyberattacks, but to keep to themselves (as they choose), the particulars of their offensive cyber methods.. . . . However, in conditions of conflict, the value of wartime cyber offensive operations may benefit from broader coordination with kinetic operations.”
NATO should also undertake to ensure that both its own information technology systems and those of the critical infrastructures upon which it relies transition to so-called “memory safe” software inasmuch as two-thirds and more of cybersecurity issues derive from the use of unsafe code. This cannot be accomplished immediately, but the United States Defense Advanced Projects Agency has developed the “TRACTOR” program which will automate the transition from the widely used C language to the memory safe RUST language.

Achieving the NATO-private sector collaboration described above, including the necessary operational and technological changes, is crucial for wartime success. However, while it would be difficult enough to establish an effective NATO-private sector cyber relationship, there are further significant obstacles given both the national and European Union cybersecurity roles. Analytically, a NATO-EU collaboration should be achievable since all share a desired outcome: resilience to a Russian (or Chinese) cyberattack.

Practically, however, NATO-EU collaboration often devolves into multiple meetings without consequential on-the-ground impact—and NATO is not without fault as its approach to national cyber requirements has been more aspirational than operational or technical. It will be a critical test for European defense—and for the leaders of NATO, the EU, and the private sector—to see if cyber resilience can in fact be enhanced or whether it will fall prey to bureaucratic dysfunctionality.

IV. Europe needs prompt enhancement of its defense industrial capabilities

Europe’s defense industrial base needs substantial and immediate enhancement. As the Draghi report on the future of European competitiveness stated, “The defence industry is too fragmented, hindering its ability to produce at scale, and it suffers from a lack of standardisation and interoperability of equipment, weakening Europe’s ability to act as a cohesive power across the bloc.” In recognition of these deficiencies, individual European allies and the European Union have pledged to enhance their defense production and capacity. But many of those much-needed initiatives will take time—to send sufficient demand signals to industry, to ramp up industrial capacity, and to field actual capabilities to ensure allied warfighters are appropriately equipped. Time, however, is a very expensive commodity for a Europe facing a reconstituting Russia. Speed is critically important.

In the short and medium term, European allies need a sober assessment of what capabilities must be fielded quickly and which capabilities can reasonably be produced on the continent. As a first step, Europe should look to Ukraine for lessons learned on how to ramp up defense production quickly and which capabilities have been particularly effective against Russia. As discussed above, unmanned vehicles play an outsized role on the modern battlefield, and maintaining robust ammunition stockpiles is essential. Ukraine mass-produces UVs—at a volume of four million drones annually. European allies should undertake to promote defense industrial initiatives that deliver unmanned vehicle capabilities at comparable scale as promptly as possible.

European allies could use the planned increases in defense budgets for investments in facilities for UV production. Such facilities can be stood up relatively quickly. By way of example, in the United States, Anduril is building a so-called “arsenal plant” to produce tens of thousands of autonomous weapons systems annually. The plant is expected to cost less than one billion dollars and to be operational in approximately eighteen months. Anduril is considering standing up a similar facility in the United Kingdom, but there are a number of European companies, such as Helsing in Germany or Leonardo in Italy, that could step up production of unmanned vehicles with the appropriate financial support. Investing in such facilities, and ramping up capacity across Europe, would dramatically strengthen Europe’s capabilities for any conflict on NATO’s eastern flank.

Alongside an industrial base in need of immediate and substantial enhancement, Europe is woefully low on artillery and ammunition rounds. The Ukrainian military uses approximately two million 155 mm artillery rounds annually. Through the European Act in Support of Ammunition Production, the European continent is supposed to scale up bloc-wide ammunition production efforts to produce two million 155 mm rounds a year. However, this much-hyped initiative has struggled to deliver on its promises—and even if it were able to reach this benchmark, it would still fall short of the necessary artillery production to sufficiently resource Ukraine and allied militaries while simultaneously replenishing allied stockpiles.

Europe struggles to produce the requisite number of artillery rounds, in part due to systemic industrial capacity issues but also because of a global shortage of TNT and gunpowder. In the short term, Europe should authorize around-the-clock industrial shifts in munition factories to ramp up production. Additionally, European allies should explore innovative opportunities to cast artillery rounds and other munitions rather than relying on the traditional method of forging, as proposed in a recent Center for a New American Security (CNAS) report. Forging is a time-intensive process compared to casting, which is more flexible and allows for recyclable metal to be molded in a shorter time frame. Europe has a significant foundry industry that could be redirected to produce artillery rounds and other munitions. Overcoming the global shortage of TNT will require strengthening strategic supply chains with like-minded allies and partners—most notably Japan. In the longer term, European allies should invest in new munition manufacturing facilities and expand the number of TNT production facilities beyond its reliance on the existing Nitro-Chem plant in Poland. To be sure, European munitions troubles extend beyond 155 mm artillery rounds. However, the clear vulnerabilities in this artillery production underscore the necessity for Europe to take prompt and innovative action to scale its munitions production.

The war in Ukraine has demonstrated that air defense is crucial to safeguarding civilians as well as critical infrastructure. Europe has tried to bolster its air and missile defense through collaborative procurement programs like the European Sky Shield Initiative and now the ReArm Europe plan. However, in the past, such initiatives have had mixed success, as progress stalls over political divergences. For example, France has been openly critical of the European Sky Shield Initiative for prioritizing the purchase of US weapon systems over European systems. As European allies continue to disagree on key issues related to security and defense, allies at the national level must forge ahead by buying individual capabilities that meet NATO’s interoperability standards to ensure these systems can be integrated across the alliance. Some would be US systems, such as Patriot, and some would be European, such as the NASAMS system by Kongsberg or the newer Franco-Italian SAMP/T NG.

Lastly, even if Europe were to adopt all of these approaches tomorrow—at both speed and scale—it would likely fall short of the needed industrial capacity to field sufficient capabilities to deter or defend against Russian aggression. In the short term, Europe must cooperate with its allies and partners, both in North America and the Indo-Pacific region, to fill its stocks and provide other capabilities. Despite political headwinds, the United States remains the strongest defense industrial partner of Europe: Its systems are widely used, trusted, and meet interoperability standards established by NATO. The remedy for laggard defense industrial capacity on both sides of the Atlantic is greater cooperation—not isolationism.

Where national governments diverge on approaches, European military planners and industry partners should explore other opportunities to strengthen industry-to-industry ties. This approach would match European defense industrial ambitions by supporting European efforts to meet short-term capability targets while also investing the necessary capital in facilities to grow a healthy and robust European defense industrial base in the long term. To this end, efforts to harness advantages on both sides of the Atlantic in the form of co-production and co-development facilities are heating up. For example, in December, RTX partnered with MBDA to open the first Patriot missile facility in Germany—which is slated to begin producing over a thousand Patriot missiles for NATO allies annually. Opportunities like this allow Europe to quickly scale up facilities, while allowing European industries to offset some of the steep costs associated with building out new manufacturing plants. In the short term, Europe is equipped with capabilities at an accelerated rate while at the same time developing the requisite infrastructure to create for itself a healthier and more self-sufficient defense industrial base.

V. Conclusion

The transatlantic community agrees: Europe must do more to enhance its role in NATO. Taking the actions set forth in this issue brief will provide the necessary enhancement of European defense capabilities in the short and medium term to deter and, if necessary, defeat a reconstituted Russia.

About the authors

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Franklin D. Kramer

Distinguished Fellow

Cybersecurity Defense Policy

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Kristen Taylor

Assistant Director

Transatlantic Security Initiative

Europe & Eurasia European Union

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The Transatlantic Security Initiative, in the Scowcroft Center for Strategy and Security, shapes and influences the debate on the greatest security challenges facing the North Atlantic Alliance and its key partners.

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What explains the transatlantic rift? It’s all about threat perception.

Jason Davidson — Thu, 05 Jun 2025 15:24:49 +0000

NATO allies are preparing for their summit at The Hague this month amid a frenzy of promises about increased defense spending, following US President Donald Trump’s call for allies to spend an unprecedented 5 percent of gross domestic product (GDP) on defense. Since taking office in January, Trump has mused about pulling back US forces from Europe while signaling a willingness to improve relations with Russia and even seize Greenland, a territory of NATO ally Denmark.

European policymakers have reacted to Trump’s moves with shock and doubt about the US commitment to NATO, and some have stepped up their defense pledges accordingly. “We still believe that the ‘N’ in NATO stands for North Atlantic and that our European allies should maximize their comparative advantage on the continent,” US Secretary of Defense Pete Hegseth said last week at the Shangri-la Dialogue in Singapore. “And thanks to President Trump, they are stepping up. An alliance cannot be ironclad if in reality or perception it is seen as one-sided.”

For its part, the European Union (EU) has approved a €150 billion defense funding loan program and allowed its members to exceed normal debt limits for military expenditures. Even before the EU’s moves, allies such as Poland and the Baltic States—who Hegseth called “model allies” in Singapore—were ramping up spending and sounding the alarm over the threat they face from Russia. But too many European allies have not yet increased their defense spending sufficiently.

What explains this contrast? Leading NATO allies (France, Germany, Italy, Poland, the United Kingdom, and the United States) diverge from one another because they face different threats and levels of threat perception. These differences explain each ally’s major defense decisions (defense spending, military structure, and military posture) as well as the ally’s role in and relationship to NATO. I explore this issue more deeply in my forthcoming book on NATO, drawing from ninety-eight interviews with current and former policymakers.

NATO allies’ different threat perceptions can explain much of the current crisis within the Alliance, and they provide the backdrop for what could be a contentious summit.

The United States: China trumps Europe

The Trump administration sees China as the most significant state security threat to US interests. The 2025 Annual Threat Assessment says that “China stands out as the actor most capable of threatening US interests globally.” The administration’s Interim National Defense Strategic Guidance reportedly focuses on the threat of a Chinese invasion of Taiwan as one of two priorities for the Pentagon, along with combating drug cartels.

The Trump administration has cited the threat from China to explain its European security policy. Hegseth said in February that the United States could not remain the primary guarantor of European security, telling allied military leaders in Brussels: “The US is prioritizing deterring war with China in the Pacific, recognizing the reality of scarcity, and making the resourcing tradeoffs to ensure deterrence does not fail.” The Interim National Defense Strategic Guidance reportedly concludes that because of the focus on China, European allies must do more for their own defense.

This view of China can also explain the Trump administration’s policy toward Greenland, an autonomous territory of NATO ally Denmark. Melting sea ice means that Greenland’s location will be critical for those seeking to control Artic sea lanes and it is home to large quantities of rare-earth minerals. US Secretary of State Marco Rubio has stressed that the United States would not use force to seize Greenland but only to protect it from encroachment by China.

This can also explain Trump’s significant, though inconsistent, turn toward Russia. Some have argued that the Trump administration is attempting a “reverse Kissinger,” aligning with Russia to weaken its ties to China. The Trump administration may even be turning toward Russia to pressure NATO allies into taking more responsibility for their own defense, as Victoria Coates, a former deputy national security advisor in Trump’s first term, has argued. Even though Trump has criticized Russian President Vladimir Putin, it is reasonable for European leaders to fear that a grand bargain between Washington and Moscow remains a distinct possibility.

Europe: Divided by diverse levels of threat

Europe is unable to defend itself without the United States. Europe lacks integrated air and missile defense, long-range precision strike, transport aircraft, as well as intelligence, surveillance, and reconnaissance capabilities. European allies are struggling to recruit, train, and equip sufficient troops for NATO’s new force model—doing so in the next decade without the United States would most likely be a bridge too far.

But even faced with these challenges, not every European NATO ally has shown the same level of urgency when it comes to increasing defense spending. The reason is that leading European allies face different threats and levels of threat, limiting the incentives of some allies to act.

The overwhelming consensus among Italian officials, for example, is that instability in the wider Mediterranean is the most important security threat facing the country. Because addressing this threat does not primarily entail military means, Italy has not felt an urgent need to increase defense spending in response to Trump’s policies. While Italian Prime Minister Giorgia Meloni announced in April that Italy would spend 2 percent of its GDP on defense this year (up from 1.5 percent in 2024), no new funding has been allocated for this yet. What’s more, reporting suggests that the government could reach the 2 percent benchmark largely through accounting changes, such as including its Coast Guard in defense spending.

Meanwhile, from strategy documents and official statements, it is clear that Poland, Germany, France, and Britain all view Russia as their greatest security threat. However, they each have different levels of threat perception, which informs the differing approaches they have taken toward military spending.

Poland provides the starkest contrast with Italy. Warsaw plans to spend 4.7 percent of GDP on defense this year, up from 4.1 percent last year. Poland’s level of defense spending makes sense given the intensity of the threat it faces from Moscow and its proximity to Russia. Poland’s view is that only a US-led NATO can provide collective defense against the threat from Russia, so it is focused on pushing allies to comply with US demands to keep Washington committed to European security.

Concern that the United States could shift away has also led Germany to spend more on defense. Following Germany’s February election, German Chancellor Friedrich Merz led a successful effort to revise Germany’s constitution to allow borrowing above 1 percent of GDP for defense spending. On April 9, Merz announced a coalition agreement with the Social Democrats, which included a pledge to ramp up defense spending “significantly” to fulfill Germany’s NATO commitments. Germany views any US moves to withdraw from Europe with alarm, and Merz continues to insist that Germany and Europe do more to keep the United States engaged in NATO. Last month, Foreign Minister Johann Wadephul said Germany will “follow” Trump’s demand that allies spend at least 5 percent of GDP on defense.

France’s independent nuclear arsenal gives it an added degree of security against the threat from Russia. While France has used the Trump administration’s statements to push for European defense independence, Paris has not reacted with urgency in terms of its own defense spending. French President Emmanuel Macron has called for a new NATO spending target of 3 percent of GDP on defense but has not proposed a new figure for French defense spending (currently at 2.1 percent of GDP).

While Britain’s nuclear arsenal would normally provide it with an extra measure of security against Russia, the United Kingdom relies on the United States for its nuclear submarines. As such, the British government has doubled down on its relationship with the United States. British officials have embraced Trump’s criticism of allies who underspend on defense, and Foreign Secretary David Lammy has called for a NATO that is “stronger, fairer, and more lethal.” Just prior to Prime Minister Keir Starmer’s visit to the United States in February, the British government announced that Britain will spend 2.6 percent of GDP on defense by 2028, up from 2.3 percent this year.

Preserving a mutually beneficial relationship

The United States’ greater focus on China and push for Europeans to take more responsibility for their defense are likely irreversible trends. But the NATO Summit in The Hague later this month provides an opportunity for the United States and its European allies to reaffirm their commitments to the Alliance amid these shifting dynamics.

First, the Trump administration should use the summit to work with its European allies on a phased and structured exchange of responsibility for European security over the next decade. Under such a plan, the United States would work with European allies to develop defense capabilities they do not currently have while maintaining the commitment of the US nuclear deterrent.

Second, Trump should take the opportunity to reassure European allies. He should affirm that the United States would come to the aid of any NATO ally that is attacked. Trump should also state plainly that his administration will work with Denmark to bolster the defense of Greenland and that it does not intend to acquire the island by force.

Third, European countries should use the summit to announce further commitments on defense spending. Following through on such commitments will entail costly domestic tradeoffs. The present moment requires courage: European leaders must make the case that significantly more defense spending is necessary because of the threat Russia poses and the United States’ turn toward the Indo-Pacific. Italy’s government in particular will have a challenging task. Because Italians are focused on threats from the Mediterranean, officials in Rome will have to make the case that Russia’s threat to European security matters for Italy. European governments like Italy’s can also make a compelling case that spending more on defense may boost overall economic growth.

If NATO allies take these steps at this year’s summit, they can help build a future Europe more capable of defending itself and an Alliance that better serves both US and European interests.

Jason Davidson is a nonresident senior fellow at the Atlantic Council’s Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security. He is also a professor of political science and international affairs and director of the Security and Conflict Studies Program at the University of Mary Washington in Fredericksburg, Virginia.

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Cyberattacks are hurting US businesses. Here’s how Congress can upgrade cybersecurity information sharing.

Tanner Wilburn, Sara Ann Brackett, and Urmita Chowdhury — Thu, 05 Jun 2025 14:11:42 +0000

Cybersecurity is a team sport, yet small and medium-sized businesses (SMBs) have spent years on the sidelines, despite being the targets of an estimated 43 percent of cyberattacks in the United States. As Congress discusses renewing the United States’ cybersecurity information-sharing framework, it’s time to finally welcome SMBs into the cybersecurity community.

On September 30, the framework for sharing important cybersecurity information between government and industry, the Cybersecurity Information Sharing Act of 2015 (CISA 2015), will expire unless Congress acts. This law—distinct from the similarly named Cybersecurity and Infrastructure Security Agency (also CISA)—provides essential legal protections that allow private companies to share cyber threat information among themselves and with the government.

There is already bipartisan support for renewing CISA 2015. Senators Gary Peters (D-MI) and Mike Rounds (R-SD) introduced legislation to extend the current law for another ten years without changes, an approach supported by major trade associations. The bill’s authors correctly emphasize the importance of preserving the established information-sharing environment. Yet, renewing CISA 2015 unchanged leaves the cybersecurity community blind to critical threat intelligence that SMBs uniquely hold.

As originally passed, CISA 2015 removed legal barriers and disincentives to sharing cyber threat data. It provides liability protections and exemptions from certain public disclosure requirements or regulatory penalties for companies that share threat indicators in good faith. These protections significantly reduce the risk of lawsuits or regulatory enforcement when organizations exchange information with the Department of Homeland Security (DHS) or other companies under the framework, provided the information was anonymized and used strictly for a “cybersecurity purpose.”

These protections dramatically enhanced cybersecurity information sharing. In the private sector, entities such as the Cyber Threat Alliance formed to facilitate voluntary company-to-company information sharing. Information Sharing and Analysis Centers (ISACs), organizations dedicated to collecting, analyzing, and disseminating sector-specific threat data, have also grown substantially. The National Council of ISACs now comprises twenty-seven sector-specific ISACs, while the Multi-State ISAC alone exceeded 18,000 members last year. These members share cyber threat information directly because of the protections offered by CISA 2015. Even government programs have evolved in response. DHS’s Automated Indicator Sharing (AIS) platform has significantly improved rapid information exchanges and threat awareness, aided by CISA 2015 protections.

SMBs are being left behind

Still missing from this list, however, are the large number of SMBs that operate across the United States. SMBs have largely been overlooked, are subject to a large number of attacks, and their employees face social engineering threats such as phishing and fraud 350 percent more than those at large companies. While platforms such as DHS’s AIS are beneficial to larger corporations, SMB participation remains limited due to high costs, technical complexity, and inadequate outreach. This exclusion leaves SMBs vulnerable and deprives the cybersecurity community of a significant source of threat intelligence.

Since 2015, the cyber threat landscape has evolved, with SMBs now frequent targets. Roughly one in three small businesses will suffer a cyberattack in the next year, with each incident costing an average of nearly $255,000, almost an order of magnitude greater than the 2014 average cost of $27,752. This changed threat landscape and lack of participation in information sharing leaves a gap.

Any new CISA 2015 authorization should address this gap to benefit the entire cybersecurity ecosystem. SMBs represent a valuable source of threat data, and integrating their insights would significantly enhance predictive capabilities and resilience. Strengthening SMB defenses would also reduce opportunities for attackers to exploit smaller entities as gateways to larger networks.

How Congress can update CISA 2015

To achieve this integration, Congress should ensure any reauthorization addresses four targeted reforms.

First, clarify definitions. The term “cybersecurity purpose” should explicitly include protections against social engineering threats such as fraud and phishing, ensuring SMBs receive comprehensive coverage for the threats they face.

Second, incentivize more participation among SMBs. Congress should authorize a DHS-managed initiative specifically designed to provide smaller businesses with accessible, actionable threat intelligence and affordable cybersecurity resources. Federal support could take the form of grants, vouchers, or subsidized cybersecurity solutions.

Third, codify successful operational models into law. This was attempted last year with a bill introduced by Representative Eric Swalwell (D-CA-14) that would codify CISA 2015’s Joint Cyber Defense Collaborative (JCDC). The JCDC has successfully united federal agencies and private companies to effectively respond to high-profile cyber incidents, including the exploitation of Ivanti gateway vulnerabilities and the July 2024 CrowdStrike outage. Currently, JCDC and many similar programs lack explicit statutory authority, making them vulnerable to termination by executive action, which is what happened to the Critical Infrastructure Partnership Advisory Council in March of this year. Codifying such programs ensures sustained and consistent cybersecurity collaboration irrespective of political shifts.

Fourth, rename the law to clearly distinguish it from the Cybersecurity and Infrastructure Security Agency. Cybersecurity acronyms are hard enough as it is. A new name, such as the Cyber Intelligence Sharing and Protection Act (CISPA), a name from an earlier version of CISA 2015, would eliminate the confusion caused by acronym duplication.

Reauthorizing CISA 2015 with these targeted improvements—clearer definitions, SMB support, codification of proven programs, and a distinct identity—will ensure that SMBs play their part in and benefit from making the next decade of cybersecurity more resilient than the last.

Tanner Wilburn is a recent graduate of the Indiana University Maurer School of Law with an MS in cybersecurity risk management from the Luddy School of Informatics, Computing, and Engineering.

Sara Ann Brackett is an assistant director with the Cyber Statecraft Initiative, part of the Atlantic Council Tech Programs.

Urmita Chowdhury is an assistant director for trainings and competitions at the Cyber Statecraft Initiative, part of the Atlantic Council Tech Programs.

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Bayoumi in the Washington Post on strengthening US-Canada ties through defense cooperation

bgalicia — Thu, 05 Jun 2025 11:21:56 +0000

Adrienne Arsht National Security Resilience Initiative GeoStrategy Initiative

On June 5, Imran Bayoumi, associate director of the GeoStrategy Initiative, co-authored an op-ed in the Washington Post with Greg Pollock, former acting deputy assistant secretary of defense, highlighting the importance of strong US-Canada relations for both countries’ economic and defense interests. They argue that one way to strengthen ties between the two neighbors is for Canada to boost its defense spending—particularly in the geopolitically critical Arctic region.

Staff

Imran Bayoumi

Associate Director

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Ukraine just gave us a glimpse into the future of European defense

Frederick Kempe — Thu, 05 Jun 2025 11:00:00 +0000

Ukraine’s audacious attack on Russian strategic bombers this past weekend, damaging more than a third of Russian President Vladimir Putin’s capabilities, provided an encouraging glimpse into what should be the future of European and transatlantic defense.

Imagine a world in which Ukraine, working alongside European and North American partners, so convincingly wields advanced technological and defense capabilities that Putin stops his murderous war and agrees to a sustainable peace. That also would send an unmistakable message of transatlantic common cause to Russia’s partners: China, North Korea, and Iran.

However, that outcome can only be achieved if the European Union (EU), after decades of neglect, turns Ukrainian inspiration and a flood of new defense spending announcements into real capabilities and technological innovation. It will also require that the Trump administration unambiguously back its European allies at the June 24-25 NATO Summit in The Hague as the Alliance makes new spending and defense production commitments.

‘A fusion of World War I and World War III’

The good news is that most NATO countries appear ready to agree at the summit to increase their defense spending to 3.5 percent of gross domestic product by 2035, along with an additional 1.5 percent for defense- and security-related infrastructure. For its part, the EU has already approved 800 billion euros in new defense spending across the bloc over the next four years.

The bad news comes in three categories: production, policies, and politics. First, even a great deal more money won’t necessarily result in the production, innovation, and capabilities required to deter Russia. Second, policies and regulations on both sides of the Atlantic provide impediments to effective defense industrial cooperation. Third, political strains and distrust have increased across the Atlantic over US President Donald Trump’s trade wars and his administration’s decision to withhold arms and intelligence from Ukraine for about a week in March.

Trump’s phone call with Putin yesterday, after which he said without comment that the Russian leader felt a strong need to respond to Ukraine’s strikes inside Russia, didn’t help. Ukraine and its European partners would have preferred clear recognition that Putin started the war, has the power to end it, and should do so now.

Even with all of that said, Europe’s most immediate and important task is to demonstrate that it can provide for its own security, given the Trump administration’s understandable reluctance to do more for US allies than they are willing to do for themselves.

“Ukraine has shown that modern warfare is a fusion of World War I and World War III—combining trench warfare with cutting-edge technologies,” write Ann Mettler and Mark Boris Andrijanič in a must-read piece in Euractiv. “Unless Europe learns to master both, its security, sovereignty, and very survival will be at stake.”

Few know the stakes better than Mettler, a former director-general at the European Commission, and Andrijanič, a former Slovenian minister for digital transformation and a current Atlantic Council Europe Center senior fellow. They outline a compelling course of action to reverse EU security weaknesses.

“As Russia’s aggression edges closer to EU borders and the transatlantic alliance weakens,” they write, “Europe stands at an inflection point.” European defense budgets are finally increasing, they note, “but if past performance is any indication of future results, there is cause for concern.”

For example, despite hundreds of billions of euros of investments into digital and green agendas, the EU remains reliant on American software and Chinese hardware, from solar panels to batteries. “This reveals a harsh truth,” they write, “spending alone doesn’t guarantee innovation. And in defence, failure won’t just be costly—it could be fatal.”

‘Something we should have done years ago’

I came away from a recent Atlantic Council delegation trip to Brussels, where we met with top NATO and EU defense planners, with new hope for European security but also growing concern about transatlantic division in the face of persistent Russian threats.

It’s clear that Europe has been shocked into action by two leaders: Putin and Trump. The Russian president’s full-scale invasion of Ukraine in February 2022 was a wake-up call for a complacent Europe. Yet it was only Trump’s return to the presidency this year that injected Europe with a greater sense of urgency.

It’s telling that Mettler and Andrijanič don’t include a transatlantic dimension in their proposals in Euractiv. I asked Andrijanič about this omission, and he said, “Unless Europe gets serious about defense, we can’t be a credible partner for the United States.” He added, “Suddenly we are doing something we should have done years ago. Europe is now laser-focused on developing as many critical capabilities as possible—and doing it fast.”

In their Euractiv article, Mettler and Andrijanič list as their priority the creation of a common market for defense, stretching from the EU to partners such as the United Kingdom, Norway, Switzerland, and, in particular, Ukraine. For the moment, the only European-headquartered company among the global top ten defense firms is the United Kingdom’s BAE Systems.

The authors also call for new EU regulatory guidance that would remove the stigma against defense and dual-use investments to unlock private and institutional capital. They also want to shake up Europe’s “sluggish defense procurement rules and procedures.”

To achieve greater innovation, the authors want to create a European ecosystem of “established industry players, startups and scaleups, investors, governments, and research institutions.” One intriguing proposal is for a dedicated collaboration platform to create a “wall of drones” along Europe’s eastern flank, so that Ukraine’s weekend success isn’t a one-off but is underpinned by “a coordinated deployment of autonomous drone swarms for surveillance and defense.”

The authors seize upon two successful US models to accelerate this European effort. One would be the creation of a European DARPA, modeled on the Pentagon’s Defense Advanced Research Projects Agency, which has focused on developing emerging technologies for national security. They would do that through transforming the existing European Defence Fund into “a better-resourced, more agile, and mission-driven institution.”

A second idea would be to use the US Defense Innovation Board, first chaired by former Google CEO Eric Schmidt, as a model for a European Defence Innovation Council. This high-level, independent group would provide strategic advice to the EU and member states on defense-related tech.

Write the authors, “The good news for Europe is that the world’s leading defence innovator is already among us, and on our side—Ukraine. Despite intense wartime pressures, the country has emerged as a frontrunner in drone technology, cyber warfare, and the integration of artificial intelligence on the battlefield. In contrast to Europe’s slow and costly model of incremental innovation, Ukraine excels in frugal innovation to rapidly deliver scalable, cost-effective, and highly impactful solutions.”

Two awful words

One way or the other, the upcoming NATO Summit will be one of historic importance. What’s positive is an Alliance-wide commitment, after pressure from Trump, for greater spending aimed at producing cutting-edge capabilities. What’s negative is insufficient recognition that transatlantic common cause on Ukraine and beyond is more crucial than ever.

Speaking to the NATO Parliamentary Assembly in Dayton, Ohio, last week, NATO Secretary General Mark Rutte put it this way: “Russia has teamed up with China, North Korea, and Iran. They are expanding their militaries and their capabilities. They are preparing for long-term confrontation.”

Quoting Winston Churchill from 1936, Rutte asked, “Will there be time to put our defenses in order? . . . Will there be time to make these necessary efforts, or will the awful words ‘too late’ be recorded?”

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X: @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

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US interests can benefit from stronger congressional ties with the Caribbean

Wazim Mowla, Maite Gonzalez Latorre — Wed, 04 Jun 2025 18:00:00 +0000

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The Caribbean’s geographic proximity to the United States—as well as its use as a transit point for US citizens, goods, and financial services—makes it a crucial hub for US national interests. However, the relationship has suffered from inconsistent and infrequent assistance. Changes in US policy priorities bring ever-changing adjustments to US engagement, leaving the Caribbean, its leadership, and its institutions with insufficient time to benefit from US policy action.
For Caribbean countries, policy continuity is critical for implementation and to see tangible and meaningful development. The region’s small populations and markets, vulnerability to natural disasters and changing global commodity prices, and limited institutional capacity slow the pace of receiving and utilizing development assistance and support.
Underpinning US-Caribbean ties with stronger US congressional engagement can provide needed longevity to the relationship. Congressional actions—like newly appropriated resources and committee hearings—can bring tangible benefits to US-Caribbean relations.

Where should the US Congress put its attention?

The heterogenous nature of the Caribbean offers various opportunities to strengthen relations with the region and, by extension, advance US interests. From natural gas to geothermal energy, Caribbean countries offer new opportunities for US investment. Reducing crime and gang proliferation across the region can protect US citizens traveling abroad and stem the potential flow of illicit goods and services.

Energy security

The United States can strengthen its positioning in the Caribbean by supporting regional energy security. At current estimated reserves, Guyana, Suriname, and Trinidad and Tobago house almost 30 trillion cubic feet of natural gas, with further offshore exploration expected to increase the size of reserves. At the same time, other countries require reliable power generation–which can be provided by liquified natural gas (LNG) imports–to provide resilience to their electricity grids during natural disasters, improve economic competitiveness, and to underpin ambitions to add renewables to their energy matrix.

Here, the United States will find opportunities on three fronts. First, natural gas exploration opportunities, liquefaction infrastructure, and building pipelines and LNG storage are areas where US oil and gas companies and mid-size service-based companies can invest. Second, imported oil from Guyana, Suriname, and Trinidad and Tobago can be low-cost and competitive options vis a vis other suppliers to satisfy growing US energy demand and supplement domestic shale supply in Texas and Midwestern states. Finally, congressional members can work with the Southern Caribbean hydrocarbon producers to support energy security in Europe and lessen demand for Russian energy resources by increasing cargo exports to EU members.

Greater Caribbean energy security can also lead to lower electricity prices, which can benefit constituents of US congressional members traveling to the Caribbean and potentially reduce migration to the United States. Most of the region (except for Suriname and Trinidad and Tobago) pays some of the highest electricity in the Americas (see Figure 3), which is on average, double or triple what US consumers pay. At the same time, electricity costs can account for almost 70 percent of a hotel’s utility due to air conditioning, lighting, and heating, among others.

Therefore, to keep profits stable, the high costs translate to the consumer–in this case, US tourists. This means that by bringing down electricity costs and lowering the cost to travel and having overnight stays in the Caribbean, US tourists benefit and have more purchasing power to buy in-country goods (most of which are imported from the United States). Further, reducing electricity prices can stem Caribbean emigration flows to US shores given that high costs of living are a key migratory push factor.

Reducing violent crime and gang activity

Security concerns in the Caribbean are on the rise. Figure 4 shows that Caribbean countries have high homicide rates (per 100,000) relative to their Latin American neighbors. Rates have been on the rise due to increased gang proliferation and illegal imports of small arms–many of which originate from the United States. For example, countries like Trinidad and Tobago, declared a state of emergency late 2024 due to increased gang activity and the usage of high-powered assault weapons. Gang proliferation is also on the rise. While Caribbean countries do not house large gangs, smaller gangs pervade the region, using the informal ports of entry to move illicit guns, goods, and services. In 2021, Jamaica identified 379 different gangs with 140 named in 2023 for Trinidad and Tobago. The decentralized nature of criminal and gang networks in the region inhibits Caribbean governments and police forces’ abilities to combat gang operations. Further, gangs in the Caribbean, especially in Jamaica, are turf oriented. This allows smaller gangs to gain a foothold in local communities, sometimes acting as community leaders and providing needed social services and protection from rival gangs.

Addressing the Caribbean’s security challenges can protect US citizens traveling to the region and curb gang activity and illicit trafficking before they reach US shores. Travel destinations for US citizens, such as Jamaica and islands in the Eastern Caribbean are among the most violent in the region. Therefore, improving citizen safety in the Caribbean ensures US citizens’ safety as well. Given that gun-related activities are a primary driver of citizen insecurity, one solution is for US agencies to work closer with Caribbean defense and police forces to improve monitoring, tracking, and seizures of illegal small arms.

Further, stemming gang activity in the region can also disrupt transnational criminal organizations’ operations. Specifically, Caribbean countries are used as a transit point for drugs, many of which end up in the United States. Enhanced maritime security and interdiction in the Caribbean Sea can help interrupt illegal drug supply chains and weaken transnational criminal organizations. However, the capacity to monitor drug flows is a challenge. Partnerships with the United States to gain access to satellite imagery and drone technologies to identify drug shipment routes can provide Caribbean governments the needed tools to tackle drug flows.

Bottom lines

The challenges facing Caribbean countries are growing and have consequences that are not constrained to the region’s geographic borders, likely to directly or indirectly affect US interests. This can be avoided if there are consistent and strong partnerships between the Caribbean and the United States. This can and should start with stronger US congressional engagement to the region.
US congressional members should consider legislation that prioritizes a holistic strategy with appropriated resources to the Caribbean. While CBSI tackles security challenges, support is needed across the energy, infrastructure development, agricultural, and financial services, among others.
Given the importance of the Caribbean to US interests, the House Foreign Affairs Committee should consider a hearing that highlights new opportunities to strengthen US interests in the Caribbean and the broader US-Caribbean partnership.
Strengthening US-Caribbean ties start with building a foundation for a long-term partnership. US congressional engagement can help turn four-year policies into decades of friendship, all while protecting US interests along its “third border.”

Read the full issue brief

About the authors

Staff

Wazim Mowla

Fellow and Lead of the Caribbean Initiative

Adrienne Arsht Latin America Center

Caribbean China

Staff

Maite Gonzalez Latorre

Program Assistant

Adrienne Arsht Latin America Center

Americas Education

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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 Pentagon’s software approval process is broken. Here’s how to fix it.

Hannah Hunt — Wed, 04 Jun 2025 17:07:52 +0000

In today’s rapidly evolving battlefields, the Department of Defense (DoD) faces a paradox: It is awash with advanced technologies, yet warfighters often wait months, even years, for approval to use the software they desperately need. Why? The bottleneck often lies in a well-intentioned but outdated process: the Risk Management Framework (RMF) and the painful path to achieving an Authority to Operate (ATO).

The ATO process, designed to safeguard national security systems, is rooted in sound principles. But in practice, it has become a procedural obstacle course—one that sidelines innovative software with lengthy, bureaucratic delays. Having gone through my fair share of ATOs across the Air Force, Army, and Marine Corps, I can attest that this process needs serious reforms. From mission planning tools to logistics dashboards, critical capabilities are too often stuck in limbo because of inconsistent, manual, and subjective risk determinations. For instance, this process has stalled the use of critical Identity Access Management software such as Okta. These software enable zero trust enforcement, rapid user authentication, and centralized access control across multi-domain, cloud, and on-premise environments without significant delays and bandwidth constraints into key warfighting systems.

To ensure US warfighters receive the tools they need in a timely fashion, the DoD should invest in updated technical training for cybersecurity professionals and implement automated, continuous security checks on software. But for these reforms to succeed, the DoD will need to institute a broader cultural shift among the cybersecurity and acquisitions workforces toward recognizing compliance as the crucial aspect of US national security policy that it is.

A subjective standard of risk

RMF is the US government’s structured approach to ensuring information systems are secure and resilient before they are allowed to operate within government networks. It was designed to replace checklist-style compliance with a risk-based decision-making process. Under RMF, systems go through several stages—categorization, control selection, implementation, assessment, authorization, and continuous monitoring. At the heart of the process is the ATO—a formal decision by an authorizing official that a system’s security posture is acceptable for use. To reach this decision, program teams must document security controls, undergo assessments by independent cybersecurity experts, and respond to findings. The intent is to ensure systems are secure before they are fielded—but in practice, the process often results in extended delays, overly cautious reviews, and inconsistent standards across organizations.

One of the most challenging aspects of the ATO process is the subjectivity of risk determination. What is deemed an acceptable risk by one authorizing official may be an unacceptable liability to another. With no shared standard of risk tolerance, system owners must often start from scratch depending on who sits in the approval seat. This variability leads to costly rework, long delays, and disillusioned program teams. Worse, it creates a culture where innovation is stifled not by bad technology, but by indecision and fear.

This is not just a bureaucratic issue; it’s a mission-impact issue. Delays of twelve to eighteen months for an ATO mean that a new targeting application, mission planning software, or AI-enabled intelligence tool never reaches the unit that needs it. When marines or soldiers are using outdated or spreadsheet-based tools while Silicon Valley technologies sit behind compliance gates, something is broken. Compliance activities do have their place. They provide a framework and a set of standards that system owners should utilize. But compliance activities make up only one facet of a resilient security posture.

When it comes to the documentation for this process, the only thing consistent about it is its inconsistency. Each security control assessor, information systems security manager, and authorizing official has their own preferences for how security controls, and security requirement guides should be documented. Even when software as a service systems have received accreditation in one military service, the ATO often does not carry over to other services, requiring the process to start over again at each service.

Across most systems in the DoD, ATOs are manual one-time reviews that only look at a snapshot in time rather than monitoring software continuously. What’s more, this inadequate review takes a significant amount of time, labor, and resources. It requires a team of cybersecurity professionals to manually review and analyze all ATO documentation to meet compliance thresholds. Because there are few security assessor teams across the DoD, there is often a delay in getting the third-party assessor on schedule to conduct the manual review.

These one-time ATO reviews, which often approve a software for one to three years, are not useful for tracking a system’s long-term security posture. In fact, leaving a system approved for this long without further review increases its security risk. Continuous monitoring is a key step in the RMF, but it is often haphazardly implemented, with security scans sometimes occurring only monthly or even quarterly. Moreover, authorizing officials ultimately accept the risk with critical or high vulnerabilities to keep systems available for users. Instead, ATO and security posture should be continually assessed through an agreed-upon standard for security guardrails and thresholds. This continual assessment should in no way be manual. Rather, it should be baked into the day-to-day software development lifecycle through automated regression, quality, and security testing with each delivery of code.

The talent gap in modern cybersecurity

Compounding the problems with the ATO process is a talent management challenge. Many cybersecurity professionals tasked with evaluating and authorizing systems are not trained in modern software development or cloud-native architectures. Developments such as the shifts to hybrid cloud, containerized applications, and infrastructure as code have dramatically outpaced cybersecurity workforce training.

Security professionals steeped in legacy systems may treat every cloud deployment as a threat, rather than an opportunity for enhanced resilience, scalability, and automation. As a result, the process designed to manage risk often ends up misunderstanding it—focusing on outdated indicators instead of real attack vectors. In one of the ATO renewals I supported, our cybersecurity assessor subject matter experts didn’t know about cloud-hosted Kubernetes technologies, which are widely implemented across DoD software organizations. They also did not understand how to implement the Kubernetes security technical implementation guide, even though they were supposed to be assessing our security compliance. As a result, the first few days of the assessment were spent teaching assessors about containers, Kubernetes, microservices, and ephemeral IP ranges before the ATO process could move forward.

The DoD can’t automate trust, but it can automate verification. And that’s where the changes to the process must begin.

Recommendations for reform

To speed up the delivery of secure software, the DoD must rethink how it defines and manages risk. The following actions would make the ATO process more efficient, ensuring that warfighters can use the software they need to meet mission success.

Invest in talent management and training. The DoD must invest in a new cadre of cyber professionals who understand development security and operations, continuous integration/continuous deployment pipelines, and cloud-native patterns. This starts with developing targeted training, incentives for continuous learning, and career pathways that reward technical skills over legacy tenure. It also requires an incentive structure that holds authorizing officials accountable for delayed ATO timelines, especially for software-as-a-service products that have already received ATOs in other organizations.
Automate guardrails and thresholds. To embrace a continuous ATO framework, programs should implement automated security checks that enforce zero trust principles, identity policies, and vulnerability scanning. They should also require logging standards directly in the pipeline. When software is built with these guardrails from the start, this reduces the need for manual reviews, bolstering confidence in the system. That way, when code is pushed and meets the predefined security guardrails, it can go straight into production environments.
Reduce redundant documentation. Much of the RMF burden is paperwork for paperwork’s sake. By adopting living documentation generated from automated pipelines—like real-time architecture diagrams, test coverage, and security telemetry—the Pentagon can save thousands of hours that are currently being wasted on static Word documents no one ever reads.

The SWFT strategy: A moment for culture change

The DoD’s new Software Fast Track (SWFT) methodology, announced on May 5, offers a hopeful roadmap. SWFT aims to make software development more agile by implementing regular software releases, modern and modular architectures, and outcomes-based measures that meet warfighter needs. But to be truly transformative, it must be paired with a culture shift across the acquisition and cybersecurity communities.

Acquisition and cybersecurity personnel must move away from compliance as a box-checking exercise and toward compliance as a byproduct of good engineering. The future lies in continuous ATOs, risk quantification tools, and AI-assisted cybersecurity—if the Pentagon is willing to invest in people and process changes.

If the DoD wants to outpace its adversaries and empower its warfighters with the tools they need, it must treat secure software delivery as a warfighting imperative—not a compliance chore. The ATO process, as it stands today, is a bottleneck the United States can no longer afford.

The call to action is clear: upgrade the workforce, automate security, and embrace a cultural change toward cybersecurity compliance. SWFT provides an opportunity—now it’s time to put it into practice.

Hannah Hunt is a nonresident senior fellow with the Atlantic Council’s Forward Defense program within the Scowcroft Center for Strategy and Security and a distinguished technical fellow at MetroStar Systems. She was previously the chief of product at the Army Software Factory under Army Futures Command and chief of staff at the US Air Force’s Kessel Run.

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For dollar-backed stablecoins to be truly stable, the US needs to set international standards

Josh Lipsky — Tue, 03 Jun 2025 19:43:47 +0000

For all the debate about trade wars and flight away from the dollar in the aftermath of the April 2 “liberation day,” a more immediate challenge for many financial policymakers is actually a rush toward the dollar triggered by the global demand for dollar-backed stablecoins.

That’s why the world’s financial leaders are closely watching the debate playing out in Congress right now over the future of stablecoin legislation. Next week, the Senate will likely take up the GENIUS Act, which will define the responsibilities for US stablecoin issuers and clarify who is responsible for oversight.

Stablecoins are cryptocurrencies whose values are pegged to a specific underlying asset. This makes them “stable”—at least in theory.

Currently, 98 percent of stablecoins are pegged to the US dollar, but over 80 percent of stablecoin transactions happen outside the United States.

Countries around the world are taking notice. In April, Italy’s finance minister, Giancarlo Giorgetti, said that new US policies on dollar-backed stablecoins present an “even more dangerous” threat to European financial stability than tariffs. His argument was that access to dollars without needing a US bank account would be attractive to millions of people and could undermine the effectiveness of monetary policy not just in Europe but around the world.

In many ways, it’s an old problem with new technology. Dollarization—the situation where citizens in another country try to swap their local currency for dollars—has been a risk in emerging markets and developing economies for decades. In the early 2000s, for example, a range of countries from Ecuador to Zimbabwe to Argentina had difficulty managing the demand for dollars instead of local currency. In each situation, years of economic pain followed in these countries.

Now stablecoins are making it cheaper and easier for people around the globe to get ahold of what is still the single most in-demand asset in the world.

Instead of the old way of having to go to a bank and exchange local currency for US dollars, which is time consuming and often involves significant fees, stablecoins make dollars seamlessly available to anyone with a cell phone.

US officials argue that this benefits the United States. When I interviewed Federal Reserve Governor Christopher Waller, who oversees payments at the central bank, about this issue in February, he said that stablecoins “could be in any fiat currency,” such as pounds or euros, “but everyone wants dollar-denominated stablecoins.” He added that “if we can get good regulation, allow these things to go out, this will only strength the dollar as a reserve currency.”

Waller’s point was that if stablecoin issuers need to back up their coins with Treasuries or other liquid assets, the increase in stablecoin usage around the world will generate even higher demand for dollars. The whole point of a stablecoin is that you can fully convert it into a dollar if you want to—meaning the issuers need to have those dollars on hand.

US Treasury Secretary Scott Bessent has put it even more bluntly. “We are going to keep the US the dominant reserve currency in the world, and we will use stablecoins to do that,” he said in March.

If so, the United States should tread cautiously.

The global proliferation of stablecoins means that some companies will take advantage of the demand and issue stablecoins that claim they are digital versions of the dollar but in reality aren’t fully backed by dollars.

If that company failed, it wouldn’t just cost consumers their savings. It could trigger a run on all kinds of financial assets.

Think back to the collapse of the algorithmic stablecoin TerraLuna in 2022. Over $45 billion in value for TerraLuna holders was wiped out within a week. But since that time, stablecoin volumes have increased across the world by over 60 percent.

The current patchwork of regulations around the globe creates more confusion, more friction in payments, and ultimately higher costs for consumers.

Already, that’s what’s happening. As new research from the Atlantic Council GeoEconomics Center shows, some countries want to create their own central bank digital currencies to compete with stablecoins, while other countries are trying to regulate the wallets that hold stablecoins.

Instead of waiting for new regulatory fences to be built up in the coming years, the United States should show that it recognizes the concerns other countries have about dollar-backed stablecoins. The legislation in front of Congress helps domestically by creating transparency and reporting requirements, but it does little internationally.

This is where the Group of Twenty (G20) comes in. The United States has a golden opportunity to help set international standards around digital assets, including the risks and regulations associated with stablecoins, during its G20 presidency next year. A key first step would be creating a new G20 payments roadmap.

A first roadmap was agreed to in 2020 and delivered important innovations on faster payments. But technology has rapidly changed in the past five years, and it’s time for an upgrade.

If the United States made stablecoins a focus this year, it would raise the bar across the world and ensure that dollar-backed stablecoin users in all countries are getting what they bargain for—an actual dollar—instead of an imitation of one.

The rest of the world will welcome US leadership in this space and will take it as a sign that, at least when it comes to the future of the dollar, the United States is not looking to export instability.

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

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Why the Middle Corridor matters amid a geopolitical resorting

Karel Valansi — Mon, 02 Jun 2025 14:00:00 +0000

Geopolitical earthquakes are redrawing trade routes across Eurasia. Russia’s war in Ukraine has awakened Central Asian countries, which have discovered their strength through cooperation to develop their economies and attain independence. Without the constant attention of Russia, this cooperation contributes to developing the Middle Corridor, a key trade route linking China to Europe via Central Asia, the Caspian Sea, and the South Caucasus. It is an alternative to traditional east-west trade routes that bypasses Russia and Iran. The Middle Corridor is a regional initiative, not an external, imposed idea. It boosts regional cooperation, flexibility, economic growth, and diplomatic dialogue. While Russia and China try to maneuver according to new geopolitical developments, Iran is ignored in these initiatives.

The Middle Corridor creates a strategic role for Turkey as a central energy hub connecting Europe to additional suppliers. The European Union (EU) has recently increased its interest and investment in the corridor. However, the United States is still sitting on the sidelines even though the Middle Corridor presents a vital opportunity to counterbalance Russian and Chinese dominance in the region and limit Iran’s desire to mitigate the effects of economic sanctions. Moreover, greater connectivity means access to Central Asia’s vast deposits of rare earth elements crucial for civilian and defense products, new energy, and information technology. As corridor countries seek to reach new markets and lessen their dependence on Russia and China, Turkey, the EU, and the United States share a common interest in increasing cooperation and counterbalancing the power of Russia and China.

The rise of trade corridors

Following Russia’s annexation of Crimea in 2014, the European Union faced unprecedented precarity and had to reconsider its energy structure to diminish its vulnerable interdependence on Russia’s asymmetrical control over pipelines and weaponization of energy. China’s Belt and Road Initiative and Europe’s urge for diversification increased the need for connectivity and shifted international attention toward trade corridors. As corridor wars intensify and become the new scene for great power competition, the United States needs a more assertive policy concerning Central Asia. This is especially true as the growing cooperation between Russia, China, Iran, and, to some extent, North Korea aims to challenge Western influence by building alternative trade routes aligned with their political agenda. Washington must actively engage in infrastructure initiatives across Central Asia to counterbalance this trend.

The Middle Corridor: A strategic alternative

The Trans-Caspian International Transport Route (TITR), or the Middle Corridor, is a multimodal trade route connecting Europe and China via Azerbaijan, Georgia, Kazakhstan, and Turkey. Since Russia’s full-scale invasion of Ukraine in 2022, its strategic importance has grown as it bypasses both Russia and Iran. The Middle Corridor relies primarily on existing rail and port infrastructure and requires further development and investment. Countries along its path are working to position it as an alternative to the Northern Corridor (the traditional route through Russia) and the Southern Corridor (which runs through Iran).

Before 2022, the Northern Corridor carried more than 86 percent of transport between Europe and China, while the Middle Corridor constituted less than 1 percent. Following the full-scale Russian invasion of Ukraine, the Northern Corridor became a financial and political liability, especially for Western countries aiming to counter Russian control over trade routes. Shipping volumes of the Northern Corridor dropped by half in 2023 compared to 2022. Part of this traffic moved to the Middle Corridor, with increases of 89 percent and 70 percent in 2023 and 2024, respectively.

The Middle Corridor has many advantages. It is a relatively safer route, especially given the disruptions along the Northern Corridor due to Western sanctions on Russia and those in accessing the Suez Canal through the Bab el-Mandeb Strait due to increased Houthi attacks on vessels. In addition to providing economic revenues to corridor countries, some define the Middle Corridor as a “crossroads of peace,” echoing the “peace pipelines” strategy of the past.

According to the World Bank, by 2030, the Middle Corridor can reduce travel times, while freight volumes could triple to 11 million tonnes, with a 30 percent increase in trade between China and the EU. However, progress in the Middle Corridor is slow, and various operational and regulatory problems are causing unpredictable delays. There are still logistical and infrastructural challenges. Most importantly, its annual capacity (6 million tons in 2024) is drastically below the Northern Corridor’s annual capacity of over 100 million tons.

Corridor wars through connectivity

Recently, connectivity and diversification have become key drivers in international politics, with regional and global powers seeking to expand their influence in the Middle Corridor. Japan is following these developments to diversify its trade routes while countering Russia and China. Although the Gulf Cooperation Council (GCC) is not yet a key player in the Middle Corridor, various summits between GCC and Central Asian countries since 2023 have manifested growing cooperation and increased GCC investments in the region’s infrastructure.

As the natural entry point into Europe, Turkey understood the importance of connectivity to sustain economic, commercial, and investment relations and political and cultural ties within the region. In line with its geostrategic location, Turkey has invested in many connectivity projects since the 1990s, such as the Baku-Tbilisi-Ceyhan pipeline, the International Transport Corridor, the Black Sea Ring Highway, the Eurasia Tunnel, the Yavuz Sultan Selim Bridge, the Edirne-Kars high-speed railway, and the Northern Marmara Motorway.

The Middle Corridor, as “the most reliable trade route between Asia and Europe,” presents Turkey with a historic opportunity to establish itself as a strategic transit hub in Europe-China trade. Diversifying its energy suppliers could reduce Russian influence in Turkey’s energy policy while expanding its influence in Central Asia and strengthening its economic ties with the EU. From the Turkish perspective, the corridor would improve its strategic position and strengthen its relations with Turkic-speaking countries in the region.

For the European Union, the Middle Corridor aligns with its Global Gateway strategy. The EU defined the development of the Middle Corridor as a priority to secure connectivity in the transport and energy sectors and promote sustainable economic growth in the region. While current global challenges increase the need for solid partnerships, Central Asia is a €340 billion economy, growing at an average rate of 5 percent annually, with further potential for collaboration. The EU sees the Middle Corridor as a fast and safer route connecting Europe and China, which helps diversify supply chains.

The Middle Corridor serving Russia, China, and Iran

For China, the development of the Middle Corridor is an opening to integrate into global markets and supply chains, an opportunity to reduce its financial burden and dependence on routes controlled by Russia, and also an escape from US sanctions.

Russia remains a major obstacle in developing the Middle Corridor. For regional countries, Moscow would “do everything in its power to control overland trade flows.” While Russia is currently distracted with its war against Ukraine, considering Russia’s sensitivities, it will at some point want to disrupt Western involvement in the region or even exploit the corridor for its own benefit. Russia has already begun exploiting the Caspian Sea and Kazakhstan to bypass Western sanctions. Moscow aims to leverage the enhanced connectivity of the Caspian Sea for military purposes, including the transport of Shahed drones from Iran. Additionally, since 2022, Russia has increased its investment in the International North-South Transport Corridor (INSTC) to diversify its trade routes, reducing its reliance on East-West routes. Iran’s neighbors and even its allies bypassed Iran in current connectivity projects. This result is mainly due to international sanctions, Iran’s poor infrastructure, and a lack of investment. In 2023, representatives from Turkey, Iran, Kazakhstan, Turkmenistan, and Uzbekistan met to discuss the Turkmenistan-Uzbekistan Route, and Tehran immediately proposed a third alternative connecting this route to Iran. Tehran also invests in routes linking Iran to China via Afghanistan to secure a stronger foothold and influence the balance of power within regional trade routes. Iran perceives the Zangezur Corridor as a potential threat that might increase Turkey’s presence near its borders. For Tehran, this project is “Turkey’s highway to Turan.”

Potential strategy for the United States, the EU, and Turkey

Although Central Asia is pivotal in ongoing corridor wars, the region is still not an American priority. The United States needs a comprehensive and updated Central Asia strategy. As Secretary of State Marco Rubio recently signaled, a first step could be to end the Jackson-Vanik Amendment , which restricts formal trade relations with nonmarket economies such as Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, and Uzbekistan. The region also needs American investment to modernize the Middle Corridor. In addition to direct economic benefits, the United States could counterbalance the influence of Russia and China. While great connectivity would enable regional countries’ ambitions, for the United States, it would facilitate access to vast mineral and rare earth reserves, which globally are under significant Chinese control.

The Middle Corridor serves as a lifeline for the landlocked region. Regional countries have the political will and determination to develop the corridor’s potential. In the age of great power competition, these countries have significant room for maneuvering, and they benefit from the multidimensional foreign policy they pursue to enhance their autonomy. However, there is a growing mismatch between expectations and the capacity of the Middle Corridor.

The United States, the EU, and Turkey should cooperate and intensify their engagement with these countries to cultivate mutually beneficial partnerships. Turkey is wildly successful as Ankara invests political capital in strengthening relations. Enhancing partnerships with regional governments and investing in infrastructure would benefit regional governments and the West, as they can maintain their influence in shaping global trade routes. Given that Russia, China, and Iran are trying to prevent the growing Western influence in the region, the West must immediately recognize the strategic importance of transit corridors. As an influence war is intensifying over transit routes, the United States should be at the center of these developments—and not in the periphery—to benefit and counter the geopolitical challenges of Russia, China, and Iran.

Karel Valansi is a political columnist who analyses the Middle East and foreign policy issues in Şalom Newspaper and T24. Follow her on X @karelvalansi.

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The Atlantic Council in Turkey aims to promote and strengthen transatlantic engagement with the region by providing a high-level forum and pursuing programming to address the most important issues on energy, economics, security, and defense.

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Turkish-American defense and energy partnerships suit the new transatlantic landscape

Gregory Bloom — Mon, 02 Jun 2025 14:00:00 +0000

The week following last November’s US elections, the newly formed American Turkish Business Roundtable (ATBR) gathered in Istanbul for a press event where ATBR directors, General Jim Jones and General Tod Wolters (both retired and both former SACEURs), addressed the impact of Donald Trump’s election victory on US-Turkey relations. At that moment, bilateral ties were strengthening, primarily through defense partnerships in response to the ongoing war in Ukraine. The announcement of a joint venture between Repkon and General Dynamics, known as Repkon USA, to manufacture 155 millimeter ammunition for Ukraine underscored both the fragility of the US defense industrial base and the advantages of accelerating the partnership with Turkey and deepening its role in NATO’s supply chain.

The consensus at the Istanbul meeting was clear: The US-Turkey relationship was poised for further improvement. This expectation was based not only on the historically positive relationship between President Recep Tayyip Erdoğan and President Trump, but also on their shared approach to foreign policy: pragmatic, transactional, and focused on strategic economic and security interests. Yet, four months later, the transatlantic security landscape has again undergone a dramatic shift.

Trump’s foreign policy signals a shift toward burden sharing among NATO allies, prompting European nations to assume greater defense responsibilities and reconsider US defense partnerships. This shift has forced European leaders to take greater responsibility for their own security needs, significantly increasing pressure on NATO members to boost defense spending to 5 percent of gross domestic product—a level that many European governments had previously resisted. As a result, European defense markets are undergoing a transformation. European countries, once heavily dependent on the United States for defense procurement, are now directing increased defense spending toward their domestic industries rather than US firms. This is evidenced by the decline in US defense stocks and the rise in European defense stocks in recent months.

For US defense firms, this presents both a challenge and an opportunity. If American companies want to remain competitive in the European market, they might be well-served to partner with Turkish firms to access European domestic procurement programs. Turkish defense firms, already well-integrated with NATO supply chains, provide an ideal platform for US companies to keep a foothold in Europe. Turkish manufacturers like Baykar, Aselsan, and Roketsan produce cost-effective, high-quality systems that European nations increasingly need. The Repkon USA partnership is just the first step, and other joint ventures could enable US firms to leverage Turkey’s industrial base while meeting Europe’s demand for non-American suppliers.

Over the past month, European defense stocks have outperformed US defense stocks due to concerns over NATO’s future following Trump’s remarks suggesting the United States might not defend allies that do not meet spending targets. This has driven European nations to accelerate defense investments, with spending projected to rise dramatically. Countries across Europe are prioritizing domestic production to reduce reliance on US suppliers, while Turkey is expanding its defense industrial base and exploring partnerships with US firms. As a result, US defense companies are seeing declines in value amid expectations that European nations will shift procurement away from direct US purchases in favor of European suppliers.

Turkey’s role as an energy hub and regional leader is becoming more critical, serving as a key transit point for resources from Iraq, the Caspian region, and the Eastern Mediterranean to Europe. The expected reopening of the Iraq-Turkey Pipeline (ITP) and the potential expansion of Trans-Caspian energy routes further reinforce Turkey’s strategic importance. In March, Turkey reinforced its regional energy leadership as Energy Minister Alparslan Bayraktar met with Iraqi Prime Minister Mohammed Shia’ al-Sudani to discuss resuming Kurdish oil exports and exporting Basra oil via the Iraq-Turkey pipeline. With the United States revoking Iraq’s waiver to import Iranian electricity, talks also focused on expanding Turkey’s electricity and gas supplies to Iraq. In Erbil, Bayraktar and Kurdistan Region Prime Minister Masrour Barzani agreed to remove barriers to Kurdish oil exports through Turkey’s Ceyhan port. These efforts reflect Turkey’s strategy to deepen regional energy ties and enhance regional energy security. As US firms look to offset margin pressures at home, investment in Turkey’s energy sector will only increase, aligning with Ankara’s ambitions to diversify its energy partnerships and solidify its role as a key transit hub for Europe.

The Trump administration’s focus on reducing inflation by lowering oil prices has also had significant consequences for global energy markets. As expectations for cheaper oil rise, many US producers are hesitant to expand domestic drilling, knowing that lower prices will reduce their profit margins. Instead, US energy firms are seeking new markets abroad, with Turkey, Iraq, and Libya emerging as key investment destinations. Recent deals underscore this trend, including the Continental Resources-TPAO partnership, which will explore and develop unconventional energy resources, and the ExxonMobil-BOTAS liquified natural gas agreement, which expands gas trade between the two countries.

The US-Turkey relationship is evolving in response to shifting transatlantic dynamics in defense and energy. The withdrawal of US financial and intelligence support for Ukraine amid Trump’s ceasefire push, later restored, pushed European nations toward self-reliance, creating both risks and opportunities for American defense firms. To maintain access to European defense markets, US companies will need to adapt by forming strategic partnerships including with Turkish firms. At the same time, the changing energy landscape is driving American energy firms to invest in Turkey and the broader region, ensuring continued economic ties between the two nations. While geopolitical tensions remain, defense and energy cooperation offer a pragmatic path forward for US-Turkey relations in this new era.

Few things are simple in US-Turkish relations, and the current environment presents obstacles as well as opportunities. Tariff effects on transatlantic trade remain uncertain in the first half of 2025, including in the area of defense industrial cooperation, though for now it seems the 10 percent tariff on Turkey may end up being relatively advantageous compared to some markets. The instinct to localize and nationalize industrial production in both the United States and Turkey represents something of a headwind for larger projects. Domestic political unrest in Turkey may also create caution in Washington or hesitance among US firms out of concern over instability impacting Turkish markets or suppliers.

Yet these concerns, while real and significant, do not outweigh the glaring and growing need that prompted formation of the ATBR. Greater US-Turkey engagement is essential for maintaining US strategic influence in NATO, European defense markets, and regional energy security; that engagement also facilitates supply chain resilience and surge capacity for future military contingencies.

Congress would be wise to support deeper defense industrial cooperation, including joint production agreements, to keep US firms competitive in Europe and engaged with Turkey. Strengthening US investment in Turkey’s energy sector would bolster transatlantic energy security and reduce reliance on adversarial suppliers. Additionally, renewed high-level diplomatic and security dialogues would help counterbalance Russian and Chinese influence while ensuring long-term US economic and security interests. A stronger US-Turkey partnership is not just beneficial—it is in many ways a strategic necessity.

Gregory Bloom is a senior advisor at the Atlantic Council’s Scowcroft Center for Strategy and Security and a nonresident senior fellow at the Atlantic Council’s Turkey Program. He also serves as the chief operating officer of Jones Group International (JGI).

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2024 in the rear view

Rich Outzen — Mon, 02 Jun 2025 14:00:00 +0000

2024 brought a host of developments and changes in the security and defense environment facing the United States, Turkey, and their NATO partners. Some of these dynamics were political and geopolitical in nature, some operational, others military and technical. As the Defense Journal assesses and describes the state of the Alliance in 2025 for its readers, a brief retrospective on the year just passed and its impact provides a part of the necessary context.

Geopolitical shaping events

Momentous geopolitical events since our winter issue have included the advent of Donald Trump’s second term as US president, the collapse of the Assad regime in Syria, and the apparent revelation in Europe that conventional military defense is a sovereign responsibility that cannot be outsourced in perpetuity. These events have had significant implications for the security of NATO, Turkey, and the United States.

Trump’s return has had several immediate effects on the United States (and thus the global) security environment. His approach narrows the US global mission from maintaining a liberal world order to pursuing US national interests, while adopting a tone of strategic ambiguity toward both rivals and allies. He has simultaneously directed reform of the US military to reemphasize combat readiness and lethality while minimizing social or ideological programs. As commander in chief, Trump has directed US soldiers to conduct counterterror strikes in places like Somalia and Yemen even as his negotiators seek to defuse conflicts in Ukraine, Gaza, and elsewhere.

The fall of Bashar al-Assad after an eleven-day rebel offensive reshaped the strategic map of the Middle East. Iran lost a valuable strategic position in its multidimensional “resistance” against Israel and Western influence. Russia lost its sunk investment in Assad and a degree of its influence in the Middle East. Turkey has gained greater stability on its southern border, close defense and intelligence ties with the new Syrian authorities, and prospects for expanded regional trade and a leading role in Syrian reconstruction. The challenges of stabilizing Syria, and tensions between Israel and Turkey stemming from their respective threat perceptions, have no immediate or apparent solution, and will require deft diplomacy to manage.

Shifts that might have attracted more attention in other times were easy to miss, but still noteworthy in terms of global security. China and Russia took steps to bolster the military junta in Myanmar that is teetering on the edge of collapse against a rebel coalition. Battles between the Sudanese army (backed by Egypt, Turkey, Qatar, and Saudi Arabia) and the antigovernment Rapid Support Forces (supported by Russia and the United Arab Emirates) have shifted decisively in favor of the army, though not yet presaging an end to the civil war. The war in Ukraine grinds on amid serious attempts by Trump to forge a ceasefire. Early 2025 continues to be an era of persistent conflict and great power competition, but one with dramatic developments that will echo throughout this and future years.

Strategic alliance development

International patterns of alliance and armament over the past half-year have reflected the weight of geopolitical changes noted above. Deep and effective US support to Ukraine’s defense against Russian aggression has led to a tighter convergence of what has been referred to as the axis of upheaval, with China, Iran, and North Korea sending weapons, supplies, and even soldiers to aid the Russian war effort. A dozen or more other countries have provided diplomatic support to Moscow, but these three have become critical suppliers of weapons and cash for the Kremlin. This is a trend that began before 2024, but has only accelerated in recent months.

The global arms market continues to shift in other significant ways. The United States in 2024 cemented its leading position in arms exports, accounting for 43 percent of global exports. Russian exports have sharply decreased as domestic production has been consumed by the ongoing war in Ukraine. Italy and Turkey have more than doubled their national shares of global exports over the past several years (2 percent to 4.8 percent for Italy and 0.8 percent to 1.7 percent for Turkey). Five Turkish defense firms rank among the one hundred largest in the world—and a sixth, Baykar, would almost certainly be high on the list if all of its sales data were publicly released. Only the United States, China, Germany, and the United Kingdom match or exceed this number. Of particular note has been the continued rise in demand for Turkish armaments from Gulf countries, especially Saudi Arabia, the UAE, and Qatar.

Europe, for its part, has shown signs of finally getting serious about developing its own conventional military deterrent vis-à-vis Russia—or at least talking about doing so. Shocked by Trump’s heavy-handed conditionality on future aid to Ukraine, Brussels and its member states have drawn up plans for massive new defense spending and other deterrent steps—if taxpayers and military-age youth prove willing. Yet the European Union’s initial formulation of deterrence against Russia independent of Washington and without integrating Turkish geography, military capabilities, and strategic resources does not inspire confidence, especially given the long years needed to restore defense industrial capacity even assuming consistent commitment. European firms and national leaders would do well to welcome Turkish contributions to European defense planning and resourcing both in NATO and in EU planning by following through on plans to sell Ankara Eurofighters and encouraging more collaboration like that between Italy’s Leonardo and Turkey’s Baykar.

While the past half year has demonstrated volatility at the geopolitical and political levels, it has brought multipolarity and diffusion of power at the strategic level. This has played out in the evolution of alliances and the flow of arms and trade more broadly. In mid-2024 dualistic constructs (autocracy versus democracy, the US-led Alliance against an axis of evil) retained some utility. The current environment is messier, with issue-specific coalitions and transactional diplomacy creating a kaleidoscope of rivals, partners, and targets that, for now at least, deny predictable patterns and lead some to question the credibility of the international system’s most potent actor.

Operational trends

As geopolitics and alliances continue to evolve, so, too, does war in operational terms. In a world with ongoing “hot wars” in Ukraine, the Middle East, Africa, and elsewhere, several discernible trends can be identified. These include diminishing returns for artillery as seen in Ukraine, failure to achieve military victory through ground maneuver forces for Russia and Israel, and the fragility of lightly armed proxy forces in various theaters.

Russia since 2022 has compensated for shortcomings in its infantry, armor, and air forces through reliance on superior tube and rocket artillery, exacting a heavy toll on Ukrainian defenders in the process. Yet in late 2024, losses among Russian artillery units rose as Ukrainian drone tactics and counterbattery fire became more effective. While Russia still outproduces NATO in artillery ammunition and continues to fire it at prodigious rates, its advantage is decreasing in relative terms.

Russia has continued to advance at high cost to try and consolidate control over the nearly 20 percent of Ukrainian territory it occupies, but has failed to end the war via ground maneuver after three years. The difficulty of ending wars through ground maneuver even against inferior opponents can also be seen in Gaza, where operations which have continued for eighteen months are not yet meeting the stated war goals of military and political leaders. Both the Russian and Israeli campaigns reflect the historical difficulty of reconciling the political nature of conflict termination with the operational conduct of wars, and a resultant tendency for destructive wars to yield stalemate when that task remains incomplete.

The recent period produced impressive operational results in other cases, notably Israel’s campaign against Iran’s regional proxy network and the Sudanese army’s efforts to regain control of the national capital region from the insurgent Rapid Support Forces (RSF) militia. In late 2024 Israel crippled Lebanese Hezbollah and struck Iranian-supported militia targets in Syria and Iraq during an audacious campaign involving air strikes, ground maneuver, and exploding cellphones. Between November 2024 and March 2025 the Sudanese Army routed the RSF from Khartoum and other areas in central Sudan. The RSF had been supported by a number of foreign sponsors, including the United Arab Emirates and several other regional countries, but ultimately failed to achieve local or regional legitimacy—as had the Iranian proxy groups in Lebanon and Syria, and arguably in Iraq and Yemen as well. The past several months have badly undermined the notion popular over the past decade that proxy wars can effectively “enable intervention on the cheap.”

Military technical developments on the horizon

Over the past several months sixth-generation fighter aircraft have moved from concept to reality. China flew two prototypes in December 2024, one produced by Chengdu Aircraft Industry Group and the other by AVIC Shenyang Aircraft. US prototypes for a Next Generation Air Dominance (NGAD) aircraft have been under evaluation since 2020, but in March 2025 the Boeing F-47 was officially selected as the program’s platform. A half-dozen other countries have done some sixth-generation work—integrating advanced stealth, artificial intelligence, manned-unmanned teaming, and other advanced technologies—though even for those with the deepest pockets, fourth- and fifth-generation aircraft will be mainstays for the foreseeable future.

Artificial intelligence is a growing element in military planning and readiness. While the United States and many of its allies have endorsed the Political Declaration on Responsible Military Use of Artificial Intelligence and Autonomy, many potential adversaries and rivals have not. Military applications for AI focus at present on information processing, threat identification, and decision-making, areas in which the United States has relative advantage. The Department of Defense’s Defense Innovation Unit is implementing a project, Thunderforge, to deploy such capabilities to headquarters in Asia and Europe. The military services each have designated units to test concepts and systems related to AI in the field. The drive to develop effective defenses against small unmanned aerial systems (UAS) has gained urgency with the continued broad proliferation of cheap, easy-to-use, lethal UAS around the world. The December 2024 Department of Defense adoption of a classified strategy to accelerate counter-UAS development signals the rising criticality of the need for cost-effective and combat-effective counters to the cheap and plentiful threat. This is an area ripe for technical development and fielding in the near future.

Adaptive Alliance

The shifting dynamics at all these levels—geopolitical, strategic, operational, and technical—shape the contours of defense and security challenges for the United States and its NATO allies. These are certainly challenging times, yet the Alliance has endured for over seven decades through other chaotic and difficult periods because the basic value proposition of mutual defense among the members remains sound. Secretary General Mark Rutte strikes the right tone with his assessment that “there is no alternative to NATO” for either the United States or its partners, and that despite frictions related to burden sharing, domestic politics, and sometimes divergent national interest, NATO’s summit in The Hague in late June will show the Alliance evolving rather than dissolving.

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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Q&A with Haluk Bayraktar

Atlantic Council Turkey Programs — Mon, 02 Jun 2025 14:00:00 +0000

Haluk Bayraktar is the CEO of Baykar, an autonomous technology company based in Turkey. He began his tenure at Baykar in 2004 as an engineering manager, when Baykar’s autonomous technology efforts were still nascent, and has been involved in every aspect of the business’s growth into a leading firm in the Turkish defense sector: project management, logistics, and business development. Baykar’s pioneering role in the rise of the Turkish drone industry makes Bayraktar a fascinating and well-informed observer on security and alliance dynamics affecting Turkey, NATO, and the region.

This interview has been lightly edited for style.

Defense Journal by Atlantic Council IN TURKEY (DJ): Thanks for taking the time to talk with us. Let’s start with developments of common interest to readers in Turkey, the United States, and Europe. Following the industrial and technology cooperation deal with Italian defense and aerospace group Leonardo, what’s next for Baykar in the Western market?

Bayraktar: Baykar has become the world’s biggest drone maker, with thirty-eight international partners now—from Europe and NATO to the Turkic countries, Africa, and the Middle East. Among NATO allies, we have partnered with Poland, Romania, Kosovo, Croatia, and of course, Turkey’s military, law enforcement, and disaster relief agencies. Turkey is a NATO ally, so all our products and technologies follow the technical standards and military specifications of the West and are entirely compatible with Western systems. The Western market is critical for us.

As for Leonardo, we are on the path to establishing a joint venture (JV). They are a major player in Europe, and their work areas are highly compatible with ours—a lot of synergies and complementarity. We were already working with them, integrating payloads and systems with our products: This has become a very strong bond or marriage. A JV is a great opportunity/potential to bring robust, field-proven systems to a broader market. Baykar has drones all around the world, including tactical and strategic platforms. Leonardo produces critical subsystems with great potential for Europe and broader markets where they have a presence, including South America and elsewhere, but Europe is our main focus. In Europe, there is no other mature alternative to what we have.

DJ: What differentiates your approach to manned technology? What is the key to your value proposition?

Bayraktar: We are a tech developer but not just tech. It’s about tech but also about ways to use that technology—about operational employment. Our approach centers on reliability, safety, and robustness. Our experience brings lots of feedback from various areas, which makes our products even more robust. So, we combine technology with real-world experience. Our fleet now exceeds 300,000 flight hours per year, so there is a lot to analyze. Our systems offer the highest performance-to-cost across the market. They are the most adaptable with continuous innovation, and they are equipped with the most advanced technology. In the defense sector, there are huge manufacturing capacity challenges everywhere, whereas there has been a great buildup in Turkey in the last twenty-five years. Over just twenty years, we’ve gone from roughly seventy to over 3,000 companies in the sector, with thousands of products. It’s a great ecosystem with important internal synergies. Baykar has established mass production capacity for unmanned systems. Our Istanbul base is the biggest facility of its kind in the world. So, potential customers know we can deliver quickly. We produce 250 Bayraktar TB2 [unmanned combat aerial vehicles] per year, fifty Akinci [high-altitude, long-endurance] UCAVs per year, and we’re ramping up to support larger capacity as the Bayraktar TB3 UCAV and the Kizilelma unmanned fighter jet move from development to production.

DJ: What is your conceptual and defense technological approach to Kizilelma? Do you see it as a loyal wingman to the fifth-generation Kaan fighter or a pathway to replace Kaan in the future?

Bayraktar: Kaan is a national manned fighter program, funded by the government. Kizilelma is Baykar’s own design and project. It is our final target on the unmanned family of products—a fighter with both subsonic and supersonic capabilities. We do not envision it as a loyal wingman, though it can work as an integrated adjunct in theory, if one were to couple it and use it with manned fighters in risky environments. US President Donald Trump recently introduced the American F-47 as a mothership controlling other fighters, and the consortium developing [the Global Combat Air Program involving Italy, the United Kingdom, and Japan] conceived it in similar fashion. But we envision Kizilelma as operating on its own with a fleet control system. As a company, we don’t develop manned systems. We exclusively invest in drones. That is our focus. Kizilelma is an aircraft with aggressive maneuvering, autonomous operation, and controls that can be flown by few operators. It completed its first flight in 2022, and we see that as a revolution. Bayraktar TB3 has the capability to take off and land on short-runway aircraft carriers. Kizilelma will have this feature too.

Fighter pilots stationed at aircraft carriers have to fly every single day and complete a certain number of sorties annually to stay current. That’s perhaps fifty training flights per day. By contrast, unmanned platforms do not require as much effort or so many daily landings to be certified for carriers. Moreover, Kizilelma will integrate artificial intelligence to assist with delegation of command and other operational aspects.

DJ: How do you view the F-35 debate in the United States, especially Elon Musk’s view that manned aircraft are not the best path forward?

Bayraktar: There are about 13,000 manned fighters worldwide right now–Russian, Chinese, US, and other systems combined. We believe that all those platforms will eventually be converted to unmanned systems, even though one cannot prove that point just yet. But when you look at the field, it’s clearly headed in that direction. To be clear, they may not be replaced one for one. It may be more like three to five unmanned platforms to replace each manned fighter. Unmanned systems will be everywhere, and it will be a crowded airspace—not just unmanned fighters but smaller first-person view drones and loitering munitions. They will be everywhere, and every country will need the ability to build and use these things. For nations to defend themselves in this century, this is a necessary capability—much like the ability to produce bullets.

DJ: Turkey has shown great agility in what has been termed “drone diplomacy,” or complementing regional policy initiatives with defense sales. What is the nature of public/private partnership in Turkish drone diplomacy?

Bayraktar: Overall, the major players in the Turkish defense ecosystem are still government-owned institutional firms. The private sector is smaller but dynamic and growing. Of course, I think that the private sector’s dynamism is preferable. SAHA is the industry group representing the smaller and midsize firms that comprise most of our private sector, and I am currently serving as the chairman.

Still, the system operates similarly for public and private firms. Anyone wishing to export applies to the Ministry of National Defense, which in turn coordinates with the Foreign Ministry and the intelligence community to issue an export license. It is the government’s decision at the end of the day. The government doesn’t promote private-sector firms per se. The Defense Industry Agency (SSB) has foreign relationships and partnerships, and they generally favor government-affiliated companies. One of the objectives of SAHA has been to help small and medium-sized companies become more visible. Our annual exhibition helps smaller players. Baykar is an example of successful growth: We’ve gone from five employees in 2004 to over 6,000 today. We know how important it is to become more visible, and we support other firms doing that. We try to make it easier for the newcomers. That is my responsibility as SAHA chairman.

My view is that European countries are better at using governmental influence to promote national commercial products. Baykar’s products promote themselves through their unique utility as well as aggressive marketing and social media presence. The Turkish government doesn’t subsidize sales, although other countries may. But we don’t rely on public credit or government grants. This is unique to Baykar: We’ve developed an unmanned fighter with the company’s own money. At the end of the day, since companies are required to receive a permit to export, the government plays an important role. The higher levels [of government officials] do talk about it and the firms need approval. The government spending environment matters greatly for domestic firms, too. And while Turkey spent 4.5 percent of its [gross domestic product] on defense before 2000, that number has remained close to 2 percent for two decades now. It was just in the last two years that it approached 3 percent.

The bottom line is that drone diplomacy is a reality and the Bayraktar TB2, in particular, has proven that. But the government doesn’t lead: market demand leads, the company follows, and the government supports.

DJ: Can you talk a little bit about the price/performance balance for Baykar systems?

Bayraktar: The Bayraktar TB2 is a very good example for price/performance balance. The initial purchase price or acquisition cost is one factor, but the life cycle, including maintenance and durability, has to be considered as well because reliability affects long-term costs. Let’s say you procure an alternative to Bayraktar TB2 for half the price. In reality, this is not an advantage if this “alternative” has double the crash rate. So, Bayraktar TB2 has a reliability advantage because you don’t face as many crashes and the cost consideration changes.

Unmanned systems represent a new niche in the defense ecosystem. Aerospace is conservative, especially for manned systems: extensive certifications and regulations serve to protect human life. But unmanned [aerial] vehicles are a different paradigm—you can add new sensors, new technology, and new operational approaches rapidly. An example is the fact that manned systems still use mechanical gyros, whereas the technologically advanced UAVs are currently using even cheaper MEMS [i.e., microelectromechanical system) sensors, fiber-optic alternatives with high-end software systems. You can easily innovate in the unmanned realm with the latest technology, whereas you need to be conservative in the manned domain because you need to make sure that each new step complies with the certification and safety standards of manned aviation. You can qualify unmanned systems with very high-end software—even AI software—and hardware much more quickly.

Baykar has a price advantage because we are vertically integrated. We have strong in-house avionics, power systems, and ground element design. This allows us to tailor critical subsystems and enable attractive pricing with high-end capability. The TB2, with a six-unit ground system and everything, still costs less than a manned platform. Our TB2 fleet recently passed the one-million-hour milestone, so our operating cost is just several hundred dollars per hour—compared to a minimum of $20,000 per hour for a single manned F-16. When you can mass produce, availability and reliability turn into a potent combination. Additionally, customers benefit from the rapid in-service schedule compared to a manned system. A country can field a full UAV system with trained people within a year, providing a very quick and affordable defense capability compared to a manned system, which is a multiyear exercise.

DJ: You mentioned thirty-eight international partners earlier. Ukraine was one of your earliest: Have you been able to apply lessons from that partnership with newer programs, such as those with the Gulf countries?

Bayraktar: Ukraine was Baykar’s first export customer. Our cooperation with Ukraine opened up the strategic level of cooperation for us. We had been working with them since 2011, but things moved rapidly after 2014. In 2014, no one else would sell them armed drones. We didn’t yet have a mature system, but we agreed to help. They were in need, huge need, and searching. That was more than ten years ago. They couldn’t get what they wanted elsewhere either, so they came to Turkey. President Erdoğan’s leadership mattered at that point, as he considered Ukraine a neighbor and friend in need. With the government’s support, we supplied armed drones starting in 2019—the order was placed in 2018. They were very happy and this was very important. President Zelensky visited in August 2019 after taking office. At his request, we agreed to build a factory in Ukraine. He acquired more systems, and we discussed an offset-type obligation. I told them: “You have very good engines. Maybe we can figure out a way to use your engines on our platforms.” So, we created effective cooperation with Motor Sich and others. In a sense, Turkey and Ukraine are complementary countries. When the war escalated in 2022, we did our best to support Ukraine. You may remember the European crowd-sourcing campaigns for Europeans to buy TB2s on Ukraine’s behalf, but we never accepted the money. We donated the platforms, giving up over $110 million in income that we chose not to generate. We are not war profiteers. We delivered all Bayraktar TB2s free of charge as part of those campaigns and the campaign funds were used for humanitarian aid and other pressing needs to support Ukraine.

Haluk Bayraktar is the CEO of Baykar, an autonomous technology company based in Turkey. Follow him on X at @haluk.

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Q&A with Dov Zakheim

Atlantic Council Turkey Programs — Mon, 02 Jun 2025 14:00:00 +0000

The Defense Journal of the Atlantic Council in Turkey recently interviewed former US Undersecretary of Defense Dov Zakheim, a longtime observer of US foreign and national security policy, regarding recent tensions between US allies Israel and Turkey. Those tensions have received extensive media coverage, including the remarks of both President Donald Trump and Israeli Prime Minister Benjamin Netanyahu during the latter’s April 7 visit to the White House—which featured Trump expressing optimism that tensions were manageable and that he might play a mediating role.

This interview has been lightly edited for style.

DJ: Thank you for your time in speaking with us. Israel and Turkey have had alternating close and tense relations for decades but maintained discrete contacts throughout the cyclical ups and downs. Are they still talking?

Zakheim: It’s hard to know because if they are talking it’s probably through intelligence channels, which get reported the least. My guess is that they probably are, if only to deconflict over Syria. There was a report commissioned by Prime Minister Netanyahu that said tensions over Syria could create a dangerous situation. Regional press reported a conclusion that the countries “could go to war,” but that’s not what the report said—just that the tensions were potentially quite serious. Turkish hard-right commentators from MHP [Milli Hareket Partisi, the National Movement Party, of Turkish nationalist] and HUDA PAR [Hür Dava Partisi, the Independent Cause Party, of Kurdish Islamist] have pretty much said the same thing; even President Recep Tayyip Erdoğan has said similar things. The tensions are worse than what happened after the Mavi Marmara incident in some ways¹. The military and security establishments in both countries tend to be more realists and to seek de-escalation, though; so, they are probably still talking.

DJ: After the very tense period between 2009–2014, President Barack Obama and later Trump worked to ameliorate Turkey-Israel tensions, leading to a rapprochement of sorts. This contributed to a softening of tensions over time. Without US involvement, the two countries pursued a diplomatic reconciliation in 2023 that was interrupted by the Hamas attacks of October 7 and the Israeli response. Do the two countries need the United States as a mediator or are they better off together proceeding at their own pace and modalities?

Zakheim: Trump has offered to mediate between Israel and Turkey so as to improve their relationship. But Washington might be too distracted by the president’s other priorities. President Trump has focused on de-escalating the situation in Gaza, which could indirectly benefit Israel-Turkish tensions stemming in part from the conflict there. In addition, the Trump administration also has Ukraine, tariffs and trade, and a lot of things competing for the attention of the president and his key advisers. It is not surprising that Netanyahu raised Syria with President Trump, because Israelis take a different view of what’s going on there and are concerned about the Turkish role: They are not comfortable with what they see as growth in Turkish influence there. Discontent in Jerusalem can’t be ignored, though it appears that President Trump’s initial response was balanced and that Netanyahu didn’t get the backing for his position that he might have wanted.

DJ: Syria is a unique challenge between Israel and Turkey now because it essentially makes them neighbors—tense and distrustful neighbors—not just countries in the same region. How do both countries meet their minimum interests in Syria?

Zakheim: It shouldn’t be zero-sum between these two, because there are other players in the equation. The Iranians are still present in Syria to a degree, and the Russians of course hope to keep air and naval bases [there]. Israelis are divided as to whether it is good or bad for Russia to stay or go. It appears Netanyahu thinks it may not be a bad thing to use the Russians to balance Turkish influence. Then there is the question of Damascus, the transitional government, itself. Some think they haven’t really evolved from their roots in al-Qaeda, while others say Damascus—especially transitional President Ahmed al-Sharaa—have been signaling moderation and reaching out to the West because they know that they need Western support. Where there are many players, a modus vivendi is possible, especially if Sharaa wants to move toward the West more than the Assad regime did. There is great fluidity in Syria now. The Kurdish factor still has to play out as well and the success or degree of their reintegration affects Ankara’s positioning. Abdullah Öcalan may want to disarm the movement he founded, the PKK [Partiya Karkaren Kurdistan, or Kurdish Workers’ Party], but it is possible that parts of the movement in Iraq or Syria do not². With so many possibilities, Jerusalem and Ankara both would do well to show flexibility.

DJ: Is Syria without Assad better for Israel than Syria with Assad?

Zakheim: I think it will very much depend on where the Syrian government goes. We haven’t heard the same sort of vitriol out of Damascus as under Assad, despite Israel taking more territory and conducting air attacks. It may be that the Israel-Syria border becomes a quiet border like it was under Hafez al-Assad as opposed to the more dangerous border that became the norm under Bashar and his backers, Hezbollah and the Islamic Revolutionary Guards Corps. Bashar was a slimy figure to the Turks as well: He lied to Ankara and was problematic for Israel. It may well be that a government that proceeds the way al-Sharaa says he wants to go could be a plus for both Israel and Turkey.

DJ: How much of the current Turkey-Israel tension do you see as structural or systemic, and how much personal (i.e., a product of the combative Netanyahu-Erdoğan relationship)?

Zakheim: There is no doubt that the personalities don’t line up very well. For comparison, though, we can look at the relationship between Netanyahu and former President Joe Biden—they were not fond of one another, but the two countries remained close. It was Erdoğan who patched things up gradually with Netanyahu over a decade. Erdoğan is a realist, and he knows very well that Israel has a number of things to offer and is an important market. Remember that Turkey is developing a very high-tech military and other industries, and there are many areas where they might partner with Israel. There was over $1 billion in bilateral trade that has now been cut off—though some still comes through third countries. The fact remains that Erdoğan is a pragmatist. If Gaza is somehow settled, that is a way for trade relations to be restored, and these two countries are potentially very important partners for trade and security cooperation.

Overall, despite the ups and downs there is a degree of complementarity. Both leaders are survivors and have pragmatist streaks. Gaza is a place where the United States can clearly play a major role in reconciling interests. If there is reconstruction, Turkish companies, especially in infrastructure, can have a role. A Turkish constructive role in stabilizing Gaza could be a new pivot point. It is true that Erdoğan plays to his base, but both he and Netanyahu remain less vitriolic about “the other” country in the equation than the hardliners in their own coalitions.

Dov S. Zakheim is a member of the Atlantic Council Board of Directors. He was US undersecretary of defense (comptroller) and chief financial officer from 2001-04. He is a senior advisor at the Center for Strategic and International Studies and senior fellow at the CNA Corporation.

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1 The Mavi Marmara incident involved Israeli Navy interdiction of civilian ships trying to break a blockade of Gaza, which resulted in the death of nine Turkish activists and ended with a 2013 apology by Netanyahu.

2 On May 12^th 2025, following a congress of PKK leadership, the organization announced a decision to disarm and dissolve organizationally. The impacts of this decision on the ground in Iraq and Syria remain to be seen, as noted in the interview.

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Transatlantic relations and a region in flux

Atlantic Council Turkey Program — Mon, 02 Jun 2025 14:00:00 +0000

Foreword

Dramatic events altered the geopolitical landscape, affecting Turkey, the United States, and NATO in late 2024 and early 2025. The election of Donald Trump as the forty seventh president of America, a ceasefire in Gaza after months of showdown between Israel and Iran’s Axis of Resistance, and the collapse of the Assad regime in Syria have challenged many assumptions and regional political-military considerations. The fifth issue of the Defense Journal assesses key dynamics as we enter a new era. The Defense Journal team examines the rise of the hyperwar concept via military applications of artificial intelligence and the frontier of development for robotic systems. We also look at trends in key US policy concerns in the region to the south of Turkey, including Israel and Syria. If the first months of the second Trump administration are any indication, rapid change and a high tempo in US foreign policy decisions affecting Washington, Ankara, and their shared interests across several regions is the new normal. The Editorial Team hopes you find these contributions interesting and useful.

Rich Outzen and Can Kasapoglu, Defense Journal by Atlantic Council IN TURKEY Co-managing editors

Articles

2024 in the rear view

By Rich Outzen

Hyperwar, artificial intelligence, and Homo sapien

By Can Kasapoğlu

Turkish-American defense and energy partnerships suit the new transatlantic landscape

By Greg Bloom

Q&A with Dov Zakheim

By Atlantic Council Turkey Program

In Syria’s fragile transition there’s a glimmer of a more stable Middle East

By Charles Lister

Q&A with Haluk Bayraktar

By Atlantic Council Turkey Program

Why the Middle Corridor matters amid a geopolitical resorting

By Karel Valansi

Honorary advisory board

The Defense Journal by Atlantic Council IN TURKEY‘s honorary advisory board provides vision and direction for the journal. We are honored to have Atlantic Council board directors Gen. Wesley K. Clark, former commander of US European Command; Amb. Paula J. Dobriansky, former Under Secretary of State for Global Affairs; Gen. James L. Jones, former national security advisor to the President of the United States; Franklin D. Kramer, former Assistant Secretary of Defense for International Security Affairs; Lt. Gen. Douglas E. Lute, former US Ambassador to NATO; and Dov S. Zakheim, former Under Secretary of Defense (Comptroller) and Chief Financial Officer for the Department of Defense.

Gen. Wesley K. Clark

Chairman and CEO of Wesley K. Clark & Associates & Board Director, Atlantic Council; former Supreme Allied Commander Europe of NATO

Amb. Paula J. Dobriansky, Ph.D.

Senior Fellow at Harvard University JFK Belfer Center for Science & International Affairs; Board Director, Atlantic Council; former Under Secretary of State for Global Affairs (2001-2009)

Gen. James L. Jones

President, Jones Group International and Executive Chairman Emeritus, Atlantic Council; former National Security Advisor to the President of the United States

Franklin D. Kramer

Distinguished Fellow & Board Director, Atlantic Council; former US Assistant Secretary of Defense

Lt. Gen. Douglas E. Lute

CEO, Cambridge Global Advisors & Board Director, Atlantic Council; former US Permanent Representative to NATO

Dov S. Zakheim

Senior Advisor, Center for Strategic and International Studies; Senior Fellow, CNA Corporation; Board Director, Atlantic Council; former US Under Secretary of Defense

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Hyperwar, artificial intelligence, and Homo sapiens

Can Kasapoğlu — Mon, 02 Jun 2025 14:00:00 +0000

Rethinking the modern neuroanatomical charts of warfare

According to Napoleon, an army walks on its stomach. War, nonetheless, chiefly revolves around cognitive functions. Take a nineteenth-century Napoleonic artillery officer calculating the range of his guns to the target, for example. The officer’s prefrontal cortex hosts three major components: control, short-term memory, and arithmetic logic. This prefrontal exercise operates on the data provided by two other sources: a premotor-parietal top-down system optimized to update and continuously transform external data into an internal format, and a hippocampal bottom-up system to serve as an access code to memory from previously acquired knowledge or to detect novel information. In other words, an army fights on mathematical military data processing systems of the parietal and prefrontal brain regions. No matter how technological improvements have run extra miles to the present day, this cognitive formulation has not changed even on the margins. A contemporary F-35 pilot, assessing the processed situational data harvested by the aircraft’s AN/AAQ-37 Distributed Aperture System showcased on the helmet-mounted display, uses precisely the same biological decision-making algorithms as the Napoleonic artillery officer posited above—albeit on steroids and with a high-performance computing edge.

Today, mankind stands on the eve of a great change in this oldest cognitive tradition of warfighting. For the first time in military history, parietal and prefrontal brain regions may take a back seat in deciding concepts of operations and concepts of employment, perhaps even strategic planning prior to combat operations, while artificial intelligence will likely assume the lead. With the rise of autonomous weapon systems in distributed battlegrounds, the neuroanatomical outlook of warfare may be evolving into a new reality.

Smart digital algorithms and autonomous robotic warfighters are poised to replace not only the muscles but also the brains of warfare. This can occur because they can replicate electronically what our brains do in the biological realm and thus can overtake us by simply performing better, not differently. Robotics and artificial intelligence mimic the core characteristics of nature. Machine-learning and artificial neural networks are good examples of this mimicry. Our everyday AI features of facial and voice recognition and smart internet search predictions function in the virtual world much as they do in the human brain. Likewise, swarming is not merely a robotic function. Birds, bee colonies, and even bacteria swarm. AI might be “smarter” than humans through faster processing of effective mimicry, and robots similarly may swarm in a more coordinated and agile manner than biological agents.

AI and hyperwar: Data, robots, and satellites

In their 2017 Proceedings article released by the US Naval Institute, US Marine Corps General John Allen and high-technology entrepreneur Amir Husain described “hyperwar” as an emerging type of armed conflict that significantly reduces human decision-making. In the new type of wars, the authors argued, Homo sapiens’cognitive function of decision-making will nearly disappear from the OODA loop (observe, orient, decide, act). Autonomous swarms of robotic warfare systems, high-speed networks married to machine-learning algorithms, AI-enabled cyber warfare tools, and miniaturized high-powered computing are likely to assume the lead roles in fighting wars. More importantly, humans might be removed from operational planning, with their role to be confined to merely very high-level and broad input. The rise of hyperwars will essentially bring groundbreaking combinations of emerging technologies, much as the German blitzkrieg combined in novel ways fast armor, air support, and radio communications. General Allen and Husain concluded that the gap between winners and losers would very likely resemble that of Saddam’s Iraqi Army facing the “second offset” technologies of electronic warfare, precision-guided munitions, and stealth platforms.

The Russo-Ukraine War serves as a battlefield laboratory to test possible elements of the coming hyperwars and the impact of artificial intelligence on conducting and analyzing warfare. First, the integration of satellite imagery intelligence and target and object recognition technologies has provided the Ukrainian military with a very important geospatial intelligence edge in kinetic operations. Second, the Ukrainian intelligence apparatus has resorted to neural networks to run ground social media content and other open-source data to monitor Russian servicemen and weapons systems, then to translate the input into target acquisition information and military intelligence. Third, playing smart with data has also sparked a capability hike in drone warfare. Open-source defense intelligence studies suggest that Ukrainian arms makers used publicly available artificial intelligence models to retrain drone software applications with the real-world data harvested from the conflict. This modified data has then been used to operate the drones themselves. Ukrainian robotic warfare assets have seen a capability boost in precision and targeting with the help of the data-mastering process. In the future, some robotic baselines will likely see a faster and more profound improvement with the new leap in AI and information management. Specific drone warfare systems, such as the American Switchblade and Russian Lancet-3, already have design philosophies that prioritize computer vision to run target identification.

It appears that the zeitgeistis on the side of the hyperwar. After all, digital data has been on a huge and exponential growth trend for at least one decade. In 2013, the world generated 4.4 zettabytes of data—with a zettabyte amounting to 10²¹ bytes. Estimates from that period forecast 163 zettabytes of global data to be produced in 2025, which was considered a gigantic magnitude. At current rates, the reality this year will be even higher, at 180 zettabytes of data, or even more. The climb in data generation is intertwined with a rise in drone warfare systems proliferation and employment globally, as well as the production of robotic warfare systems. The dual hike in data and robots forms the very basis of hyperwars.

Other areas to monitor are orbital warfare and space warfare systems. Unlike warfighting and maneuver warfare on the planet Earth, the space operational environment presents technical challenges rather than strategic ones. Satellites are very vulnerable to offensive action since their movements are very limited and incur massive technical requirements for even small moves. A recent war-gaming exercise by American space and defense bodies showcase that one way to boost survivability in space warfare is to reposition “bodyguard satellites” to block access to key orbital slots. AI would be a key asset in accomplishing this concept in a preventive way. Being able to process very large data accumulations to detect hostile action patterns invisible to intelligence analysts, AI offers a new early-warning set of capabilities to decision-makers on Earth.

Horses, dogs, and human warfighters

Mankind as a species has long been fighting in cooperation with other members of the animal kingdom. The cavalry, for instance, for centuries leveraged the synergic warfighting mix of the domesticated horse—Equus ferus caballus—and Homo sapiens. Dogs—Canis lupus familiaris—are another example, as the first species domesticated by our kind and thus long-accustomed to fighting at our side. The role of war dogs is not restricted to history books or ceremonies and parades: a Belgian Malinois took part in the US killing of Abu Bakr al-Baghdadi, the founder of the Islamic State in Iraq and al-Sham (ISIS), back in 2019. Another dog of the same breed operated alongside the American Navy Seals in 2011, during Operation Neptune Spear, to kill the mastermind behind the 9/11 terror attacks, al-Qaeda ringleader Osama bin Ladin.

Scientifically speaking, Homosapiens not only befriended horses and dogs—we neuroscientifically altered these domesticated species’ decision-making algorithms through selective breeding. Scientific experiments showcase that domesticated horses have learned to read human cues to adapt their behaviors. War dogs are the product of key manipulations via human intervention across generations of deliberate breeding. Magnetic resonance imaging studies have proven that through selective breeding over centuries, humans have significantly altered the brains of domestic dog lineages to achieve behavioral specialization, such as scent hunting or guard capabilities and tasks.

The advent of AI requires us to accept that human brains, like those of domesticated animals with military utility, have adapted and will continue to adapt in response to neural stimuli. Combat formations, ranging from mechanized divisions to fighter squadrons, function as the musculoskeletal frame of warfare, while the human decision-making system functions as the brains and neurons. Throughout military history, the brain and the limbs interacted with various ways of communications—be it trumpets of military bands ordering a line march or contemporary tactical data links of modern warfare sharing real-time updates between a fifth-generation aircraft and a frigate’s onboard systems. Homo sapienshas been at the very epicenter of the equation no matter what technological leaps have taken place and will adapt in unpredictable ways to being the slower and more marginal element in decision architecture. Drone warfare has not led to autonomous killer robots but to the rise of a new warrior class: drone operators with massive kill rates, seen both in Putin’s invading army and the Ukrainian military. The rise of hyperwars may produce even further change to the human role, though, as the biological brain races to compete with accelerating decision cycles and nonbiological elements that outpace us. Domesticating AI in warfare will prove more challenging than either dogs or horses, and it is not yet clear what would ensue if we were to design servants quicker and more agile than the masters.

Implications for US-Turkish defense cooperation

The United States and Turkey are not only the two largest militaries within NATO; they have the broadest and most combat-proven drone warfare prowess. Their robotic warfare solutions have been rising quickly in autonomous characteristics and have already reached the human-in-the-loop level in combat operations. In the coming decades, human-out-of-the-loop CONOPS (concepts of operations) will likely emerge for both the US and Turkish militaries. This common feature of defense technology and geopolitics presages a lucrative path for cooperating within the hyperwar environment.

Moreover, Washington and Ankara can enhance their respective collaborations with Ukraine, a nation with the most recent drone warfare experience against the Russian Federation—a direct threat to NATO member states, as officially manifested by the alliance’s incumbent strategic concept. The Ukrainian case extends to utilizing satellite internet connection in the C4ISR (command, control, communications, computers, intelligence, surveillance, and reconnaissance) aspect of robotic warfare, as well as employing private satellite imagery in target acquisition widely.

Kyiv has already developed close defense ties with the United States and Turkey—even taking part in the latter’s drone proliferation, particularly in the engine segment (for example, Baykar’s Kizilelma). Establishing a trilateral lessons-learned mechanism, which would incorporate defense industries alongside government agencies, would boost such an effort.

Overall, hyperwar seems to be paradigm for future warfare. The United States and Turkey make it possible, and through collaboration perhaps likely, that NATO will retain the upper hand in the hyperwars of the future.

Can Kasapoglu is a non-resident senior fellow at Hudson Institute. Follow him on X @ckasapoglu1.

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China: There is no cooling off this trade war

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A tax on remittances could hurt US households—and national security

Ananya Kumar — Mon, 02 Jun 2025 12:10:45 +0000

Last month, the US House of Representatives narrowly passed a sweeping tax and spending bill that is the top legislative priority for President Donald Trump. Among its lesser-known provisions is a proposed 3.5 percent tax on remittances sent by anyone who is not a US citizen or national.

Currently, remittances are not taxed separately, as senders already pay income tax on the earnings they transfer to family and friends abroad. “The One, Big, Beautiful Bill” would upend that system—effectively taxing those transfers twice. But that’s not all. A tax on remittances—valued at $905 billion globally—would not only hit US households and low-income countries, where they can account for more than 30 percent of gross domestic product; it could also undermine key US national security and foreign policy priorities.

If the Senate passes the Republican budget bill, remittance senders and recipients—who already contend with high fees—will undoubtedly be hit the hardest. In 2024, the global average cost of sending two hundred dollars across borders was 6.4 percent. That’s more than double the United Nations’ sustainable development goal of 3 percent and exceeds the Group of Twenty (G20) target of 5 percent.

If overall remittance volumes were to fall, US remittance providers—the companies that enable the sending and receiving of these payments—would be adversely affected. The proposed legislation imposes new responsibilities for these remittance service companies—such as verifying the sender’s citizenship and enforcing new fee structures and reporting mechanisms—all of which impose new costs, compliance burdens, and risks for remittance providers. These additional requirements threaten to reduce operational efficiency and drive up consumer prices, especially as US companies currently dominate the remittance services sector, setting standards for transfer speed, cost, and security. A tax-driven shift in the market would hurt these companies’ profitability and competitiveness, undermining broader US economic interests.

The risk of driving transactions underground

When it comes to national security, the United States already has a robust framework to monitor and regulate money and payment flows, including laws and infrastructure designed to combat financial crime. Remittance service companies are a central component of this framework, enabling state and federal law enforcement to track and pursue suspicious transfers and bad actors.

Moreover, research shows that taxing remittances leads to increased use of underground or informal channels for sending money. That is, senders seek out alternatives—less regulated, less transparent, and less safe ways of transferring their money abroad. In fact, countries that have enacted punitive measures on cross-border payments and currency exchange have often undermined their own ability to combat financial crime, thereby weakening their economies and diminishing their foreign influence.

Argentina serves as a revealing case study. Under previous leadership, the Argentine government imposed foreign exchange and capital controls that drove transactions into underground banking networks, making it far harder to trace illicit activity. These restrictions also weakened the already vulnerable economy, contributing to stagnation and inflation. President Javier Milei is now actively reversing these policies in favor of open and transparent capital flows and foreign currency exchange—reforms that significantly benefit both law enforcement and economic stability.

In the United States, the revenue generated by a federal tax on remittances would likely be less than 0.1 percent of the national budget. At the same time, it would reduce remittance volumes or push them underground, contradicting broader US national security goals and making US companies less competitive by increasing their cost of doing business. Accordingly, policymakers should reconsider the trade-offs and recognize that transparent, reliable remittance services serve the national interest of the United States.

A foreign policy tool hiding in plain sight

With respect to foreign policy and the ability to influence global development, remittances play a vital role—especially in an era of shrinking public-sector aid. Private remittance flows often reach communities and individuals more directly and efficiently than government-to-government assistance. US senders are often family members and friends of recipients, as well as faith-based and other humanitarian organizations. These flows ultimately contribute to stabilizing fragile economies, reducing the financial distress that often drives illegal migration. Additionally, remittances often support democratic activity and institutions in recipient countries, while also helping undermine autocratic governments by empowering citizens with resources independent of state control.

Because they account for one-sixth of all cross-border payments, remittances also reinforce the global dominance of the US dollar. A large portion of remittances is sent in—or exchanged into—US dollars, bolstering the currency’s central position in the international financial system and providing visibility into foreign transactions. This visibility, in turn, allows for the effective enforcement of anti–money laundering (AML) and countering the financing of terrorism (CFT) policies, as well as sanctions enforcement in cases of illicit activity.

Given these strategic benefits, the United States should take concrete steps to better leverage remittances as a national security and foreign policy asset. This begins with adopting smart, forward-looking policies that strengthen remittance channels and maximize their impact.

First, US policymakers should not just protect, but also actively promote legal remittance channels to ensure that these funds can flow safely and efficiently. Rather than imposing restrictive measures such as new taxes, the United States should foster deeper collaboration between law enforcement and well-regulated remittance providers. Such cooperation would support the adoption of rapidly evolving compliance technologies that more effectively detect illicit financial flows.

Second, the United States should reduce the costs and friction associated with remittance transactions. This includes granting well-regulated US remittance providers direct access to national payments systems and modernizing AML and Bank Secrecy Act regulations to reflect the realities of digital transactions. Emerging technologies can improve financial crime detection—provided that regulators offer clear guidance and foster their adoption.

Third, the United States should leverage its presidency of the G20 in 2026 to establish a global working group that captures the complexity of remittances as a tool of foreign policy and national security. The G20 has traditionally provided targets for remittance payments. Additionally, a US-led working group could address the need for better global coordination to curb illicit flows, reduce frictions, and explore how remittances can complement official aid flows, especially in constrained fiscal environments.

By recognizing and elevating the role of remittances, US policymakers can incorporate a powerful, underused asset into their broader foreign policy strategy—one that supports both domestic prosperity and global stability.

Ananya Kumar is the deputy director for future of money at the Atlantic Council’s GeoEconomics Center.

The author thanks Daniel Gorfine for his contributions to this article.

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Experts react: How the world is responding to the courtroom drama around Trump’s tariffs

Atlantic Council experts — Fri, 30 May 2025 22:50:44 +0000

From Beijing to Buenos Aires, they’re glued to US court dockets. US President Donald Trump’s sweeping tariff regime was thrown into legal limbo this week, thanks to decisions from the New York–based US Court of International Trade and a Washington, DC–based US district judge. Both rulings found that Trump overstepped with the emergency authorities he used for his April 2 “liberation day” tariffs, but the tariffs remain in place for now thanks to a stay granted by a Washington–based appeals court—with this battle likely heading to the US Supreme Court. The legal whiplash comes as countries around the world scramble to negotiate deals with the Trump administration before the global “reciprocal” tariffs kick in on July 9. But are their calculations now changing? We turned to our network of global experts to explore how the courtroom drama is playing among US trading partners.

Click to jump to an expert analysis:

European Union: New US tariffs unaffected by the courts could have the biggest bite

United Kingdom: The UK-US deal continues to provide certainty and some unique advantages

Mexico, Canada, and the Americas: While some countries may be in less of a rush, USMCA negotiations will ramp up

India: Its special position means New Delhi should press ahead on a deal

China

There is no cooling off this trade war.

With the future of many of Trump’s tariffs in legal limbo following the Wednesday ruling by the Court of International Trade, including the 30 percent levies recently imposed on China, one might think US-China tensions were in for a cooling-off spell.

They would be wrong.

That’s because it’s become abundantly clear that Washington and Beijing aren’t just involved in a trade and tariffs spat, but instead are competing in a head-to-head, existential struggle over which country gets to rule the future of advanced technology and global supply chains.

In the less than one month since both sides issued a joint statement recognizing the importance of a “sustainable, long-term, and mutually beneficial economic and trade relationship,” Washington has warned companies not to use chips from Huawei, China’s national champion, and has restricted Beijing’s access to airplane technology, software used for advanced semiconductors, and chemical products. And in a bombshell move on Wednesday, Secretary of State Marco Rubio announced that Washington would begin to “aggressively revoke” the visas of some of the 277,000 Chinese students in the United States, including those with connections to the Chinese Communist Party or studying in “critical fields.”

For its part, Beijing has threatened firms and individuals with its Anti-Foreign Sanctions Law, if they “implement or assist” US curbs on Huawei. And most egregiously from Washington’s perspective, Beijing hasn’t lifted restrictions on the export of rare earths, following negotiations between Treasury Secretary Scott Bessent, US Trade Representative Jamieson Greer, and China’s Vice Premier He Lifeng in Geneva earlier this month.

Trouble is, all these hostile trade actions make perfect sense in the context of the larger battle between the two countries over tech and supply chains. And that was obvious from the beginning. China’s dominance over rare earths is an incredibly important source of leverage over the United States and the rest of the world—one that it won’t give up willingly.

Now fissures in what the US president hailed as a “total reset” in relations are becoming public. On Friday, Beijing accused the United States of “[weaponizing] trade and tech issues” and “malicious attempts to block and suppress China.” And Trump vented in all caps on social media that China “HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.”

My answer to both sides: You should have seen it coming.

— Dexter Tiff Roberts is a nonresident senior fellow at the Atlantic Council’s Global China Hub and the Indo-Pacific Security Initiative, which is part of the Atlantic Council’s Scowcroft Center for Strategy and Security. He previously served for more than two decades as China bureau chief and Asia News Editor at Bloomberg Businessweek, based in Beijing.

European Union

New US tariffs unaffected by the courts could have the biggest bite.

The European Union’s (EU’s) negotiations with the United States continue despite this week’s court rulings for multiple reasons.

Countries should assume that the US government will use another legal vehicle to impose tariffs regardless of the outcomes of the legal challenges on the International Emergency Economic Powers Act (IEEPA). For example, as referenced in the Court of International Trade’s ruling, it is perfectly legal for the president to invoke Section 122 of the Trade Act of 1974 to address balance of payments issues. This law allows the president to impose tariffs of up to 15 percent for a period of five months. During those five months, the government can launch an investigation under Section 301 of the 1974 Trade Act, investigating unfair trade practices that burden or restrict US commerce. 

An additional pressure point is the ongoing Section 232 cases on sectors that comprise the majority of US-EU trade. The completed cases on steel, iron, and aluminum, as well as on autos and auto parts, levied tariffs of 25 percent. But the outstanding cases, including cases that could be decided in the next month, on pharmaceuticals and semiconductors, could be at different levels. The investigations are also broader in scope, going after “derivative” products, which can include downstream products as well as any supplies needed to make the covered products. The EU’s largest trade deficits in goods with the United States are autos, pharmaceuticals, and chemicals, so these investigations could have a significant impact on the European economy.     

The current situation is hurting transatlantic investment and businesses, and European economic actors are demanding certainty. While EU officials may be reviewing and recalibrating their offer to reflect the current circumstances, they are continuing to negotiate with the United States. With world leaders gathering at the Group of Seven (G7) and NATO summits in June, the time to negotiate an agreement and provide clarity for the transatlantic economy is now. 

—Penny Naas is a nonresident senior fellow with the Atlantic Council’s Europe Center.

United Kingdom

The UK-US deal continues to provide certainty and some unique advantages.

Trump instinctively likes the United Kingdom and it so happens that, within his paradigm of global trade, the United Kingdom does no harm, as it doesn’t have a large trade surplus with the United States. This meant the United Kingdom was only given the 10 percent “baseline” tariff on the notorious liberation day foam boards, a competitive advantage that has been lost—temporarily at least—since Trump announced a ninety-day pause on “reciprocal” tariffs. Still, the British government plowed ahead with its bilateral negotiations and was the first to secure a deal, albeit one that entrenched the 10 percent baseline.

London feared other countries might blame the United Kingdom for enabling this, but they haven’t. Instead, the US Court of International Trade ruled that blanket tariffs, including the 10 percent baseline tariffs, are illegal. This suggests that the United Kingdom might again be deprived of the hard-fought edge it has with the Trump administration. Only last week, Trump threatened the EU with a blanket 50 percent tariff because he had been briefed that negotiations were not advancing. Still, London can be satisfied with a few of the deal’s achievements. First, it provides most of its firms with certainty that exporting to the United States will involve either the 10 percent baseline or, ideally, no new tariff if the court ruling survives appeals. Second, the deal offers the United Kingdom exemptions within certain quotas from higher sectoral tariffs on cars and steel. These advantages exempt the United Kingdom from tariffs that were not struck down by the court ruling and make the deal worthwhile no matter what happens in the courts.

—Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

Mexico, Canada, and the Americas

While some countries may be in less of a rush, USMCA negotiations will ramp up.

The back and forth on broad-based US tariffs has trading partners around the world, including in the Americas, scratching their heads about what to do next. And it’s not just at the technical level. US judicial processes and court jurisdictions on trade have quickly become front-page news across the hemisphere. But without clarity on how additional courts may rule, and how Trump may then respond, Latin American trade ministers are forced to play out scenarios of what may come next and to try to base their commercial outlook on their preferred hypothesis.

The implications of this uncertainty have direct impacts on Americans. As research from the Adrienne Arsht Latin America Center has recently shown, countries in Latin America and the Caribbean (LAC), particularly Mexico, import more (in value) of US products per capita than other countries of similar income and development levels. And while tariffs are directed at US imports, the recent court decisions will continue to drive trade uncertainty as decision makers adapt their strategies to this new complex scenario.

Since “liberation day,” many LAC countries have rushed to try to line up meetings with the Office of the United States Trade Representative to see what actions can be taken to get a suspension of the 10 percent tariffs. Clarity on a path forward is particularly important for the region since US trade deficits—the top reason for Trump’s tariffs—do not generally apply to LAC. In fact, the United States had a $47 billion trade surplus with South and Central America in 2024—the only major region with such a surplus. With the seesaw in the judicial determination of the president’s legal authority, countries may now be in less of a rush to see what needs to be done to get out from underneath the tariff cloud. Why make concessions if the legality of the original determination is up in the air?

For Mexico, the largest US trading partner in the world, it’s important to remember that goods that comply with the US-Mexico-Canada Agreement (USMCA) are exempt from additional tariffs. However, non-USMCA-compliant goods are subject to a 25 percent tariff, which in Mexico’s case was about half of all its exports to the United States (or around 40 percent of its global exports) in 2024. This situation has introduced uncertainty for businesses engaged in US-Mexico trade, particularly those dealing with noncompliant goods. To avoid what will likely be continued uncertainty, negotiators are looking to expedite USMCA review discussions that were originally supposed to ramp up in 2026, with a mid-2026 deadline for that process to conclude.

—Jason Marczak is vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

India

Its special position means New Delhi should press ahead on a deal.

With the decision by the Court of International Trade that Trump’s tariffs invoked under IEEPA are illegal, many capitals around the world are recalculating their risk if they fail to (or choose not to) negotiate a reciprocal tariff deal by July 9. It appears the balance of leverage has shifted, especially if new tariffs are temporarily paused. My advice, as a former US trade negotiator, is to exercise caution in abandoning these negotiations or even slowing them down. One way or another, the Trump administration is likely to find ways to continue to threaten these tariffs (whether under other statutes or by winning a reversal of the Court of International Trade’s judgement) and will be keeping tabs on those who stop playing ball during this new period of uncertainty and instability.

In fact, India is in a special position, although it too seeks relief from Trump’s reciprocal tariffs. The current negotiation is recognized by both sides as the first phase of a larger, comprehensive “Bilateral Trade Agreement,” or BTA. While it is not being called a free trade agreement, its substance looks a lot like one, and India has pushed for this going all the way back to the first Trump administration. As such, the negotiations are not so one-sided—the Trump team has made it clear that the outcomes must be win-win and that it understands that Prime Minister Narendra Modi must show his electorate that he achieves concrete gains beyond avoiding new US tariffs.

I expect India will stay committed to pursuing a first-phase reciprocal tariff deal and build on this to eventually accomplish a fully cooked BTA, which could take several years of negotiations. India will gain new market share in the United States and increased investment in its economy, even as it opens up to more imports of goods and services from the United States.

—Mark Linscott is a nonresident senior fellow with the Atlantic Council’s South Asia Center. He was the assistant US trade representative for South and Central Asian Affairs from 2016 to 2018, and assistant US trade representative for the WTO and Multilateral Affairs from 2012 to 2016.

Trump Tariff Tracker

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New presidents and new nuclear developments test the United States–Republic of Korea alliance

Heather Kearney, Amanda Mortwedt Oh — Fri, 30 May 2025 22:26:48 +0000

Key takeaways

South Korea’s new President, who will be elected on June 3, will have to grapple with many South Koreans’ unease with relying on the United States’ nuclear arsenal for deterring North Korea.
The first and most important test the US-South Korea alliance under Trump and the incoming new South Korean president faces is the continuing growth of North Korea’s nuclear and ballistic missile capabilities.
South Korea’s establishment of a new strategic command outside of the combined US-ROK military structure highlights Seoul’s willingness and capability to take greater responsibility for deterring North Korea, but careful coordination will be required to ensure this strengthens rather than strains the alliance.

In the coming years, the US-South Korea (Republic of Korea, or ROK) alliance is likely to be tested in at least three fundamental ways: by a concerning growth in North Korea’s nuclear and ballistic missile weapons program; by changes to ROK defense capabilities and structures, including the establishment of ROK Strategic Command (ROKSTRATCOM); and by potential strategy and policy changes under new US and ROK political administrations.

Though the alliance may rise to the challenges of these tests to emerge stronger, these factors could potentially prevent the United States and the Republic of Korea from leveraging the mutual benefits that come from being integrated into a unified wartime command system and the long-standing ideal of a US-ROK bilateral agreement that emphasizes mutual defense. The United States will need to continue to adapt its approach, account for its ally’s perspectives, and plan for the inevitable change to the status quo on the Korean Peninsula.

A second North Korean enrichment facility heightens security concerns in Seoul

The first test for the alliance is the continuing growth of North Korea’s nuclear and ballistic missile programs. Current estimates suggest Pyongyang has enough fissile material to build up to 90 nuclear warheads, which generates compelling security concerns that could create tension among two longtime and staunch allies—the United States and the Republic of Korea. North Korean leader Kim Jong Un has placed increasing importance on the regime’s nuclear weapons development in the last decade, portraying nuclear weapons as not only defensive but providing the means to win in conflict. In September 2022, North Korea promulgated a new law that laid out a much broader approach to the use of nuclear weapons, including their employment in various conditions.

In 2023, Kim updated Article 58 of the state’s constitution to “ensure the country’s right to existence and development, deter war and protect regional and global peace by rapidly developing nuclear weapons to a higher level.” In September 2024, North Korean state media released photos for the first time of a suspected second uranium enrichment facility and Kim called for a higher number of more capable centrifuges to boost his plans to “exponentially” increase nuclear warhead production. Further, 2025 marks the final year for Kim to achieve the military capability development goals laid out in his five-year plan.

Kim Jong Un touring a uranium enrichment facility at an undisclosed location. Photo released by Korean Central News Agency, September 2024.

North Korea has a nuclear dyad with land- and sea-based nuclear weapons, and it is developing new technologies, including hypersonic gliding flight warheads and multiple independently targetable reentry vehicles, consistent with Kim’s drive to rapidly develop nuclear weapons and the five-year plan. North Korea’s Strategic Forces have short-range, medium-range, intermediate-range, and intercontinental ballistic missiles (ICBMs), along with 200 road-mobile launchers. North Korea’s continued development of its rail-based ballistic system shows the regime’s efforts to diversify launch platforms, including various vehicles and ground launch pads and potentially submarines, and increase the survivability of its force. While Kim’s ability to strike the US homeland with North Korean ICBMs only grows with additional testing and the introduction and testing of its solid-fuel ICBM in 2023, the regime is also hard at work improving the efficacy of its precision-guided tactical nuclear weapons, which are designed to significantly damage South Korea and US forces on the peninsula, as well as create response challenges for the alliance.

In addition, North Korea is moving forward on its sea-based deterrent. It has ballistic missiles and what it terms ”strategic” (alluding to long range and nuclear capability) cruise missiles for both developmental, missile-firing submarines and underwater platforms. Its tactical nuclear attack submarine, the Hero Kim Kun Ok, is designed to launch tactical nuclear weapons from underwater. In January 2024, the regime tested its underwater unmanned nuclear weapon system, the Haeil-5-23, as a purported response to the trilateral US-ROK-Japan maritime exercise. In January 2025, the regime tested an underwater-to-surface strategic guided cruise missile while also vowing to respond to the United States with the “toughest counteraction.”

Ultimately, North Korea wants to halt US-ROK joint (and multinational) military exercises and to splinter an alliance of seventy-plus-years between the two nations. Its determined and bellicose approach has the potential to highlight the asymmetry of what’s at stake between the United States and the ROK and, if unchecked, sow fear and doubt into the fabric of the alliance.

Would South Korea go nuclear? A shift in ROK defense architecture

The second test of the alliance follows changes in the ROK’s defense architecture and capabilities, including the advent of the ROK Strategic Command (ROKSTRATCOM), which may increase potential areas for divergence among allies even as the changes show the ROK’s increasing capability and willingness to take greater responsibility for its own defense. ROKSTRATCOM’s establishment may be an opportunity rather than just a challenge and it is perhaps more a response to an increasingly serious threat from North Korea than a shortfall in the US-ROK alliance. It nevertheless highlights that South Koreans may not feel US extended deterrence guarantees are sufficient given the growing North Korean threat.

Plans to establish ROKSTRATCOM were underway for over two years by the time of the command’s official establishment on October 1, 2024, yet many Americans either did not pay attention or believe there was a need for such a command on the Korean Peninsula. After all, the United States, South Korea’s strongest ally, has been with the ROK since the Korean War began in 1950. The two countries also have a long-standing Mutual Defense Treaty, signed shortly after the Korean War Armistice. So, for some observers, South Korea’s need for such a command was questionable. The United States already commits to defending South Korea, most visibly with 28,500 military personnel present on the peninsula and contributing to the Combined Forces Command, US Forces Korea, and the United Nations Command. Regular joint exercises and strategic activities, such as a port visit of the USS Kentucky ballistic missile submarine to Busan, also bolster this presence.

The ROK-US Combined Forces Command (CFC) marks its forty-sixth anniversary with a ceremony at Camp Humphreys, Pyeongtaek, November 7, 2024. Photo provided by United States Forces Korea.

Importantly, though, ROKSTRATCOM does not clearly fall under the combined alliance wartime command construct under a bi-national Combined Forces Command that has been in place since 1978. ROKSTRATCOM is instead an independent ROK-controlled command, currently led by ROK Air Force Lieutenant General Jin Young Seung, and it is still under development exactly how this new command will align and coordinate with CFC and other alliance constructs like the bilateral Military Committee.

Markus Garlauskas, Indo-Pacific Security Initiative director, Scowcroft Center for Strategy and Security, with Lt. Gen. Jin Young Seung, ROKSTRATCOM commander, at the ROKSTRATCOM headquarters in February 2025. Photo provided by the Atlantic Council

Operationally, ROKSTRATCOM resides under the ROK Joint Chiefs of Staff, serving as an integrator of ROK armed forces’ strategic weapons systems from each military branch. In July 2024, a former ROK minister of defense expressed the administration’s vision of the command:

The strategic command will be a unit that leads the development of nuclear and conventional integrated operational concepts and plans and combat development in new areas such as space, cyber, and the electromagnetic spectrum in conjunction with the operation of the ROK-US Nuclear Consultative Group (NCG).

According to a news report citing the South Korean Ministry of National Defense, the command “would also give the orders to subordinate military assets to strike enemy targets or intercept hostile missiles as part of the Kill Chain strategy and the Korea Massive Punishment and Retaliation [KMPR] plan.” (See the ministry’s 2022 white paper for more information about the kill chain strategy and the KMPR plan.)

It is more than just command and control that is changing, however. South Korea’s independent strike capabilities are increasing. South Korea unveiled its most powerful conventional weapon, the Hyunmoo-5, referring to it as an “ultra-high-power ballistic missile.” The high-yield Hyunmoo-5 appears to be intended as a ROKSTRATCOM capability, integral to reinforcing ROK messages of an “overwhelming response” to any North Korea nuclear attack. It remains to be seen, however, how the command will contribute these forces to a conflict on the Korean Peninsula—and this calls into question the previously relied upon unified command system.

The establishment of ROKSTRATCOM is a historic event and time will tell if capabilities breed intentions. It appears South Korea is not willing to take the option of having nuclear weapons off the table despite the US nuclear umbrella and extended deterrence commitments. As the ROK continues to grapple with its current and future defense challenges, the United States should take care to be an integral part of this ROK process, thereby ensuring a better understanding of the intentions of allies, enhancing the alliance, and deterring North Korea from strategic attack.

New presidents in Washington and Seoul portend policy changes

The third test involves expected changes by the new Trump administration to US policies and strategies affecting the alliance, along with potential adjustments by the imminent new South Korean administration to its approach toward the alliance and to defense issues more broadly. Coupled with divisive domestic politics in both the United States and South Korea, these developments could potentially open old wounds and create new points of contention within the alliance. As the new US administration begins to set its tone for foreign policy for the rest of its term, many South Koreans seem hopeful, but uncertain. Meanwhile, South Korean media reports and commentaries are examining the implications of rumored US force reductions in Korea and other potential changes to US policy and strategy affecting the alliance as either challenges or opportunities.

South Korea will soon have its own new president, after the martial law declaration by Yoon and his removal from office resulted in elections set for June 3. A new ROK president may well inject more uncertainty into the state of South Korean affairs, which could affect the alliance, as the country works to self-heal from Yoon’s surprising martial law announcement and the subsequent fallout.

Meanwhile, there are lingering questions about whether South Korea will eventually develop its own nuclear weapons. While many Americans empathize with South Korea’s undesirable position, its creation of ROKSTRATCOM and varied calls by ROK officials for nuclear weapons are concerning for US assurance efforts and, potentially, its nonproliferation policy. Would South Korea really go nuclear? Given the tense nuclear-armed neighborhood that surrounds the small country, and North Korea’s continued refusal to give up its nuclear weapons, many ask, “Why not?” Others, however, argue South Korea “cannot” or would “never” do so because it is a signatory of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT). However, the NPT has a get-out-of-jail free card in Article X. According to a 2005 Arms Control Today article by the late arms control experts George Bunn and John B. Rhinelander:

Article X of the NPT provides a “right” to withdraw from the treaty if the withdrawing party “decides that extraordinary events, related to the subject matter of this [t]reaty, have jeopardized the supreme interests of its country.” It also requires that a withdrawing state-party give three months’ notice.

South Korean public discussion of a nuclear latency capability and indigenous nuclear weapons has been growing, with some officials publicly expressing the desire to keep the option open or to actually build nuclear weapons. Most recently, the People Power Party presidential candidate, Kim Moon Soo, announced that, if elected, he would pursue a nuclear latency capability—meaning that South Korea would be much closer to being able to build nuclear weapons on short notice. This indicates South Korea’s unease with relying on the United States as the only nuclear weapons responder to a growing North Korean nuclear arsenal.

Conclusion

These new hurdles—a more capable and threatening nuclear North Korea; a shift in South Korea’s defense architecture, including a unilateral strategic command; and presidential-level political changes—will inevitably strain the alliance, but may also present opportunities. The US-ROK alliance has remained ironclad, with more than seven decades of experience and adaptation, underpinned by a commitment to each other’s mutual defense. Now it is up to both countries to learn from their past while developing new approaches to the changing status quo. No matter who wins the ROK presidential election, the continued strength of the US-ROK alliance matters in the face of threats confronting both the United States and South Korea. Early and in-depth engagement by Washington with the new South Korean president to begin charting a new course for the alliance will ensure the US-ROK alliance emerges even stronger and more equipped to enhance each country’s interests, as well as underpin stability in the region.

About the authors

Heather Kearney is a nonresident fellow in the Indo-Pacific Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security. She is also a senior Indo-Pacific analyst in the Joint Exercise, Training, and Assessments Directorate at United States Strategic Command. As a senior analyst for risk of strategic deterrence failure, she leads a team dedicated to assessing trends in the environment in order to inform strategic risk assessments.

Amanda Mortwedt Oh is a USSTRATCOM liaison officer in the Office of Strategic Deterrence and Nuclear Policy, Strategic Stability, in the Joint Staff J-5 Directorate. She focuses her research on Northeast Asia and strategic deterrence and was most recently a Fall 2024 Nonproliferation Policy Education Center Policy Fellow. She is the previous director of international outreach and development at the Committee for Human Rights in North Korea (HRNK) and has published several articles and reports on North Korea’s prison camps and human rights issues. She is also a lawyer in the US Army Reserve Judge Advocate General’s Corps.

Disclaimer: The views presented in this article are those of the authors and do not necessarily represent the views of US Strategic Command, the US Air Force, the Department of Defense, or the US government.

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NASA needs a twenty-first-century approach to space exploration

Dan Hart, Emily Sespico — Fri, 30 May 2025 17:38:28 +0000

A debate is taking place within the halls of the US government as to whether US astronauts should next set foot on the Moon or on Mars. While this question of “Moon versus Mars” has taken center stage in the media, there is an even more important question that needs to be asked: How should the seismic technological advances happening on Earth shape our very approach to exploring and working in space?

These technological changes necessitate a hard look at how intelligent machines and robotics should be deployed to prepare for and assist human explorers. Exploiting these technologies can accelerate discovery, enhance safety, and increase the productivity of future crewed space voyages. Additionally, if the United States chooses to synchronize technology investment in space and on Earth, we will innovate faster and accelerate exploration and discovery, all while strengthening our earthly economy and quality of life.

On Earth, a technological revolution is in full motion. Artificial intelligence (AI) and machine learning are coupling with vast computational advances to create machines that can sense, think, learn, and adapt. Machines are assisting, protecting, and replacing humans in hazardous environments and in industrial work. They’re taking on greater roles—and with more autonomy—to increase efficiency, quality, and safety across a wide array of sectors, including agriculture, mining, and manufacturing. Some robots have even taken a central role in providing the steadiest, most skillful hands for demanding surgeries. These advances are dramatically affecting how we live and work on Earth.

Lessons from Apollo: Transforming spaceflight with robotics

This technological revolution has direct applications for space travel. The US National Aeronautics and Space Administration’s (NASA’s) Artemis program, its present-day plan to return astronauts to the Moon, mimics the approach of its Apollo program from the 1960s and early 1970s. For many of those who are old enough to have witnessed the first Apollo Moon mission through black and white TV sets in 1969, the dramatic Apollo 11 lunar landing is etched into their memories. But what many likely don’t recall are the risks and challenges that had to be overcome to make such a historically groundbreaking achievement possible. For instance, the iconic Apollo 11 mission narrowly escaped disaster when its lunar module (the spacecraft intended for transporting astronauts to the Moon’s surface) missed its intended landing site. Had it not been for Apollo 11 astronaut Neil Armstrong’s skillful last-minute piloting, and a bit of luck, the mission could have gone down in history as a great tragedy.

Back then, there were no intelligent machines. Sole reliance on the adaptability of US astronauts was the best bet for accomplishing lunar exploration. It was an enormously risky venture and required extreme bravery. In certain fateful circumstances, it took extreme sacrifice from human explorers. While understandable given the technology of the 1960s and 1970s, is this still the way the United States should be approaching exploration missions in the twenty-first century?

Beyond Artemis’s schedule setbacks, cost growth, and technical challenges that are garnering headlines, there lies a fundamental question: Why is humanity still relying so heavily on humans in space, when on Earth, it is steadily learning to use intelligent, adaptable, machines to ensure safety and increase efficiencies? Should these tools not take on even more advanced roles in the “final frontier”?

This is not to suggest that humans should be removed from spaceflight. It would be a mistake to assume that robots and machines can substitute for the inspiration felt from seeing human explorers venturing into the unknown. The image of a human once again setting foot on the barren lunar landscape or an astronaut standing upon a dried Martian lakebed for the first time will generate enduring lightning bolts of wonder for young and old alike. In addition, the powerful symbolism of the astronauts of partner nations exploring together will help to bind humanity together. That said, human spaceflight is currently on the order of thirty times more costly than robotic missions. Additionally, it is questionable whether it makes sense to continue to put astronauts at high risk while there are autonomous alternatives that, at a relatively moderate cost, can increase the likelihood of success. As NASA’s Aerospace Safety Advisory Panel (ASAP) stated in its January 2025 report’s assessment of the Artemis program, “the aggregate risk associated with accomplishing so many ‘first-time’ milestones . . . may be too high.”

In several respects, the Chinese space program has proven to be more effective at integrating robotics into its space travel missions. China’s recent successful robotic lunar sample return missions indicate that they are taking a more thoughtful approach to exploration than the United States. With less investment, and in less time, than the United States, China is realizing meaningful gains through its recent Chang’e-5 and 6 lunar sample return missions. Meanwhile, the United States is struggling with the technical, cost, and schedule issues arising from the development of new rockets, complex cryogenic landers, and the intricacies of leading with crewed exploration missions.

Looking forward and reaching upward

NASA needs to forge a future in which intelligent machines and humans work together seamlessly and the strengths of each are maximized. Human spaceflight missions should focus on major events and major steps forward that evoke maximum inspiration. NASA should increase the use of robots as the workhorses of space exploration. Robotic missions should continue to lead scientific investigation and their roles should be expanded to prepare sites for human explorers, as well as to build, sustain, maintain, and operate space equipment and infrastructure in support of human presence.

Three aims should guide how NASA moves forward with integrating intelligent machines into spaceflight operations.

Modernize NASA’s organizational structure. NASA’s current organizational structure separates science from exploration and maintains separate budget lines for each. Its Science Directorate governs robotics and intelligent machines, while its Exploration Directorate focuses on human spaceflight. This artificial distinction has not withstood the test of time, as there is simply no space exploration without scientific objectives. NASA should reorganize around its main contemporary objectives and let its talented leaders across science and engineering determine the best ways to achieve them.

Reformulate NASA’s Artemis campaign. NASA should change its plan so that early flights are robotic, with work and preparations being performed by intelligent machines ahead of crewed missions. For instance, robotic missions could be used to investigate and prepare lunar landing sites, build shelters, and stock them with pre-positioned instruments, equipment, and provisions. By leading with machines rather than astronauts, the risk of dangerous landings (like those which nearly resulted in catastrophe during Apollo and ended several recent robotic missions) can be reduced. By preparing lunar habitats robotically, the first astronauts could have a shelter available upon landing, should unanticipated issues arise. This robotic integration could be lifesaving, providing modern safeguards for Artemis astronauts that would also begin to address the safety concerns recently raised by NASA’s ASAP.

To accomplish this, NASA should accelerate and build upon its Commercial Lunar Payload Services program, which has already begun to prove fruitful through recent successful partnerships such as Firefly Aerospace’s Blue Ghost Mission 1. Congress should increase funding for highly capable lunar machines that can travel large distances and move lunar rocks and soil for scientific exploration and infrastructure construction. Looking forward, humanoid robots should be used to activate the lunar base and operate equipment when astronauts are not there or are on excursions.

Equip lunar robots with virtual reality. The integration of virtual reality (VR) technologies into intelligent space exploration machines could enable scientists, engineers, and others on Earth to become active participants in the exploration of the Moon, distant planets, and beyond. These integrated VR capabilities could both increase scientific collaborations and provide indelible experiences, increasing public awareness, inspiration, and support for space exploration and science, technology, engineering, and mathematics (STEM) education.

Humanity will naturally explore. There is huge potential ahead in advancing knowledge in space science and finding ways to tap the nearly limitless resources available in space. As government leaders consider the options for the next giant leap for humankind, it behooves them to take a clearheaded look at their objectives and how they can be most efficiently and safely met. NASA should be leading the way in the international scene by driving advances in intelligent machines and robotics. In doing so, it will improve the US space program and ensure that technological investments in space are well aligned with the needs back on earth.

Dan Hart is a nonresident senior fellow at the Atlantic Council’s GeoTech Center.

Emily Sespico is an assistant director at the Atlantic Council’s GeoTech Center.

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The frontier is the front line: On climate resilience for infrastructure and supplies in Canada’s Arctic

Jeffrey Reynolds, Kristen Taylor — Fri, 30 May 2025 14:49:31 +0000

Prime Minister Mark Carney’s victory in the May 2025 elections provides a clearer picture of Canada’s political future and strategic priorities. During the election campaign, Carney emphasized bolstering defense spending and increasing Canada’s presence, awareness, and infrastructure footprint in the Arctic. As Carney seeks to achieve these stated ends, he will contend with a strategic environment that looks more dangerous for Ottawa than at any time since the end of the Cold War. And he will likely struggle to reconcile the strategic importance of the Arctic with the cost of developing the infrastructure required to secure it. But as the ice retreats, so too do the barriers that once insulated Canada’s Arctic.

The frontier has become the front line.

Canada’s choice is binary: secure its portion of the Arctic or suffer the consequences of foreign powers acting with impunity in and around Canada’s Arctic. Ottawa’s central challenge, therefore, is to harden its Arctic presence with dual-use infrastructure and supply chain resilience while hostile powers increase their influence around the pole.

This task gets more difficult the longer Ottawa dithers because change manifests across many vectors concurrently. The infrastructure and supply chains critical to the region are underdeveloped and ill-suited for the future—and they do not improve with age. Climate change continues to alter the contours of the region, often to Canada’s strategic disadvantage. An ascendant generation of US strategists proclaim that the Canadian Arctic is the “new soft underbelly” of North America. And it is no longer fantasy to suggest that the Arctic is ground zero for the new ‘Great Game’ between the United States, Russia, and China.

The region has been one of strategic contest since 1921, when Joseph Stalin claimed the North Pole for the Soviet Union, a claim re-animated by Moscow in 2015. It may lack the trenches and dragon’s teeth in Europe, or the clashes between fishing vessels and coast guard ships in southeast Asia. But the Arctic is no longer a low-threat, low-force posture environment that can be defended by a couple Coast Guard icebreakers and some Canadian Rangers on snowmobiles.

It is a region of strategic consequence and likely to be more so in the coming decades, which begs the question—why does Canada lag allies and adversaries alike in both the defense and development of its Arctic territory?

The simplistic answer is that Ottawa is torn among competing interests and an inability, or an unwillingness, to marshal the domestic resources necessary to protect its Arctic from a growing cast of players keen to exploit perceived vulnerabilities in pursuit of their interests.

The Atlantic Council delved deeper into Canada’s challenge to bolster infrastructure and supply chain resilience in the region. Research included literature reviews, interviews, and off-the-record conversations with a broad range of government and private-sector stakeholders. Interviews yielded constructive, if passionate, views from respondents who expressed repeatedly how much they want Canada to secure its part of the Arctic and enable its full development.

Analysis revealed that Ottawa knows the region well; the Canadian government has few peers in understanding the Arctic and what is required to right supply chains there. Geological surveys and development plans are completed to a gold standard. Stakeholders know the problem and solution space—and have for decades. But domestic policy, not climate change or geopolitical calculus, is the primary factor influencing strategic decisions for Canada’s north.

Key players (and honorable mentions)

Climate change has made the Arctic accessible. Glacier melting has created new sea routes, extended shipping seasons, and unveiled vast natural resources. But it has also created an opening in the region for strategic contest. Three threat vectors shape the region’s security dynamics for Canada.

Russia

More than half of the Arctic Circle’s population and half its economy are Russian. Russia sits at the end of one of the Arctic’s most accessible regions. Russia is opening old bases and building new infrastructure throughout the region. It holds more than 50 percent of Arctic investment (made between 2017 and 2022), and its military doctrine treats the north as central to economic and national defense. Since 2014, the Kremlin has launched Cold War-style investments in Arctic airfields, radar systems, submarine networks, and year-round basing. Russian military planners are considering anti-access/area denial (A2/AD) domes extending over the Northern Sea Route.

Moscow likely observes that Canadian defense planning remains rooted in an outdated peace dividend mindset—one that grossly underestimates the threat of state-on-state conflict in the Arctic. Canada’s lack of comprehensive undersea surveillance renders its Arctic maritime approaches effectively blind, and its military presence in the region—symbolized by a modest footprint of Canadian Rangers—leaves much to be desired in terms of deterrence or rapid response. Equipment remains outdated, modernization plans languish in bureaucratic limbo, and logistics chains are stretched perilously thin. These gaps create space for Russian forces to maneuver below the threshold of war, exploiting ambiguity and Canada’s limited detection capabilities to assert influence or project force unchallenged.

The Kremlin likes to see how Canada’s strategic dependence on the United States substitutes alliance commitments for genuine sovereign deterrence. Ottawa’s whole-of-government approach—while inclusive in theory—has fragmented decision-making in practice, rendering Canada slow and reactive at a time when speed and coherence are strategic advantages. Indigenous consultation, while legally and morally necessary, remains procedurally rigid and politicized, often becoming a brake on critical national security decisions rather than a channel for partnership and empowerment.

While Russia invests heavily in its Arctic capabilities, Canada’s Arctic capability is stuck in the twentieth century. Surveillance assets are aging, space-based platforms are insufficient, and investment in modern ISR (intelligence, surveillance, reconnaissance) technology remains anemic. Communications remain unreliable across vast regions, exposing both civilian and military systems to disruption. Cyber defenses—especially around critical infrastructure—are poorly funded and unevenly deployed, inviting adversaries to strike via code rather than missile.

China

China considers itself a “near-Arctic power” and its Polar Silk Road links Arctic shipping to its global Belt and Road ambitions. China’s white papers frame the region as a commons to be commercially and scientifically accessed. Icebreaker construction in Chinese shipyards matches the tempo of a nation preparing for permanent presence.

Beijing understands that Canada’s economic infrastructure in the Arctic is brittle. Melting permafrost, seasonal reliance on ice roads, and a near-total absence of deepwater ports make northern logistics vulnerable to both climate and conflict. These choke points offer asymmetric opportunities to disrupt supply chains or sabotage dual-use facilities. China could exploit these vulnerabilities by embedding itself through ostensibly civilian investments in Arctic mining, telecommunications, or transportation infrastructure—investments that are strategic positioning by other means. In such a fragile environment, any hybrid attack or technological failure could sever vital arteries with catastrophic effects.

From China’s vantage point, Canada’s Arctic declarations are noble but hollow—bold in language but weak in execution. For Beijing, which has increased defense spending every year for three decades, Canada’s plan to reach two percent of gross domestic product (GDP) on defense spending by 2030 is symbolic. Procurement remains tangled in inefficiency and overregulation, hampering modernization and undermining operational readiness. Economic pressures, shifting political winds, and lukewarm support for military spending are likely to derail Canada’s commitments before they mature. Moreover, China likely sees Canada’s overreliance on its NATO allies as a strategic liability. The Arctic can be probed or pressured just below NATO’s collective defense thresholds—ensuring ambiguity, diffusing Western resolve, and highlighting Canada’s limited unilateral options.

Manpower shortages, insufficient Arctic basing, and the long-delayed Nanisivik port all point to structural underinvestment in hard infrastructure. These gaps offer Beijing a rich menu of asymmetric opportunities to: subvert Arctic economies through proxy investments; cultivate cultural ties through scholarships, research partnerships, and diplomatic outreach; sabotage digital and physical infrastructure through cyberattacks or dependency entrapments; and sow political dissent by financing Indigenous, environmental, or anti-militarization movements within Canada’s own democratic fabric.

The United States (and others)

For Washington, Canada’s failure to defend its Arctic territory is not merely a function of limited resources, but of deliberate strategic neglect. The refusal to acquire nuclear-powered submarines—essential for year-round under-ice patrols and true sovereignty enforcement—reveals a deeper aversion to the burdens of great power responsibility. While adversaries invest in undersea dominance and dual-use Arctic infrastructure, Ottawa opts for half-measures: diesel patrol submarines that can’t operate under the polar ice, minimal surveillance capabilities, and no permanent military basing north of 60.

The US view is shifting from a posture of “monitor and respond” to one of “prepare and deter.” Pentagon reports no longer downplay the Arctic as a region of strategic importance. Even smaller powers have taken notice. India published its Arctic strategy in 2021, emphasizing scientific diplomacy. Turkey signed the Svalbard Treaty to gain access rights to the Arctic in 2023. France and Germany are also exploring greater footprints in the region.

While the Icebreaker Collaboration Effort (ICE) Pact with Canada and Finland represents a trilateral effort to rebuild icebreaker capacity and harden the Arctic industrial base, it is not enough. Canada remains trapped in a peacetime posture and mentality—symbolic patrols and seasonal exercises—while the region becomes increasingly contested by powers that are, at best, are neutral to Canada’s concerns and, at worst, openly hostile to them.

This inertia is rooted in a political culture that prioritizes accommodation over assertiveness. Successive governments have deferred to progressive special interest groups whose influence blunts hard security policies. Environmentalist and Indigenous consultations, while important, are often weaponized procedurally to paralyze decisive action. The result is a government debilitated by process, one that speaks of sovereignty but shrinks from the instruments necessary to enforce it. Even modest defense initiatives face resistance if they challenge entrenched activist orthodoxies or require confronting Canada’s internal contradictions. This includes the legal quagmire of provincial and territorial jurisdiction in the North, which Ottawa remains unwilling to override or reform.

Perhaps most damning for Washington is Canada’s lack of strategic coherence. Ottawa provides a strategic framework for the Arctic but fails to dedicate the resources to achieve the objectives contained therein. Policy and strategy without resource commitments are unseriousness ideas. Moreover, Canada’s policies do not form a doctrine of Arctic deterrence, convey no idea on how to mobilize federal will, and fail to weave a unifying narrative that connects Arctic defense to the survival of Canada as a sovereign nation in an increasingly anarchic world.

America cannot—and will not—permit a soft underbelly to fester in a domain as critical as the Arctic. It is not inconceivable for US forces unilaterally securing parts of the Canadian Arctic in the event of a crisis. Such actions, while diplomatically uncomfortable, would be strategically necessary if Canadian gaps remain unaddressed. To be blunt: if pressed and in a fight with Russia or China in the Arctic, the US will almost certainly be “Elbows Up” in defense of North America, even if it offends Canadian sensitivities.

Five “cold kills”

Our research unearthed five factors that contribute to Canada’s Arctic inertia. Each of these “cold kills” continues to impede progress on increasing supply chain and defense resilience.

1. Lacking multipartisan consensus on the region as “ground zero” for a new “Great Game.”

Canada cannot do much in the Arctic if it lacks enduring political will to support and fund dual-use infrastructure over decades. The growing importance of the Arctic for great-power competition underscores the need for politicians, defense planners, local communities, industry partners, and other relevant stakeholders to walk in the same general direction, if not in lockstep. Despite the urgency of this task, no sustained, cross-partisan strategy for Arctic defense exists. Without it, investments, infrastructure development, and operational planning will almost certainly come up short. In 2025, Natural Resources Canada is projected to invest $12.1 million toward climate adaptation projects in the North—which is necessary, but insufficient when compared to similar efforts by other Arctic powers.

Yet, allies offer a contrast. Norway’s Arktis 2030 fund and its defense pledge of 3 percent of GDP underscore a whole-of-society approach. Finland’s NATO entry boosted its participation in Arctic exercises. Sweden utilizes Arctic data to create a stronger and better informed national defense policy. Denmark leverages Greenland’s geostrategic importance in its Arctic defense. While Canada’s Arctic is inaccessible by comparison, it can look at what NATO allies do right in the region and their whole-of-society approaches.

2. Placing too much of the strategic burden on local communities.

The Canadian government continues to place disproportionate responsibility for Arctic security on local communities, revealing a dangerous strategic asymmetry between rhetoric and capability. The Canadian Rangers, though a symbol of national resolve and cultural integration, are not a substitute for a modern, standing military presence. They are lightly armed, part-time volunteers—valuable in their knowledge of the land but structurally unfit to deter or respond to the increasing threats posed by adversarial state actors operating just beyond the line of sight. This over-reliance has created a strategic mirage: Ottawa appears engaged in Arctic defence, but the burden is unfairly borne by those with the fewest resources and the highest exposure.

In effect, Canada’s Arctic is not treated as an equal part of Confederation, but as a frontier outpost whose primary function is surveillance and symbolic sovereignty. The political imagination to raise Arctic communities to the standard of living of rural southern Canada is absent. There is no serious nation-building project underway—no long-term vision to tie infrastructure, broadband, energy, healthcare, and education in the North to the national grid of opportunity.

The region is home to significant deposits of iron ore, gold, diamonds, and rare earth elements. The Mary River Mine on Baffin Island is one of the world’s richest reserves of high-grade iron ore, producing millions of tons annually. Similarly, the Hope Bay and Meliadine gold mines contribute substantially to Canada’s mineral output. These resources are critical for economic development and for national security, given their importance in defense manufacturing and technology. Yet, the extraction and transportation of these resources are hampered by limited infrastructure that eludes further development due to lack of coordination and investment at all levels of government. While the Yukon Security Advisory Council can be a model for shared governance federal, territorial, and Indigenous jurisdictions overlap without coherent authority. The result is a bureaucratic bottleneck that limits response agility and accountability, especially in scenarios involving mass casualty events or foreign incursions below the threshold of war.

3. Misunderstanding the Arctic as a land- or maritime-centric domain, instead of a multidomain one.

Canada’s Arctic strategy remains anchored in a legacy mindset—fixated on land and maritime domains—while the battlespace has already expanded far beyond the ice and tundra. The Canadian Arctic is a multi-domain operating environment in the most rigorous sense: a crucible where air, sea, land, space, and cyberspace domains converge. Focusing primarily on ground mobility or maritime choke points is antiquated.

In an era defined by precision-guided conflict, gray zone incursions, and orbital competition, the North requires integrated deterrence across all domains. The space domain is already decisive; Russia and China have launched dual-use satellites optimized for polar reconnaissance, while Canada’s surveillance constellation remains limited and aging. Cyberspace, too, is an active front. Persistent foreign probing of Canada’s critical Arctic infrastructure—from power grids to fiber lines—underscores the need for zero-trust architectures and sovereign cyber capacity hardened against both disinformation and sabotage. The air domain, often overshadowed, remains underutilized despite offering cost-effective ISR opportunities via high-altitude, long-endurance drones and balloon-based sensors that can supplement space assets in degraded environments.

Canada must approach the Arctic as a multi-domain region. Infrastructure nodes at Iqaluit, Yellowknife, and Inuvik must be conceived not as mere logistics hubs, but as permanent and staffed bases in a broader multi-domain lattice of deterrence. Airfields should be hardened, satellites shielded, networks encrypted, and data fused in real time. The resilience and infrastructure footprint must be multi-domain: ISR in orbit, radar on ice, seaborne logistics hubs, and hardened cyber networks. It might even be cheaper to establish and easier to maintain air-based sensors to augment space-based sensors, such as high-altitude, long-endurance drones and high-altitude balloons.

4. Missing the point that infrastructure spending enables both military and local resilience.

Canada’s policy frameworks fail to grasp a foundational truth: infrastructure is not ancillary to defence; it is defence. Roads, railways, hospitals, and power stations in the Arctic are bulwarks of resilience and lifelines to national unity. The harsh environment demands more than token outposts; it demands permanence that begins with infrastructure designed for both civilian and military pursuits.

Canada’s persistent underinvestment in Arctic infrastructure can be attributed largely to sticker shock. Building in the north is expensive at the outset, but those initial costs conceal long-term value. Roads, railways, and ports that facilitate the movement of Canadian forces and provide necessary infrastructure for local communities also enhance NATO mobility and resilience.

The Grays Bay Road and Port Project is unlikely to open before 2035. Until then, the Port of Churchill remains Canada’s only Arctic deepwater port for more than 106,000 miles of coastline—and even it is more than 800 kilometres south of the Arctic Circle. The overland situation is equally stark. The long-considered Mackenzie Valley Highway remains unbuilt. Meant to replace unreliable winter roads and connect remote Arctic communities, the highway should be considered as a defense artery.

Moreover, the North needs cyber towers as much as radar domes; fibre optic cables as much as sonar arrays. Schools and post-secondary institutions—anchored by Arctic research centres—should be erected alongside hardened military installations to attract families, not just forces. In Alaska, the dual-use success of the University of Alaska Fairbanks and the Ted Stevens Anchorage International Airport provides a model: educational and aerospace ecosystems aligned with the broader security posture of the United States.

Still, there are signs of acceleration. The Department of National Defence has committed $230 million to extend the main runway at Inuvik Airport. The upgrades include modern lighting and arrestor systems—investments tailored for sustained military operations and a rare example of a concrete commitment in a domain often shaped by abstraction. Canada should build Arctic spaceports and drone launch facilities for persistent surveillance and communications dominance—assets that would likely qualify as defence expenditures under a broadened NATO definition. And that definition is evolving. With calls to raise the alliance-wide benchmark to five percent of GDP, the line between civil and military investment will blur. Forward-thinking allies are already redefining defence to include national resilience, critical infrastructure, and technological redundancy.

5. Failing to call out the need to achieve A2/AD capability.

Canada’s current Arctic strategy is more performative than purposeful. It remains anchored in rituals of presence rather than a doctrine of deterrence. The reasons are structural and cultural: A2/AD sounds too aggressive for a nation wedded to peacekeeping identity and constrained by intergovernmental jurisdictional frictions. But if Canada is to hold the Arctic, it must defend it—not merely inhabit it. That demands something Canada has never attempted: a comprehensive anti-access/area denial (A2/AD) strategy adapted for the circumpolar battlespace.

A2/AD refers to the deployment of integrated capabilities that prevent an adversary from operating freely within a region. This includes long-range fires, persistent surveillance, advanced radar, cyber denial tools, hardened command-and-control infrastructure, and air and maritime denial platforms. Canada does not mention A2/AD in its Arctic lexicon because it fears what it implies: that the North is no longer a sanctuary but a frontier. Building an Arctic A2/AD network would require political will, sustained investment, and a strategic mindset that accepts confrontation as a precondition for sovereignty. It would also provoke diplomatic risk—Russia would label such a move provocative, and China would test the perimeter with gray-zone maneuvers masked as scientific exploration or commercial navigation. Yet the absence of such a posture risks far greater cost: a hollow sovereignty, subject to erosion by increments.

Investments in some areas do not amount to A2/AD. True, Canada’s $38.6-billion commitment over twenty years to modernize NORAD is substantial. If fully implemented, this would be the largest reinvestment in continental defense since the early Cold War. Arctic over-the-horizon radar systems will track threats from the US-Canada border to the Arctic Circle. A more powerful polar variant will extend coverage into the Arctic archipelago and beyond. Crossbow—a classified network of advanced sensors—will supplement these systems with real-time precision. And the Defence Enhanced Surveillance for Space (DESSP) project will allow space-based tracking of adversary launch and maneuver capabilities. Canada has partnered with Australia on a next-generation Arctic early-warning detection system. But even these investments are insufficient; they do not achieve A2/AD in the Arctic. Canada has ISR blind spots, insufficient logistical depth, and infrastructure degraded by thawing permafrost. RADARSAT’s capabilities are aging; the Northwest Passage is functionally unmonitored. There is no cruise missile defense layer.

A Canadian A2/AD architecture would extend ISR reach from geostationary orbit to the ocean floor. At its core: Over-the-Horizon Radar (AOTHR), high-altitude drones, and advanced satellite constellations fused via a hardened C4ISR backbone. Any credible A2/AD structure must project deterrence not only northward but outward via NORAD, integrating seamlessly with allied efforts across the Greenland-Iceland-UK gap and the European High North.

Challenge and opportunity

We recommend the following six steps to shape decision-making vis-à-vis Canada’s Arctic. Addressing each of them is necessary for more resilient supply chains and robust infrastructure for defense of the Canadian Arctic.

1. Achieve enduring domestic political consensus.

Without sustained, bipartisan consensus on the strategic value of the Arctic, Canada’s northern policy will remain fragmented, underfunded, and vulnerable to reversal.

Canada should establish a nonpartisan Arctic Strategy Council, drawing on members from federal, provincial, territorial, and Indigenous governments, as well as the private sector. This council could be modeled loosely on the United Kingdom’s National Security Council, with a standing mandate to oversee and report on Arctic development milestones.

To correct course, Parliament should adopt a minimum percentage of GDP for Arctic infrastructure and defense investments—similar to how NATO’s 2-percent defense spending benchmark frames national priorities. A 0.5-percent GDP floor specifically earmarked for Arctic readiness would send a powerful signal to allies, adversaries, and Canadians alike.

2. Build permanent bases and infrastructure.

Sovereignty requires presence. Canada cannot assert command over its northern territory while maintaining a transient, seasonal military posture.

Canada must develop at least two permanent Arctic bases by 2035 and reinforce the air infrastructures in Yellowknife. These installations should support multi-domain enablers: ground forces, drone squadrons, ISR satellites, and cyber defense detachments. One proposed location is Resolute Bay in Nunavut—a strategic logistics point halfway through the Northwest Passage. Another is Tuktoyaktuk in the Northwest Territories, where the Inuvik-Tuktoyaktuk Highway provides ground access to the Beaufort Sea.

Canada need not sacrifice environmental stewardship to bolster its dual-use infrastructure in the region. On the contrary, the development of small modular reactors (SMRs) offers a way to meet energy needs in a sustainable and flexible manner. These compact, deployable energy systems would enable off-grid installations to power radar stations, bases, and airstrips—allowing the Canadian Armed Forces to operate autonomously across a vast and power-starved frontier.

Canada can and should discover best practices in other nations and adopt to the fullest extent possible. The Arctic Remote Energy Networks Academy is training a new generation in clean energy implementation, building the intellectual and technical foundation for sustainable Arctic energy systems. It is one example of innovation that can help make strides in the Arctic.

3. Reorient superclusters toward strategic innovation.

Canada’s innovation ecosystem is misaligned with its strategic realities.

To adapt, Canada must integrate Arctic operational challenges into supercluster mandates. The focus of these superclusters has strayed too far from core security imperatives, and redirecting their mandate toward the defense and security sector could allow Canada to reanimate its atrophied defense industrial base, stimulate Indigenous research and development, and provide a platform for strategic innovation drawn from academic and private-sector talent.

The Global Innovation Cluster for Advanced Manufacturing could sponsor development of modular Arctic housing for deployed forces. The Digital Technology Cluster could support remote communications networks hardened against magnetic interference. And the Protein Industries Cluster could help devise shelf-stable, high-calorie rations adapted to extreme environments.

Canada should establish a national challenge prize—modeled on the US Defense Advanced Research Projects Agency (DARPA) Grand Challenge—to spur innovation in climate-resilient infrastructure, Arctic mobility, and remote power generation. Such efforts should be coordinated by a Defence Innovation Agency akin to the United Kingdom’s Defence and Security Accelerator (DASA), ensuring alignment between technological output and operational need.

4. Integrate civil-military infrastructure.

Canada must adopt a whole-of-society approach to Arctic logistics—one that erases the line between civilian and military use.

Every kilometer of highway, every meter of runway, and every watt of power grid must serve dual purposes. Similarly, the Grays Bay Road and Port Project, which aims to connect the rich mineral fields of western Nunavut with the Northwest Passage, must be prioritized for its economic benefits and geopolitical value. Its completion would give Canada a second deepwater Arctic port—an essential node for resupply, power projection, and emergency response.

Meanwhile, the feasibility of Arctic spaceports must be considered thoughtfully. With global competition accelerating in polar orbit surveillance, Canada’s geography is a latent advantage. Nunavut and the Northwest Territories are prime candidates for launching satellites into sun-synchronous and polar orbits, a domain critical for ISR.

5. Accelerate NORAD modernization and ISR integration.

Canada must modernize its Arctic surveillance and early-warning capabilities through the renewal of NORAD and deep integration of orbital, aerial, and terrestrial ISR platforms.

Canada must move decisively to modernize its contributions to NORAD and integrate a layered, multi-domain ISR architecture that meets the threats of the 21st century. The existing North Warning System (NWS)—a relic of the Cold War—is functionally obsolete. It is increasingly vulnerable to kinetic destruction, electronic warfare, and deception by adversaries leveraging hypersonic, low-flying, and space-enabled strike platforms. While Canada has acknowledged this through its stated commitment to over-the-horizon radar (OTHR) and new space-based capabilities, progress has been halting, piecemeal, and under-resourced.

Canada should fast-track its involvement in key pillars of NORAD modernization alongside the United States by:

Over-the-Horizon Radar (OTHR): Advance procurement and installation of Arctic-facing OTHR systems based in Labrador and Nunavut to create a persistent early-warning envelope stretching across the polar approaches. These systems must be hardened against electromagnetic disruption and integrated into NORAD’s command-and-control nodes in real time.
Ballistic Missile Defence and the Golden Dome: Canada must shed outdated policy inhibitions and join the continental Ballistic Missile Defence (BMD) architecture. A Canadian contribution to a “Golden Dome” over North America—built on Aegis Ashore components, ship-based interceptors, and ground-based midcourse defence systems—would reinforce deterrence and mitigate the strategic vacuum currently inviting adversary escalation. Participation in the US Missile Defense Review and integration into layered BMD command structures should begin immediately.
Space and High-Altitude ISR: The integration of RADARSAT Constellation Mission (RCM) assets with Gray Jay microsatellites must be complemented by investment in high-altitude, long-endurance (HALE) UAVs, stratospheric balloons, and commercial space partnerships. Persistent polar orbit surveillance is not a luxury—it is the sinew of a sovereign Canadian deterrent.

A modern NORAD without a full Canadian partner is a NORAD weakened in scope, credibility, and political cohesion. In an age of hypersonics, space militarization, and AI-driven surveillance, Canada’s northern shield must be not just symbolic but steel-wrought—an active, intelligent barrier underpinned by the best minds and machines the alliance can field. The window to shape this future is closing fast. Canada must step forward now, not as a follower, but as a co-architect of North America’s defence.

6. Integrate the Arctic with broader national and allied defense postures.

Canada’s Arctic strategy must not be treated in isolation.

Canada must integrate its Arctic strategy into a broader, assertive national defence posture—one that acknowledges the indivisibility of Canadian sovereignty and its responsibilities as a G7 power. The Arctic is not a separate theatre, but the forward glacis of the North American fortress. What begins as radar coverage over Baffin Bay ends in deterrence posture from Vilnius to the Taiwan Strait. Canadian defence policy must therefore harmonize Arctic readiness with strategic power projection abroad, ensuring the nation can respond decisively to threats—whether they emerge from the Beaufort Sea, the Black Sea, or the South China Sea.

The Arctic remains critical—but it is not Canada’s only defence priority. A myopic focus on the North risks undermining broader global responsibilities. Canada must project credible force across multiple domains and theatres. That means integrating Arctic surveillance—through over-the-horizon radar, low Earth orbit satellite constellations, and AI-driven ISR—directly into NORAD’s early warning lattice. These capabilities must be interoperable with US Northern Command, NATO’s Arctic flank, and allied sensors in the Indo-Pacific. Surveillance is not enough; it must be paired with striking power and forward basing.

Strategic mobility and offensive reach are essential. Arctic airbases must be upgraded to sustain F-35 squadrons year-round, with rapid deployment capabilities for long-range precision fires and mobile expeditionary forces. Arctic-class naval platforms should anchor presence and power projection into contested waters, with the logistical depth to pivot between the Arctic archipelago and Pacific choke points. Canadian-built UAVs and high-altitude drones should patrol both the Northwest Passage and Western Pacific, forming a twin-hemisphere presence. Above all, Canada must act as a sovereign Arctic nation capable of defending its territory, while remaining a credible contributor to the rules-based international order. The Arctic is the crucible, but Canada’s responsibilities—and its enemies—do not stop at the pole.

Canada’s Arctic infrastructure and supply chain resilience are foundational components to its basic expression of sovereignty. But the future of the Arctic belongs to those who show up first and endure longest. The question is not whether Canada can afford Arctic sovereignty, but whether it can afford its absence.

About the authors

Jeff Reynolds is a nonresident senior fellow with the Transatlantic Security Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security.

Kristen Taylor is an assistant director with the Transatlantic Security Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security.

Acknowledgements

This research was made possible by the generous support of the Canada Mobilizing Insights in Defense and Security (MINDS) program.

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Michta in 19FortyFive, RealClearDefense, and RealClearWorld on Putin’s strategic objectives in Ukraine

bgalicia — Thu, 29 May 2025 19:12:25 +0000

Senior Fellow, GeoStrategy Initiative

On May 29, Andrew Michta, senior fellow in the GeoStrategy Initiative, was published in 19FortyFive on Russian President Vladimir Putin’s ambition to restore “Russia’s imperial dominion.” He argues the Trump administration has failed to bring an end to the war in Ukraine because it does not fully grasp Putin’s worldview and warns that diminishing support for Ukraine and NATO would hand him a strategic victory. Michta’s piece was featured in RealClearDefense and featured in RealClearWorld.

Russia is simply not interested in any outcome in Ukraine short of achieving the primary policy objectives that drove it to invade […] in the first place.

Andrew Michta

Staff

Andrew A. Michta

GeoStrategy Initiative Scowcroft Center for Strategy and Security

Central Europe Eastern Europe

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Welcome to the long war: Why a Ukraine deal was never realistic

Brian Whitmore — Thu, 29 May 2025 19:10:44 +0000

This war will be decided on the battlefield.

Four months of chaotic shuttle diplomacy aimed at reaching a cease-fire in Ukraine, multiple phone calls between US President Donald Trump and Kremlin leader Vladimir Putin, repeated US attempts to pressure, browbeat, and bully Ukrainian President Volodymyr Zelenskyy into concessions, have all yielded exactly nothing.

Which is not in the least bit surprising. Because there is no deal to be had with Russia on Ukraine. There never has been, and there never will be.

There is simply no magic formula, no concession, and no grand bargain that would satisfy the Kremlin’s maximalist and eliminationist goals. Moscow wants to end Ukraine’s sovereignty, nationhood, and statehood. Ukraine wants to continue to exist as an independent sovereign state. Given this, no compromise is possible. Any Kabuki negotiations or Potemkin cease-fire would be meaningless and treated by the Kremlin as nothing more than a strategic pause and an opportunity for sanctions relief.

“Russian imperialism will not be neutralized by negotiations, compromises, or concessions,” Andreas Umland, an analyst at the Stockholm Centre for Eastern European Studies and an associate professor at the National University of Kyiv-Mohyla Academy, wrote on May 22.

Following his latest call with Trump, Putin said he wanted any settlement to address what he called the “root causes of the crisis.” That choice of phrase was no accident. The Kremlin leader used a similar formulation when addressing the issue of ending the war during a joint press conference with Belarusian strongman Alyaksandr Lukashenka in March.

Putin’s repeated use of the term “root cause” is a tell. For the Kremlin leader, the root cause of the war is the very existence of Ukraine as a sovereign state, which he has long seen as anathema. At the 2008 NATO Summit in Bucharest, Putin made this clear when he told then US President George W. Bush that “Ukraine is not even a state.” Putin has also repeatedly referred to Ukraine as “little Russia,” a Tsarist-era term to describe Ukrainian lands.

For Putin and the Kremlin elite, Russian colonial dominance of Ukraine is an ideological issue that is not subject to negotiation. The Kremlin cannot be persuaded, it can only be defeated.

Russia’s game: decouple the war from relations with Washington

If anyone doubts Russia’s intentions, then recent remarks by Vladimir Medinsky, one of Putin’s court ideologists and the Kremlin’s chief representative at recent talks in Istanbul, should put them to rest. “Russia,” Medinsky told the Ukrainian delegation, “is prepared to fight forever.” He added, in reference to the Northern War of 1700-1721, which elevated Russia to the status of an empire, “we fought Sweden for twenty-one years. How long are you ready to fight?”

But with the front line largely static and Russia making miniscule gains with high casualties, forever may turn out to be a very long time and have a very steep cost.

According to the Institute for the Study of War (ISW), in the first four months of 2025, Russia advanced just 1,627 square kilometers on the front in eastern Ukraine while suffering 160,600 casualties. That’s a staggeringly high ninety-nine casualties for every square kilometer of territory. ISW also estimates that “at this rate of advance, it would take Russian forces approximately 3.9 years to seize the remainder of Donetsk, Luhansk, Zaporizhzhia, and Kherson oblasts,” the four regions Putin has claimed to have annexed. Moreover, according to ISW, it would take nearly a century to seize all of Ukraine save its Western border regions at a cost of nearly fifty million casualties—which is roughly one third Russia’s current population.

The economics of the war are also not trending in Moscow’s favor. As Charles Lichfield, deputy director of the Atlantic Council’s GeoEconomics Center wrote in February, “while Moscow has found ways to mitigate the impact of [Western sanctions], growing deficits, unsustainable subsidies, and the rising cost of debt servicing” are putting severe strain on the Russian economy.

Additionally, a widely circulated report by Craig Kennedy of Harvard University’s Davis Center for Russian and Eurasian Studies suggests that the “surprising resilience” that the media and analysts have been seeing in the Russian economy is largely a mirage. According to Kennedy’s research, published earlier this year, the war is largely being financed by concessionary off-the-books loans to defense contractors at well below market interest rates. Simply put, this is not sustainable over the long term.

Given this, the Kremlin’s goal vis-à-vis the United States is to decouple the war from Russia-US relations, normalize relations between Moscow and Washington, and get sanctions relief. In a speech in late February, Putin said that Moscow “would be happy to cooperate with any foreign partners, including American companies” to secure rare-earth-minerals deals. Putin added that lifting sanctions could lead to a profitable new economic relationship between the United States and Russia, particularly in the energy sector.

Putin, of course, wants an economic rapprochement without ending his quest to conquer Ukraine. Russia has continued to pound Ukrainian cities with aerial assaults, resulting in mass civilian casualties even as he seeks to entice Washington economically.

And for his part, Trump appears open to the idea. Following his most recent call with Putin, the US president indicated a desire to establish normal economic relations with Moscow. This would be a grave error, as it would throw Putin a lifeline to continue his war of aggression.

Fortunately, there does appear to be pushback in Washington. The Sanctioning Russia Act of 2025, which would expand existing penalties on Russia, was introduced in the US Senate by South Carolina Republican Lindsey Graham and Connecticut Democrat Richard Blumenthal and has more than eighty cosponsors.

Europe’s moment and Ukraine’s resolve

For its part, the European Union (EU) and the United Kingdom have already moved ahead with their own new package of sanctions enacted on May 20, a day after the latest Trump-Putin call. Brussels and London are also pledging to increase military assistance to Ukraine to make up for any shortfall resulting from a US cutoff.

German Chancellor Friedrich Merz, French President Emmanuel Macron, British Prime Minister Keir Starmer, and the EU’s top diplomat, Kaja Kallas, all seem to understand that this could be Europe’s moment. But one of the biggest wildcards going forward is whether Europe can overcome its internal divisions—mainly opposition from Hungary and Slovakia—and surge arms to Ukraine.

Which brings us to Ukraine itself—and here the calculations are simple. As the Ukrainian political scientist Anton Shekhovtsov wrote earlier this week, “Ukraine’s choices are to fight back and risk being killed, or to surrender and be killed. By fighting back, Ukraine has a chance; by surrendering, it has none—making surrender not a viable option.”

And for Ukraine, as always, necessity has become the mother of invention. Faced with a potential shortfall in weapons, Kyiv has created a vibrant domestic arms industry focusing on drone warfare.

“In just three years, Ukraine’s military has evolved from defending itself with leftover Soviet weapons to pioneering a new kind of warfare,” the Ukrainian war correspondent Nataliya Gumenyuk writes in the Atlantic.

“Fortunately for Ukraine, American weapons are not the only factor that has rebalanced the battlefield in the past three years. Starting in 2024, Ukrainian-made drones definitively changed the way both sides waged war. For Ukraine, the adjustment was not just tactical, but a broader, doctrinal evolution in how its military fights.”

Gumenyuk concludes by noting that “as Ukraine’s partners speak of peace deals and security guarantees, Ukraine’s armed forces are adapting in every way they can to continue carrying out their mission . . . They cannot afford the luxury of counting on American commitments or Russian concessions, because for most Ukrainians, what matters above all is physical safety. And the only force protecting human lives in Ukraine is the Ukrainian military.”

So here we are, after three years of war and four months of failed diplomacy to end it. This war will be decided on the battlefield. It is for the United States and Europe to decide whether they are prepared to help Ukraine win it.

Brian Whitmore is a nonresident senior fellow at the Atlantic Council Eurasia Center, an assistant professor of practice at the University of Texas-Arlington, and host of The Power Vertical Podcast.

The post Welcome to the long war: Why a Ukraine deal was never realistic appeared first on Atlantic Council.

After partial relief, what’s next for Syria sanctions?

Alex Zerden — Thu, 29 May 2025 18:03:01 +0000

The Trump administration took a bold first step toward sanctions relief for Syria with the May 23 actions by the State Department and the Department of the Treasury. Unprecedented sanctions and related relief will help the Syrian people and fulfill US President Donald Trump’s May 13 commitment for the “cessation” of “sanctions.” Much will now depend on progress made in Syria and further relief efforts.

The United States has opened meaningful space for reconstruction and private sector engagement. Efforts to do so include the Treasury’s Office of Foreign Assets Control (OFAC) issuing General License (GL) 25 (including frequently asked questions on May 28), a State Department Caesar Act waiver, and Financial Crimes Enforcement Network (FinCEN) USA PATRIOT Act Section 311 exceptive relief for the systemically important Commercial Bank of Syria. Along with other relief, the measures remove obstacles to reconnecting the sanctioned Central Bank of Syria and certain Syrian commercial financial institutions to the global financial system.

While a significant signal, these announcements do not mean a return to business as usual with Syria after forty-six years of punishing economic measures directed primarily against the former Assad regime. Syria remains a high-risk jurisdiction due to years of conflict, endemic corruption, state institution collapse, narcotrafficking of captagon, insufficient anti-money laundering efforts, and inadequate financing of terrorism controls. In February, the intergovernmental Financial Action Task Force affirmed Syria’s status on its “grey list” of jurisdictions under increased monitoring. These relief measures announced by the State Department and the Treasury are also either temporary in nature (the 180-day Caesar Act waiver) or subject to revocation at any time (GL25 and the FinCEN Section 311 exceptive relief). Additionally, other US legal and economic restrictions remain in place, including the following:

Syria’s state sponsor of terrorism (SST) designation that, in part, removes some of Syria’s sovereign immunity in US courts;
foreign terrorist organization (FTO) designations with attendant material support criminal liability enforced by the Department of Justice and civilly by US terrorism victims;
United Nations sanctions, including on key members of the Syrian interim government; and
export controls administered by the Department of Commerce.

As an immediate next step to build on this momentum, the Trump administration can take the following measures:

Provide policy clarity on the outstanding restrictive economic measures and legal prohibitions related to the SST and FTO designations. The administration can publish a memorandum by the Department of Justice to articulate the administration’s prosecutorial policy involving alleged material support to FTOs operating in Syria. While novel, such guidance would provide greater legal clarity, especially for humanitarian organizations operating in Syria.
Work with Congress to review the statutory sanctions in place against Syria to ensure that they reflect the fall of the Assad regime and current political developments.
Work with allies and partners to calibrate the United Nations sanctions to current risks.
Provide guidance, including frequently asked questions, for the Caesar Act waiver and the FinCEN Section 311 exceptive relief, as well as interagency policy guidance on the roadmap for further relief.
Develop a policy for using and supporting partners with positive economic statecraft tools such as technical assistance to rehabilitate the financial sector, in addition to licensing, waiving, and removing restrictive economic measures.

The US government should be commended for acting swiftly to update sanctions and other authorities to better reflect the current realities on the ground. Significant work remains ahead to responsibly calibrate restrictive economic measures to achieve US foreign policy goals and support positive economic tools to allow the Syrian people to benefit from this dramatic change in US policy.

Alex Zerden is the founder of Capitol Peak Strategies, a risk advisory firm, an adjunct senior fellow at the Center for a New American Security, and a former Treasury Department financial attaché. You can follow him on X at @AlexZerden.

New Atlanticist May 13, 2025

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Civil Society Economic Sanctions

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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 Economic Sanctions

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Will Trump’s tariffs survive US courts?

Atlantic Council — Thu, 29 May 2025 15:18:10 +0000

GET UP TO SPEED

It depends on your definition of “emergency.” Donald Trump, in his self-declared “liberation day” on April 2, didn’t just impose tariffs on virtually the entire world. He did it by using a novel legal theory and expanding the use of decades-old legislation called the International Emergency Economic Powers Act (IEEPA) in a way no US president had done before. Now, with those tariffs on pause but set to come into effect in early July, a federal court ruled Wednesday that Trump’s use of that law was unconstitutional. Is this the end of the trade wars? Not at all, according to our experts. Below, they issue their verdict on what trade tools Trump could turn to next and what these developments mean for every country in the thick of negotiations with the administration.

TODAY’S EXPERT REACTION BROUGHT TO YOU BY

Josh Lipsky (@joshualipsky): Chair of international economics and senior director at the Atlantic Council’s GeoEconomics Center, and former adviser to the International Monetary Fund
Barbara C. Matthews: Nonresident senior fellow at the GeoEconomics Center and former US Treasury attaché to the European Union

Case law

The administration will appeal the ruling, and Josh expects an appeals court to issue a stay, meaning the tariffs would return. But this case is almost certainly headed to the US Supreme Court in the coming months.
Josh calls the decision “a setback for the administration,” which asked for this court to take the case. The unanimous ruling included judges appointed by Trump and former US President Ronald Reagan.
But Barbara notes that the ruling “is limited in scope and provides many mechanisms” for the Trump administration to “accomplish the same goals.” Specifically, “the court’s rationale supporting White House tariff tools as remedies for balance-of-payments issues potentially renders the April 2 tariffs on relatively firm ground compared with the January 2025 fentanyl tariffs against Mexico, China, and Canada.” That’s because Trump justified the April 2 reciprocal tariffs as rectifying US trade deficits with all countries participating in the global trading system.
The court was more definitive, Barbara tells us, about the fentanyl tariffs, ruling that both the declared emergency and Trump’s remedy were overly broad. The appeal process will need to address “whether (or not) Congress may delegate its tariff authority, whether Congress limited the scope of national emergency determinations by the White House when it enacted IEEPA,” and “whether tariffs imposed to address a national emergency must be narrowly tailored in relation to the nature of the emergency, the time horizon for the tariffs, or both.”

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Backup plans

While appeals play out, the administration will have several tools at its disposal to continue its current tariff policy. First, Wednesday’s decision agrees with a 1975 court ruling that Congress may provide the executive branch with “limited authority” to impose tariffs. The ruling then asserts that the authorities granted to the White House under IEEPA are more narrow than those under its predecessor statute, the Trading with the Enemy Act. The decision then “provided a blueprint for how the Trump administration can continue using tariffs to address both geoeconomic imbalances and a wide range of national emergencies with greater precision,” says Barbara.
While it appeals Wednesday’s ruling, the White House could narrow the scope, timing, or legal foundation for the fentanyl tariffs and the reciprocal tariffs under IEEPA, Barbara says. Such a move would require the administration to admit at least tacitly that the executive branch’s emergency and tariff authorities can be limited by judicial decision. Josh adds that the administration could follow the court’s decision and rely on sections 122 and 338 of the Trade Act, involving balance of payments, to support the April 2 reciprocal tariffs.
While the ruling was a surprise, Josh notes that a not fully appreciated move in April, in which the administration shifted semiconductors and consumer electronics tariffs to section 232 of the Trade Expansion Act, was a signal that the administration wanted stronger legal footing for some of its toughest levies on China. “In hindsight, that move was more of a tactical retreat. Because that process is well under way, it gives [the administration] a powerful new tariff that could come over the summer.”
Barbara agrees, noting that Trump has already used “traditional” methods of section 232 and section 301 for other tariffs unaffected by the ruling, such as those on automobiles. Such moves, however, would extend the timeline for trade negotiations and potentially intensify policy volatility until late this year or early 2026.

Trade war and trade peace

This news comes as countries are racing to strike deals with the administration ahead of a July deadline for the return of the reciprocal tariffs. Josh expects that “other countries will now try to slow-walk their negotiations,” resulting in fewer deals ahead of that July deadline and an August deadline to conclude tariff negotiations with China.
This decision also impacts congressional budget negotiations ahead of an August deadline to raise the debt ceiling. A Republican budget bill garnered enough votes to pass the House thanks in part to optimistic projections for tariff revenue, Josh points out, which is now in jeopardy. As negotiations turn to the Senate, “keep an eye on the bond market, which already has not reacted well to the bill’s deficit impact,” he adds.
Barbara notes that Congress could choose to use this budget bill to ratify the fentanyl and April 2 tariffs, which could satisfy aspects of the trade court’s ruling, but “any such legislation likely also would face legal challenge.”
“All of this adds up to more uncertainty—not less,” Josh adds. “Businesses will be unable to make any long-term investment decisions, and the idea that tariffs are going only lower from here may be a miscalculation. Markets seem jubilant that the president may not have as much tariff authority as he thought, but the hangover is coming soon. Trump has many trade tools still at his disposal, and he will not want his core international economic agenda overturned by three judges from a lower court.”

Trump Tariff Tracker

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Metzl featured on Fox News on antisemitism, student visa policy, and US competitiveness

bgalicia — Thu, 29 May 2025 12:17:55 +0000

Nonresident Senior Fellow for Technology and National Security

On May 29, Jamie Metzl, nonresident senior fellow in the GeoStrategy Initiative, appeared on Fox News’ Brian Kilmeade Show to discuss antisemitism on college campuses and the Trump administration’s student visa policies. He argued that policymakers must address the rise of malign influence on US campuses while ensuring that universities remain engines of economic growth by supporting cutting-edge scientific and technological research. Metzl’s segment begins at 12:25.

Fellow

Jamie Metzl

GeoStrategy Initiative Scowcroft Center for Strategy and Security

China Defense Technologies

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Metzl discusses US student visa policy on CNN’s NewsNight

bgalicia — Thu, 29 May 2025 11:56:00 +0000

On May 29, Jamie Metzl, nonresident senior fellow in the GeoStrategy Initiative, appeared on CNN’s NewsNight with Abby Phillip to discuss US visa policy. He emphasized the importance of thoroughly vetting individuals entering the country while also highlighting the need to retain top global talent. Metzl noted that doing so is critical to maintaining US competitiveness, particularly in the context of growing strategic competition with China, which he described as a new “cold war.”

Fellow

Jamie Metzl

Nonresident Senior Fellow for Technology and National Security

GeoStrategy Initiative Scowcroft Center for Strategy and Security

China Defense Technologies

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Dispatch from Dayton: What Trump can learn about ending war

Frederick Kempe — Wed, 28 May 2025 22:30:00 +0000

DAYTON, Ohio—US President Donald Trump could learn a lot about how to best end Russia’s murderous war on Ukraine, now into its fourth year, from the US experience here thirty years ago in negotiating what became known as the Dayton Peace Accords.

If Trump wants to stop Russian President Vladimir Putin’s war, and he has made that an administration priority, then he should reflect on what it took to finally stop Serbian President Slobodan Milošević in 1995—after nearly four years of killing and more than 100,000 dead, including the massacre at Srebrenica, Europe’s worst genocide since the Holocaust.

A deal required relentless US diplomatic engagement backed by a demonstrated military threat and carried out alongside unified European allies. It also took twenty-one days of intensive negotiations in Dayton—not involving then US President Bill Clinton until the end—while all parties were cloistered from media and outside influences at Wright-Patterson Air Force Base.

Marking the Dayton anniversary, Ohio Congressman Mike Turner brought the NATO Parliamentary Assembly here last week, gathering delegates from the thirty-two allies as well as from partner countries. They joined leaders from the Western Balkans, assorted experts, and even the Sarajevo Philharmonic, which performed for participants in a giant hangar stocked with presidential aircraft in the National Museum of the US Air Force.

Though I came to commemorate history, I left having interrogated its architects. My aim was to gain clues that might help the Trump administration in its still-fruitless quest for an end to Russia’s war on Ukraine.

It would be easy to discount the lessons for Ukraine and Russia now, where the stakes are so much higher, from Bosnia-Herzegovina and Serbia then. Nuclear-armed Russia has two hundred times the land mass of Serbia and more than twenty times its population. And Ukraine, with its pre-war population of forty million and France-sized territory, is more than ten times larger in geographic size and population than Bosnia-Herzegovina. In my view, that makes the lessons only more compelling.

The first lesson? “Peace agreements are extremely rare,” former Swedish Prime Minister Carl Bildt, the European Union’s special representative at the talks thirty years ago, said in a session of former officials that I moderated. “In modern European history, there are only two really: Dayton and the Good Friday Agreement,” which in 1998 ended a thirty-year conflict in Northern Ireland known as “the Troubles.”

Both were forged in the aftermath of horrific violence, which is also the case in Ukraine. Yet both also required something that is still lacking today: determined, focused, and creative US leadership in lockstep with European partners. Both also succeeded through disciplined diplomacy, military leverage, and the unglamorous work of compromise.

Beyond that, winning peace in Dayton demanded US credibility but not neutrality. At Dayton, the United States was not an impartial mediator but rather a focused powerbroker, using whatever muscle was necessary to shape the outcome. No lasting deal can reward Putin’s aggression, just as Dayton didn’t knuckle under to reward Milošević.

Another lesson is that building peace is as crucial as ending war. Dayton and Belfast were both followed by years of international engagement, economic aid, and security commitments. Peace might have collapsed had those efforts not continued.

Most importantly, the United States led but did not go it alone. Peace that endures requires multilateral support. Dayton hasn’t worked perfectly, but without the European Union and NATO it wouldn’t have worked at all. “Only when the international actors can get together with a uniform message and policy can results be achieved,” said Bildt, who is also an Atlantic Council International Advisory Board member. “There was success in Dayton, yes. But it should also be said that there was massive failure prior to Dayton due to disagreements across the Atlantic, disagreements in Europe, and disagreements in the United States.”

US General Wesley Clark, who at the time was the military right hand to Richard Holbrooke, the chief US negotiator, took away a different lesson: “Don’t be timid,” Clark, a member of the Atlantic Council Board of Directors, said to the NATO parliamentarians. “We are going to have to be unified. And we are going to have to be forceful enough to convince Putin he will not win. Right now, he thinks he’s winning.”

In a slap across the face of Trump’s efforts to broker peace, Putin from last Friday to Sunday launched what Ukrainian officials called the largest combined aerial assault of the conflict, including some nine hundred drones and dozens of missiles of various types. That prompted a frustrated Trump to write on Truth Social about Putin that “something has happened to him. He has gone absolutely CRAZY!” The US president added that “missiles and drones are being shot into Cities in Ukraine, for no reason whatsoever.”

The problem is that there’s nothing crazy about Putin’s calculations, and his reasons are obvious. He’s trying to wear down Ukraine and its partners, and he’s betting that he has more staying power. He sees US military and diplomatic support in retreat, European efforts as insufficient, and Ukraine as weary. Trump has belatedly acknowledged that Putin has been “tapping” him along.

With all that in mind, Washington will have to try far harder now than it did then to change a murderous despot’s mind—or resign itself to accepting Putin’s ongoing war and its ambition to redraw the European map.

Until Washington stood up to Milošević in 1995, Clark said, the Serb leader thought he could pull the wool over Europe’s eyes with his small army overrunning Bosnia. When he bid farewell to Milošević at the end of the talks, Clark remembers the Balkan leader saying, “We Serbs never had a chance against your NATO, your airplanes, your missiles.”

Speaking with me at the same NATO session, Christopher R. Hill, who was part of the Holbrooke delegation in Dayton, added another important lesson—that the parties must be ready to end the war. “I am not sure Russia is ready for peace,” he said. “They should be, but they don’t seem to be. I think until they are, we have got to help Ukraine because a hundred years from now . . . our grandchildren, our great-grandchildren, will be thinking about what we did to deal with this crisis.”

The Dayton Accords were not perfect, but they were proof of what US leadership can achieve when properly applied. Speaking in Bosnia-Herzegovina shortly after the agreement was finalized, the then US president explained why the United States had chosen to lead, rather than cut and run from the European conflict.

“Around the world, people look to America not just because of our size and strength but because of what we stand for and what we’re willing to stand against,” Clinton said. “And though it imposes extra burdens on us, people trust us to help them share in the blessings of peace. We can’t be everywhere . . . But where we can make a difference, where our values and our interests are at stake, we must act.”

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on X: @FredKempe.

This edition is part of Frederick Kempe’s Inflection Points newsletter, a column of dispatches from a world in transition. To receive this newsletter throughout the week, sign up here.

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Does the Nippon Steel deal reflect a new normal for foreign investment in the US?

Sarah Bauerle Danzman — Wed, 28 May 2025 19:52:41 +0000

Last week, US President Donald Trump announced that a deal had been reached approving a “planned partnership” between Nippon Steel and US Steel. This news seemed to settle an almost eighteen-month saga during which Nippon Steel’s proposed acquisition of US Steel was unexpectedly and controversially embroiled in a national-security review by the Committee on Foreign Investment in the United States (CFIUS). In one of his last acts as president, US President Joe Biden had prohibited the transaction before punting the decision to the next administration.

I have written about the Nippon deal numerous times, always emphasizing the commercial benefits of the deal, the ways in which Japanese investment in the US steel industry is a net positive for US national-security concerns, and the dangers of blocking the transaction. The big question now, beyond the specific details of the Nippon deal, is if the CFIUS process itself has changed in ways that will affect future deals.

Rather than indicate that CFIUS has returned to its narrow national-security mandate, the Nippon deal suggests that the Trump administration is willing to use CFIUS authorities to intervene in private transactions for political and industrial policy objectives.

CFIUS was not envisioned as a tool to manage US industries’ strategic competitiveness broadly.

First, the terms of the deal, while still scant, suggest that most of the terms mirror what was already on the table, just with a different public relations spin. In an attempt to head off criticism of the transaction, Nippon clarified that US Steel would retain its name and Pittsburgh headquarters and a majority US-citizen board. As public pressure against the deal mounted, Nippon also committed to invest substantially in upgrading US capacity and promised to not offshore US production.

Second, what may be different from Nippon’s previous offer is what US Senator David McCormick (R-PA) is describing as a “golden share.” This arrangement would likely give the US government direct control over a certain number of board seats, though no specific details of the arrangement have been disclosed. Despite the use of the term “share,” there doesn’t seem to be any indication that the US government would take an ownership stake in the company. While CFIUS mitigation agreements have in the past provided the US government with some authority to maintain minimum standards for key personnel post-merger, it would be a substantial increase in the use of CFIUS authorities to create an open-ended requirement for the US government to approve board members in an active and ongoing manner.

Depending on the final wording of the arrangement and the manner in which CFIUS implements it, government control over board members could be used for broad industrial policy practices. CFIUS is supposed to analyze proposed cross-border acquisitions for discrete national-security risks and to only intervene if it finds a risk to national security that arises from the transaction under review. Its mechanisms for intervention are a mitigation agreement or a recommendation that the president prohibit the investment. CFIUS was not envisioned as a tool to manage US industries’ strategic competitiveness broadly, but the United States’ expanded interest in critical supply chains has substantially blurred the line between strategic industrial policy considerations and narrow national-security concerns.

If the US government began imposing strict production requirements on Nippon, that would mark a substantial drift toward statist production management measures. Moreover, the embrace of a more forward-leaning mitigation stance would mirror the French approach to foreign investment review since 2014. As a reflection of how that has played out, Paris imposed mitigation measures on 53 percent of authorized transactions in 2022. More to the point, it would run counter to the White House’s America First Investment Policy, which explicitly calls for the end of “overly bureaucratic, complex, and open-ended ‘mitigation’ agreements” in favor of ones that “consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.”

Finally, Trump, who announced a celebratory rally in Pittsburgh along with the agreement, and Biden, who touted his decision on the campaign trail, set a concerning precedent by openly politicizing the Nippon Steel deal. In 1975, US President Gerald Ford established CFIUS through Executive Order 11858. Originally little more than a data-seeking exercise, CFIUS was explicitly formed to depoliticize foreign direct investment (FDI) at a time when some members of Congress were increasingly alarmed about the security implications of investments from oil-rich nations. Over the years, the four major overhauls of CFIUS authorities in 1988, 1992, 2007, and 2018 have all, to varying degrees, featured a tug-of-war between a Congress that sought more oversight over FDI for a mixture of security and political reasons and an executive branch that generally tried to keep FDI from becoming a political football.

If CFIUS reviews become simply political talking points—rather than being based on factual merits—and if firms think that they must mollify the US president in order to be allowed to invest in the United States, then the Nippon Steel deal will be remembered as the transaction that confirmed the fifty-year attempt to depoliticize FDI into the United States has failed.

Sarah Bauerle Danzman is a nonresident senior fellow with the GeoEconomics Center’s Economic Statecraft Initiative.

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Hammes speaks about China’s maritime expansion on Midrats podcast

kwinzerwilks — Wed, 28 May 2025 15:13:53 +0000

On May 5, Forward Defense nonresident senior fellow T.X. Hammes was a guest on the Midrats podcast. The episode, titled “China’s Overseas Bases & the Transition to War,” discusses how China continues to expand its ownership, access, and control of ports globally while simultaneously building the world’s largest navy and diverse set of military capabilities to defeat the US military in the Indo-Pacific.

Fellow

Thomas X. Hammes

Forward Defense Scowcroft Center for Strategy and Security

Conflict Defense Industry

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Soofer’s report, “Strengthening Deterrence with SLCM-N,” quoted in Asia Times article

Atlantic Council — Tue, 27 May 2025 20:08:02 +0000

On May 13, Forward Defense senior fellow Robert Soofer was quoted in an Asia Times article titled, “US Navy wants sea-launched nuke missiles to hold China at bay.” The article cites his Atlantic Council issue brief, co-authored with John Harvey, “Strengthening Deterrence with SLCM-N.” The article references their argument that SLCM-N capabilities address “a US capability gap in response to the threat of limited nuclear employment.”

Former fellow

Robert Soofer

Former Senior Fellow

Forward Defense

Arms Control Defense Policy

Public Event Tue, May 27, 2025 • 9:00 am ET

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British ambassador to the US: The UK must ‘become less dependent on America, while remaining inseparably linked’

Peter Mandelson — Tue, 27 May 2025 19:40:18 +0000

On May 27, Peter Mandelson, the British ambassador to the United States, spoke at this year’s edition of the Atlantic Council’s Christopher J. Makins Lecture, a series exploring the state of the Atlantic partnership and its future direction. The below is adapted from his opening speech, entitled “Renewing the Transatlantic Alliance: Peace Through Strength in a New Age of Great Power Rivalry.”

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The Rt Hon Lord Mandelson on Britain in an enduring transatlantic relationship

British Ambassador to the United States The Rt Hon Lord Mandelson speaks at the 2025 Christopher J. Makins lecture to discuss the significance of the transatlantic relationship during this unprecedented geopolitical period.

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Eighty years ago this month, the streets of Britain, America, and allied nations erupted in celebration at the fall of fascism in Europe.

For me personally, it’s a source of enormous pride that my grandfather, Herbert Morrison, served as home secretary in Winston Churchill’s wartime coalition.

He also served as deputy prime minister in Clement Attlee’s transformative postwar government in Britain. That government didn’t just support the formation of NATO to counter Soviet expansionism—they were the co-architects of it.

Amidst Cold War tensions and economic upheaval, Britain and America advanced from allies to integrated strategic partners at the dawn of the nuclear age, our scientists having joined forces in the Manhattan Project to create the advantage we had at the beginning of this age.

It was Western unity which ultimately ended the Cold War peacefully and demonstrated resilience to new threats, including the 9/11 attacks, where NATO invoked Article 5 for the first time.

Over eight decades, the foundations of collective defense have remained steadfast whilst the transatlantic relationship has continuously evolved and adapted to counter new challenges.

Today, I want to talk about the profound challenge we face in a new age of great power rivalry, a period characterized by political volatility, by economic mercantilism, and geopolitical competition.

We are witnessing the end of an era of hyper-globalization where we assumed that economic integration had made wars almost obsolete.

The logic seemed compelling: Mutual interests, integrated global supply chains, and shared economic stakes created too much to lose from warfare. History seemed to point only in one direction.

And those comfortable assumptions have been shattered.

We now see the rise of modern mercantilism, where nations prefer to prioritize national economic strength and autonomy in many respects.

States are intervening and playing a more protectionist role in managing trade and directing industrial policy to become ever more self-sufficient and localized.

I’m not declaring globalization dead, but it is being radically reconfigured around us.

China’s export-driven growth strategy flooded the global market with state-subsidized products, undercut Western manufacturing, and hollowed out industry.

The social disruption of rapid technological change, where, if you take media as an example, we have moved suddenly from decades of information flowing to people through established news organizations to a future where you only see “news” online that is curated to what you want to know, or what the algorithm—and those behind it—decides you want to know. And then there’s the backlash against globalization’s uneven distribution of benefits.

You can produce many different numbers to show the widening wealth disparities in the West over the past thirty years, but I would choose a simple one: GDP per capita in the United States has grown about 60 percent to 70 percent in real terms, but real median household income growth has been about 20 percent to 25 percent. The typical American household has not done as well as the booming US economy would suggest. A similar story holds true across all our countries in the West.

This has posed profound challenges to culture, place, and society—which too many of us over the past decades, frankly, have ignored. From the American Midwest to the coastal towns of England, a hands-off approach left many places adrift from the success stories of global cities such as London and New York.

And in a world which has often felt dominated by the exponential rise of social media, a sense of grievance—and of difference between us and them—has been amplified.

So yes, I credit President Trump’s acute political instincts in identifying the anxieties gripping not only millions of Americans, but also far more pervasive global trends: Economic stagnation, a sense of irreversible decline, the lost promise of meaningful work for so many people. These are the giants now that we must confront head-on.

So, where do we go next?

It is in no one’s interest—certainly not those of close allies—that each country pursues a wholly individualized path, which leads to accelerated economic fragmentation.

But if we are serious about rebuilding confidence in the international system, if we wish to maintain a set of common rules and standards—a shared economic and security commons in between us—we need to devote an enormous amount of energy and goodwill to preserve, sustain, and deepen the alliances which exist between like-minded countries.

For the UK and the rest of Europe, we must reboot the transatlantic alliance—indeed, a boot up the proverbial backside is needed now—to deliver peace through strength across three interconnected domains: military, economic, and technological.

For my generation, the twentieth-century gains in peace and prosperity were thought of as a European peace dividend.

I now recognize it as an urgent bill, that peace dividend: An urgent bill for decades of defense underinvestment—a payment that is long overdue.

We have lived in a fantasy created by the US security guarantee, complacent that a friendly heavyweight across the water would be always there when the going gets tough.

We meet in the shadow of Russia’s barbaric invasion of Ukraine, now in its fourth year.

The UK strongly supports President Trump’s initiative to bring this terrible war to an end. And we are working together with partners to secure a just and lasting peace.

The Ukraine conflict has served as a brutal wake-up call. State-on-state war has returned to Europe. Adversaries are using nuclear rhetoric to influence decision-making, and we are seeing regular attacks on European infrastructure beneath the threshold of warfare.

It is crystal clear that European defense must step up and rebalance for our collective security. Actually, I think President Trump is doing Europe a favor by confronting us with this reality.

The United States is the UK’s closest defense and security ally. We must become less dependent on America, while remaining inseparably linked to America—a distinction that I underline of critical importance. Yes, less dependent, but still inseparably linked.

Ukraine is just one flashpoint of many amid growing global instability. Even the US does not have limitless resources.

This is precisely why Britain must step up in providing for European security and why we have committed to the biggest sustained increase in defense spending since the Cold War.

We will become NATO’s fastest-innovating nation, ensuring our military forces have the technological and military capabilities to secure long-term strategic advantage, not just spending more, but spending better.

Of course, this all needs to be grounded in intelligent and effective strategic choices, not merely increased expenditure. Efficiency and innovation to renew our defense manufacturing bases must drive every pound, every dollar, and every euro that we invest.

And we will double down on our alliances. In defense, we will always be NATO first but not NATO only—and this is particularly true of the UK’s focus on the Indo-Pacific, as well as our new security partnership with Europe.

One good example is AUKUS, the trilateral security partnership with Australia and America, which will deliver advanced nuclear-powered submarines and catalyze technology sharing on other advanced capabilities.

Turning to the theme of economic strength, Britain now enjoys something that has eluded us for far too long: a government with both unity of purpose and longevity.

This government’s mandate and President Trump’s will both last for the next four years—providing huge opportunities for collaboration between us.

We are both pro-business and pro-trade in Britain, and committed to innovation, not as empty slogans but as practical imperatives.

This UK government is committed to creating the best investment environment with a regulatory reset that makes us the most competitive in Europe—that’s our aim.

One of the reasons we were able to close the first trade deal of the Trump administration is that our strong economic relationship between our countries is fair, balanced, and reciprocal. But also because, frankly, we are a businesslike nation with pragmatic instincts.

One of the great backhanded insults in British history was when Napoleon Bonaparte dismissed us as a mere “nation of shopkeepers.” He was right: Commerce is the lifeblood which flows through our veins, and that is one reason why we British and American cousins remain so close.

And that is also one reason why I see the current deal as the beginning of a new chapter as well as an end, in a sense, in itself. There is scope for an even more transformative stage in our long partnership. And I believe that centers on technology.

So let me address technological strength as the third. We face a clear, shared threat. There is nothing in this world I fear more than China winning the race for technological dominance in the coming decades.

China represents a far more dynamic and formidable strategic rival than the Soviet Union ever was: economically sophisticated, highly innovative, and strategically patient.

The United Kingdom and United States are the only two Western nations with trillion-dollar technology ecosystems combined with unparalleled talent and research capabilities in our universities and corporations.

We must combine forces, in my view, to drive the scientific breakthroughs that will define this century, and AI should be the spearpoint of that collaboration.

Artificial intelligence stands as the next great foundational technology. Through its power, we can rapidly make progress across so many frontiers of science: quantum, synthetic biology, medicine, nuclear fusion.

Rather than stifling these transformative technologies through excessive regulation, our two governments must unleash their immense potential for human benefit and Western advantage.

Let me say this in conclusion. In his immortal Iron Curtain speech, delivered in Missouri, Churchill spoke eloquently about the primacy of American power and its awesome responsibility to future generations.

Today, we face our own historical inflection point.

No one should doubt that we face accelerating global competition in which it is strongly in our interests to expand the perimeter of our alliances while deepening the transatlantic partnership at its core.

So our diplomacy must be more urgent, more agile, and more creative. We must deepen the political and military alliances which defined our past successes but also create new partnerships—borne in and of technology—which will redefine our future. The stakes could not be higher. The opportunities, actually, could not be greater. And I am confident that our two countries will indeed rise together to meet those challenges.

Peter Mandelson is the British ambassador to the United States.

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Russia’s summer offensive could spark a new humanitarian crisis in Ukraine

Viktor Liakh, Melinda Haring — Tue, 27 May 2025 19:34:22 +0000

As the Russian army gears up for a major summer offensive, Ukraine could soon be facing its most serious humanitarian crisis since the initial phase of the full-scale invasion more than three years ago. If the West does not act swiftly by sending military aid, tightening sanctions, and reaffirming its long-term commitment to Ukraine, the unfolding crisis could overwhelm Kyiv and undermine the Ukrainian war effort.

Current Russian troop movements and battlefield dynamics indicate that the coming summer offensive may be one of the largest and most ambitious of the entire war. If successful, this campaign could allow Russian troops to push the front line tens of kilometers forward into Ukrainian-held territory and overrun parts of Ukraine’s Donetsk, Luhansk, Zaporizhzhia, and Dnipropetrovsk provinces.

The cities of Kostyantynivka, Pokrovsk, and Kramatorsk are high on the list of likely targets. They have all experienced significant damage and large-scale displacement as a result of Russian bombardment. If these cities and others in the surrounding area fall to the Russians in the coming months, the wider region could become depopulated as large numbers of people flee the fighting.

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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.

Based on current trends and previous displacement waves, at least two hundred thousand Ukrainian civilians living close to the current front lines of the war could be forced to leave their homes by fall 2025. This is not speculation; it is informed by experience gained during Russia’s full-scale invasion.

Since the beginning of the invasion in February 2022, Ukrainian organizations have been on the front lines of the humanitarian response. They have provided essential aid, temporary housing, psychological support, and ongoing reintegration counselling to help Ukrainians displaced by Russia’s invasion rebuild dignity and restart their lives.

Ukraine’s civil society has worked wonders over the past three years but cannot realistically hope to absorb another 200,000 diplaced people without international support. The situation is even more alarming due to the recent closure of USAID, which was a major player in the humanitarian response to Russia’s invasion. With Putin’s troops already advancing, Ukraine’s Western partners must not ignore the looming danger.

According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), more than 3.6 million people remained internally displaced within Ukraine as of early 2025. Most are women, children, and elderly individuals. Many have already been forced to flee multiple times. This population of displaced people may soon become considerably larger.

Eurasia Center events

Senior Fellow, GeoStrategy Initiative

Drones, defense, and diplomacy: Negotiations and the battlefield in Ukraine

Conflict Defense Technologies Europe & Eurasia Politics & Diplomacy

Compounding the crisis, European governments are beginning to phase out temporary support programs for Ukrainians. While the EU recently agreed to extend temporary protection through 2026, enforcement is sometimes patchy. Meanwhile, there are indications across Europe that resettlement fatigue is growing.

In the UK and US, political rhetoric on the topic of Ukrainian refugees has shifted ominously. Most recently, reports emerged that the Trump administration is exploring options to repatriate Ukrainians who entered the United States following the start of the full-scale Russian invasion.

If these trends continue, millions of Ukrainians could find themselves trapped between advancing Russian forces and a closing window of international asylum. While Ukrainians in the east of the country flee Putin’s invading army, many Ukrainian refugees may be forced to return home with uncertain prospects.

If the overstretched Ukrainian military is unable to contain Russia’s summer offensive, the fallout will reverberate far beyond Ukraine’s borders. The displacement of at least 200,000 more civilians would severely strain humanitarian corridors, destabilize border regions, and sow chaos in Ukrainian cities already struggling to absorb previous waves of refugees.

Ukraine’s Western partners still have time to prevent this, but they must act with a sense of urgency. While the Trump administration has been clear that it does not plan to provide Ukraine with further military aid, it should continue sharing intelligence with the Ukrainians while confirming its readiness to sell arms to Kyiv. Europe must speed up the delivery of promised weapons and should expand supplies significantly to improve Ukraine’s position on the battlefield.

In parallel, European countries should take steps to provide reassurance and protect the legal status of Ukrainian refugees. Donor organizations can help by strengthening partnerships with Ukrainian civil society groups that have demonstrated agility, transparency, and high levels of local trust.

The next phase of Russia’s invasion is not just being fought on the front lines of the war. It is taking place across the country in bomb shelters, train stations, and temporary accommodations. Russia is trying to break Ukrainian resistance by making large parts of Ukraine unlivable and destabilizing the country. Ukraine’s partners can do much to counter these efforts, but they must act now before the military and humanitarian situation deteriorates further.

Viktor Liakh is president of the East Europe Foundation. Melinda Haring is a nonresident senior fellow at the Atlantic Council’s Eurasia Center and a senior advisor at Razom for Ukraine.

Staff

Andrew A. Michta

GeoStrategy Initiative Scowcroft Center for Strategy and Security

Central Europe Eastern Europe

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Do Trump’s criticisms of Putin mark a turning point in his Russia policy?

John E. Herbst — Tue, 27 May 2025 18:04:35 +0000

This is part of a series of regular assessments of the efforts, spearheaded by the Trump administration, to achieve a negotiated end to Russia’s war on Ukraine. Read previous entries here and here.

What’s new?

On May 25, US President Donald Trump issued a blistering criticism of Russia’s massive and dayslong bombardment of Kyiv, Odesa, and other Ukrainian cities. Trump’s language was blunt and directed squarely at Russian President Vladimir Putin. In an impromptu discussion with reporters, Trump said of Putin: “I’ve known him a long time, always gotten along with him, but he’s sending rockets into cities and killing people, and I don’t like it at all. We’re in the middle of talking and he’s sending rockets into Kyiv and other cities. I don’t like it at all.” He also spoke about imposing additional sanctions on Russia.

Trump followed up this statement with a strongly worded Truth Social post, in which he said that Putin “has gone absolutely CRAZY! . . . I’ve always said that he wants ALL of Ukraine, not just a piece of it, and maybe that’s proving to be right, but if he does, it will lead to the downfall of Russia!”

What does it mean?

These developments have led some observers to ask whether, after weeks of expressing frustration but ultimately accommodating Kremlin obstructionism, the Trump administration is about to take a tough stand. This was the strongest of several statements Trump has made against Putin over the past two months as it has become obvious, even to members of the administration who have sought to end support for Ukraine, that Putin has no interest in accepting Trump’s approach to achieving a negotiated end to the war. Trump made similar remarks in late April and early May, both suggesting that he would impose additional sanctions on Russia.

But there’s the rub. Trump’s criticism of Russian strikes on Ukrainian cities and Kremlin nay-saying in the peace talks has not led to new sanctions. And just last week, after his long phone call with Putin, who once more refused US terms for a cease-fire, Trump heralded the Kremlin call for continuing direct Russia-Ukraine talks. It is therefore no surprise that Putin doubled down with massive air strikes in Ukraine.

Putin no doubt takes solace that in the Truth Social post that labeled him “CRAZY,” Trump also slammed Ukrainian President Volodymyr Zelenskyy for “talking the way he does. Everything out of his mouth causes problems, I don’t like it, and it better stop.” At this point, Putin reads Trump, like other Western leaders since Russia’s 2008 war in Georgia, as unwilling to take strong action against aggression.

Is Putin right? Yes, Trump has vacillated over the past three months, treating Zelenskyy’s understandable public reservations about White House wavering more harshly than Putin’s active obstruction of US objectives. Trump has also taken substantial criticism from friendly editorial pages, such as the New York Post and the Wall Street Journal, as well as from at least some Republicans in Congress. On Monday, Republican Representative Don Bacon and Republican Senator Chuck Grassley both publicly called on Trump to take further action against Russia.

What to watch next

What’s more, momentum is building to move the Sanctioning Russia Act of 2025—introduced by Senator Lindsey Graham (R-SC) and Senator Richard Blumenthal (D-CT) and now cosponsored by eighty-one senators. According to well-connected Republicans, the White House saw value in the presentation of the bill in April as a way of subtly putting pressure on the Kremlin, but it did not want any movement toward passage at that time. In the wake of recent developments, I am hearing that the Trump administration is mulling giving Republican senators the option of voting their conscience. With more than eighty cosponsors, that means the bill would pass easily.

This step cannot be taken for granted, and it is a sign that Putin’s aggressive posture—which prompted even US Vice President JD Vance to remark earlier this month that Russia was asking for too much—may finally prompt Trump to take more vigorous action. Indeed, Putin continued his vicious air campaign on Monday night, prompting another Truth Social post on Tuesday where Trump focused only on Putin, saying that the Russian leader is “playing with fire.”

While it remains to be seen whether actions will follow from Trump’s tougher rhetoric, Zelenskyy could help himself and Ukraine by taking a page from Putin’s playbook and controlling his urge to criticize White House policy. Responding to Trump’s strong criticism of Russia’s belligerence, Putin called Trump overly emotional but still thanked him for his peace efforts. Even justified criticism of US policy by the Ukrainian president diverts Trump’s attention from the real problem.

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

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Busch’s piece on USMCA trade talks featured in the Washington International Trade Association’s USMCA Archives

ntursun — Tue, 27 May 2025 15:16:06 +0000

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Eftimiades interviewed by NTD on Chinese espionage

Atlantic Council — Tue, 27 May 2025 15:06:19 +0000

Original Source

On May 20, Forward Defense nonresident senior fellow Nicholas Eftimiades was interviewed by NTS News, in a segment entitled, “Former Intelligence Officer: China Leverages Entire Society for Intel.” With Tiffany Meier, Eftimiades discusses the Chinese Communist Party’s espionage strategy, pulling insights from his book, Chinese Intelligence Operations and Tactics.

Fellow

Nicholas Eftimiades

Forward Defense Scowcroft Center for Strategy and Security

China Intelligence

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Cryptocurrency Regulation Tracker cited by GIR on the regulatory landscape for cryptocurrencies

ntursun — Tue, 27 May 2025 14:32:35 +0000

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Donovan and Nikoladze cited in the South China Morning Post on the rising role of gold in sanctions evasion

ntursun — Tue, 27 May 2025 14:26:02 +0000

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What’s the Trump administration’s dollar strategy? It depends on who you ask.

Alisha Chhangani — Tue, 27 May 2025 14:20:15 +0000

The US dollar has been the backbone of the international financial system for nearly a century. According to the Atlantic Council’s Dollar Dominance Monitor, the dollar’s preeminent position remains secure in the near and medium term. However, five months into US President Donald Trump’s return to the White House, there are concerning signs. The dollar’s value has plummeted to near its lowest level in three years as investors reassess their confidence in the greenback amid a rapidly shifting monetary and geopolitical landscape.

Within the Trump administration, there appear to be competing and sometimes contradictory perspectives over what dollar dominance means for US policy interests. The perspectives mirror broader debates beyond the White House about the role of the US dollar. Three divergent playbooks—around the dollar as a reserve, payment tool, and store of value—are worth exploring, not least because they are increasingly at odds.

The “America first” dollar

For Trump, the dollar’s international role appears to be of a piece with his broader “America first” philosophy. Trump’s statements suggest that he sees the use of the dollar in global payments as a symbol of US nationalism. During his campaign, for example, Trump threatened to impose 100 percent tariffs on nations from the BRICS group of emerging economies and others seeking to build alternative currency blocs aimed at undermining “the mighty US dollar.” In his words: “You leave the dollar, you are not doing business with the United States.”

Trump’s renewed tariff policy risks undermining dollar dominance by disrupting the economic relationships that have sustained the global dollar system. The many countries that run trade surpluses with the United States value holding and using dollars in international trade. This is because the dollar boasts strong network effects and highly liquid markets. It offers ease of trade and the convenience of invoicing and settling in a single dominant currency. This creates a cycle: Dollars flow out when the United States imports more than it exports, and then those dollars come back as foreign investment in US assets. If the United States reduces imports significantly—via tariffs or trade restrictions, for example—fewer dollars flow abroad. There are already signs that this is happening: Foreign investors have sold $63 billion in US equities between March and April 2025, and the US dollar index is down 8 percent this year. This marks a major retrenchment given that foreign investors entered 2025 with a record 18 percent ownership share of US equities.

Although tariffs are paid by US importers, they also hurt foreign exporters by reducing demand for their goods. Importantly, these tariffs signal that the United States is willing to use its dominant position in global trade and finance as a tool of coercion. In response, affected countries may seek to reduce their dependencies on the United States by developing alternative payment systems, trading in local currencies, and diversifying their reserves. These likely consequences may be an incentive for the administration to pursue a more moderate tariff policy than originally announced, as is already happening, at least temporarily.

Trump also sees domestic innovation in private sector financial technology as central to sustaining the dollar’s global role. On January 23, Trump signed an executive order encouraging the development of dollar-backed stablecoins issued by private firms to enshrine dollar dominance. As much as 80 percent of the flow of dollar-backed stablecoins is happening outside of the United States, and countries such as Argentina, Brazil, and Nigeria have seen significant adoption of stablecoins for remittances or as a hedge against local currency instability.

US Treasury Secretary Scott Bessent and Federal Reserve Governor Christopher Waller have emphasized that stablecoins could reinforce the dollar’s primacy by creating new demand for US Treasuries, since almost 99 percent of stablecoins are dollar-denominated. While the widespread adoption of dollar-backed stablecoins could reinforce dollar dominance, it also introduces new vulnerabilities. For example, stablecoins could potentially accelerate de-dollarization, especially if nations become concerned about excessive dollarization of their economies and threats to monetary sovereignty.

According to the Atlantic Council’s central bank digital currency (CBDC) tracker, there has been a global increase in retail CBDC development since the Trump administration took office—potentially signaling that countries are creating domestic digital alternatives specifically designed to limit the proliferation of dollar-backed stablecoins in their economies. Moreover, if inadequately regulated, stablecoins could pose systemic risks—such as triggering bank runs or forcing the liquidation of reserve assets during periods of financial stress, destabilizing Treasury markets. Furthermore, widespread stablecoin adoption without appropriate regulations could lead to shadow payment systems evading traditional oversight, undermining sanctions and monetary policy.

Internal tensions within the Trump administration on digital assets are already emerging. Trump’s inner circle of business leaders appear to favor the broader adoption of digital assets to bolster US competitiveness, while national security officials seem to worry that stablecoins could facilitate money laundering and terrorism financing, as well as undermine Washington’s ability to effectively wield sanctions. The ultimate role of stablecoins in the dollar’s international standing will depend on whether these two groups can reconcile the multiple priorities at stake.

The dollar as an economic burden

But there are other views on the dollar in the White House, as well. Stephen Miran, the chairman of the White House Council of Economic Advisers, has argued that the dollar’s reserve currency status comes at a steep cost to American workers and industry. In November 2024, Miran framed the dollar’s reserve currency status as a structural liability—one that forces the United States to run persistent trade deficits and maintain an overvalued dollar to meet global demand for safe dollar-denominated assets. At the time, Miran proposed unconventional remedies, including purposely devaluing the dollar to create a multipolar currency system to share the reserve status burden.

Miran seems unconcerned about the dollar’s share of global central bank reserves but acknowledges the risks of a weaker dollar—primarily that investors might abandon dollar assets, increasing US borrowing costs. His proposed solution is to “term out” US debt by convincing countries to exchange short-term holdings for one-hundred-year bonds. While this would lock in foreign investment and reduce rollover risk, the extremely distant maturity could undermine trust rather than build it. Reserve holders prioritize liquidity and flexibility, so dramatically extending maturities might backfire, accelerating diversification away from dollar assets as the currency depreciates.

A fractured coexistence

At the heart of these competing views lies a critical tension that policymakers must address: The dollar serves multiple functions globally, and each function demands distinct strategic approaches.

Miran’s critique focuses on the dollar’s role as a reserve currency. Trump’s BRICS tariff threats, by contrast, focus on the dollar’s payments role. And the Federal Reserve and Treasury’s emphasis on stablecoins is best understood as an attempt to bolster the dollar’s store-of-value function. These are different hats that the dollar wears, and they often require divergent policy responses. Managing one of the hats without due attention to the others risks internal contradictions that could erode the very dominance policymakers seek to preserve.

It is unclear which side within the administration will ultimately have more influence, leading to uncertainty about US policy in the interim.

So what’s the dollar strategy, then?

To maintain long-term dollar dominance, the Trump administration should focus on creating a cohesive policy that reconciles the dollar’s multiple roles and avoids conflicting policy actions. Central to this effort should be a commitment to financial stability (avoiding large-scale tariffs, significant currency manipulation, and cryptocurrency spillover). The world is more likely to view the dollar as trustworthy when it sees the United States as a stable and reliable custodian of foreign assets.

Here are three specific ways the White House can pursue a strong, cohesive dollar policy:

Promote responsible innovation and oversight of dollar-backed stablecoins: The administration—particularly national security agencies, the Treasury, and the Federal Reserve—should actively monitor risks posed by the global proliferation of dollar-backed stablecoins. Policymakers should not ignore the accelerated dollarization of emerging markets and potential restrictive responses. Regulation alone is insufficient; clear enforcement mechanisms are needed to ensure compliance and mitigate systemic risk.

Seek stability through strategic trade measures: The administration should prioritize a stable trade policy and eliminate broad, across-the-board tariffs. Instead, it should apply targeted measures to address specific instances of nonmarket practices and currency manipulation. This would help preserve the dollar’s role by maintaining global investor confidence and ensuring continued dollar circulation in trade without disrupting broader relationships or supply chains.

Reinforce institutional credibility and policy coordination: Reaffirming the Federal Reserve’s independence is important for maintaining global confidence in US monetary policy, capital markets, and the dollar’s long-term strength. At the same time, the administration should enhance the coordination of analytic efforts and ensure consistency across agencies in messaging and policy implementation on dollar-related issues. This could be achieved by more effectively leveraging existing interagency structures, such as the National Security Council and the National Economic Council. Or, if necessary, it could be done by creating a new, dedicated coordination mechanism. The key objective is to deliver greater clarity, predictability, and coherence in the government’s approach.

Above all, policymakers should recognize that the greatest threat to the dollar is not external—it is the erosion of trust in the United States’ political and legal institutions. The dollar is not just backed by the size of the US economy; it is backed by faith in the rule of law, the sanctity of contracts, an independent central bank, and the stability of democratic governance. Structural advantages—network effects, deep capital markets, and the dollar’s centrality to global payments—make its dominance resilient. But these foundations are only as stable as the legal, political, and institutional frameworks behind them. If that foundation weakens, then no number of tariffs or volume of stablecoins can preserve the dollar’s central role in the global system.

For now, there is no viable alternative to the dollar. But the Trump administration’s competing and fractured view on the dollar’s various roles may cause enduring harm to its long-term dominance.

Alisha Chhangani is an assistant director at the Atlantic Council’s GeoEconomics Center.

Israel Rosales contributed to the data visualization in this article.

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Donovan and Nikoladze cited by Kitco News on the reasons behind the surge in gold demand

ntursun — Mon, 26 May 2025 15:16:17 +0000

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Lichfield quoted in Les Echoes on potential developments in the Russia-Ukraine war in light of Trump’s change in rhetoric

ntursun — Mon, 26 May 2025 14:46:48 +0000

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What Trump’s new executive orders mean for the US nuclear energy industry

Jennifer T. Gordon — Sun, 25 May 2025 15:10:02 +0000

On Friday, US President Donald Trump signed four executive orders related to the rapid deployment of next-generation nuclear technologies in the United States. Overall, the orders represent a policy outlook on nuclear energy that has remained relatively consistent for nearly a decade. However, there are a few key breaks from precedent, especially in that the orders encourage commercial nuclear fuel recycling and decrease the independence of the Nuclear Regulatory Commission (NRC).

New reactors and national security

“Deploying Nuclear Reactor Technologies for National Security” is the most comprehensive of the four. It aims to speed the deployment of advanced reactors at Department of Defense facilities, in order to provide power for military installations and for operational energy. The executive order notes that the regulatory pathway will be through the United States Army and ambitiously calls for one reactor to be operational at a “domestic military base or installation no later than September 30, 2028.” It also calls for the deployment of advanced reactors at Department of Energy facilities, and it directs the US secretary of energy to designate artificial intelligence (AI) data centers that “are located at or operated in coordination with Department of Energy facilities . . . as critical defense facilities, where appropriate.”

In a departure from what has been the US government’s de facto stance toward commercial nuclear fuel recycling in the United States (assuming that it refers to commercial reactors), this order calls for the US secretary of energy to “identify all useful uranium and plutonium material within the Department of Energy’s inventories that may be recycled or processed into nuclear fuel for reactors in the United States.” There are currently no domestic commercial fuel recycling facilities in the United States, and the partnership outlined in this order between the Department of Energy and industry will likely be a boon to US reactor companies looking to use recycled fuel, especially as competitor countries stand up their own recycling capabilities. The order then goes on to direct the Department of Energy to provide high assay low-enriched uranium (HALEU) for commercial reactors that are authorized to deploy at the department’s sites. This will add to the demand signal for HALEU fuel and strengthen the domestic nuclear fuel supply chain.

Importantly, the order excludes the Department of Defense and the Department of Energy from the National Environmental Policy Act (NEPA) for construction of advanced reactors on some federal sites. It also notes that there may be additional categories that will be excluded from adhering to NEPA. The Department of the Interior already has a number of categorical exclusions for NEPA (for example, for geothermal exploration) but does not yet have any listed for nuclear reactors. The rest of this order touches on interagency coordination, civil nuclear exports, and employee clearances.

Changes to the NRC

At first glance, the next executive order, “Ordering the Reform of the Nuclear Regulatory Commission,” appears more measured than news reports had predicted over the past few weeks. It mentions a reduction in force for the commission, but it notes that “certain functions may increase in size consistent with the policies in this order, including those devoted to new reactor licensing.” At the same time, the order directs the NRC to finalize a revision of its regulations and guidance documents, and this revision must be concluded within eighteen months. It also directs an eighteen-month deadline for final decisions on construction and operation applications for any type of nuclear reactor. It is difficult to see how an understaffed agency will be able to complete more work in less time.

Although the new executive order does not explicitly mention White House oversight of the NRC, it does note the involvement of the Office of Management and Budget (OMB) and especially the Department of Government Efficiency (DOGE) in reorganizing the NRC. These measures, combined with the February 18 executive order “Ensuring Accountability for All Agencies”—which already decreased the independence of the NRC—could likely reduce the NRC’s workforce and lessen its standing among global nuclear regulatory authorities. This could happen even as the White House directs it to hasten its regulatory processes to expedite the licensing and deployment of next-generation nuclear technologies.

The question of new testing

A third order, “Reforming Nuclear Reactor Testing at the Department of Energy,” directs the national laboratory system to reform its process for ensuring that reactor developers are able to test their reactors quickly and effectively. However, the document does not explicitly direct the national laboratory system to construct new test reactor facilities. The first Trump administration signed into law the Nuclear Energy Innovation and Capabilities Act in 2017, which addressed the need for a fast-neutron test reactor and resulted in the start of the Versatile Test Reactor (VTR) project at Idaho National Laboratory.* But Congress later defunded this project. Although the new order does not explicitly call for the construction of a new testing facility, its direction to increase capacity for testing new reactors may lead Congress to look again at the VTR project.

The broader nuclear base

Finally, “Reinvigorating the Nuclear Industrial Base” addresses well-trodden issues, such as workforce development and the restarting, completion, uprating, or construction of nuclear power plants. It also calls for a new report to address the fuel cycle, especially regarding high-level waste management, fuel recycling (including commercial recycling), isotopes, and enrichment and conversion. This new report would follow the Nuclear Fuel Working Group’s 2020 report “Strategy to Restore American Nuclear Energy Leadership,” which focused on the front-end of the fuel cycle as well as civil nuclear exports. The order also notes that the US secretary of energy shall update the department’s “excess uranium management policy to align with the policy objectives of this order and the Nuclear Fuel Security Act” of 2023, which was signed into law by US President Joe Biden.

Based on these new executive orders and earlier announcements, the second Trump administration’s policies toward nuclear energy seem largely aligned with the policies of the Biden administration and the first Trump administration. The major shift that is reflected in this set of executive orders is the desire to conduct a reduction in force across government agencies and to weaken the independence of regulatory authorities, including the NRC. In the new orders, the Trump administration has articulated ambitious goals for rapid deployment of next-generation nuclear technologies; however, reducing personnel and funding for the NRC and the Department of Energy, along with weakening the NRC’s independence and global credibility, will make it challenging to realize the full potential of the US nuclear energy industry.

Jennifer T. Gordon is the director of the Nuclear Energy Policy Initiative and the Daniel B. Poneman chair for nuclear energy policy at the Atlantic Council’s Global Energy Center.

Note: The Idaho National Laboratory is a donor to the Atlantic Council’s Nuclear Energy Policy Initiative.

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Can the EU leverage economic pressure to broker a Gaza cease-fire?

Lize de Kruijf — Fri, 23 May 2025 13:05:12 +0000

The ongoing Israel-Gaza war has evolved into a highly politically complex and dire humanitarian conflict. With thousands of civilian casualties reported, the majority in Gaza, international calls for a cease-fire are intensifying. Efforts to broker a resolution have largely centered on US-led diplomacy, with most recent efforts including White House envoy Steve Witkoff’s new proposal aimed at securing a cease-fire and hostage release. Yet negotiations remain deadlocked following the collapse of a truce in March over Israeli demands for Hamas to disarm and for its leaders to go into exile. Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani, a key mediator, described the talks in Doha as hampered by “fundamental differences between parties.”

As diplomatic efforts falter, attention is turning to economic statecraft—the strategic use of trade and economic leverage to influence state behavior. The European Union (EU) and United States are Israel’s largest and second-largest trading partners, and any economic pressure they apply could have severe consequences for Israel’s economy. Already facing tariffs from the US, Israel may soon encounter additional pressure from the EU, which is considering its own economic measures.

In Europe, growing humanitarian concerns about the scale of destruction in Gaza have prompted calls to reevaluate the best strategy to manage the conflict. Notably, the humanitarian blockade and high-profile incidents, such as the deaths of fifteen aid workers during an Israeli special forces operation in Rafah—an event Israel attributed to “professional failures”—have intensified pressure for a more impactful response. There is a growing sentiment that new tools may be needed to influence the trajectory of the conflict.

Recently, Dutch Foreign Minister Casper Veldkamp called on the EU to investigate Israel’s compliance with Article 2 of the EU-Israel Association Agreement, which ties trade relations to respect for human rights and democratic principles. Veldkamp argued that, “The blockade violates international humanitarian law. You have the right to defend yourself, but the proportions now seem completely lost. We are drawing a line in the sand.”

Although Veldkamp faced domestic political backlash for his move, support across Europe appears to be growing. On May 20, the governments of the United Kingdom (UK), France, and Canada issued a joint statement urging Israel to halt its renewed offensive in Gaza. While reaffirming Israel’s right to defend itself, the statement described the current escalation as “wholly disproportionate.” In tandem, the UK suspended talks on expanding a free-trade agreement with Israel and announced additional sanctions on extremist Israeli settlers in the West Bank.

Crucially, the majority of EU foreign ministers backed the Dutch proposal to review the EU-Israel Association Agreement. Their choice signals a potential turning point: the first serious momentum behind reevaluating a trade framework that underpins diplomatic and economic ties. Should the EU find Israel in breach of Article 2, it could suspend parts of the agreement or enact targeted economic penalties.

The implications are substantial. The EU is Israel’s largest trading partner, accounting for 32 percent of Israel’s total trade in goods as of 2024, amounting to $48.25 billion. Services trade added another $29 billion, while bilateral foreign direct investment stands at over $134.8 billion. This underscores a deeply integrated economic relationship.

Despite the ongoing conflict, Israel has so far managed to maintain some level of macroeconomic stability. Debt levels are within sustainable bounds, credit worthiness remains intact, and the economy has continued to grow (albeit slowly). However, the economic toll of war is has been straining certain sectors disproportionately. The tech industry continues to grow, partially due to defense contracts, but construction has largely halted, agricultural sectors have lost critical labor, and tourism has plummeted. While gross domestic product growth has not entirely contracted, it slowed to around 1 percent in 2024. This was a significant drop from 6.5 percent in 2022, with the deceleration primarily driven by reduced exports. In response, the Israeli government has implemented budget adjustments that include cuts to domestic welfare programs—historically an area of generous spending—as it works to offset growing wartime expenditures.

Compounding these challenges, Prime Minister Netanyahu recently announced plans to eliminate Israel’s trade surplus with the United States—its second-largest trading partner—which amounted to $7.4 billion in 2024. While the move is framed as a gesture toward economic rebalancing and strengthening bilateral ties, it may carry domestic economic consequences. Efforts to narrow this surplus—especially in a climate of shifting global trade patterns and economic uncertainty—could dampen Israeli export growth and further expose the economy to external shocks.

The potential suspension or downgrading of EU-Israel trade ties would add significant pressure. Given the scale and interdependence of EU-Israel trade, such a move could affect Israel’s economic resilience and, by extension, its ability to sustain long-term military operations in Gaza.

While no approach guarantees a swift end to such a deeply entrenched conflict, economic statecraft presents a credible alternative to stalled diplomatic channels. Unlike traditional negotiations, which often falter due to uncompromising demands or ideological impasses, economic levers could alter the cost-benefit calculus of continued hostilities. A concerted and coordinated effort by major economic partners could incentivize compromise, creating a window for diplomacy to succeed.

The EU’s evolving posture may represent a strategic recalibration—one that leverages economic influence to encourage de-escalation while remaining anchored in international law and human rights norms. Whether this shift can yield tangible results remains to be seen, but it marks an important recognition: that intractable conflicts may require not just moral outrage or political pressure, but a strategic application of economic power.

Lize de Kruijf is a project assistant at the Atlantic Council’s Economic Statecraft Initiative.

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The post Can the EU leverage economic pressure to broker a Gaza cease-fire? appeared first on Atlantic Council.

Putin aims to destroy Ukraine and has zero interest in a compromise peace

Peter Dickinson — Wed, 21 May 2025 20:51:25 +0000

US President Donald Trump came away from Monday’s phone call with Vladimir Putin expressing confidence that the Russian leader wants peace, but few others appear to share this optimism. Many senior Western figures were reportedly unimpressed by Putin’s vague references to a “memorandum on a possible peace agreement” and believe he is still engaging in stalling tactics. “Putin is clearly playing for time. Unfortunately we have to say Putin is not really interested in peace,” commented German Defense Minister Boris Pistorius.

Trump’s latest call to Putin also prompted fresh questions over the US leader’s handling of the faltering peace process. Britain’s The Economist pondered Trump’s “strange reluctance to get tough with Putin,” while Washington Post columnist Max Boot led a chorus of voices accusing the Kremlin strongman of manipulating his American counterpart. “While Trump’s lack of success in peacemaking might not doom Ukraine, it certainly dispels the president’s pretensions to being a world-class deal maker,” argued Boot. “Putin is playing him for a fool, and Trump doesn’t even seem to realize it.”

The mood was very different in Moscow, with the Kremlin-controlled media trumpeting the call as a significant success for Russian diplomacy. In his daily press review, BBC correspondent Steve Rosenberg reported that many of Russia’s leading news outlets were “crowing” over the contents of the Trump-Putin conversation. “It looks like Russia has won the latest round of global poker,” commented one newspaper. “Donald Trump’s stance couldn’t be more advantageous to Moscow,” observed another.

It is no surprise to see mounting unease in Western capitals over the US push to end the Russia-Ukraine War. Since Trump first initiated peace talks in February, Ukraine has agreed to an unconditional ceasefire and signaled its readiness to make major territorial concessions. In contrast, Russia has consistently rejected calls for a ceasefire while proposing new conditions of its own and creating various obstacles to any meaningful progress. At one point, Putin even claimed that Ukrainian President Volodymyr Zelenskyy lacked the legitimacy to sign off on a peace deal and suggested placing Ukraine under United Nations administration.

Recent diplomatic developments have further underlined Russia’s reluctance to end the war. When the leaders of Britain, France, Germany, and Poland delivered a ceasefire ultimatum to Putin in early May, the Russian ruler responded by calling for the first bilateral talks with Ukraine since spring 2022. However, Putin then chose not to attend the bilateral meeting in Istanbul that he himself had proposed, preferring instead to send a low-level delegation. This was widely interpreted as a “slap in the face” for Ukraine and the collective West.

Putin’s representatives during last week’s negotiations in Istanbul sought to emphasize Moscow’s unwillingness to compromise, calling on Kyiv to officially cede four entire provinces to Russia including a number of major Ukrainian cities that the Kremlin has so far been unable to seize militarily. If Ukraine refuses to do so, they warned, Russia will increase its demands to include six Ukrainian provinces. “We fought Sweden for twenty-one years. How long are you ready to fight?” the head of the Russian delegation reportedly commented, in reference to the eighteenth century Great Northern War. “Maybe some of those sitting here at this table will lose more of their loved ones. Russia is prepared to fight forever.”

While Putin rarely makes such thinly veiled threats, he continues to insist that any settlement must focus on eliminating what he refers to as the “root causes” of the war. This is generally understood to mean Ukraine’s international neutrality and disarmament, along with the reestablishment of Russia’s former imperial dominance in every sphere of Ukrainian public life, from language and education to national memory and religion. Any Ukrainian leader who agreed to such terms would be signing their country’s death sentence.

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Trump’s efforts to talk up the prospects of a negotiated peace and his attempts to entice Putin with commercial incentives suggest a fundamentally flawed understanding of Russia’s war aims in Ukraine. The US leader seems to sincerely believe that Putin can be persuaded to end his invasion by the promise of limited territorial gains and future economic prosperity. In reality, nothing could be further from the truth.

Putin is not fighting for Ukrainian land; he is fighting for Ukraine itself. He views the current war in the broadest of possible historical terms and sees the destruction of the Ukrainian state as a sacred mission that will define his entire reign and shape Russia’s future for decades to come. It is ludicrous to suggest that he could be swayed from this messianic vision by mundane talk of trade deals and sanctions relief.

Putin’s thirst for historical revenge can be traced back to his traumatic experience during the collapse of the Soviet Union. While Putin did not personally face the grinding poverty that millions of his compatriots endured in the 1990s, Russia’s national fall from grace nevertheless made a profound impression on him. Ever since, he has been haunted by fears of a further imperial collapse and driven by a determination to reverse the verdict of 1991. This has fueled his revanchist brand of Russian nationalism, and helps to explain his otherwise inexplicable obsession with Ukraine.

Throughout his reign, Putin has made no secret of his bitter resentment over the breakup of the USSR, which he has called “the greatest geopolitical disaster of the 20th century” and “the disintegration of historical Russia.” Crucially, he views Ukraine as a central and indivisible part of this fabled “historical Russia.” Indeed, the Ukrainian capital Kyiv occupies pride of place in his imperial mythology as “the mother of all Russian cities.”

To Putin, the emergence of an independent Ukraine is a symbol of Russia’s post-Soviet humiliation and a potential catalyst for the next stage in his country’s retreat from empire. According to this twisted imperial logic, if a province as quintessentially Russian as Ukraine is allowed to break away and establish itself as a modern European democracy, the entire Russian Federation will be in danger of disintegrating. Likewise, Putin is convinced that if Ukraine can be returned to its rightful place within Greater Russia, the injustice of 1991 will be undone and Russia will resume its position among the world’s Great Powers.

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Putin has been attempting to force Ukraine back into the Kremlin orbit ever since the 2004 Orange Revolution, which he personally helped spark by clumsily intervening in Ukraine’s presidential election. The violence of these efforts has escalated in direct proportion to the strengthening of modern Ukraine’s own national identity. At first, Putin pursued his imperial goals in Ukraine through control of the country’s political, business, cultural, and religious elites. When this failed, he ordered the 2014 invasion of Crimea and eastern Ukraine. Once it became apparent that even this partial occupation of the country would not derail Ukraine’s national consolidation, Putin made the fateful decision to launch the full-scale invasion of February 2022.

The rising tide of Russian aggression against Ukraine has been accompanied by ever more extreme anti-Ukrainian rhetoric. For years, Putin has publicly insisted that Ukrainians are Russians (“one people”). On the eve of the current invasion, he published an entire essay denying Ukraine’s right to exist. Putin and other senior Kremlin officials have repeatedly labeled Ukraine as an artificial country built on stolen Russian land, a Nazi invention, and an intolerable “anti-Russia” created for the purpose of undermining Russia itself. Ukrainians who insist on their own national identity are typically portrayed as traitors undeserving of sympathy or mercy.

This dehumanizing propaganda has laid the ideological foundations for the crimes that are currently being committed by the occupying Russian army in Ukraine. Wherever the Kremlin is able to establish control, Ukrainian patriots and community leaders are routinely detained and incarcerated in a vast network of prisons and camps. While the number of victims remains unknown, UN officials have concluded that the large scale and systematic nature of the disappearances qualifies as a crime against humanity. Those who remain are subjected to a reign of terror and forced to accept Russian citizenship while submitting their children to indoctrination. Meanwhile, all traces of Ukrainian national identity, culture, and statehood are being ruthlessly erased. Many experts believe these actions qualify as genocide.

Putin is understandably happy to exploit the Trump administration’s enthusiasm for peace talks. This allows him to buy time, divide the West, and reduce the flow of weapons to Ukraine. But it is already abundantly clear that he has no real interest in ending his invasion. Indeed, he dare not stop. Any peace deal that secures Ukraine’s survival as an independent state would be viewed in Moscow as a major defeat. Rather than taking his place alongside Stalin, Peter the Great, and Ivan the Terrible as one of Russia’s greatest rulers, Putin would be remembered in Russian history as the man who lost Ukraine. He would rather fight on indefinitely than accept such a fate.

Trump deserves considerable credit for seizing the initiative and attempting to end the war between Russia and Ukraine. At the same time, his current approach is obviously not working. The time has now come to stop seeking compromises with the Kremlin and start speaking to Putin in the language of strength. This means tightening sanctions on Russia and targeting the many countries that continue to fuel Putin’s war machine. Above all, it means significantly increasing military aid to Kyiv and boosting Ukraine’s ability to defeat Russia on the battlefield. Putin has staked his entire reign on the destruction of Ukraine. He will not back down unless forced to do so. Peace will only come when Ukraine is too strong to be subjugated.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Although the details of Golden Dome remain unclear, the Trump administration should seek to hold a revived missile defense dialogue with US partners and allies across Europe, Asia, and the Middle East. Such a dialogue would serve the Trump administration’s agenda in its strategic, political, and industrial dimensions. However, the success of this dialogue and effective missile defense collaboration will require overcoming technical military challenges, as well as carefully addressing the sensitivities of regional partners. In particular, this means being careful not to overstate Golden Dome’s role in the United States’ pledges of extended deterrence to its allies.

Can US missile defense help the Pentagon prioritize the Indo-Pacific?

Renewing US investment in missile defense could be seen by the current administration as a way to help reassure allies from the threat of potential adversaries such as Russia, China, North Korea, and Iran while mitigating the need for a massive deployment of US troops on the ground. This logic is not new. During the Obama administration, US officials conveyed to NATO allies that deploying missile defense systems in Europe would compensate for the reduction in the number of army brigades deployed on the continent. The origins of Poland’s Aegis Ashore system in Redzikowo, officially transferred to NATO in November 2024, date back to the decisions taken by the Obama administration.

Given the Trump administration’s desire to reduce the US military footprint worldwide and focus on strategic competition with China, missile defense could be a convenient way to maintain global influence while lowering overseas troop commitments. From the outset, missile defense has always involved advanced technologies, demanding years of research and development that only a few countries can afford. If Golden Dome achieves its goals, it will shift resources to develop space-based missile defense systems. This could disrupt the current market for missile defense, which is made up mainly of ground and naval-based sensors and interceptors. Today, none of the US allies and partners in Europe, the Middle East, or Asia has a space industry that could credibly invest in this new domain. Consequently, it is likely that strategic cooperation on Golden Dome means allies procuring future US missile defense systems and added incentives for co-production. A few regional partners are engaged in the co-production of US missile defense systems, such as Japan* for the surface-to-air SM-3 and PAC-3 missiles. Last April, Japan proposed the co-production of SM-6 new-generation long-range ship-to-air missiles. Israel may be interested in similar collaborations, as its main missile defense systems (Iron Dome, Arrow, David’s Sling) already rely on co-development and co-production with the United States.

For a broader allied collaboration on missile defense production to take shape, however, the United States will need to navigate several military and diplomatic difficulties in dialogues with its partners.

Different allies, different reassurance needs

First, US partners in Europe, the Middle East, and the Indo-Pacific face different threats from their respective adversaries’ missile capabilities. Golden Dome is conceived to address global competitors launching an intercontinental ballistic missile at US territory. It is planned to include space-based interceptors, which could prove effective in defending allies against adversaries using long-range ballistic missiles—for instance, if Russia were to launch a strike against Europe.

However, Europeans are also worried about shorter-range cruise missiles and drone campaigns such as the one launched by Russia in Ukraine, which requires different systems to address. In light of Ukraine’s experience, Europeans started addressing their capability gaps to protect against a full spectrum of air threats (cruise missiles, ballistic and hypersonic missiles, aircraft, and unmanned aircraft sysems). Meanwhile, the Gulf states and Israel face the threat from rockets and missiles fired by Iran or its proxies.

The ability of missile defense to reassure local partners varies according to the severity of the threat. For instance, in the extreme scenario of a total US withdrawal of troops from South Korea, it is unlikely that Seoul would view US missile defense as a credible substitute for US boots on the ground as a defense against North Korea. Lastly, allies and partners are unlikely to receive the same amount of attention. The United States is prioritizing the Indo-Pacific theater, and Golden Dome is intended as a technological breakthrough in the space domain—an area where China is rapidly advancing. This will lead European and Gulf states to fear being left out of any new missile defense arrangement.

Golden Dome and Alliance politics

The second challenge facing Washington lies in the disparities in the regional security architectures in Europe, Asia, and the Middle East. In the past two decades, the United States has only succeeded in creating a truly regional framework for missile defense in Europe.

In the Middle East and Asia, most US missile defense cooperation is bilateral. The lack of regional integration often results from distrust among local partners. It is also caused by the reluctance of countries in these regions to tie their national security prerogatives to an intergovernmental mechanism heavily dependent on Washington. This constrains the United States’ ability to apply missile defense cooperation lessons from NATO elsewhere.

In the Middle East and Asia, Washington must build on its existing cooperation frameworks and should consider exploring new formats. The August 2023 Camp David Summit opened up the development of a trilateral security cooperation framework with Japan and South Korea, with more consultation, information-sharing, and cooperation designed to accompany the integration of Indo-Pacific missile defense architecture. The three countries have since implemented real-time information sharing about North Korean missile launches. Additionally, missile defense could become an item on the agenda of the Quadrilateral Security Dialogue, or between NATO and its four Asian partners—Japan, South Korea, Australia, and New Zealand.

Washington will also have to accommodate the different industrial interests of its partners. Today, US allies have domestic defense industries with their own missile defense programs to protect. In Asia, countries such as South Korea and Japan have produced their own missile defense systems. Even though they will keep procuring US products, their governments will carefully protect their industrial bases. In Europe, the Sky Shield initiative, launched in 2022 by twenty-four participating countries, will rely on US Patriot and Israeli Arrow batteries. France fiercely opposed the initiative in the name of strategic autonomy, to no avail.

However, Sky Shield may not reflect the current state of US-European relations. Golden Dome emerges amid a transatlantic crisis in which Europeans are trying to become more self-sufficient in their defense. Their desire for strategic autonomy and the need to protect the European defense industrial base mean they will likely pursue their own version of missile defense. In this case, European governments must make clear the areas where they intend to design and produce their own systems, including investments in the space domain.

Differences in political priorities and strategic culture are inevitable, but consultations should identify the space for common interests between the United States and its allies. The case of Israel offers positive lessons on cooperation in missile defense. The US and Israeli militaries have very few things in common when it comes to threat assessment, force structure, and doctrine, not to mention Israel’s desire to protect its national defense industry. But both countries—and their defense industries—have found ways to develop missile defense technologies to mutual benefit.

Ultimately, the success of a renewed missile defense dialogue will boil down to how much cooperation on the Golden Dome project can serve the security interests of US partners. While the deterrent value of missile defense remains limited, Golden Dome could play a complementary role. With nuclear and missile threats becoming ever more serious, the question of how to defend against such attacks has never been more salient in allied capitals, be they in Europe, the Middle East, or the Indo-Pacific.

Léonie Allard is a visiting fellow at the Atlantic Council’s Europe Center, previously serving at the French Ministry of Armed Forces.

Jean-Loup Samaan is a senior research fellow at the Middle East Institute of the National University of Singapore, as well as a nonresident senior fellow at the Atlantic Council’s Scowcroft Middle East Security Initiative.

Correction: This article was updated on May 29, 2025 to reflect the fact that multiple regional partners engage in co-production of US missile defense systems. A previous version of this article incorrectly stated that Japan was the only country to do so.

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Kumar quoted by AFP on how Trump is shaping US ties with G7 countries

irosales — Wed, 21 May 2025 17:30:19 +0000

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Kumar quoted in Hindustan Times on the role of US trade negotiations in calming G7 uncertainty

ntursun — Wed, 21 May 2025 15:10:21 +0000

Senior Fellow, Global Energy Center

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Replace the Inflation Reduction Act with FUEL-AI

Joseph Webster — Wed, 21 May 2025 13:00:00 +0000

The race to artificial general intelligence (AGI) could be the most consequential technological competition in history. Some American technologists see initial AGI leadership as self-reinforcing, granting early adopters lasting advantages. By contrast, many Chinese and (increasingly) US experts believe broad, cross-sectoral artificial intelligence (AI) adoption will shape long-term outcomes. This requires an all-of-the-above energy approach: natural gas, coal, and advanced energy technologies like solar, batteries, advanced nuclear, and wind. Regardless of whether the AI race proves to be a sprint or a marathon, however, US policymakers face difficult, complicated choices resourcing AI and its energy needs.

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As AI and data centers expand demand for power, natural gas and coal alone can’t meet future needs, while current solar and battery supply chains carry security risks. To resolve these challenges, the United States should expand domestic manufacturing of advanced energy technologies while maintaining natural gas—and, possibly, coal—production in the near term.

To win the AI race against the Chinese government, US energy policy must shift from a climate-first lens to one that prioritizes national security and securing a growing supply of power. To do so, Congress should pass the Future Usable Energy Legislation—Artificial Intelligence (FUEL-AI) Act, which would prioritize key national security interests such as providing power for key AI hubs like Northern Virginia’s Data Center Alley, streamlining permitting, modernizing transmission and the grid, supporting domestic energy manufacturing, and incentivizing energy efficiency technologies.

Energy and the race for AI supremacy

Whether the AI race is a sprint or a marathon, both paths demand massive amounts of new electricity. Though energy is a small share of AI costs, it’s a critical operational constraint: data centers can’t run without power.

While acknowledging profound uncertainties, top forecasts project data centers and AI-driven electricity demand could reach 4.6–9.1 percent of total US consumption by 2030, up from 4 percent today. If the sprint scenario holds, only fast-to-deploy sources like solar and batteries can keep pace with demand.

Even in the marathon scenario of broad AI adoption, the United States will likely need large amounts of new electricity—fast. Relying on natural gas and coal alone to power AI won’t work. Natural gas turbine production is constrained, and no major coal plant has opened since 2013. Supply chain constraints, profound grassroots opposition, and investor reluctance make new coal capacity unlikely.

Even though gas and coal will play a major role in powering US AI, a gas and coal-only strategy won’t succeed. In the worst-case scenario, insufficient electricity generation could create shortages and necessitate persistent brownouts that were last seen in the United States in the 1970s. Even if those dire conditions don’t materialize, however, higher domestic natural gas prices would reduce the competitiveness of US liquefied natural gas and pipeline gas exports. But the impact of a natural gas and coal-only approach would be felt most acutely by consumers, since residential electricity prices are already outpacing inflation.

Rural Americans would be hit hardest by rising electricity costs and poor reliability. They spend 4.4 percent of household income on energy—versus 3.1 percent in metropolitan areas—and face more outages.

Fueling AI with a summer peaking resource

In both AI sprint and marathon scenarios, solar and battery storage are highly suitable for meeting rising demand due to their speed, low cost, scalability, and geographic flexibility.

Solar is highly capable for matching data centers’ peak summer demand, especially in warm-weather markets. In Northern Virginia, home to 13 percent of all reported data center operational capacity globally, regional solar generation typically peaks in the summer—matching peaks for both commercial data centers’ cooling needs and residential consumers’ electricity consumption.

Solar’s flexibility makes it ideal for data center clusters, as it requires minimal infrastructure and no resupply. China appears to recognize solar power’s strategic value, concentrating rooftop solar in coastal provinces and deploying at least 3,000 megawatts of capacity at the dual-use Shigatse Peace Airport near the Indian border.

Strengthening solar cybersecurity

China’s dominance of solar supply chains poses security risks, especially given solar power’s importance for AI. Reports of Chinese-made inverters with unexplained communication equipment underline the dangers, as such devices could destabilize the grid—a risk the US Department of Energy has long flagged.

However, inverter threats are just one among many. The Chinese government and other adversaries already have broad ability to target US and partner infrastructure. Cybercriminals operating in Russia attacked Colonial Pipeline, while China has been linked to Mumbai’s 2021 blackout, malware found in US power and water systems, a still-unexplained transformer interdiction in Houston, and crypto mines operating near US military sites. Indeed, Chinese firms are estimated to own one-third of US crypto mining infrastructure and supply the vast majority of its machinery. Furthermore, ERCOT, the operator for most of the Texas grid, warns these high-load operations can worsen grid events, turning low-voltage issues into frequency control problems.

China’s role in software and hardware supply chains poses sabotage risks. Just as Russia weaponized energy in Ukraine, Beijing could exploit electricity systems in a Taiwan conflict. The United States should assess the inverter threat by reviewing installed units, ramping up inspections of Chinese-connected devices, and conducting other risk mitigation and software hygiene measures.

Instead of fruitlessly seeking to eliminate vulnerabilities and establish perfect security across pipelines, crypto mines, and inverters, however, the United States must rely on deterrence, threatening proportionate responses if China conducts electricity sector sabotage.

Replace the Inflation Reduction Act with FUEL-AI

The AI race with China carries immense stakes and uncertainty. To compete, the United States will need vast new electricity generation—regardless of whether the race is a sprint or a marathon. This requires an all-of-the-above energy approach: natural gas, coal, and advanced technologies like solar, batteries, advanced nuclear, and wind.

The United States should replace the Inflation Reduction Act with FUEL-AI, shifting focus from climate to national security. FUEL-AI would make it easier to build new energy infrastructure by streamlining permitting and modernizing transmission. Additionally, it would support domestic energy manufacturing for key national security technologies, such as transformers and advanced batteries; and prioritize power demand and supply measures at AI hubs like Northern Virginia’s Data Center Alley.

These reforms could attract bipartisan backing. Both parties oppose the Chinese government and support strategic technologies like nuclear power and transformers, while US advanced energy supply chains support hundreds of thousands of jobs and hundreds of billions of dollars in investment. Reorienting energy policy toward AI competitiveness can unite national security and economic priorities without abandoning the advanced energy technologies of the future.

Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and Indo-Pacific Security Initiative, and editor of the independent China-Russia Report. This article reflects his own personal opinion.

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To build tomorrow’s power grid, the United States should look to geothermal energy

Sudeep Kanungo, Will LaRivee — Wed, 21 May 2025 11:58:52 +0000

The rapid expansion of artificial intelligence (AI) and the surge in cloud-based data centers are creating an urgent need for proportional growth in electricity.

Total US data center energy use is estimated to reach 325 to 580 terawatt-hours, or 6.7 to 12 percent of the total US energy demand, by 2028. To date, much of the supply has been sourced from traditional, carbon-heavy sources like coal and natural gas.

However, meeting the additional electricity demand while ensuring that energy grids are resilient and sustainable in the long term will require diversifying energy sources. Geothermal energy offers a promising solution for stable, reliable baseload power. But to unlock its full potential, the US government must take action to reduce the barriers to entry for industry.

Unearthed potential

Geothermal energy has numerous advantages over other renewable sources. Most immediately, it is a reliable, constant source of power as it relies on heat sources unaffected by atmospheric changes. In addition, it has a limited land footprint (per unit of power generated), minimal workforce requirements, and flexible generating capacity. Geothermal’s advantages make it an ideal complement to intermittent sources of energy such as solar and wind. With its load-following capacity—the ability to adjust power output depending on demand—geothermal can stabilize the grid, ensuring continuous power. Its resilience to weather-related disruptions, due to being located underground, further strengthens its role in maintaining grid stability amid climate volatility.

Despite providing reliable power generation for over a century, geothermal sources currently account for just 0.4 percent of US electricity generation. Naturally occurring or conventional geothermal systems are geographically limited, primarily found in the western United States. But next-generation emerging technologies may enable access to new sources in other locations. Conventional geothermal systems rely on heat sources, water, and natural fractures. But next-generation technologies, such as enhanced geothermal systems and closed-loop systems, use engineered fractures or closed wellbore loops to circulate fluids for energy capture where fractures do not naturally exist. These innovative approaches can unlock up to ninety gigawatts of clean, reliable power by 2050, dramatically expanding geothermal energy’s role in the US power grid.

Incremental advancements have also enhanced the efficiency of current geothermal technologies. For instance, drilling speeds at the US Department of Energy’s Frontier Observatory for Research in Geothermal Energy (FORGE) site have improved by over 500 percent in just three years, substantially cutting well-development costs. Such advancements bring geothermal closer to being cost competitive, with future projects potentially lowering operating costs by 17 to 30 percent by 2030.

Widely supported

Geothermal technology currently enjoys bipartisan Congressional support. The House of Representatives passed HR 6474, a bill that would amend the Energy Policy Act of 2005 to speed up geothermal development by offering categorical exclusions for environmental reviews in areas with prior drilling. The bipartisan bill—sponsored by US representatives Michelle Steele (R-CA) and Susie Lee (D-NV)—has been referred to the Senate Committee on Energy and Natural Resources.

Another bill that has been introduced in support of geothermal development is the HEATS Act, which would exempt certain geothermal activities on state and private lands (excluding American Indian lands) from needing federal drilling permits, provided the operator has a state permit. Additionally, the Supercritical Geothermal Research and Development Act, introduced in November, seeks to advance research into geothermal systems that use water at temperatures and pressures above its critical point (around 374 degrees Celsius and 221 bar) to increase its energy generation potential. Although neither bill has passed, they highlight the growing interest in geothermal technologies in strengthening US energy independence.

Furthermore, there are signs of the US administration’s support for geothermal, with Energy Secretary Chris Wright having pointed to geothermal as an important tool for US energy security and job creation.

Equally important is the tech sector’s growing engagement with geothermal energy. Google recently partnered with NV Energy, a major Nevada utility company, to develop what it calls a “Clean Transition Tariff.” Under the model, NV Energy would enter into a power purchase agreement to acquire energy from a geothermal plant operated by Houston-based Fervo and sell it to Google at a fixed rate (that includes the “tariff,” or cost of the partnership). This model could be adapted by other data processing companies to lower operating costs and reduce carbon footprints.

But barriers to entry remain

Despite its immense potential, geothermal energy faces significant hurdles that slow its widespread adoption. A major challenge is the substantial upfront investment required for geothermal projects. Drilling is a costly process, involving multiple stages—exploration, confirmation, and development—each demanding significant capital.

Another challenge for the geothermal industry is the lengthy and unpredictable project development process (which takes an average of seven years), driven by strict federal permitting regulations. Unlike oil and gas, which benefit from categorical exclusions for exploration, geothermal developers must undergo full environmental reviews at multiple stages, including both exploration and development.

How to unlock US geothermal potential

To fully realize the potential of a promising US geothermal energy market, the US government must take coordinated, concerted action to lift the nascent industry over those initial barriers to entry:

Empower program offices: To address the financial barrier to entry, the Department of Energy released, in its Commercial Liftoff Report, a two-phase plan for the full-scale deployment of next-generation geothermal approaches. The first phase focuses on building investor confidence in the market viability of geothermal, with an estimated investment of $20 billion to $25 billion. The second phase focuses on broadening geothermal’s footprint across the United States, requiring over $200 billion in investment. Initial investment remains a key hurdle, so the administration must empower dedicated program offices, such as the Department of Energy’s Geothermal Technologies Office and Loan Programs Office. Greater autonomy in these organizations can help de-risk projects, foster innovation, and reduce high upfront costs by addressing financial, technological, and resource-related challenges.

Streamline the permitting process: With strong bipartisan support for geothermal energy, Congress should pass the HEATS Act to accelerate the geothermal permitting process. The government should aim to enable exploration, drilling, and resource confirmation within twelve to eighteen months of a company starting the permitting process.

Expand federal research, development, and demonstration grants: To achieve breakthroughs in next-generation geothermal, continuous research, development, and demonstration are crucial. Congress should pass the Supercritical Geothermal Research and Development Act, currently before the House Committee on Natural Resources, to fuel innovation and development for this emerging technology.

Build a robust geothermal innovation ecosystem: To unlock the full potential of next-generation geothermal, the US Department of Energy should lead the creation of a coordinated innovation ecosystem that brings together federal and state agencies, Congress, project developers, financiers, researchers, and communities. Such an ecosystem is essential to align policy, funding, and deployment priorities; streamline permitting; and build public trust. A Geothermal Innovation Council, led by the Department of Energy and supported by dedicated congressional funding, could formalize cross-sector collaboration, accelerate project pipelines, and ensure that geothermal development is equitable, efficient, and scalable.

Sudeep Kanungo is a nonresident senior fellow at the Atlantic Council’s GeoTech Center.

William Larivee is a resident fellow at the Atlantic Council’s GeoTech Center.

The authors would like to acknowledge the contributions made to this article by the Atlantic Council GeoTech Center Nonresident Senior Fellow Mahmoud Abouelnaga.

US-Ukraine minerals deal creates potential for economic and security benefits

Svitlana Kovalchuk — Tue, 20 May 2025 20:50:09 +0000

The Ukrainian parliament ratified a landmark economic partnership agreement with the United States in early May, setting the stage for a new chapter in bilateral relations between Kyiv and Washington. The minerals deal envisages long-term cooperation in the development of Ukrainian natural resources. It marks an historic shift in Ukraine’s status from aid recipient to economic partner, while potentially paving the way for the attraction of strategic investments that could help fuel the country’s recovery.

The agreement was widely welcomed in Kyiv. Ukraine’s Minister of Economy and First Deputy Prime Minister Yulia Svyrydenko called the deal “the foundation of a new model of interaction with a key strategic partner,” and noted that the Reconstruction Investment Fund within the framework of the agreement would be operational within a matter of weeks. “Its success will depend on the level of US engagement,” she emphasized.

This deal isn’t just about mining and investment. It is a new kind of partnership that combines economic cooperation with security interests. US Treasury Secretary Scott Bessent, who played a key role in negotiating the terms of the agreement, said the minerals deal was a signal to Americans that the United States could “be partners in the success of the Ukrainian people.” Others have stressed that the partnership will allow the US to recoup the billions spent supporting Ukraine in the war against Russia. However, the deal isn’t primarily about reimbursement. It is a declaration of a strategic alliance rooted in mutual economic interest.

The new agreement between Kyiv and Washington differs greatly from classic concession deals as Ukraine retains full ownership of national natural resources while the Reconstruction Investment Fund will be under joint management. Unlike more traditional trade deals or resource acquisitions, this is a strategic agreement that combines commercial objectives with geopolitical interests, making it a textbook example of economic statecraft. By establishing military aid as a form of capital investment, the United States is securing a long-term stake in Ukraine’s security and the management of the country’s resources.

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The minerals deal with Ukraine offers a number of obvious potential advantages for the United States. Crucially, it ensures preferential access to rare and highly valued natural resources like lithium and titanium, thereby reducing dependency on China. This is a strategic win for Washington with the possibility of significant long-term geopolitical implications. The deal also creates a framework for further US military aid to be treated as an investment via the Reconstruction Investment Fund, providing opportunities for the United States to benefit economically from continued support for Ukraine.

By signing a long-term resource-sharing agreement, the United States is also sending an important signal to Moscow about its commitment to Ukraine. Any US investments in line with the minerals deal will involve a significant American financial and physical presence in Ukraine, including in areas that are close to the current front lines of the war. Advocates of the deal believe this could help deter further Russian aggression. Kremlin officials are also doubtless aware that around forty percent of Ukraine’s critical mineral reserves are located in regions currently under Russian occupation.

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There are fears that the mineral deal makes Ukraine too dependent on the United States and leaves the country unable to manage its own resources independently. Some critics have even argued that it is a form of dependency theory in action, with Ukraine’s mineral wealth set to primarily fuel the needs of US industry rather than building up the country’s domestic economy. However, advocates argue that Ukraine was able to negotiate favorable terms that create a credible partnership, while also potentially securing valuable geopolitical benefits.

The agreement provides the US with a form of priority access but not exclusivity. Specifically, the US is granted the right to be informed about investment opportunities in critical minerals and to negotiate purchase rights under market conditions. However, the framework of the agreement explicitly respects Ukraine’s commitments to the EU, ensuring that European companies can still compete for resource access.

In terms of implementation, it is important to keep practical challenges in mind. The identification, mining, and processing of mineral resources is not a short-term business with immediate payoffs. On the contrary, it could take between one and two decades to fully develop many of Ukraine’s most potentially profitable mines. Without a sustainable peace, it will be very difficult to secure the investment necessary to access Ukraine’s resources. Without investment, the Reconstruction Investment Fund risks becoming an empty gesture rather than an economic powerhouse.

The minerals deal has the potential to shift the dynamics of the war while shaping the US-Ukrainian relationship for years to come. The United States is not only investing in resources, it is also investing in influence. Viewed from Washington, the agreement is less about producing quick payoffs and more about allowing President Trump to make a statement to US citizens and to the Russians. For Ukraine, the minerals deal provides a boost to bilateral relations and creates opportunities for a new economic partnership. America’s strategic rivals will be watching closely to see how this partnership now develops.

Svitlana Kovalchuk is Executive Director at Yalta European Strategy (YES).

John E. Herbst — Tue, 20 May 2025 17:10:35 +0000

This is part of a series of regular assessments of the efforts, spearheaded by the Trump administration, to achieve a negotiated end to Russia’s war on Ukraine. Read the previous entry in the series here.

Both the Kremlin and the White House statements on the two-hour May 19 phone call between presidents Donald Trump and Vladimir Putin suggest that the results were meager—and Trump may be backing off some of his tough rhetoric on Putin. On Truth Social, Trump said: “Russia and Ukraine will immediately start negotiations toward a Ceasefire and, more importantly, an END to the War. The conditions for that will be negotiated between the two parties, as it can only be, because they know details of a negotiation that nobody else would be aware of.”

For his part, Putin labeled the conversation “informative and helpful,” but he also said that the “root cause of the issue” must be addressed. That means Ukraine must agree to the draconian terms that Russian negotiator Vladimir Medinsky recently set down in Istanbul, such as the demilitarization of Ukraine and Ukrainian troop withdrawals from Ukrainian territory Russia has “annexed” but does not occupy. In short, this represents zero movement toward ending the fighting since the Ukraine-Russia talks last week in Istanbul.

“I believe it went very well,” Trump said of the call with Putin on Monday. Trump’s positive characterization of the exchange is odd because last week, when Putin chose not to show up at the talks in Istanbul that he had proposed—talks that Trump encouraged Ukrainian President Volodymyr Zelenskyy to attend—Trump justified Putin’s capriciousness by saying that, of course Putin did not show up because he, Trump, was not there. The US president asserted that “Nothing’s going to happen until Putin and I get together, okay?” In preparation for the call with Putin this week, Trump wrote on Truth Social: “THE SUBJECTS OF THE CALL WILL BE, STOPPING THE ‘BLOODBATH’ THAT IS KILLING, ON AVERAGE, MORE THAN 5000 RUSSIAN AND UKRAINIAN SOLDIERS A WEEK, AND TRADE.”

Yet at the end of that call, Trump was upbeat about the resumption of Russian-Ukrainian talks, and he was silent on the need for him to meet with Putin. This outcome is no surprise because Putin continues to thwart Trump’s stated goal of achieving an immediate end to the shooting. Putin underscored this Sunday night with the launch of the largest drone attack on Ukraine—over two hundred drones—since the start of the invasion.

In the days ahead of the call, US Vice President JD Vance and US Secretary of State Marco Rubio noted that if progress toward peace does not actually appear, the United States could “walk away” from the talks. This is a way of putting pressure on the parties. Without explanation, White House Press Secretary Karoline Leavitt said that the administration is frustrated with both sides, even though, as Vance said earlier this month, it is Russia that is asking for too much.

Meanwhile, Zelenskyy and his European partners in the United Kingdom, France, Germany, and elsewhere are proceeding with their efforts to place additional sanctions on Moscow, an effort that would be more effective at moving the Kremlin toward an actual cease-fire if Trump worked with this group. At the moment, White House policy does not reflect the view of 61 percent of the American public that the administration’s policy is weak on Putin.

Despite the tentativeness of recent White House policy, it cannot be ruled out that Trump will make good on his promise to achieve a durable peace by putting ample pressure on the party obstructing that outcome. But for now, it is hard to escape the conclusion that Trump blinked.

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

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Tannebaum interviewed by Bloomberg on President Trump’s call with Putin and how the US can pressure Russia

irosales — Tue, 20 May 2025 14:57:09 +0000

The post Tannebaum interviewed by Bloomberg on President Trump’s call with Putin and how the US can pressure Russia appeared first on Atlantic Council.

Lichfield quoted in NYT on how the G7 finance ministers’ summit may unfold

irosales — Tue, 20 May 2025 14:42:13 +0000

The post Lichfield quoted in NYT on how the G7 finance ministers’ summit may unfold appeared first on Atlantic Council.

Cole speaks about the role of fiction and narrative in current affairs on the Marine Corps Association Scuttlebutt podcast

kwinzerwilks — Tue, 20 May 2025 14:30:00 +0000

On May 15, Forward Defense nonresident senior fellow August Cole was a featured guest on the Marine Corps Association podcast Scuttlebutt. In this episode, titled “Useful Fiction With August Cole From Modern Day Marine,” Cole discusses how asymmetric forces like fiction and narrative have an outsized impact on today’s battlefield.

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Why the US cannot afford to lose dollar dominance

Martin Mühleisen, Valbona Zeneli — Tue, 20 May 2025 14:00:00 +0000

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This Atlantic Council Strategy Paper explores the relationship between the status of the United States as a geopolitical superpower and the role of the US dollar as the world’s dominant currency. It examines how these two facets of US power have reinforced each other and how a decline in either of them could trigger a downward cycle in US influence around the world. The report discusses options for how the United States could counteract such trends, relying on its traditional strengths and strategic alliances.

How to keep the dollar at the center of global trade

Over the past eight decades, the status of the United States as an economic and geopolitical superpower and the role of the US dollar as the world’s dominant currency have reinforced each other. As a synonym for the dollar’s preeminent role in international currency transactions and foreign reserve holdings, dollar dominance has long been associated with the United States’ exorbitant privilege to finance large fiscal and current account deficits at low interest rates. This has helped the United States run a large defense budget and conduct extensive military operations abroad. In turn, the United States has used its military capabilities to support the free flow of goods and capital across the globe, boosting global growth while providing investors with confidence that investments in US financial instruments are secure. This virtuous cycle contributed to the long-lasting stability of the post-World War II international order, leading to a sustained rise in economic welfare in the United States and around the world.

As the size of the US economy relative to the rest of the world continues to shrink, this dynamic may begin to be turned on its head.¹ Maintaining a global military presence would be harder to finance in the future if the US dollar were to lose its dominant reserve position, reversing the virtuous cycle and precipitating a US loss in global influence. This is one of the reasons why strategic competitors, such as China and Russia, currently work toward a “dedollarization” of their economic relations and global financial flows more broadly. Although last year’s BRICS summit failed to make progress on an alternative financial order, China and Russia are set on undermining the leading role of the dollar, limiting the United States’ ability to impose sanctions, and making it more costly to service its debt and finance a large defense budget.²

There is currently no other currency (or arrangement of currencies) that could challenge the US dollar’s preeminence, however. Even a smaller role of the dollar in global trade transactions would not immediately challenge its reserve currency status, given the lack of investment alternatives in other currencies at a scale comparable to US markets. The dollar has also benefited from strong global network effects that would be difficult to replace (that is, the costs for any country to divest into other currencies remain prohibitively high unless other countries do the same). Nevertheless, the tariff measures recently announced by the Trump administration could lead to a decline in the global use of the dollar, especially if they were accompanied by a decline of trust in the United States as a safe and liquid destination for global financial assets. Similarly, a proposal by the current chair of the Council of Economic Advisers to use tariffs as leverage for negotiating favorable exchange rate parities with US trade partners and to restructure their US Treasury holdings into one-hundred-year bonds—a so-called Mar-a-Lago Accord—would deliberately weaken the dollar to support domestic manufacturing. This could further erode the currency’s global dominance. Both scenarios would involve high costs to the world economy, including for the United States. More fragmented markets and higher financial volatility would be associated with income losses and higher inflation. Facing higher borrowing costs, the United States would be forced to make difficult spending decisions between its military budget, social welfare programs, and other priorities. Its global leadership role would decline, allowing strategic antagonists to benefit from any vacuum that a smaller US role would leave behind.

It is therefore vital to US national security that the dollar retain its role at the center of global trade and financial networks. This paper proposes ways for the United States to maintain the attractiveness of dollar-denominated assets for foreign investors, arguing for a speedy resolution of tariff disputes that have a strong potential to weaken its global standing. It underscores the need to compensate for a relative decline in US economic and military capabilities with strong alliances, which would deny China and other autocratic states a strategic opportunity to weaken the United States’ influence on the world stage and the exorbitant privilege that the dollar’s role as the global reserve currency still confers.

A cargo ship docked at an industrial port in Hong Kong alongside shipping containers. Source: Unsplash/Timelab.

Strategic context

For the past eighty years, the United States’ economic and geopolitical preeminence and the role of the US dollar as the world’s dominant currency have contributed to a vast increase in global trade and capital flows. The “exorbitant privilege” to finance large fiscal and current account deficits at low interest rates helped the United States maintain its large geopolitical footprint, which contributed to the stability of the environment fostering global commerce and investment. However, as the center of the world’s population and economic activity has been shifting toward Asia and Africa, the virtuous cycle supporting the US-led global architecture threatens to come to an end, giving way to greater economic and geopolitical volatility.

The exorbitant privilege

The US dollar’s rise as a global reserve currency dates back to about a century ago, when the British empire was in decline after World War I. The United States had become the world’s agricultural and manufacturing powerhouse, its largest trading nation, and a major source of foreign capital around the globe. It was natural for the dollar to also become one of the major currencies used for international transactions, and it eventually started to replace the pound as central banks began to hold larger shares of their reserves in dollars in the late 1920s. The transfer was backed by the economic dynamism of the world’s richest democracy and, after 1945, its might as a victorious military power.

In the early years after World War II, the dollar was the anchor for the Bretton Woods system of fixed exchange rates, established on a US promise to exchange dollars for gold at a fixed parity. It became increasingly clear, however, that the gold-based system was not adequate for a fast-growing global economy that underwent a gradual liberalization of capital flows. In the meantime, French government officials accused the United States of exploiting the status of the dollar to run up large fiscal deficits (driven by the costs of the Vietnam war), a phenomenon they dubbed the “exorbitant privilege.”³ However, when the United States under President Richard Nixon decided to take the dollar off its gold parity in 1971, this did not provoke a major flight away from the US dollar—on the contrary, the dollar itself had by then become the anchor for the global financial system.

Today, more than fifty years after the “Nixon shock,” the United States still benefits from the dollar’s leading role in the global economy, even as the relative size of the US economy has shrunk. Until recently, dollar payments accounted for 96 percent of trade in the Americas, 74 percent in the Asia-Pacific region, and 79 percent in the rest of the world outside Europe. About 60 percent of global official foreign reserves were held in dollars, and about 60 percent of international currency claims (primarily loans) and liabilities (deposits) were denominated in dollars. The United States was the world’s largest investment destination, with foreign direct investment (FDI) totaling $12.8 trillion. Inward FDI flows have increased five-fold in the last three decades with $311 billion in new investment in 2023 (see Figures 1 and 2).

Figure 1. Inflows of foreign direct investment (FDI) to the United States were the same in 2000 and in 2023 (in millions of dollars)

Source: World Bank data, 2025, https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?end=2023&locations=US&start=2000&view=chart.

Figure 2. Stock of FDI in the United States has increased five-fold since 2000 (on a historical cost basis, in trillions of dollars)

Source: Statista data, 2025, https://www.statista.com/statistics/188870/foreign-direct-investment-in-the-united-states-since-1990/. Note: Under the historical cost basis of accounting, assets and liabilities are recorded at their values when first acquired.

In an era of floating exchange rates and liberalized capital markets, one should nevertheless be realistic about the benefits the dollar’s status as a reserve currency. It is true that the United States can borrow exclusively in its own currency; it also enjoys somewhat lower interest costs because other countries’ official reserves are being invested in US Treasury securities; and it generates seigniorage income from dollars being held abroad. But real interest rates among the advanced economies have moved broadly in tandem in recent years, and estimates for the interest savings on US treasury bonds due to the US dollar’s reserve currency status amounted to some 10 to 30 basis points at best. The exorbitant privilege therefore seems to lie mostly in the volume of debt the US government can borrow without incurring higher interest rates. One recent estimate, for example, suggests that the reserve currency status of the US dollar increases the sustainable level of US government debt by 22 percent.⁴

US deficit financing

The large size of the US economy and demand for US government securities have made US financial markets the deepest and most liquid markets in the world, with about $27.4 trillion in outstanding US government debt as of July 2024. This has been supported by strong institutions and a transparent regulatory environment, the absence of capital flow restrictions, and the wide range of services offered by the US financial industry, which all have attracted foreign capital into the United States. The importance of US debt markets was also evident during times of crisis when global shocks tended to trigger a “flight to safety” into US assets.

The market depth and safety of US dollar assets are features that traditionally distinguished the United States from other major economies that also have large financial markets and issue bonds primarily in their own currency, such as the euro area, Japan, or the United Kingdom. Moreover, these countries do not have their own means to guarantee their geopolitical security; they depend on alliances with the United States as the ultimate sovereign guarantor. This is in large part a function of US military strength and the US nuclear arsenal, backing up NATO’s credibility as a collective defense organization. Although these factors used to be rarely invoked as an explicit factor in investment decisions, investors’ trust in the ability of the United States to preserve its dynamic economy and honor its financial obligations even during times of conflict lies at the heart of the US dollar’s global dominance.

The strong preference of investors for US dollar assets allowed the United States to run permanent current account deficits in recent decades, driven both by government spending and the low saving preferences of its households. As a side effect, the United States has often functioned as a “locomotive” for the global economy, providing growth impulses for export-oriented economies such as China, Japan, or Germany, whose high saving rates and current account surpluses are the counterpart to US deficits. Moreover, for many years, differences in the composition of US financial assets (largely FDI and other equity) and liabilities (lower-yielding bonds) provided the United States with a positive foreign income balance despite the growing amount of net foreign liabilities.

Will the good times last?

Even before the current administration sought to reorient global trade patterns by imposing tariffs on allies and other trading partners alike, the question was whether and how long the United States would be able to hold on to the dollar’s dominant role. There were several developments that pointed to a more difficult future ahead, including demographics, geopolitics, and technological trends. Already at that time, however, it was clear that domestic policy choices would ultimately determine whether the United States would hit a limit in the willingness of foreign investors to finance its rising liabilities vis-à-vis the rest of the world.

First, while the US dollar is still the world’s leading reserve currency, its share in central banks’ reserve holdings has gradually fallen in recent years. The dollar’s share declined from around 70 percent in the 2000s to 60 percent in 2022, when it was followed by the euro (20 percent) and several currencies in the single digits, including the yen, pound, and Chinese renminbi. The renminbi has gained some market share as a reserve currency in recent years; yet China, with its closed capital account and politically uncertain investment climate, has not been able to significantly increase international use of its currency. Instead, most gains have been made by a range of smaller currencies, including the Australian and Canadian dollars, reflecting digital technologies that have facilitated bilateral transactions without involving the US dollar as a bridge currency. Smaller currencies may indeed continue to gain market share, but there could also be other shifts in the global reserve composition, depending on the further evolution and impact of US trade and sanctions policies. The rise in gold prices, for example, has been attributed to central banks increasing their holdings within their reserve portfolios.

Second, US net foreign liabilities have increased sharply since the global financial crisis, increasing to about 70 percent of gross domestic product (GDP) by 2023. To put this in perspective, only Greece, Ireland, and Portugal are larger net debtors among industrial and emerging economies, and US net liabilities are equal to 90 percent of the net assets of all creditor countries combined. Since current account deficits have generally been modest over the past decade, the decline owes to valuation changes stemming from the strong performance of US equity markets relative to international markets, increasing the wealth of foreign investors holding US stocks. To serve these net liabilities, foreigners implicitly expect US companies to remain highly profitable and the United States therefore to run larger trade surpluses going forward. With the dollar gradually appreciating in recent years, it remains to be seen whether these expectations can be met or whether foreign investors will reduce their net holdings of US assets. The increasing negative interest balance (and the fact that much of the positive net returns on FDI were due to profit shifting into Ireland and other low-tax foreign domiciles) has caused some to argue that the extraordinary privilege is no longer in existence.

Third, prospects of continued large budget deficits could make it more costly to finance US government debt in the future. The Congressional Budget Office (CBO) has projected US budget deficits to remain above 6 percent of gross domestic product (GDP) over the coming years. This projection is made on the basis of current law, that is, assuming the expiration of both the 2017 Tax Cuts and Jobs Act (TCJA) passed during the first Trump administration and the healthcare subsidies passed during the Obama administration. Even under this optimistic assumption, government debt is projected to rise from 98 percent of GDP in 2024 to 118 percent of GDP in 2035. While the current administration has vowed to impose significant expenditure reductions to accompany the presumed extension of the 2017 tax cuts, failure to reduce the US deficit could drive long-term interest rates higher in coming years.

Even so, until recently, it seemed too early to worry about the safe asset status of US government securities per se. This was in large part because there are currently no instruments that could match the role of US government securities at comparable volumes. However, the stability of US debt dynamics rests in no small measure on the continued performance of the US economy, which in turn depends on strong institutions and sound economic policies. History shows that political polarization has the potential to undermine both of these pillars, a warning that would be important for the US government to heed while it is reducing government functions and cutting back its public workforce. As Steven B. Kamin and Mark Sobel write, “partisan divisions, political dysfunction, and the resultant inability to cope with the nation’s challenges” should be considered the main risks to long-term US economic prospects and dollar dominance. The administration’s willingness to risk a deep recession to launch an elusive manufacturing renaissance in the United States plays precisely into those concerns.

Even before April 2025, trade restrictions had significantly increased in recent years after declining for most of the twentieth century. The geoeconomic fragmentation driven by the COVID-19 pandemic, Russia’s war of aggression in Ukraine and, most recently, economic tensions between the United States and China, could now drive a major reorganization of global economic and financial relationships into separate blocs with diminishing overlap. A study by the International Monetary Fund (IMF) estimates that greater international trade restrictions could reduce global economic output up to 7 percent. In case of a wider trade conflict, smaller countries could be increasingly forced to choose sides, with those moving closer to China likely aligning their currency use for international transactions and reserves away from the US dollar and the euro.

Fifth, the United States has used sanctions as a tool of foreign policy, particularly against Russia in the wake of its 2022 invasion of Ukraine. This led to the suspension of trading in US dollars on the Moscow Exchange (MOEX), disrupting financial operations not only within Russia, but also affecting other international market players as a result of the extraterritorial nature of the US sanctions. Since 2014, following the sanctions related to the annexation of Crimea, Russia has increased its use of the Chinese yuan, which became MOEX’s most-traded currency (54 percent in May 2024). Concerns about their bilateral trade relations with Russia and China have other countries looking for alternatives to mitigate possible risks associated with US dollar transactions, for example, in the BRICS grouping, which is set to further expand its membership of emerging market economies in coming years. If accompanied by bilateral tariff increases, as currently envisaged by the Trump administration, this could have further implications for the dollar’s role in global trade transactions.

Finally, in the context of a geopolitical fallout, potential tariffs between the United States and the EU could significantly impact the transatlantic economy, which remains the most important bilateral trade and investment relationship for both partners. For example, a 10 percent universal tariff on all US imports is projected to reduce EU exports to the US market by one-third, and subsequent retaliation could similarly hurt US exporters. Higher interest rates in response to tariff-induced inflation would have additional growth implications. All this could heavily weigh on financial markets on both sides of the Atlantic, further reducing the attractiveness of US dollar-denominated assets.

Limits to military superiority

Any developments that weaken the US economy and the role of the dollar could also affect the United States’ ability to preserve its military superiority. China is in the middle of an extraordinary defense buildup that is challenging US strategic positions in the Indo-Pacific theater. Moreover, the Ukraine war has led to stepped-up cooperation between Russia, Iran, and North Korea (which has been contributing troops to compensate for Russia’s losses), and China increasingly supports Russia’s armament efforts by supplying it with drones and dual-use technology.

The United States and Europe have also been pushed on the defensive in Africa as China, especially, has made strategic inroads there, as have Russia, India, and countries in the Persian Gulf. Many countries are looking to China for help in developing their energy and transport infrastructure, imports of low-cost consumer and investment goods, and market access for their own exports, allowing the use of strategic ports and other locations in exchange.

At the same time, China has a hold on supply chains involving critical raw materials, controlling 85 percent of the world’s refined rare earth materials, which are crucial for high-tech military technologies. If made unavailable to the United States, this could significantly complicate the production of advanced weaponry. The global processing capacity for critical raw materials is also highly concentrated in China, providing it with means to influence market prices and access, and creating supply chain vulnerabilities and dependencies.

Advances in military technology toward low-cost weapons, lower procurement costs in competitor countries, and a relative decline in US manufacturing capabilities (e.g., in shipbuilding) pose significant challenges to US military strength. While the United States retains a large nominal advantage in military spending over other competitors, the discrepancy is smaller when considering cost differences; in other words, the United States has a smaller advantage in real terms than suggested by simple budget comparisons (see Figure 3).

Figure 3. Combined military spending by China, Russia, and India outstrips the US when calculated by purchasing power parity (2019, in billions of dollars)

Source: Peter Robertson, “Debating defense budgets: Why military purchasing power parity matters,” Column, VoxEU portal, Centre for Economic and Policy Research, October 9, 2021, https://cepr.org/voxeu/columns/debating-defence-budgets-why-military-purchasing-power-parity-matters.

In fact, a recent congressional review of US defense strategy has raised concerns that the United States is not ready for a multifront war spanning theaters in Europe and Asia. US forces have also been slow to adopt new battlefield technologies, including a trend toward autonomous weapons systems, which will take considerable time to redress. In addition, the end of the New START treaty in 2026 could trigger a nuclear arms race that would force the United States to expand its nuclear forces after decades of deep cuts.

While the United States is still the only country able to project military power at any point in the world, it is unlikely to be able to respond to these challenges on its own. The room to dedicate additional fiscal means to the US defense budget is increasingly circumscribed by growing interest and entitlement spending (see Figure 4), and even under optimistic assumptions, there is a risk of strategic overreach for the United States, given the magnitude of challenges across different regional theaters.

Figure 4. Projected federal outlays show entitlement spending and growing interest may curb defense spending (2025, as a percentage of federal revenues)

Source: Congressional Budget Office, The Long-Term Budget Outlook: 2025 to 2055, CBO, March 2025, https://www.cbo.gov/publication/61270, and calculations by the author.

While US presidents have long called for European nations to play a bigger part in their own defense, the second Trump administration has ramped up the pressure on NATO allies to take on a larger military role and financing burden in the European theater. However, raising the combat readiness of European armed forces will require several years under the best of circumstances. Unless the United States is willing to cede military dominance in Europe to Russia, it will need to continue supporting its European allies—including in arms production, securing supply chains, and military burden sharing—for the foreseeable future.

If the United States were to forgo a deepening of its alliances in Europe and become outmatched by China in Asia, it could in principle still benefit from the relative safety of its continental geography. However, it would face a loss of military stature and reduced global reach. No longer being a global hegemon, the United States would not be able to protect global trade and financial flows in the way it has done in the past, hurting itself and other economies that similarly benefited from open trade. The United States would leave a vacuum of power that would most likely be filled by China and other autocratic countries, with detrimental effects for its own security and economic stability.

Goals

This paper proposes a strategy to preserve the US dollar’s lead role in international markets, allowing it to continue attracting foreign capital at favorable interest rates. As laid out above, the dominant role of the US dollar has been a key element in a decades-long virtuous cycle that allowed the United States to finance its large military apparatus while expanding its social safety net and keeping a low tax burden.

With the rise in public debt and the sharp increase in net international liabilities, this cycle cannot continue indefinitely. The time has come for the United States to begin reining in deficit spending and rebuilding its fiscal position. Notwithstanding the Trump administration’s commitment to this objective, this process will take time, given continued pressure on defense and entitlement spending. Continued dollar dominance would therefore be critical for keeping a lid on interest rates while nurturing a political consensus that could lead to a lasting decline in government deficits over several administrations.

Continued dollar dominance would also be beneficial from a geopolitical perspective, providing the United States with leverage in shaping the future of global finance, leadership in multilateral organizations, and the continued possibility of sanctioning opponents to raise the cost of acting against US interests. Having said that, the United States’ ability to dominate global developments on its own will likely continue to diminish. To maintain and reap the full benefits of the dollar as a reserve currency, it will need to rely more on networks with countries that have trade, financial, and security interests that align with those of its own. These networks evolve around shared interests, and they will only thrive in an environment of mutual respect and give-and-take.

Breaking up such networks by way of a US isolationist withdrawal—the possibility of which is as high as it has been at any time in the past century—would trigger a fragmentation of the global economic and security landscape with large losses in general welfare (i.e., prosperity and well-being) both in the United States and abroad. It would accelerate the decline in the dollar’s reserve status as it could force countries to fundamentally rethink their security arrangements, possibly leading to a reorientation of trading and financial relationships toward China and other illiberal states.

In fostering US interests, the objective for US policymakers should therefore be to maximize the mutual advantages accruing from working with countries that benefit from the United States’ global economic and security footprint, as well as the stability provided by the dollar as a leading currency. If the United States manages to pursue its domestic interests while remaining at the center of a network of powerful alliances, the dollar’s reserve currency status and its exorbitant privilege could serve US interests for years to come.

Major elements of the strategy

In principle, the new US administration has a strong opportunity to address the geopolitical challenges facing the United States, given its decisive electoral victory and control over both houses of Congress. While there is clearly a risk that ideological priorities might preempt serious work on other issues, the presence of growing external threats should eventually refocus attention on several objectives that would be in the strategic national interest.

Foster strong and robust long-term growth

The first objective coincides with one of the administration’s key priorities, namely, to create the conditions for strong US economic growth and employment over the long term. This is a necessary condition for the United States to retain its economic and military superpower status: Without a strong economy, the burden of maintaining a global footprint would eventually become suffocating and capital would become increasingly unavailable to support a growing debt burden. In the worst case, the United States would follow the example of the United Kingdom, whose leading global status was gradually eclipsed by other powers during the last century (see Figure 5).

Figure 5. China’s GDP growth rates have outpaced those of the United States and the European Union for more than two decades (2000–2024, measured at constant prices)

Source: “World Economic Outlook Database,” International Monetary Fund, accessed March 1, 2025, https://www.imf.org/en/Publications/WEO/weo-database/2023/October/select-country-group.

The question is how the dynamism of the US economy can be maintained against the background of weakening demographics, rapid technological change, and fragmenting global trade. These trends challenge the business model of established US companies, especially those competing against Chinese or other firms that benefit from the tools of state capitalism being deployed by their home countries. Moreover, supply chains for critical raw materials and intermediate products seem more tenuous in the future, given the dominant position of China in key industries.

From a trade perspective, there are two considerations that the administration should have balanced. On the one hand, firms should be allowed to continue to operate in an open and competitive market environment that rewards innovation and efficiency, in turn allowing the United States to reap the productivity gains necessary to generate future gains in income and welfare. On the other hand, it would be naive to expect US companies (or industries) to thrive in sectors where state-backed competitors enjoy large-scale cost advantages due to extensive subsidies or other forms of state support. This suggests that the new administration should have avoided a protectionist trade stance, shielding a large part of the US economy from foreign competition. However, it should also have been prepared to stave off an economic decline of sectors that could be critical for long-term economic or military purposes.

In early April, however, the administration took an opposite approach by raising tariffs on almost all other countries in proportion to bilateral trade imbalances. (Many of the highest tariff rates were temporarily paused a week later, leaving a 10 percent rate on most of the world for now.) Apart from their economic and financial fallout, these measures are unlikely to significantly reduce the overall US trade deficit, given (a) the substantial difference in domestic saving rates between the United States and large trading partners; (b) retaliatory measures taken by many countries; and (c) trade diversions and exchange-rate adjustments that will counter some of the effects of the tariffs.

It remains to be seen whether investment in the United States will pick up to a significant extent, given the uncertainty about the extent and duration of the trade restrictions currently in place. Moreover, labor-intensive manufacturing industries will have a hard time regaining a footing in the United States, given the falling costs of automation and persistent labor cost differentials with emerging markets and developing countries. A major plank of a strategy to boost employment and long-term growth should therefore lie in a speedy resolution of trade negotiations and a reduction in bilateral tariff rates between the United States and its largest trading partners, particularly Europe, Japan, and China.

The United States should also focus its industrial policy on boosting innovation, protecting or regaining technological advantages, especially in artificial intelligence (AI) and quantum computing, preserving access to supply chains and export markets, and maintaining strategic production capacities, preferably in conjunction with its European and Asian allies.

Beyond trade policies, there is a much larger agenda to strengthen the growth fundamentals of the US economy. This includes building a growing and better educated workforce that can translate AI and other innovative technologies into commercial products that can be sold in a global marketplace. Given the significant returns to scale in digital technologies, the United States should ensure that its institutions are strong enough to ensure a fair and transparent marketplace and combat monopolistic practices.

All of this would help the United States preserve its productivity advantage vis-à-vis the rest of the world, a key condition for durable real wage growth and rising living standards. To ensure that gains are distributed broadly throughout society, the expiration of key provisions of the 2017 TCJA provides an opportunity to boost incentives for new investment and labor-market participation while generating additional revenues from higher incomes and economic rents.

Moreover, while the new administration has a critical view toward illegal immigration, cutting off the legal flow of well-educated foreign students and productive workers into the United States, a key ingredient for its past economic success, would be an unforgivable own goal.

Street view of the US Department of the Treasury building in Washington, D.C. Source: Unsplash/Connor Gan.

Regain fiscal room to maneuver

Despite the projected increases of US government debt in coming years, the United States has been able to easily finance large deficits and is expected to do so in the future. However, the increasing amount of outstanding debt, as well as the rise in the average interest rate paid by the federal government, are constraining the budgetary room for new initiatives by the incoming administration. The share of discretionary spending—that is, spending not mandated by debt obligations or entitlement programs such as Social Security and Medicare—has already fallen from around 50 percent in the 1990s to below 30 percent today. As this share is projected to shrink further over the coming years, the trade-off between defense spending (which currently accounts for about half of all discretionary expenditure) and other priorities (such as infrastructure spending) is becoming stronger.

Everything else equal, reining in the fiscal deficit would therefore have a positive impact on long-term interest rates and crowd in private investment, a key ingredient for long-term growth. Although the creditworthiness of the United States is not yet in doubt, the increase in US government bond yields after the 2021 inflation scare, as well as the rise in bond yields after the April tariff announcements, has been a wake-up call, indicating a departure from the low-interest environment of the 2010s. It also increased the cost of private-sector investment, including higher mortgage rates that have contributed to a significant drop in new housing construction.

The first-best option to realize budgetary savings would be on the back of sustained robust growth, as discussed in the previous section, whereas deficit-financed tax cuts or spending increases would deepen the United States’ long-term fiscal quandary. Fiscal policy should instead focus on enhancing the efficiency of the tax system and reducing public expenditure—especially in the health sector, where the United States outspends other advanced economies by a large margin while achieving inferior outcomes.

However, imposing across-the-board spending cuts and labor-force reductions are not a proven tool to generate significant fiscal savings. They have a relatively small budgetary effect but a possibly significant impact on the government’s ability to function, which will eventually have to be rectified through new hirings. Given the demographic trajectory, there also is a need at some point for better targeting or changing the economic parameters of US entitlement programs (the “third rail” of US politics), but with continued dollar dominance, the United States would still have the space for a gradual phase-in of policy reforms.

Maintain deep and liquid financial markets

US financial markets are attractive to foreign investors because of their openness and underpinning by transparent and market-friendly rules established by US law. As a result, foreign portfolio holdings in US equities amounted to $13.7 trillion in 2023, and foreign investors owned $7.6 trillion in Treasury securities, equivalent to about a third of publicly held federal debt. Moreover, foreign deposits in the US banking system have steadily risen to about $8 trillion in 2024, highlighting the important role of foreign capital for the functioning of the US economy. Besides maintaining a welcoming framework for foreign investors, the United States will also need to ensure that financial market regulations remain effective and stay up to date with technological developments.

The more volatile geopolitical and economic environment has already tested the resilience of US financial markets, and both regulators and private entities should be prepared to deal with future shocks. As in other advanced economies, for example, US banking regulations have considerably tightened since the 2007–2009 global financial crisis; but the failures of Silicon Valley Bank and several other midsize institutions have revealed continued supervisory problems. US and European regulators were close to concluding an extension of the Basel Accord (Basel 3.1), but momentum has been lost given strong resistance by the financial industry on both sides of the Atlantic. Even if the new administration were unwilling to pursue negotiations within the Basel Committee, or planning to consolidate regulatory agencies, it must not lose focus on ensuring that banks remain well-run and adequately capitalized.

In a similar vein, there have been episodes in recent years when liquidity in US government bond markets collapsed, threatening to severely disrupt the workings of the global economy (with daily trading volumes in the Treasury bond market averaging $600 billion in 2023). Both the September 2019 repo crisis and the March 2020 meltdown required emergency intervention from the Federal Reserve system to keep the markets operational. Changes to the functioning of markets, including channeling a larger number of transactions through clearing agencies and improving transparency, should help reduce uncertainty during times of crisis, provided they are left in place by the new administration.

This, of course, assumes that there are no policy accidents, such as the US Congress not authorizing a debt ceiling increase, which could lead the United States to default on its government bonds and seriously undermine the US dollar’s standing abroad. Similarly, a forced change in the terms of US government bonds as has been proposed by some analysts, especially if directed at foreign investors, carries the risk of a large repricing of US financial instruments that could be traumatic for financial markets worldwide.

In the realm of financial regulation, the United States had until recently taken a conservative approach to innovative technologies such as stablecoins and cryptocurrencies. A 2022 report by the Financial Stability Oversight Council found that activities involving crypto assets “could pose risks to the stability of the US financial system if their interconnections with the traditional financial system or their overall scale were to grow without adherence to or being paired with appropriate regulation, including enforcement of the existing regulatory structure.”

The new administration has adopted a more welcoming approach, with several crypto proponents taking on key roles in US regulatory agencies. This pro-cryptocurrency stance may well lead to stronger innovation, but it could also contribute to heightened market fluctuations and uncertainties. Even under a lighter touch, new rules and regulations are likely to emerge from this transition phase. While this will pose some compliance challenges for companies, it will still be important to balance innovation with financial stability concerns. Introducing appropriate safeguards and maintaining a strong commitment to ethical practices will prove essential for helping businesses navigate the evolving landscape, build trust with consumers and regulators, and ensure the long-term success of digital payments.

By contrast, the Trump administration’s negative stance on the creation of a US central bank digital currency (CBDC) creates a potential risk to the dollar’s global standing. While there is indeed no clear use case for a CBDC at present, and adoption of retail CBDCs in most countries so far has been small, technological developments in this area are hard to predict. The United States might prefer to foster US dollar-based stablecoins rather than a CBDC to cement the dominant role of the dollar, but there is a risk that it could fall behind if a large number of other countries were to shift to CBDC-based settlement technologies. Moreover, given the challenging nature of digital currencies, the United States would not be able to shape international regulations that promote the efficient use of CBDCs and address critical concerns related to money laundering, fraud, and consumer protection.

Strengthen relations with emerging markets and developing countries

As the United States and Europe vie to preserve their geopolitical primacy against the onslaught from Russia and China, it is important to keep in mind that the world’s demographic center of gravity has already begun to shift toward Africa, India, and Southeast Asia. The geopolitical weight of these regions is still relatively modest, but their economic role is expected to steadily increase due to powerful demographics. Compared to China, the United States has been slow to recognize the importance of intensified trade relations with countries that may relatively soon become key export markets for US companies and engines for global growth.

Not long ago, the United States and other industrial countries were the major source for development finance, including through bilateral aid and in their role as majority shareholders in the Bretton Woods Institutions. The results of this decades-long engagement were decidedly mixed, however. Numerous large emerging-market countries thrived after the crises of the 1990s, but loans to many developing countries turned sour as countries failed to sustainably generate increases in per capita incomes. Member countries of the Organisation for Economic Co-operation and Development (OECD) consistently missed their targets for grants and other development aid, and developing countries have accused the industrialized world of not providing adequate compensation for the damage caused by past CO2 emissions.

China has used this opportunity to project itself as a friend and partner for many developing countries. Deploying its ample foreign exchange reserves (which it has been keen to direct away from US Treasury bonds), China’s Belt and Road Initiative has financed investment projects in resource-rich and strategically located developing countries—surpassing one trillion dollars—deepening trade and political relationships in a way that the West has been unwilling to match, and making China the world’s largest debt collector. China has leveraged these relationships to secure access to critical minerals and set itself up as the market leader in their processing and refining, gaining geopolitical leverage against the United States in the event of a future trade war. China has also received considerable diplomatic support from developing countries for its policy of unification with Taiwan.

The United States and its Western partners should urgently contest China’s position as an informal leader of the developing world. There is space to do so, as many countries have been disillusioned by China’s self-interested motives, which have often left them with badly executed infrastructure projects and high debt that proved difficult to restructure. To be successful, however, the United States and its allies must increase the speed and volume of their engagement with developing countries, offering projects and loans that exceed those of Chinese lenders in quality while being competitive in cost and timeliness. The Trump administration should therefore advance the planned restructuring of the former US Agency for International Development (USAID) under the State Department or the Development Finance Corporation (DFC), resuming support for partner countries in need of economic assistance.

Moreover, given tight national budget constraints, the Bretton Woods institutions should be more tightly integrated in a strategy to support friendly countries in the developing world. To do so successfully, they will need to remain firmly under Western control. However, to preserve their legitimacy as international institutions, they will need to stay focused on their essential mandates, which still enjoy widespread support.

However, the past few decades have shown that a strategy based merely on loans and development aid is not enough. Developing countries also require better market access to boost exports and raise their growth trajectories. While this will be hard to legislate both in the United States and Europe, there could be significant long-term benefits from a gradual market opening. First, it would preempt Chinese companies from cornering markets in countries with strong population growth, and second, pressures for migration could diminish as income in source countries would rise over time. Taking the long view, healthy trade and investment relations with the dynamic economies of tomorrow would benefit the standing of the US dollar.

Finally, the use of sanctions as a tool to achieve geopolitical objectives is a double-edged sword, and they should be used in a more targeted and sustained manner. The primacy of the dollar enables the United States to effectively exclude targeted individuals and economies from the global financial system. However, the effectiveness of sanctions declines over time as actors find ways to circumvent them; at worst, the broad application of sanctions against other countries can lead to a reorientation of global trade and financial relations that could undermine the dollar’s preeminence. For example, the desire of BRICS countries to develop alternatives to the use of the dollar may be inconsequential at present, but it could eventually become one of many factors that relegate the dollar to a less dominant position in global payments and reserve arrangements.

Preserve military superiority

The US National Security Strategy (NSS) recognizes China as a major national security challenge, emphasizing its ambition and capacity to alter the rules-based international order. As a result, the 2022 National Defense Strategy (NDS) focuses on bolstering US deterrence against China, with a strong emphasis on collaboration with allies and partners. Russia also poses a direct threat to US and transatlantic security, particularly in light of its invasion of Ukraine and the resurgence of traditional warfare in Europe. Additional challenges include threats from North Korea, Iran, and terrorist organizations as well as the rise of authoritarian powers, disruptive technological advancements, global economic inequality, pandemics, and climate change.

To preserve its power, strengthen deterrence, and build an enduring advantage, the United States should better integrate its military efforts with the other instruments of national power, such as economics and diplomacy. In an era defined by strategic competition and the rapid diffusion of disruptive technologies, preserving technological superiority is essential. This requires robust investment in research and development, particularly in innovative technologies like advanced weapons systems, satellites, AI, autonomous systems, and human-machine teaming to enhance the efficiency and effectiveness of US military forces.

The US defense budget, which was $816 billion in 2023 (see Figure 6), constitutes about 40 percent of global military spending and is projected to increase by 10 percent by 2038 (after adjusting for inflation), reaching $922 billion (in 2024 dollars), according to the CBO; 70 percent of that increase would go to compensate military personnel and pay for operations and maintenance. However, defense spending comprises 3.5 percent of US GDP, down from 5.9 percent in 1989, and 13.3 percent of the federal budget compared to 26.4 percent in 1989 (see Figure 7).

Figure 6. US military spending has increased sixfold from 1980 to 2023 (in billions of dollars)

Source: SIPRI military expenditure database, https://www.sipri.org/databases/milex.

Figure 7. US military spending has remained steady as a percentage of GDP but fallen as a share of federal spending (1980–2023)

Source: Peter G. Peterson Foundation, https://www.pgpf.org/article/chart-pack-defense-spending/.

During the first Trump administration, the US defense budget saw significant increases focusing on military modernization and development of new technologies, as well as the creation of the Space Force as a new branch of the military aimed at addressing emerging threats in space. The second Trump administration will likely focus on increasing defense budgets as the “peace through strength” doctrine advocates for a robust military presence to strengthen deterrence.

Aligning defense spending with the goals of the NDS requires prioritization of investment in nuclear modernization, missile defense and defeat programs, and resource allocations across air, sea, and land forces in line with strategic objectives, ensuring the efficient use of budgetary appropriations with a focus on the quality of military capabilities over quantity.

This effort would help sustain the global dominance of the US dollar by deterring geopolitical challenges and ensuring stability in international financial and trade systems, minimizing economic coercion, and reassuring global investors of the security and profitability of the US market. The US Navy plays a crucial role in securing global trade routes by keeping sea lanes open, facilitating the free flow of goods and capital. Additionally, strategic alliances and security arrangements with key oil-producing nations, particularly the Gulf states and Saudi Arabia, reinforce the petrodollar system, sustaining global demand for the US dollar in energy markets. Furthermore, US military and geopolitical strength underpin the credibility of economic sanctions, a critical tool of financial influence and dollar dominance.

Leverage military alliances

The 2022 US NSS emphasized alliances and partnerships as fundamental aspects of the US foreign policy to maintain a competitive edge in an era of strategic competition, including military collaboration, economic partnerships, and diplomatic interactions throughout the transatlantic and Indo-Pacific regions. In this aspect, strengthening relationships with key partners such as India and Japan is regarded as pivotal in addressing China’s increased influence. This includes joint military exercises, as well as sharing intelligence, and combining resources for defense initiatives.

The United States should collaborate with allies to create a secure environment by prioritizing comprehensive resilience in a community that can effectively respond to any security or defense crisis posed by adversaries, authoritarian regimes, malign state and nonstate actors, disruptive technologies, or threatening global events such as pandemics and climate change.

To bolster national security, strengthen military capabilities, foster economic resilience, and maintain global competitiveness, the US administration must prioritize a robust division of labor and responsibilities across key strategic areas, such as manufacturing, military operations, supply chain management, and weapons production. The division of labor with allies and partners enhances further efficiency and productivity, allowing partners to focus on their strengths, streamlining processes in specialized manufacturing companies while reducing costs, and providing access to advanced technologies critical for national defense. Pooling resources and know-how enables allies to share advanced technologies, coordinate and streamline production processes, and build strategic stockpiles.

Collaboration with allies plays a vital role in fostering resilient and redundant supply chains that are critical for diversifying sources of critical materials and reducing vulnerabilities in the face of global disruptions; it also fortifies national defense while promoting mutual security and economic stability. Securing critical supply chains is crucial to safeguard national security and the US administration should develop a National Defense Industrial Strategy to coordinate efforts across government agencies to prioritize resilience and protect the integrity of supply chains critical to defense manufacturing and operations.

Some elements of the above are already in place but need further enhancement and stronger commitment, particularly by leveraging economic opportunities. The United States must align economic and security interests within its alliances. Strengthening NATO’s economic coordination can ensure allies remain integrated into the dollar-based system through trade and defense procurement; it also can promote dollar-based investments in European defense, especially as European NATO partners are committing more resources to the defense sector.

Similarly, an expansion of international alliances and cooperation with a larger number of countries would reinforce dollar-based trade conditions in security agreements and promote standardization with US financial institutions among Indo-Pacific partners. Recommended actions include:

Expanding the AUKUS security pact (with Australia and the United Kingdom) and the role of the “Quad” alliance (including Australia, India, and Japan) in economic security.
Enhancing naval cooperation in key maritime regions and with nations that control strategic trade chokepoints.
Increasing coordination through a strategic allied council, as warranted.

In addition, effective communication would be essential to articulate the nature of the threat with clarity and promote credible narratives to safeguard the information space against propaganda campaigns, cyber influence operations, and the weaponization of social media. Proactive information strategies devoted to strengthening partnerships with like-minded democratic nations can protect public trust and reinforce resilience.

The bull sculpture in front of the Shenzhen Stock Exchange in Shenzhen, China. Source: Shutterstock.

Assumptions and alternatives

This strategy paper is based on several assumptions that are central to its proposals and the period over which they should be implemented.

First, there is no fundamental change in the principal characteristics of the Chinese economy, namely a heavy degree of state intervention and a closed capital account. India is also assumed to maintain capital account restrictions, and Europe will not implement a single capital market for some time. A change in these conditions could prompt some reserve flows into the respective currencies, but it would still be deemed unlikely that capital markets in these countries would evolve to a point where they could compete with the United States in depth and liquidity.
Second, US deterrence in key military theaters (Europe, South China Sea, Korean Peninsula) will remain effective for the time being, and the United States does not get drawn into an active military conflict, for example, over Taiwan. Otherwise, the United States would have to shift toward a more decisive and short-term war strategy.
Third, the United States remains dominant, or at least competitive, in developing critical technologies such as AI, microchip production, cryptology, and communications. It will be able to defend strategic assets, such as major military bases, carrier groups, space technology, or command, control, and communications (C3) infrastructure, against physical or virtual attacks. Failure to do so would make the United States more dependent on the technological capacities of its allies, requiring more effective coordination and systems integration that would be hard to achieve over a short time horizon.
Fourth, another important assumption is that the new administration will also realize that the United States is indeed lacking the resources to remain the sole military hegemon for much longer. Adopting a more realistic approach will not come without challenges to its own credibility, as the wider US public has yet to realize that technological progress has narrowed the military advantage held by the United States over its competitors, that the room for discretionary government spending could narrow dramatically over the coming years, and that US manufacturing would not be capable of supporting a major military conflict for long. In the event of a future conflict, public support for the Trump administration, or for any US government down the road, could evaporate quickly if these expectations were not corrected through public communication in good time.

The new administration may fear that collaborating more closely with political allies, including the necessary compromises it would require, could lead to a perception that foreign interests are driving US policies. At the same time, the increasing cooperation between China, Russia, and North Korea highlights that the Trump administration would not be able to focus on China alone, as it has stated in the past, while leaving its European partners to deal with Russia entirely by themselves. On the contrary, the lack of an effective European nuclear deterrence might force Europe to increasingly fulfil Russia’s geopolitical demands to avoid armed conflict, potentially allowing Russia to undermine political and economic relations between the United States and Europe. Since Europe remains the United States’ largest trading and financial partner by a significant margin, it should be clear that such a strategy would be entirely self-defeating.

As for some of the tariff and exchange-rate pronouncements by the Trump administration, it is important to keep in mind that an economy with free capital movements and an independent monetary policy cannot pick a specific value for its foreign exchange rate (the “impossible trinity” of economics). In the case of the United States, this means that an imposition of tariffs to weaken the dollar, as has been floated by President Donald Trump during the election campaign, will not change the fact that the US dollar exchange rate remains market determined as long as the United States allows unrestricted capital inflows and outflows and has an independent Federal Reserve. In particular, the exchange rate of the dollar would continue to reflect differentials in saving rates among major trading partners, over which the United States has limited influence.

If the new administration were serious about attempting to depreciate the value of the dollar, it could only do so by undermining its appeal as a safe asset to foreign investors. One way to do this would be to renege on the US commitment to free and open trade and capital flows, which have formed the basis for robust growth over many decades. Tampering with the independence of the Federal Reserve, let alone with the US legal system more broadly, could trigger significant financial volatility, including increases in the market interest rate on US government debt, major stock market losses, and a shock to the US economy that could dwarf any gains from what might be considered as a more favorable exchange rate. The self-defeating nature of such moves would quickly become evident; but if confidence is lost, it would be difficult to restore.

Indeed, there are few credible alternatives for any US administration other than leveraging the strength of the US economy and its currency against the growing autocratic threat while operating in close alliance with other democracies.

Withdrawing into self-isolation, as in the 1930s, could provide a false sense of security in today’s interconnected world. It would undermine the global dominance of the dollar by weakening its economic and strategic influence as allies and partners may hedge against US unpredictability, seeking alternative financial systems to diversify. Moreover, such a policy would allow other countries to occupy geostrategic positions to the detriment of the US economy and national security.
Similarly, accommodating strategic opponents like Russia or China would undermine trust in US leadership and lead to strategic losses in all theaters. Without the United States providing strong global leadership, other countries would not be able to thrive without catering to the interests of the other powers, and the United States could enter a phase of economic decline.

Finally, the most likely alternative to the strategy outlined above would be that the United States remains mired in a polarized political environment that leads to short-sighted policy decisions that fall short of the strategic challenges ahead. Most importantly, the United States would not be able to improve its fiscal situation and eventually would lack the resources needed to maintain its strategic financial and economic dominance and the superiority of the dollar. The continued erosion of US power might not be catastrophic for the United States itself, but it could trigger bouts of political instability and economic volatility around the globe, with negative consequences for the role of the US dollar and the welfare of US citizens.

Conclusion

This paper outlines a strategy for the United States to maintain dollar dominance. It argues that the United States will likely remain the world’s largest economic and military power, though it will face increasing difficulties in pursuing its strategic objectives on its own. There is a risk of military overreach as US defense spending is competing with other public expenditure priorities. Additionally, high fiscal deficits could further weaken the exorbitant privilege that has enabled the United States to sustain large fiscal and currency account deficits in the past.

The stakes are now higher compared to eight years ago, when Trump first took office, both because of the run-up in public debt during that period and because Russia and China are now more closely aligned in trying to weaken the democratic West. While reining in the fiscal deficit and boosting the US economy’s growth potential, the administration should proceed cautiously, preserving economic and diplomatic relations with existing allies. The United States should also strengthen partnerships with emerging markets and the developing world, where countering China’s efforts to co-opt countries into its economic and political orbit should become a strategic priority.

Atlantic Council Strategy Papers Editorial Board

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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

The Scowcroft Center is grateful to Frederick Kempe and Alexander V. Mirtchev for their ongoing support of the Atlantic Council Strategy Paper Series in their capacity as executive editors.

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1 Gross domestic product at purchasing power parity (PPP) reflects differences in international price levels and offers the best concept to compare economic output and living standards across countries. According to this measure, the global share of US GDP has declined from 20 percent in 2000 to 15 percent in 2024. See, e.g., IMF Datamapper, https://www.imf.org/external/datamapper/PPPSH@WEO/OEMDC/ADVEC/WEOWORLD/USA.

2 The BRICS grouping has expanded beyond its core nations of Brazil, Russia, India, China, and South Africa. The ten non-Western nations in the coalition “now comprise more than a quarter of the global economy and almost half of the world’s population”; see Mariel Ferragamo, “What Is the BRICS Group and Why Is It Expanding?,” Council of Foreign Relations, December 12, 2024, https://www.cfr.org/backgrounder/what-brics-group-and-why-it-expanding.

3 Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (Oxford: Oxford University Press, 2011).

4 This means that, for example, if the United States could sustain a maximum public debt level of, say, 200 percent of GDP, the loss of dollar dominance would reduce this level to 164 percent of GDP. See Jason Choi, et al., “Exorbitant Privilege and the Sustainability of US Public Debt,” NBER Working Paper 32129, National Bureau of Economic Research, February 2024, https://doi.org/10.3386/w32129.

The post Why the US cannot afford to lose dollar dominance appeared first on Atlantic Council.

Amid India-Pakistan tensions, the US must rebalance its security priorities in South Asia

Srujan Palkar and Mrittika Guha Sarkar — Mon, 19 May 2025 17:46:36 +0000

This month’s escalation between India and Pakistan—the most severe since 1971—was more than a bilateral flashpoint. It revealed how international policy frameworks meant to deter crisis now primarily serve to defer it. India’s Operation Sindoor, launched in response to the Pahalgam terror attack, and Pakistan’s retaliatory Operation Bunyan Marsoos escalated into four days of missile and drone strikes, targeting airbases and civilian zones across both sides of the Line of Control in Kashmir. The conflict’s resolution was driven by a mix of battlefield calculations, intelligence warnings, and external diplomatic mediation—including renewed US attention.

Yet even as the United States expands strategic cooperation with India—publicly endorsing its counterterrorism priorities—it continues to extend Major Non-NATO Ally (MNNA) status to Pakistan. This gives Pakistan a privileged military cooperation position under US law and eligibility for loans, agreements, and priority weapons delivery, along with closer ties to NATO countries’ military establishments—all without any preconditions or accountability on counterterrorism. This dual-track posture risks US credibility and incentivizes ambiguity over accountability. It sustains a structural pattern: provocation by militant actors, calibrated retaliation, and rapid external intervention—without a chance for any party to go to the root of the problems.

As such, the United States should pursue a conditional revocation of Pakistan’s MNNA status—suspending it while outlining concrete benchmarks for its restoration. Revoking Pakistan’s MNNA status would reinforce an ongoing recalibration in US regional policy—aligning security privileges with counterterrorism performance, encouraging institutional accountability within Pakistan, and acknowledging the growing weight of US-India strategic cooperation without foreclosing future engagement with Islamabad.

The US counterterrorism role in South Asia

For over two decades, US counterterrorism policy in South Asia has combined growing alignment with India and strategic privileges for Pakistan. This contradiction has normalized a repetitive cycle of terror attacks on India, targeted retaliation, and a US desire to be part of the solution but no institutional changes that could meaningfully shift the landscape.

To his credit, US President Donald Trump has worked toward effecting change—which was visible after India’s 2019 revocation of Article 370, which removed the Jammu and Kashmir region’s special constitutional status. The Trump administration refrained from public criticism of this move, framing it as a bilateral matter. Similarly, after the 2019 Pulwama attack, the United States condemned the terrorist act and urged Pakistan to dismantle terror infrastructure on its soil. The first Trump administration also played a pivotal role in maintaining Pakistan on the Financial Action Task Force grey list, pressuring Islamabad to act against terrorist financing networks.

The Trump administration’s endorsement of India’s strategic autonomy, especially in counterterrorism operations, marked a shift toward recognizing India’s capability to address its security challenges independently. India’s less formal and less codified designation as a Major Defense Partner (but not a MNNA) further underscored this approach. It resonates with Trump’s broader foreign policy doctrine, which favors burden-sharing and encourages allies to take greater responsibility for their defense. Ensuring a strategically autonomous India is not just a US interest, but a potential milestone achievement for Trump.

However, the most immediate obstacle is a US security policy that continues to privilege Pakistan’s military establishment. The Pahalgam attack occurred in close proximity to Vice President JD Vance’s visit to India, drawing historical parallels to the 2000 Chittisinghpura massacre, which took place hours before President Bill Clinton’s arrival. While causality is debatable, the recurrence of such timing highlights how extremist violence in the region can intersect with high-visibility diplomatic moments, complicating crisis management and signaling.

While confidence-building measures between India and Pakistan—such as the 1991 Agreement on Advance Notice of Military Exercises and the 2005 nuclear confidence-building measure framework—remain in place, they have proven insufficient during episodes of heightened tension. In recent crises, including in 2019 and 2025, India has kept key partners, including the United States, informed ahead of taking action to manage signaling risks and minimize escalation. Pakistan has also engaged international stakeholders, though typically only in the context of post-escalation outreach. These differing approaches to crisis communication carry implications for how third-party actors interpret intent and calibrate their response.

The contrasting diplomatic practices of India and Pakistan directly influence how external actors, particularly the United States, interpret each country’s intent and determine their diplomatic responses during crises. Given these differences in crisis management behavior, Washington’s continued extension of MNNA status to Pakistan without clear criteria related to counterterrorism or escalation management creates ambiguity. But US strategic designations like MNNA should periodically be reassessed and clearly linked to behaviors—such as transparency, proactive communication, and restraint—that concretely support regional stability.

Besides, Pakistan’s designation as an MNNA in 2004 was intended to anchor counterterrorism logistics during the US war in Afghanistan. With the war over and US dependence on Pakistani transit routes effectively ended, the core justification for Islamabad’s MNNA status has eroded. At the same time, China now accounts for over 70 percent of Pakistan’s arms imports, while US lawmakers—citing both strategic drift and insufficient counterterrorism compliance—have repeatedly questioned the designation’s utility. Rebalancing US priorities does not require substituting Pakistan with India but rather ensuring that strategic privileges reflect Washington’s current alignment—not legacy entitlements.

How the US can use its economic leverage

As a frequently used quip goes, “Most states have armies. In Pakistan, the army has a state.” That inversion isn’t rhetorical—it defines a structural barrier to Pakistan’s economic recovery. Through business entities such as the Fauji Foundation, Bahria Foundation, and Army Welfare Trust, the military retains a significant commercial presence across the banking, real estate, fertilizer, and logistics industries. While not unique among developing states, the scale and opacity of this role pose obstacles to reform. Repeated International Monetary Fund (IMF) programs have flagged structural issues—such as privatization bottlenecks, tax distortions, and subsidy burdens—as impediments to stabilization.

In fiscal year 2023, Pakistan’s debt servicing obligations absorbed over 80 percent of federal revenue, foreign exchange reserves fell below four billion dollars, and inflation peaked near 30 percent, though it has now eased to around 5 percent. These economic pressures sharply limit the policy options available to civilian leaders. The United States could more effectively support structural economic reforms in Pakistan by explicitly linking privileges—such as MNNA status—to concrete progress on economic governance and institutional accountability.

In this context, revoking MNNA would not rupture relations but reframe them around contemporary realities. The United States remains a key voice in international financial institutions and investment forums that shape Pakistan’s recovery path. From IMF conditionality to multilateral development flows, economic leverage is now the primary channel of influence. Rather than permanently revoking MNNA, Washington should set clear, achievable economic and governance benchmarks, creating a credible pathway for Islamabad to regain or enhance strategic privileges upon meeting certain standards.

Stability through strategic restraint and recalibration

The May 10 pause in fighting reflected a recalibration in South Asia’s strategic balance. Pakistan entered negotiations under mounting pressure: its military had sustained visible losses and continued escalation—while a one-billion-dollar tranche of IMF funding remained pending—threatened deeper fiscal and political instability.

India, in contrast, had secured a clear tactical upper hand through Operation Sindoor. Yet its swift endorsement of the cease-fire reflected strategic restraint. The decision allowed India to reinforce deterrence, bring the Indus Water Treaty to the renegotiation table, and redraw red lines. Prime Minister Narendra Modi’s statements that India “will not tolerate any nuclear blackmail” and “will not differentiate between the government sponsoring terrorism and the masterminds of terrorism” signals a new red line—in the instance of a repeat attack, India could target the Pakistani military in addition to terrorist camps.

To prevent similar escalations with these new red lines having been drawn, Washington must reassess the strategic benefits it extends in the region. Conditionally revoking Pakistan’s MNNA status would clarify that US defense privileges are tied to demonstrated counterterrorism cooperation and economic reform, rather than past strategic alignment. While some warn that this move could drive Pakistan closer to China, retaining MNNA status without accountability has already reduced US leverage. If the goal is influence, the United States should anchor its partnerships with conditionality—not ambiguity.

Srujan Palkar is the global India fellow at the Atlantic Council.

Mrittika Guha Sarkar is the India policy consultant at Horizon Engage.

The post Amid India-Pakistan tensions, the US must rebalance its security priorities in South Asia appeared first on Atlantic Council.

Lichfield quoted in Reuters on tariff discussions at the G7 finance ministers’ summit

irosales — Mon, 19 May 2025 15:18:03 +0000

The post Lichfield quoted in Reuters on tariff discussions at the G7 finance ministers’ summit appeared first on Atlantic Council.

The next 120 days of predictably volatile trade policy

Barbara C. Matthews — Fri, 16 May 2025 18:19:49 +0000

Understandable relief associated with the de-escalating tariff war will soon fade as markets and corporations face a long, uncertain summer. US tariff truces with China and other global trading partners mark a turning point in the trade war, and countries begin to negotiate the terms of a major geoeconomic rebalancing. As Atlantic Council experts observed, the shift from multilateral trade negotiations at the World Trade Organization to bilateral tariff negotiations with the United States could impact the Bretton Woods trade policy framework and trigger considerable global economic upheaval.

Bilateral trade deals struck with Washington will redefine the balance of geoeconomic power and elicit powerful reactions domestically and abroad. In addition to negotiations with major trade partners (European Union, Mexico, Canada, China, Japan), at least twelve large economies reportedly have begun active trade talks with the United States. The first set of early agreements with the United Kingdom and India are incomplete; and new details could be announced at any point. These are not merely bilateral negotiations. Every public move and every new deal will change the landscape for negotiation among the other parties.

The timing for the tariff negotiations seems certain to trigger additional policy volatility throughout the summer as overlapping – but not aligned — deadlines approach in relation to both the trade talks and domestic fiscal policy negotiations. US deadlines for reaching reciprocal tariffs agreements with trading partners are set to expire one month before separate negotiations with China. All trade negotiations will occur amid parallel budget and debt ceiling negotiations in the United States, where a trio of additional domestic pressure points loom large this summer:

Budget negotiations, including controversial spending cuts and initiatives to make permanent the tax cuts from President Trump’s first term in office
Treasury borrowing needs and debt ceiling challenges
Increasingly agitated opposition party roadblocks within Congress

Consequently, the next 120 days present a critical window for decision making that will generate ripple effects across the global economy. Choices made over this period will challenge corporate executives, financial institutions, and policymakers to chart solid trajectories amid an increasingly random news cycle that can trigger headline-driven market rollercoaster rides. Uncertainty regarding trade and tariffs could extend into the autumn and the new fiscal year if trade partners cannot agree. The prospect for revival of the draconian tariff hikes announced in early April 2025 increase the risks of potentially destabilizing outcomes.

The fiscal policy issues involve hard deadlines. US Treasury Secretary Scott Bessent’s letter to the speaker of the house on May 9 indicates that the next fiscal cliff (when taxpayer revenue must be supplemented by bond market sales in order to keep the government open) will likely materialize in August 2025. Secretary Bessent has requested that Congress increase the debt ceiling before departing for its traditional August recess. In other words, the deadline for resolving (or at least making progress on) the trade war truce with China now coincides with the debt ceiling “X date,” as well as the traditional summer recess for Congress.

These issues are not new. From President Obama onward, the summer budget season in the United States has consistently included debt ceiling brinksmanship, hard budget negotiations, and plenty of breathless headlines. Summer 2025 will be still more intense. Budget negotiations play out amid both a strikingly poisonous political climate and major tariff negotiations, the outcomes of which will materially impact economic growth rates globally.

None of these inflection points align neatly with the quarterly reporting process that drives markets and corporate disclosures. Incomplete information within markets and corporates regarding daily policy decisions increases the risk of poor strategic decisions. Corporate executives understandably choose inaction pending final decisions. Inertia generates downstream slowdowns in economic activity, ratcheting up pressure on governments globally to deliver clarity. In such an environment, the risk of overreaction to a headline and a news story is high.

Those outside the policy process can, at least, anticipate new bouts of volatility and opportunity. Between June and September 2025, a number of scheduled events provide policymakers with potential offramps and opportunities to make deals, in addition to the steady stream of negotiating teams meeting with US government officials in Washington. These include:

May 28-31, Department of Commerce rules due on the application of Section 232 tariffs regarding non-US content in auto parts
June 3, South Korean election
June 15-17, Group of Seven (G7) Summit in Canada
June 19, Eurogroup Summit
June 25-27, Penultimate Group of Twenty (G20) sherpa meeting
June 27, EU Council Summit
July 6-7, BRICS Summit in Brazil
July 9, expiration of the current reciprocal tariff war ceasefire
Mid-July, targeted date for debt ceiling extension by Congress
July 29-31, G20 Trade and Investment Working Group meeting
August 4, tentative Congress summer recess begins
August 12, expiration of the reciprocal trade war with China ceasefire
Mid-August, the latest estimate for the X date and the budget ceiling (the next fiscal cliff)
August 21-23, Jackson Hole monetary policy conference
September 30, end of the US fiscal year
October 12, Department of Commerce Section 232 report due regarding critical minerals
October 17, IMF and World Bank Annual Meetings (often with side meetings for the G20, the Financial Stability Board, the G7, and the BRICS)
November 2, Department of Commerce Section 232 report due regarding timber and lumber
2026, USMCA partners must decide whether to extend or terminate the regional trade agreement

Several other events are expected, but at uncertain times. There might be changes to the United States-Mexico-Canada Agreement tariff structure, extensions to existing deadlines regarding tariff negotiations with the United States (particularly: July 9 and August 12), or a deterioration of truce terms. For example, the United States could revive at any time its doubling (to $200) of fees for de minimis packages shipped to the United States from China using the postal services.

News reports indicate that bilateral negotiations are underway between the United States and at least twelve significant global economies (in addition to ongoing negotiations with China, Canada, the European Union, the UK, and Mexico): Israel, Japan, Vietnam, Cambodia, Thailand, India, South Korea, Australia, Argentina, Switzerland, Malaysia, and Indonesia.

June and July will be a rolling feast of headlines and leaks. Each decision and headline will contribute to geoeconomic realignment, impact global growth rates, and shape the structure of cross-border economic engagement.

The current pause in the tariff war may be welcome, but the more intense negotiations still lie in the future. Never has it been more important to pay particular attention to every move of the policy cycle.

Barbara Matthews is a nonresident senior fellow at the Atlantic Council’s Geoeconomics Center. She is also Founder and CEO of BCMstrategy, inc., a company that generates AI training data and signals regarding public policy.

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.

Nonresident Senior Fellow, Nuclear Energy Policy Initiative

The post The next 120 days of predictably volatile trade policy appeared first on Atlantic Council.

The United States’ role in managing the nuclear fuel cycle

Kemal Pasamehmetoglu — Wed, 14 May 2025 21:10:18 +0000

While there is uncertainty about the magnitude of nuclear energy required as global energy demand increases, it is likely that global nuclear energy usage will increase significantly in the next few decades. Such an expansion will require considerable growth in the nuclear energy ecosystem and enabling technologies, presenting a chance for the United States to shape the global nuclear energy landscape. US leadership is critical for upholding the highest global standards of safety, security, and nonproliferation —moreover, nuclear energy partnerships with other nations can help the United States establish and reinforce strong diplomatic ties. Its engagement in the sector brings an added national security benefit.

Building on the Atlantic Council’s previous report on the nuclear innovation ecosystem, this new report by Kemal Pasamehmetoglu explores the role of the United States in establishing a full domestic nuclear fuel cycle.

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Kemal Pasamehmetoglu

Energy & Environment Nuclear Energy

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