When it comes to the beginning of the China-Iraq relationship, there are a number of starting points. Some are framed within the longue durée and civilizational discourse favored by the Chinese and cherished by the Iraqis. For instance, in his March 15, 2023, speech introducing the Global Civilization Initiative, Chinese President Xi Jinping invoked ancient cross-cultural exchange as the foundation of China’s modern outreach. Chinese officials talk about Iraq in similar terms. When Cui Wei, China’s ambassador in Baghdad, visited a local research center, he opened by recalling that “our ancestors—more than two thousand years ago—built the ancient Silk Road for friendly communication with the countries of the world . . . As for Iraq, it is a shining pearl on the Silk Road, which left China and Iraq with good memories.” In this narrative, Abbasid-era trade brought Chinese papermaking, gunpowder, printing, compasses, silk, porcelain, and tea to Iraq and, through Iraq, to the wider Middle East and Europe. In return, astronomy, calendars, medicine, spices, and arts moved eastward into China. This semi-mythical view of the Silk Road allows Beijing to distinguish itself from Western powers and present its presence in Iraq as rooted in deep history rather than modern geopolitics. 

Alongside this civilizational rhetoric sits an official diplomatic starting point, and these two stories are mutually enhancing. China recognized the Kingdom of Iraq in 1942, though ties remained limited. A substantive relationship emerged after the 1958 coup led by Abd al-Karim Qasim and the two countries formally established diplomatic relations on August 25, 1958. Beijing viewed Qasim’s coup as part of a broader anti-imperialist realignment and saw Iraq through the lens of Cold War polarization. The Iraqi Communist Party’s strength reinforced this perception. During this period, China’s embassy in Baghdad became a key hub for distributing Maoist literature, part of Beijing’s effort to export revolutionary ideology. 

A third foundation of the two countries’ relationship is personal and ideological, as demonstrated through figures such as former Iraqi President Jalal Talabani and, later, Adil Abdul-Mahdi. Talabani visited China in 1955 and met Premier Zhou Enlai, seeking support for the Kurdish national movement in Iraq. China declined, and Talabani later recalled realizing that Beijing’s stance on national questions was incompatible with Kurdish aspirations. Despite this refusal, he remained drawn to Maoist thought. Material links also emerged early: During the Great Leap Forward famine, Iraqi dates became an important ration for Chinese households, a memory now invoked in cultural exchanges pairing Iraqi dates with Chinese tea. These civilizational, diplomatic, personal, and material strands gave China a multilayered story about its presence in Iraq and prepared the ground for the more strategic phase that followed. 

The modern relationship: War, weapons, and debt 

The modern China-Iraq relationship took shape in post-Mao China, especially during the 1980s. By the onset of the Iran-Iraq War, China had begun prioritizing economic development and external markets—priorities later embodied in the Belt and Road Initiative (BRI). But Beijing’s approach to the two countries and their conflict was never purely economic. Deng Xiaoping saw an opportunity to counter Soviet influence as Moscow appeared to pivot toward Tehran. According to historian Pierre Razoux, China pursued three goals: containing the Soviet Union, expanding markets, and maintaining a balance between the two belligerents. 

In practice, Beijing discreetly armed Iraq while avoiding any outcome that might destabilize Iran. Chinese shipments included T-59 and T-69 tanks (copies of the Soviet T-55 and T-62), Type 59 towed field guns (copies of the 130-milimeter M-46), Type 56 assault rifles (copies of the Soviet Kalashnikov), and millions of shells and assorted munitions. Throughout the war, China became Iraq’s third-largest arms supplier, after the Soviet Union and France. This arms trade generated substantial Iraqi debt and Chinese claims became the largest portion of Saddam Hussein’s external war debt, including roughly $8.5 billion in commercial obligations. These debts later provided Beijing with leverage as Iraq reentered the international system after 2003. 

The 1990–2003 sanctions era further shaped the economic relationship. Iraq’s isolation created openings for Chinese firms willing to operate under sanctions. In 1997, the China National Petroleum Corporation (CNPC) signed a production-sharing agreement (PSA) for the al-Ahdab field in the southern Iraqi city of Kut—an uncommon contract model in Iraq, where service contracts had become the norm after the 1970s nationalization. Baghdad’s weakened negotiating position and China’s opposition to sanctions facilitated the deal. Although the PSA did not fully materialize in the 1990s, it laid the contractual groundwork for Beijing’s return in the post-Hussein era. 

Talabani turns to Beijing for debt relief

After 2003, Talabani’s long-standing ties with China became politically consequential. While serving with the US-run Coalition Provisional Authority in 2003, he traveled to Beijing. China reopened its Baghdad embassy in 2004. The decisive moment came in 2007, when Talabani, as Iraq’s president, returned to China to negotiate debt relief. Beijing agreed to cancel all Iraqi sovereign debt and 80 percent of commercial debt—roughly $6.4 billion. This forgiveness cleared the way for reviving pre-2003 energy contracts. 

When the Ahdab project was relaunched, its PSA was converted to a service contract aligned with Iraq’s post-nationalization model. Chinese officials cast the project as a flagship for renewed cooperation.  

China’s emergence as a major oil partner aligned with the preferences of Iraq’s new Shia-led political class. Reporting from 2008 indicated that Iran encouraged Iraqi authorities to steer contracts away from US oil majors. For many Shia actors, Western oil companies symbolized the risk of external interference—a view shaped partly by the legacy of the 1950s struggle over Iranian oil nationalization. Chinese firms, by contrast, were seen as politically neutral and commercially pragmatic. Their willingness to operate amid insecurity, corruption, and low margins further strengthened their position. 

As ties deepened, Iraqi leaders sought broader economic engagement with China. After Talabani’s visit, then Prime Minister Nouri al-Maliki traveled to Beijing in 2011 to solicit Chinese participation in infrastructure and power generation to “help Iraq restore its own industry.” The partial withdrawal of US forces then opened additional space for China. With much of Iraq’s oil revenue consumed by salaries and routine government spending, officials looked for alternative ways to finance major projects. Prominent Iraqi politician Ahmed Chalabi proposed borrowing from China for large-scale infrastructure—a concept that fed into the 2019 “oil-for-infrastructure” framework. 

Prime Minister Adil Abdul-Mahdi’s 2019 trip to Beijing marked the high point of this approach. He described China as a partner for rebuilding Iraq’s infrastructure and embraced an explicitly pro-China development narrative. In an op-ed for China Daily, he argued that “a new world is emerging as the old one disintegrates” and cast the BRI as an inclusive path to long-term mutual benefit. The delegation’s message—with its emphasis on speed, efficiency, and technology transfer—captured Baghdad’s hope that China could deliver what Western firms, in Iraqi eyes, had not. 

‘Everyday dependence’ leads to lasting ties

These elite choices reflect deeper social and economic shifts. Iraq’s 2024 population census revealed that the country is urbanizing rapidly: More than 70 percent of Iraqis now live in cities. Urban households demand appliances, cars, electronics, and clothing, but face limited purchasing power. Chinese products—cheaper and increasingly familiar—meet these households’ needs. Over time, this has created a form of everyday dependence on Chinese goods that reinforces the broader geopolitical relationship. Affordability has gradually translated into acceptance, and acceptance into trust. 

These economic dynamics intersect with a changing political discourse. Recent election cycles in Iraq have seen a sharp decline in the prominence of democratic norms—rule of law, human rights, institutional accountability—in party narratives. As Western states also appear less committed to these values, Iraqi elites increasingly feel less pressure and elevate other priorities. Concepts linked to China’s development model—service provision over rights, infrastructure over institutions, efficiency over process—have gained traction across the political spectrum. 

China did not originate these trends, but its model resonates with and, in some cases, strengthens them. Beijing offers investment without political conditions, engagement without democratization requirements, and diplomatic rhetoric emphasizing non-interference in domestic politics—particularly in places such as Iraq. For many Iraqi leaders, this combination is appealing. And for many Iraqi consumers, China’s presence is already embedded in daily economic life.

Together, these forces—historical narratives, wartime ties, debt diplomacy, energy cooperation, and structural shifts in Iraq’s society and political culture—have produced a relationship that is both durable and expanding. While Iraq’s future trajectory will depend on broader regional and global dynamics, China’s position in the country is now anchored in multiple layers of the Iraqi state and society, making it a long-term feature of Iraq’s economic and geopolitical landscape. 

Where China is most active in Iraq

China has established an expansive and multisectoral presence in Iraq, spanning energy, telecommunications, consumer markets, and education. Its strategy appears aimed at deepening Iraq’s economic reliance on China across vital sectors, thereby embedding Beijing’s influence within Iraq’s long-term development trajectory. Bilateral trade between the two countries amounted to $54 billion in 2024, and China is the major source of foreign direct investment in Iraq, contributing $34 billion in 2023. 

Energy dominance 

For decades, China’s interest in Iraq has centered primarily on its vast energy resources. This manifests in purchasing Iraqi oil and developing Iraq’s energy infrastructure—both of which are vital to China’s energy security and geopolitical ambitions. In 2024, China imported slightly more than 1 million barrels per day (bpd) from Iraq, or 10 percent of its total crude imports. 

Chinese state-owned firms dominate the oil sector in Iraq, which is the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) after Saudi Arabia and home to the world’s fifth-largest reserves. Reports suggest Chinese companies manage about one-third of Iraq’s 145 billion barrels of proven reserves and hold direct shares in roughly 24 billion barrels. They produce two-thirds to three-quarters of Iraq’s output of slightly more than 4 million bpd, with CNPC alone accounting for half of total production. 

Initially limited to state firms, Chinese investment has recently expanded to include private energy companies attracted by Baghdad’s favorable contract terms. These firms were licensed in August 2025 to develop several new fields and plan to add 500,000 bpd to Iraq’s production by 2030, as Baghdad targets 6-million-bpd capacity. 

While Beijing’s role secures its energy interests, it also deepens Iraq’s tilt toward the East—an orientation encouraged by Shia political factions allied with Iran. These groups promote stronger ties with China (and, to a lesser degree, Russia) as a means of reducing dependence on Washington and circumventing US pressure. 

Mindful of the optics of deepening ties with China, Prime Minister Mohammed Shia al-Sudani sought to reengage US energy firms. During his April 2024 visit to the United States, he met oil executives in Houston and urged them to renew investment. The effort appeared to bear some fruit. In October 2025, Exxon Mobil signed an agreement to re-enter the Iraqi market and operate the Majnoon field in Basra, after its full exit from Iraq in January 2024 and subsequently handing over of the West Qurna 1 field to PetroChina. 

Telecommunications and digital infrastructure 

China’s involvement in Iraq’s telecom sector predates Hussein’s fall. Chinese company Zhongxing Telecom Co. first entered Iraq in 1999, when the country remained under international sanctions. Around the same time, Huawei began clandestinely building a fiber-optic network for Iraq’s military, which was later bombed during a 2001 US-UK air raid—an episode that led to Washington’s view of Huawei as a national security threat. 

In 2003, following the overthrow of the Baath regime by the United States and its allies, Huawei returned to Iraq’s emerging telecom market via Asiacell, the country’s leading carrier. In 2011, Robert C. Fonow, a US State Department adviser to Iraq’s Telecommunication Ministry, told the Washington Times that Huawei effectively “owned” Iraq’s telecom sector, alleging the firm had received more than six hundred contracts worth billions of dollars—some indirectly financed by US reconstruction funds.  

Today, Chinese technology firms remain central to Iraq’s digital expansion. In June 2025, Asiacell and China Mobile International (CMI) signed a memorandum of understanding (MoU) to expand enterprise-level digital services, billed as accelerating Iraq’s digital transformation through CMI’s global expertise. Huawei also partnered with Iraq’s Communication and Media Commission, Iraq’s top regulatory body in the field, to train personnel in cybersecurity. Iraqi officials have publicly encouraged deeper Chinese investment in telecommunications, signaling a sustained partnership in digital infrastructure. 

Consumer markets and renewable energy 

China’s commercial reach extends to Iraq’s consumer markets—from electronics to vehicles to solar energy. In the first half of 2025, Iraq imported eighteen thousand Chinese cars worth $639 million, a 30-percent increase over the same period in the previous year. The Kurdistan region accounted for the largest share, as consumers favored affordable yet feature-rich Chinese vehicles. For example, a 2025 MG GT sedan sells for about $8,850, compared with around $20,000 for comparable Asian or Western models. Similarly, a BYD hybrid sport utility vehicle (SUV) retails for $24,300, well below competitors’ SUVs. Local dealers report that “buyers who once paid more for American cars from Dubai now prefer Chinese cars with leather interiors, large screens, and panoramic roofs at a fraction of the cost.” 

Chinese solar panels have also surged. According to the Washington-based Attaqa Energy Research Group, Iraq ranked third in 2025 among Arab-majority states for Chinese solar imports. In the year’s first half, Iraq imported 0.9 gigawatts of solar panels—a nearly 600-percent increase in terms of solar generation capacity from 2024—driven by state-backed projects to install solar systems in homes, schools, and public buildings. 

Education, media, and cultural outreach 

Alongside its economic footprint, China has ramped up soft-power efforts to win Iraqi hearts and minds. Keen to counter critical media coverage of China, Chinese diplomats at times engage with Iraqi media—particularly to push back against criticism on issues such as the Uyghur crisis in Xinjiang. 

Chinese universities are offering around eighty scholarships to Iraqi students for the 2025–2026 academic year. The Chinese consulate in Erbil has backed the 2019 establishment of a Chinese language program at Salahaddin University in Erbil—one of only two such programs in the Middle East. It also helped create a China Studies Center at Sulaimaniyah University, which publishes a Kurdish-language magazine introducing China and supports translation of Chinese books.  

China’s exchange programs regularly bring Iraqi civil servants and professionals to Chinese institutions for technical training. The Chinese consulate in Erbil now plans to establish the Great Wall organization to strengthen bilateral relations by bringing together Iraqi Kurds who have visited China through various Beijing-sponsored exchange programs. Beijing has further expanded scientific cooperation by signing an agreement with Iraq in 2025 to develop a “peaceful nuclear technology program,” including construction of Iraq’s first nuclear training reactor for academic use in nuclear physics and radiological sciences. The initiative, led by Minister of Higher Education Na’im al-Abboudi—a senior member of the Iran-backed Asa’ib Ahl al-Haq movement—has drawn scrutiny in Washington for its potential geopolitical implications. 

Beijing has a distinct approach to Kurdistan 

China’s relationship with the Kurdistan Region of Iraq (KRI) differs in tone and texture from its engagement with federal Iraq, yet both align with Beijing’s broader strategy. Energy remains the core of China-Iraq relations, and China’s activities in the KRI ultimately reinforce that foundation. However, the China-Kurdistan relationship appears more diverse, shaped by the autonomous region’s social openness and China’s preference for a low-risk, apolitical presence. 

Historically, the relationship has two main strands. The first dates to Talabani’s 1955 visit to Beijing and his fascination with Maoism, which shaped aspects of his political worldview and indirectly influenced the early identity of his party, the Patriotic Union of Kurdistan (PUK). After 2003, the PUK became essential for rebuilding China-Iraq ties, and it is no coincidence that every Iraqi ambassador to China since 2003 has been from the PUK, reflecting both personal networks and political continuity. 

Another key moment in the relationship was China’s opening of its consulate in Erbil in 2014. At the ceremony, then Kurdistan Regional Government (KRG) Prime Minister Nechirvan Barzani described it as “the first step toward building a new phase in bilateral relations,” signaling opportunities in politics, culture, infrastructure, and commerce. As the KRG’s former foreign relations chief, Falah Mustafa, put it, China’s permanent seat on the UN Security Council gives its presence in Erbil symbolic and practical weight. Yet Beijing has remained cautious in its political engagement with Kurdish authorities, consistent with its 1991 abstention on UN Resolution 688 condemning Hussein’s repression of the Kurds. 

Despite this reticence, China has built a wide-ranging network of relationships. The Chinese consulate in Erbil regularly invites Kurdish political parties, universities, media outlets, and government ministries to short study programs in China. This resembles earlier US public diplomacy programs but is more ideologically neutral. Beijing makes a point of engaging all political currents, including leftist, nationalist, and Islamist parties. As a former KRG adviser noted in an interview with one of the authors, “During a trip to China, I met a member of the Kurdistan Communist Party and a cadre of an Islamic party attending the same course.” Kurdish officials appear increasingly attentive to China’s rise and its willingness to support development in Iraq and Kurdistan. This was reflected in comments by Sulaimaniyah Governor Haval Abubakr, who recently described China as “the America of the East.” 

China’s expanding activity in the KRI also intersects with the US-KRG relationship. As the United States has constructed a massive new consulate complex in Erbil, intended as a physical symbol of long-term commitment, China has also signaled interest in building a new consulate of its own. However, while the KRI has deep diplomatic and security ties with the United States, its relationship with China remains overwhelmingly concentrated in trade and cultural domains. Indeed, this is a deliberate choice on Beijing’s part. By avoiding security and identity questions, China cultivates what might be described as a “decaf” relationship—active and useful, yet stripped of political commitments. 

Kurdistan’s openness to the world enables this strategy. Travel is highly valued socially, and China’s invitations arrive at times when economic hardship—such as salary delays by Baghdad—limits mobility. “I managed to have a trip in a time of salary crises,” a Sulaymaniyah lecturer interviewed for this report noted after joining a Chinese study program. This openness has provided fertile ground for Beijing’s soft-power outreach. 

China’s public diplomacy is more developed in the KRI than in the rest of Iraq. It promotes familiarity with Chinese institutions, culture, and political narratives through sustained engagement. This has shifted public perceptions and increased interest among Kurdish students and professionals. As noted earlier, Beijing has supported institutions such as China in Kurdish, the China Studies Center in Sulaimaniyah, and the Chinese Department at Salahaddin University, with plans for additional language programs. Events like Chinese Film Week and commemorations of the “80th Anniversary of the Victory of the Chinese People’s War of Resistance Against Japanese Aggression” give China cultural visibility and institutional depth. Collectively, these centers make cultural programming and exchanges smoother and more consistent. 

This network also supports China’s commercial aims. The long-standing Asiacell-Huawei partnership is illustrative. Asiacell, headquartered in Sulaymaniyah, is Iraq’s largest telecom company, and its relationship with Huawei began on the eve of the 2003 US invasion. In February 2003—anticipating conflict—Huawei scouted opportunities in Kurdistan. When Washington issued its ultimatum to Hussein in March, Huawei moved Asiacell staff to Shenzhen for emergency training. In 2023, the two firms celebrated the twentieth anniversary of their “precious partnership,” outlining plans to integrate artificial intelligence into Iraq’s telecom services. Today, Huawei is the primary equipment provider to all major Iraqi telecom operators, a position rooted partly in its early foothold in the KRI. 

China’s presence also shapes Kurdistan’s sociopolitical landscape. Chinese goods—from household items to solar panels to electric vehicles—dominate local markets. As a Sulaymaniyah trader interviewed for this paper explained, “You cannot produce anything in Kurdistan, as the Chinese make it cheaper, even if it’s a pillow cover.” This economic dependency affects local production and, over time, influences political imagination. Concepts associated with China’s governance model—especially centralized party control and the importance of family connections—mirror existing patterns and appeal of China in Kurdistan and federal Iraq. 

It is important to note that when it comes to strategic economic sectors, the KRG is not linked to China in the same way the federal government and the areas under its control are. For example, while the federal government’s energy sector is dominated by Chinese firms, there is only one Chinese-owned company—Addax Petroleum, owned by Sinopec—operating in the Kurdistan region’s oil sector.

How this growing closeness affects US policy  

As China prioritizes securing new markets abroad and ensuring energy security at home, Iraq has become integral to Beijing’s geoeconomic ambitions and economic statecraft in the Middle East region. Over the past two decades, China’s expanding presence has begun to shape Iraq’s economic future, regional role, and relations with the United States. Baghdad now faces the delicate task of balancing ties with both powers to avoid alienating either side. There is an economic and geographical logic driving Iraq’s relationship with China. China is the world’s largest energy importer, and Iraq—one of the world’s top oil producers—naturally falls within Beijing’s orbit of interest. Iraq’s infrastructure gaps and development needs also make Chinese capital and expertise attractive, if not indispensable, while Chinese consumer goods remain affordable for most Iraqis. 

However, the broader implications of this relationship cannot be understood solely through economics. China’s increasing footprint unfolds against the backdrop of intensifying US-China rivalry and the global drift toward multipolarity. Iraq is gradually emerging as a site of subtle competition between these two powers—particularly in areas such as infrastructure (especially energy), digital networks, and potential land-based transit corridors. Yet, given the deeply interconnected nature of today’s global economy and Iraq’s heavy reliance on external actors for technology, investment, consumer products, and security, it is unrealistic to expect Iraq to de-link from either China or the United States. 

Beyond economic logic, Iraq’s deepening engagement with China reflects political calculations and rationale at the domestic, regional, and global levels. Globally, China’s ascent since the mid-2010s has offered states like Iraq an alternative pole through which to diversify partnerships and reduce dependence on the West. Engagement with Beijing thus forms part of Baghdad’s broader hedging strategy—maintaining ties with multiple global actors to avoid overreliance on any single one. 

Domestically, this orientation intensified as Shia parties consolidated unprecedented control of the Iraqi state, particularly after the war against the Islamic State of Iraq and al-Sham (ISIS) and the weakening of Kurdish autonomy and political influence in Iraqi politics after the unsuccessful Kurdish independence bid in 2017. Many among Iraq’s new Iran-backed power brokers view China as a politically neutral strategic partner—one that provides investment without demanding reforms or pressing governance conditions. At the elite level, China appears to have the upper hand in the soft-power contest with Washington concerning the appeal of the two countries and their approaches to Iraq. While Washington’s retreat from democratization and aid has eroded its image, China’s cultural outreach, development model, and messaging resonate with many Iraqis.  

The Iran factor

Regionally, openness toward China has grown since the early 2010s, amid the rise of the Iran-led Shia axis. Many dominant Iraqi Shia parties maintain deep ties with Tehran, and their affinity for China aligns with Iran’s own pursuit of a closer relationship with Beijing. Aware of the risks of being perceived as leaning too heavily toward China—and also Iran, particularly in the aftermath of the October 7, 2023, conflict between Israel and Gaza and the gradual weakening of the Iranian-led axis—Baghdad has recently sought to rebalance its approach by inviting more US investment in its energy sector. 

Iraq’s recent deals with US energy companies such as ExxonMobil, Chevron, and others reflect the recognition among the dominant Shia political class that excessive dependence on China risks political backlash and economic vulnerability, particularly as Washington intensifies efforts to contain Beijing’s global influence. This dynamic highlights the limits of hedging for resource-rich countries like Iraq that lack the structural leverage to shape regional outcomes or reduce dependence on the United States. 

It remains unclear whether Iraq’s renewed outreach to US companies signals a genuine attempt at balanced relations or a tactical effort to ease US pressure determined to squeeze Iraq as part of its maximum pressure campaign against Iran. What is clear is that China’s expanding economic role in Iraq is a growing concern for Washington. Greater Chinese market share means shrinking space for US businesses and, more broadly, a potent erosion of US influence that is more than symbolic. Given that the post-2003 Iraqi order was created through US intervention—and later saved from ISIS’s existential threat through a massive US-led coalition—China’s growing role in Iraq reflects a deeper transformation in the landscape of external influence shaping the country. 

Beijing’s digital infrastructure deals, including telecommunications and cybersecurity, could create new vulnerabilities for US-Iraq security cooperation not unlike Huawei’s engagement with Iraq under Hussein. The use of Chinese companies in strategic sectors—ports, refineries, and data networks—risks limiting the space for US and Western governments and companies’ engagement with Iraq. Crucially, Iraq’s ambitious Development Road Project (DRP) connecting the Gulf to Turkey and Europe could also intersect with China’s BRI, particularly its sea route portion, and diversify Beijing’s options for trade with the Middle East and from there to Europe. Despite a cool initial reception, Beijing now appears open to supporting the Iraqi DRP, perhaps recognizing its value in shortening overland trade routes with Europe. This all fits into China’s geoeconomic strategy, expanding trade, increasing access to critical energy resources, and creating new markets for Chinese companies. 

However, this is not the entire story. Iraq appears to follow a compartmentalized approach to relations with both the United States and China, whereby Baghdad has cultivated deeper ties with China in trade, energy, and telecommunications while remaining heavily dependent on the United States in finance, security, and diplomacy. Revenue from Iraq’s oil exports flows into the Federal Reserve Bank of New York, from which the Central Bank of Iraq withdraws regularly. Iraq’s monetary and financial systems thus remain deeply tethered to the US financial system and Washington’s oversight. Any disruption in this relationship—such as sanctions or delayed clearances—could trigger liquidity crises in Iraq’s fragile economy. 

Iraq’s security dependence on Washington also remains quite firm for now. The Iraqi security forces rely on US intelligence, equipment, and training for operations against ISIS and for broader defense needs. Advanced systems such as F-16s and Abrams tanks further anchor this relationship. Iraq sits at the intersection of three core US priorities: countering Iranian influence, stabilizing global energy markets, and—after the transformations set off by October 7, 2023—rebuilding a regional order friendly to Washington. As part of this broader regional reality security links remain important for both sides, particularly as Iraq’s Shia ruling class feel threatened by the developments over the past couple of years.  

Diplomatic asymmetry is even deeper: Iraqi prime ministers routinely seek White House invitations as symbols of legitimacy and international recognition. Since 2003, Iraqi leaders at the presidential, prime-ministerial, and foreign-ministerial levels have visited Beijing on numerous occasions, yet the only senior Chinese official of comparable rank to visit Iraq during that period was Foreign Minister Wang Yi in February 2014. Iraq invests in the relationship far more than China does. 

This produces a paradox: Iraq remains reliant on US protection but is increasingly integrated into China’s commercial ecosystem. Unless the United States expands its economic engagement, its influence will continue to erode. For much of the Shia elite, China—not the United States—is the preferred long-term partner. Yet Iraq cannot function without engagement with both in some form. Historically, Iraqi attempts to shift too far toward one camp produced destabilization, including coups during the Cold War. The country’s social, economic, and security needs, along with its geopolitical position, require a diversified and compartmentalized approach to major global powers—though not one that entails equal reliance across all sectors. 

Energy is a key arena. China is a major importer of Iraqi oil while increasingly serving as Iraq’s primary supplier of solar panels and renewable technologies. At the same time, China’s domestic energy consumption is shifting. The International Energy Agency (IEA) notes that China’s use of gasoline, jet fuel, and diesel—totaling 8.1 million bpd—declined slightly in 2024 and stood 2.5 percent below 2021 levels. As global oil demand plateaus and buyers gain greater leverage, Iraq has become increasingly anxious not to lose China as a primary customer. 

Demographic and economic trends inside Iraq are particularly important as they further push the country toward China. Rapid urbanization, high birth rates, and low incomes make Iraqi households dependent on inexpensive imported goods. China is often the only viable supplier. As Iraqi society and consumption patterns evolve, so will its economic and political tilt toward Beijing. By contrast, the United States has lost most of its non-military leverage—aside from sanctions and coercive tools—partly due to years of inconsistent engagement. Moreover, the nature of Iraq’s rentier economy, and its governance model built on patron-client relations and the informal patronage networks that sustain it, requires the rapid development of oil resources as the main pillar supporting this system. For the reasons outlined above, Chinese firms represent a more reliable option for Iraq to ensure the continued expansion of its oil sector and the conversion of those revenues into political power. 

Against this backdrop, Iraq’s trajectory suggests an ongoing use of hedging as its primary policy, albeit an uneasy one. Hedging is a strategic behavior through which a state avoids clearly aligning vis-à-vis two powerful actors, maintaining instead an in-between, ambiguous, flexible position. Over the past couple of years, the Shia Coordination Framework-led government under Sudani has noticeably embraced this posture. Yet Iraq’s hedging exercise remains constrained by internal and external pressures, particularly Iran’s influence. Tehran’s networks—militias, political allies, and economic ties—limit Baghdad’s freedom of maneuver. Other constraints include anti-normalization legislation in the Iraqi Parliament targeting Israel, which prevents Iraq from joining the Abraham Accords and expanding ties with US allies. The outcome of recent Iraqi parliamentary elections will likely reinforce this dynamic. Although Sudani’s coalition performed strongly, Iran-aligned militias and parties performed far better, ensuring that hedging will continue—but in a narrow and contested space at least for the foreseeable future. 

Sardar Aziz, PhD, is a researcher, columnist, and adviser, and a nonresidential affiliate at the IRIS center at the American University of Iraq, Sulaimani. He is a former senior adviser to the Kurdistan Parliament in Iraq. He has worked extensively on China and Iraq.

Mohammed A. Salih is a nonresident senior fellow in the Foreign Policy Research Institute’s National Security Program and a researcher and journalist based in the United States. He holds a PhD from the University of Pennsylvania and has written extensively for more than two decades on Iraq, Kurdish, and regional affairs.

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Energy & Environment Energy Markets & Governance

MENASource Oct 6, 2025

Can Iraq and Kuwait transform the Khor Abdullah waterway dispute into a regional diplomacy model?

By Rami Alkhafaji and Safwan Al-Amin

The dispute underscores the complexities of post-conflict border demarcation— and how legal disputes may multiply into geopolitical ones.

Iraq Maritime Security

The Iraq Initiative is driving policy-oriented programs and analysis that advance Iraq’s stability and sovereignty, regional integration, and democratic and economic development. It also aims to promote a strengthened US-Iraq partnership.

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The post In Iraq, China’s long game unfolds appeared first on Atlantic Council.

Shortly thereafter, Saudi Arabia’s minister of finance approved the kingdom’s 2026 borrowing plan, projecting total financing needs of $57.9 billion. The proceeds are intended to fund a projected fiscal deficit of $44 billion, equivalent to 3.3 percent of Saudi Arabia’s gross domestic product (GDP).

This financing was highly successful, but as detailed in this report, the markets do not price Saudi Arabia as AA credit. In fact, Saudi Arabia trades at a discount to single A-rated sovereign debt, suggesting that the kingdom has work to do to build confidence in the country’s ambitious economic transformation plans, while showing the marketplace that this nation has the ability to generate accretive value generating returns.

Notably, while the Saudi Ministry of Finance constructed the 2026 budget on assumptions of slowing aggregate global demand for crude oil, the revenue outlook embedded in the projections implies a more constructive view on oil prices. As detailed in the table below, oil revenue, captured within “Other Revenue,” is budgeted at 64 percent of total revenue in 2026, unchanged from 2025. This suggests that hydrocarbons remain the dominant fiscal pillar, even as diversification accelerates. 

By contrast, Goldman Sachs, in a December 2025 report titled “Saudi Arabia: FY2026 Budget Targets Significant Consolidation,” takes a more skeptical view of the kingdom’s fiscal outlook, driven largely by oil revenue assumptions. Goldman estimates a budget deficit of 6 percent of GDP, compared with the government’s projection of 3.3 percent, implying that Saudi Arabia may ultimately need to borrow additional capital to finance its growth ambitions.

Saudi Arabia’s widening fiscal deficit, alongside a growing current account deficit, reflects an economy firmly in investment-led growth mode. This is simply a function of a government that is spending more on expenditures than revenues, the definition of an expansionary fiscal policy. In addition, a widening current account deficit is by definition an economy investing more than it has in savings. Taken together, this showcases the government’s commitment to funding growth. Sustaining this trajectory will require continued access to both domestic and external financing markets. During the first week of January, the kingdom demonstrated precisely that access by issuing $11.5 billion of senior unsecured bonds, drawing reported demand in excess of $20 billion from global fixed-income investors, particularly for longer-duration tranches.

The transaction underscored Saudi Arabia’s strong market standing, supported by moderate debt levels, manageable debt-service ratios, and substantial foreign reserve buffers. In addition, Saudi Aramco’s partial public listing has created an additional channel through which the state can access and monetize future oil cash flows, enhancing fiscal flexibility alongside sovereign borrowing. Assuming borrowing remains aligned with economic growth and fiscal discipline, access to capital markets should remain durable.

The diversification of the Saudi economy over the past decade has been significant. Non-oil GDP has risen from approximately 56 percent of total GDP in 2016 to roughly 65 percent in 2026, according to data compiled by the Saudi General Authority for Statistics and International Monetary Fund estimates. Nonetheless, oil revenues remain the primary fiscal driver, and any assessment of Saudi Arabia’s budget outlook is incomplete without considering global energy market dynamics.

In its Global Energy Perspective 2025, McKinsey & Company notes that while fossil fuels are likely to retain a meaningful share of the global energy mix beyond 2050, demand is expected to plateau between 2030 and 2035.

Neal Shear, founder of Morgan Stanley’s commodities platform and former global head of sales and trading, observes that “it is hard to accurately predict peak global demand for energy.”

“However, it is much easier to come to a consensus that the secular trend line for fossil fuel demand is downward over the next decade,” he told me.

Shear further argues that today’s crude oil market is increasingly demand-driven rather than supply-driven, rendering global supply dynamics closer to a zero-sum game. Incremental barrels from countries such as Venezuela may displace production elsewhere, rather than expand overall consumption. Over time, absent commensurate supply discipline, a downward-shifting demand curve implies secular downward pressure on prices.

The year 2026 marks the tenth anniversary of Vision 2030, Saudi Arabia’s ambitious economic transformation strategy. The program’s core objective of diversification away from hydrocarbons into sectors such as petrochemicals, tourism and hospitality, mining, healthcare, manufacturing, retail, construction, and finance has materially reshaped the kingdom’s economic landscape over the last decade.

Looking ahead, policymakers could further strengthen market confidence in two key areas. First, financial markets and more broadly investors would welcome greater fiscal transparency, particularly a clearer breakdown of oil-related revenue assumptions and the treatment of Saudi Aramco dividends within the budget framework. As it stands, the Saudi budget does not delineate this dividend in full, so it is not readily transparent to investors how much of the budget is being driven by oil revenues. Second, as investment scales, there should be a stronger emphasis on capital efficiency and risk-adjusted returns. Transparency around outcomes, including those that underperform, would likely enhance, rather than diminish, investor confidence.

The chart below shows that Saudi sovereign bonds trade at wider spreads than those of AA-rated peers, consistent with the kingdom’s split credit ratings. More notable, however, is that spreads also exceed those of single-A sovereign benchmarks, suggesting that markets continue to apply a degree of caution beyond what headline ratings alone would imply. Part of this reflects technical factors, including index inclusion, but it also points to a broader question of confidence as Saudi Arabia advances its Vision 2030 agenda. As the scale of public investment rises, sustained fiscal transparency, clearer articulation of oil-revenue assumptions, and demonstrable capital efficiency will be critical in translating economic transformation into tighter sovereign risk premiums.

Source: Vaneck, JPM Indices (Saudi Arabia Sovereign Spread JPGCSASS Index, EMBIGD A Spread JPSSGDCA Index, EMBIGD AA Spread JPSSGDAA Index)

Markets do not demand perfection; they value clarity, discipline, and resilience. Saudi Arabia’s long-term strategy is coherent, ambitious, and increasingly credible. If executed with continued transparency and fiscal prudence, it has the potential not only to transform the kingdom but to reshape the broader region. The US debt capital markets, for now, appear to agree.

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

The post Why US markets are betting on Saudi Arabia  appeared first on Atlantic Council.

In the good scenario, Delcy Rodríguez, the new leader of the Chavismo regime, serves as a transitional figure on Venezuela’s path to democracy, capitalism, the rule of law—and prosperity largely financed from the country’s substantial oil reserves. In this scenario, Secretary of State Marco Rubio’s apparent plan of stabilization, recovery, and transition succeeds. In tandem, Venezuelan oil production and exports would rise sharply. Still, most analysts hold that oil production challenges will persist even in this best-case scenario.

In the ugly variant, the Chavismo regime largely stays in power but undertakes policies meant to bolster oil production, in line with Washington’s preferences. Markets seem to view this modified status quo as most likely: crude oil prices have modestly fallen while share prices for pure-downstream players like Valero—which could process more heavy crude volumes—have risen. Indeed, if the raid quickly leads to political stability and other supportive conditions, Venezuelan oil production could rise. Still, a renaissance for Venezuelan oil and gas will be difficult to achieve. Even if Washington maintains a single-minded focus on oil extraction, political risks and uncertainty will remain acute, likely ensuring that US companies will remain deeply reluctant to commit huge amounts of capital for “decadal projects.”

Alternatively, in a bad scenario, the raid could trigger significant convulsion in Venezuelan politics and foreshadow a longer and larger military intervention, which would likely send Venezuela’s crude oil production sharply lower. In this case, the loss of Venezuelan crude oil—which is highly suitable for middle distillates like diesel­­—could reverberate throughout global and US energy and food prices. The data suggest that, in the United States, the trucking sector and rural areas are disproportionately exposed to diesel markets and will face affordability pressures if a large-scale military intervention doesn’t go well. While the Trump administration’s seizure of 30 million to 50 million barrels of Venezuelan oil (equivalent to about one to two months of Venezuela’s crude oil exports) will provide some buffer against short-term disruptions, long-duration outages could prove damaging.

As we’ve written previously, Venezuela is less influential in global crude oil markets than it used to be due to declining production, but it nevertheless retains a somewhat more important role in diesel markets. That’s because Venezuela (and Colombia, where the conflict could escalate horizontally) exports heavier crude oil grades that are highly suitable for diesel, while US Gulf Coast complex refineries are configured to process these grades.

The diesel “crack spread”—the difference in price between crude and diesel—indicates that while crude oil prices currently account for 41 percent of diesel prices, other factors also matter, like suitable crude grade availability. The energy consultancy RBN finds that diesel crack spreads are rising to their highest level since early 2024. Internationally, the International Energy Agency reports that global middle distillate markets are already facing price pressure on limited supplies. Accordingly, persistent disruptions to Venezuelan (and potentially Colombian) oil could hold significant impacts for US diesel and trucking markets.

Who will feel the pinch

Given the potential for a diesel price uptick and its effects on the affordability crisis, it’s worth examining how the fuel is consumed. In the United States, diesel consumption is overwhelmingly tilted to transportation, which accounted for over 75 percent of US middle distillate consumption in 2023, by volume. 

Sources: Energy Information Administration, Author’s Calculations.

Accordingly, the more than 3.5 million professional truck drivers would be disproportionately impacted if diesel prices rise. Unsurprisingly, this market and workforce skew away from metropolitan areas, as about 48 percent of truck vehicle miles traveled occur in rural areas. 

But rural areas wouldn’t be the only places affected. A jump in diesel prices would also be felt across much of the United States. State-level distillate fuel oil consumption correlates with population and energy consumption. Texas is the largest distillate fuel oil consumer in absolute terms, followed by California, New York, Pennsylvania, and Florida.

Viewed through the lens of per capita consumption, or distillate intensity, Wyoming’s was the highest at about 983 gallons (assuming that every barrel of distillate holds about 42 gallons). Other distillate-intensive states include North Dakota, Alaska, Nebraska, and New Mexico. While these states do not directly import crude oil from Venezuela (or Colombia), they will nevertheless be impacted if shortages propagate through diesel markets. 

Some of the most distillate-intensive states are surprising. Some reasons for their elevated diesel consumption include their geographic scale, coupled with large rural areas and large industrial sectors. Other reasons relate to fuel economy: diesel consumption, especially on trucks, can rise due to winter weather, high cross-winds, or hilly terrain.

Accordingly, if distillate prices rise due to major, sustained outages in Latin America arising from the US intervention in Venezuela, diesel-reliant states, trucking markets, and rural areas will face disproportionate costs. The initial raid against Maduro was an undeniable tactical success, but the economic costs and strategic tradeoffs of a long-duration and large-scale military intervention in Latin America could prove high.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center and the Indo-Pacific Security Initiative; he also edits the independent China-Russia Report. This article represents his own personal views.

Staff

Joseph Webster

Senior Fellow, Global Energy Center

Global Energy Center Indo-Pacific Security Initiative

Central Asia China

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Dispatches Jan 4, 2026

Venezuelan oil was the enabler, not the prize

By Landon Derentz

It will likely take years to rehabilitate the country’s energy sector and achieve a sizable increase in oil exports.

Energy & Environment Oil and Gas

Dispatches Jan 3, 2026

Experts react: The US just captured Maduro. What’s next for Venezuela and the region?

By Atlantic Council experts

What does the future hold for Venezuela following the US raid that removed Nicolás Maduro from power? Atlantic Council experts share their insights.

Democratic Transitions Latin America

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post How Venezuela’s future will help determine US diesel and trucking costs  appeared first on Atlantic Council.

Bottom lines up front

• US electricity grid planning prioritizes reliability and neglects affordability considerations, which contributes to skyrocketing energy bills. 
• Utilities and government regulators should ensure that the impact on energy affordability is considered in planning for new energy infrastructure buildout. 
• The Department of Energy and Congress should support industry-led efforts to keep costs down by streamlining permitting processes.

At an October meeting of the North American Electric Reliability Corporation, the authority on grid reliability in the United States and Canada, the agency’s president and CEO declared that the United States is facing “a five-alarm fire” when it comes to providing reliable electricity. This was due, he explained, to an “escalating toxic soup” of causes. This warning of a reliability crisis in the US power grid demonstrates a growing problem: power demand is outpacing the installation of new supply. But some resolutions to this reliability crisis are driving prices and electricity bills higher, creating an energy affordability crisis that is every bit as urgent.

Americans are paying more for their power for several reasons. For instance, power companies are making necessary grid upgrades and replacing aging distribution and transmission infrastructure. They are also responding to wildfire- and storm-related damages. But there is another contributing factor as well: increasing electricity demand driven primarily by new data centers and electrification, the costs of which are often (though do not have to be) passed on to consumers.

For example, a report from the independent market monitor for the PJM Interconnection, the grid operator responsible for the power grid across thirteen states and the District of Columbia, and a follow-up investigation by the Union of Concerned Scientists found that PJM customers are paying an additional $13.6 billion for the July 2025 to July 2026 delivery year for upgrades needed solely to accommodate increasing data center capacity. These additional costs effectively force ordinary ratepayers to subsidize the tech industry’s growing power bills. In November, PJM’s market monitor filed a formal complaint to the Federal Energy Regulatory Commission (FERC), suggesting that PJM should not approve any more new large data center interconnections until procedures improve, citing reliability and affordability concerns.

Too often, US grid planning prioritizes reliability and neglects affordability considerations, which contributes to skyrocketing energy bills. According to an August 2024 report from the consulting firm Brattle Group, more than 90 percent of all US transmission investments are made based on the justification that they are needed for reliability. And since utilities can pass most grid upgrade costs directly to consumers, they lack market incentives to optimize their spending on grid infrastructure absent oversight.

In some cases, this singular focus on reliability is leading utilities to forgo grid investments that can help reduce overall costs and improve the financial sustainability of the power system, oftentimes because they lack regulatory incentives to do so. While reliability remains paramount for maintaining a functioning power grid, affordability objectives and the pursuit of grid-related cost savings must become a central pillar of grid planning alongside reliability and resilience.

The gold standard of grid reliability—and its limitations

Grid reliability is in fact under significant threat in many regions across the United States. Power demand is growing rapidly, and generators are reaching retirement age faster than new ones are being built and connected to the grid. However, cost is often underemphasized in grid planning due to the way regulated utilities are structured. Utilities typically earn a guaranteed return on equity for incurred capital expenditures, known as the rate base, and pass operational costs directly to the consumer through rates approved by state public utility commissions and—if the utility’s service territory or a project crosses state lines—FERC.

Since higher capital spending yields a higher return, this model encouraged utilities to build more infrastructure. But it can also incentivize utilities to build more than necessary or pursue incremental upgrades that add up to higher costs, instead of more affordable holistic grid solutions. Without prudent regulation, utilities can stack up unnecessary capital investments (known as “gold plating”) that are then paid by captive consumers. In other cases, utilities lack regulatory incentives to make improvements to the grid, as is the case for many advanced transmission technologies.

As a result, transmission and distribution costs have increased rapidly, which have caused retail rates and bills to rise at a fast pace. Nationally, the average residential electricity rate has increased more than 30 percent since 2020. Moreover, average electricity rates are projected to grow between 15 and 40 percent by 2030, straining already tight household budgets.

The burden has tended to most acutely impact consumers near data center hubs. Seventy percent of the price node increases across the country—the points throughout the grid where prices are determined—were in locations near significant data center activity, with costs growing by as much as 267 percent. Among the regions affected are “Data Center Alley” in Northern Virginia, Silicon Valley, and, increasingly, the Dallas-Fort Worth metropolitan area.

Thus, plans for system upgrades and grid expansion must incorporate cost-benefit analyses alongside reliability considerations, rather than presuming that any reliability benefit justifies the cost. In other words, utilities should use planning and investment criteria that take into account grid upgrades that avoid high generation or operating costs, especially during times of peak demand or extreme weather.

Improving grid planning

There are several grid planning reform efforts that could lower prices for end users and help ensure that costs are properly distributed among ratepayers, all while increasing the pace and volume of the buildout of energy infrastructure needed to meet US power needs.

Beyond Order 1920

FERC’s Order 1920-B is a landmark FERC order issued in April that requires utilities to conduct long-term, ten-year-horizon planning studies to better predict and procure energy infrastructure needs. However, Order 1920-B does not reform existing utility processes, some of which are outdated. Utilities should complement these long-term efforts by reforming existing processes within their authority that are still driven primarily by reliability.

Designate more national interest transmission corridors

The Department of Energy (DOE) should accelerate the designation of additional national interest electric transmission corridors (NIETCs), land predesignated for transmission infrastructure development aimed at improving project timelines and certainty. If successful, this could vastly improve the prospects of building interstate and interregional transmission lines, which are notoriously difficult to complete.

The DOE currently has three NIETCs heading toward approval, but several regions with valuable opportunities to build high-capacity, interstate transmission infrastructure have been dropped from the initial round of designations due in part to concerns over limits to funding and capacity. The DOE should quickly initiate a second round of designations using the latest research, including a recent report on the tremendous value of interregional transmission lines. New transmission infrastructure is urgently needed, so identifying land on which these projects can be built is essential. The NIETC process has thus far contributed little to the development of additional energy infrastructure but could be crucial to informing national grid planning if its progress is accelerated.

Require cost-benefit-based planning and prudent cost allocation

Utilities and energy commissions must develop new, forward-looking grid planning strategies that incorporate cost-benefit analyses and ensure fair cost allocation of investment expenses.

Experts have recommended several reforms for improving planning outcomes. For example, utilities should co-locate generation sites with large loads to reduce system upgrade costs and the risk of grid congestion. Utilities and transmission developers should install advanced transmission technologies that can expand the capabilities of existing infrastructure at lower cost than building new lines. Meanwhile, policymakers should pass legislation and regulation that allows utilities to recover such investments through their rate base. And they should offer energy efficiency and demand response programs to consumers to lower consumption, which would also lower energy bills.

Consideration of alternatives has long been part of utility decision-making. Incorporating cost-benefit analyses and balancing multiple variables in grid planning is core to securing a reliable and affordable power system.

Develop new rate structures for large-load and “reliability-driven” customers

Utilities should also consider new rate designs for data centers and other large-load customers that are driving the need for new infrastructure. They should also consider rate design for customers with stringent reliability needs, such as hospitals, fire stations, and critical telecommunications facilities. Customers who are less willing to pay to avoid blackouts should be able to opt in to demand response programs, which can curtail power delivery when necessary.

System operators should also consider how market structures may lead to unfair expense allocation due to grid upgrades that are only required for data centers. Proper cost allocation between the primary beneficiaries of network improvements is critical, especially when data centers are outpacing every other demand category.

For instance, some utilities are considering creating a new customer class for data centers—in addition to residential, commercial, and industrial users—with a specialized rate. Other utilities have enacted temporary moratoria on new data center interconnections so that they can reliably serve the existing load while new rules are established for data centers. Calls for moratoria on new data centers are gaining national traction. On the markets side, Southwest Power Pool, which serves areas spanning from Montana to Arkansas, has proposed an accelerated interconnection process for “high-impact large loads.” The DOE has also requested that FERC create a rulemaking for large load interconnection to interstate lines, which could introduce solutions to meet the energy demand challenge of hyperscale data centers nationwide. Independent organizations should analyze these solutions to determine which are effective and replicable in other service territories.

How federal action can shape the grid

There is broad consensus in Congress on the urgency to accelerate construction of new grid infrastructure. To unlock a better US power system, legislators should supplement industry-led efforts by streamlining permitting processes and mandating proactive, cost-benefit-based system planning. In September, a bipartisan caucus released a Permitting Reform Framework, which includes several recommendations that could help control costs.

Public-private partnerships can also accelerate development timelines, increase investor certainty, and decrease the cost of capital. This month, the DOE extended a $1.6 billion loan guarantee to enable the reconductoring of five thousand miles of transmission infrastructure in five states.

These partnerships require consistency in agency decision-making on investments. In July, the DOE canceled a $4.9 billion loan guarantee for the Grain Belt Express line that would have delivered low-cost power from Kansas to Indiana. As the DOE continues to review existing loan guarantee program contracts, a higher threshold should be applied to transmission projects before initiating cancellation.

Consider the costs

While reliability is critical, transmission planners and government entities must also prioritize cost-effectiveness. Failing to do so will risk saddling Americans with high-cost power by stalling the buildout of transmission infrastructure and preventing less expensive generation solutions. Relying solely on old generation will increase costs. A report by the energy consulting firm Grid Strategies published in August estimated that DOE orders to keep coal plants open past their economic life will cost consumers at least $3.1 billion.

Instead, the DOE should focus on facilitating the rapid deployment of new, cost-effective power grid and generation assets. The United States needs an all-of-the-above approach to grid solutions and electricity generation, because when all options are allowed to compete, the result is efficient markets, lower costs, and reliable power. Effective transmission systems enable this competition. By considering available cost savings alongside reliability in grid planning, planners and regulators can ensure a resilient, modern power grid that delivers affordable electricity for all Americans.

The post Don’t solve the power reliability crisis by creating an affordability crisis appeared first on Atlantic Council.

All of this unfolded against the backdrop of a new administration in Washington that has been unafraid to shake up decades of US diplomatic conventions.

As 2025 comes to a close, our senior analysts at the Atlantic Council’s Middle East Programs unpack the most prominent trends and topics they are tracking for the new year.

Khalid Azim: Three trends shaping the economic landscape

Gissou Nia: Demands for justice—and protests driven by the thirsty

Karim Mezran: North Africa is a rising priority for US policy

Ahmed Fouad Alkhatib: Key questions remain for Palestinians

Victoria J. Taylor: Iraq must maintain unprecedented stability

Daniel B. Shapiro: A political transition in Iran approaches

Nathanael Swanson: Will the Israel-Iran cease-fire hold?

Jonathan Panikoff: A duality of possible trajectories

Three trends shaping the economic landscape

Three major macro trends will shape the Middle East and North Africa in 2026, each carrying profound implications for the region’s economic trajectory.

1. The pressure of lower energy prices
As energy revenues soften, governments across the region will be forced to make more disciplined, risk-adjusted investment decisions. The era of abundant fiscal cushions is shifting toward one that requires sharper prioritization, operational efficiency, and a clearer sense of expected returns. This will test policymakers’ ability to allocate capital effectively and to reduce long-standing subsidies and support for entrenched constituencies. These choices become even more consequential as a growing cohort of young people demand economic opportunity, purpose, and social mobility.

2. Rising debt and the cost of ambition
Fiscal tightening will coincide with an accelerating need for investment. Across the Gulf, governments are committing billions to data centers, artificial intelligence ecosystems, new power generation, and other foundational infrastructure. These projects will increasingly be financed through borrowing, especially as the current account deficit grows. The result will be higher debt levels and rising debt-servicing costs. Countries that clearly articulate their economic value proposition and demonstrate credible reform will have a competitive advantage in the capital markets. Those that do not may face steeper financing costs and slower momentum in their diversification strategies.

3. Vision 2030 ten year anniversary: A regional bellwether
Saudi Arabia’s Vision 2030 has already reshaped the kingdom’s economic and social landscape through diversification, investment in future industries, and the creation of a more open and optimistic society. The plan’s tenth anniversary in 2026 marks a critical milestone, not only for the kingdom but for the region. The next decade will be defined not by the wealth beneath the ground, but by the wealth of human talent above it. How effectively the kingdom transitions from resource-driven growth to human capital-driven growth will influence the MENA region’s competitiveness for a generation.

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

Related reading

MENASource

Nov 20, 2025

Saudi Arabia’s next horizon: Building human capital beyond Vision 2030

By Khalid Azim

Riyadh still needs to take fully support small and medium-sized enterprises—the true engines of job creation.

Economy & Business Middle East

Demands for justice—and protests driven by the thirsty

In 2026, expect to see more widespread protest movements for change across the Middle East and North Africa fueled by climate change and authoritarian mismanagement. Analysis of global protest movements in 2025 focused heavily on the young age of the protesters. While youth demographics have gained relevance as new communication tools have emerged over the last decades (in 2011, it was Twitter organizing the youth in the “Arab Spring”; in 2025, it’s the gaming app Discord organizing Morocco’s “Gen Z” protests), the evergreen undercurrent is frustration with corruption and elites. Resources have become scarcer due to global warming and authoritarian mismanagement, and the globe has become increasingly and overtly transactional as it shuns diplomacy in favor of kinetic means and “might is right” politics. The Middle East and North Africa are profoundly impacted by both these negative trends. With water running out in Tehran and water instability around the Nile Basin and the Tigris and Euphrates River, expect the next wave of regional protests to be driven not just by the youth, but by the thirsty.

Regional victim and survivor-centric demands for justice will also continue to grow in 2026 in countries that are emerging from conflict, experiencing government transitions, or where restive populations wish to usher in a change of rule. There is no clearer example than in Syria, where Assad’s exit one year ago opened the space for a new Syria and where a previously exiled network of Syrian lawyers, researchers, and advocates now work on transitional justice processes from inside their own country. In Iran, where the population is publicly demanding regime change, victims of protest violence, executions, and custodial deaths have organized powerful advocacy groups to demand that international processes deliver justice where domestic courts are unable and unwilling to do the job. And across the region, while many governments have been complicit in the violence in Gaza, the Arab street stands at odds with those governments and instead has demanded—alongside much of the world—that the perpetrators of the violence in Gaza be held to account.

Gissou Nia is the director of the Strategic Litigation Project at the Atlantic Council.

Related reading

MENASource

Dec 8, 2025

States shouldn’t waste the chance to establish a Syria Victims Fund

By Kate Springs, Celeste Kmiotek

A centralized fund would better support victims of international law violations in Syria, who face unique challenges.

Democratic Transitions International Norms

North Africa is a rising priority for US policy

North Africa is poised to move closer to the center of US regional policy for 2026. The past year of quiet US engagement, including the work of US President Donald Trump’s Senior Advisor Massad Boulos, is beginning to reduce tensions and open political space. Algeria and Morocco are edging towards some degree of a detente, creating space for practical steps on the Western Sahara file.

Additionally, Libya may see modest but meaningful progress. Headway on an agreement between the divided governments on a unified development funding mechanism may reduce parallel spending and put less pressure on the dinar, as well as release the funds for long-awaited reconstruction and modernization projects. The decision to include Libyan units from both east and west in AFRICOM’s Flintlock 2026 special operations forces exercise suggests an incremental movement on military unification in Libya, an area where US diplomacy with key partners has grown more active.

Egypt will remain an integral partner as Washington tries to deal with situations in Gaza, states located on the Red Sea, and Sudan. At the same time, renewed attention to commercial diplomacy signals a shift toward advancing US business interests across North Africa.

Taken together, these dynamics make the region harder to overlook and suggest that 2026 may be the year North Africa becomes a sustained policy priority in Washington.

Karim Mezran is the director of the North Africa Initiative and resident senior fellow with the Rafik Hariri Center and Middle East Programs at the Atlantic Council.

Related reading

MENASource

Oct 3, 2025

US, Italy, and Turkey alignment could push the needle in Libya

By Frank Talbot and Karim Mezran

The US, Italy and Turkey can—through balanced diplomacy—reinforce the economic opportunities presented by institutional unification in Libya.

Italy Libya

Key questions remain for Palestinians

This was a tectonic year of realignments for the Palestinian people, as well as their heavily divided and largely powerless leadership. Next year is likely to be equally important and trend-setting—and four major threads have emerged that could shape its trajectory.

For Palestinians and what’s next for Gaza, the top four trends to look for in 2026 are the following:

1. The Trump administration’s commitment to the Palestinian issue and its willingness to engage the Palestinian Authority, which remains subject to US sanctions and restrictions. Will elements of a comprehensive peace deal between Palestinians and Israelis, like the one that Trump proposed during his first term, return?
2. What becomes of the Gaza cease-fire that the United States and international players are hoping to cement into a lasting peace deal that transforms the coastal enclave? The year 2026 is either going to be one in which Hamas is disarmed and fundamentally changed—or it will be one in which the Palestinian terror group continues to dominate Gaza’s affairs and prevent substantive change to revitalize the decimated Strip after two years of devastating warfare.
3. The prospect of Saudi-Israeli normalization—which could unlock immense potential for the kingdom, the Palestinians, Israel’s regional integration, and a regional anti-Iran coalition—is enormous. The year 2026 will set the tone for whether Saudi Arabia proceeds with integration based on its often-stated requirement for Palestinian statehood, or if this ends up in further stalemate and stagnation.
4. The fourth critically significant trend to watch is the impact the Gaza war and Israel will have on influencing voters in the upcoming midterm elections. As with the Trump election, this issue increasingly played a role in rallying US voters to the ballot box, including the high-profile race to elect New York City Mayor-Elect Zohran Mamdani. The year 2026 will reveal whether this trend persists or if it is a fad that passes once the Gaza war comes to a more permanent end.

Ultimately, 2026 will either mark the end of the Gaza war and the initiation of reconstruction and hope in the Strip—or it will perpetuate a state of stagnation and stalemate, risking a return to fighting, devastation, and more tragic deaths.

Ahmed Fouad Alkhatib is the director of Realign For Palestine at the Atlantic Council.

Related reading

MENASource

Nov 10, 2025

A little-discussed point in Trump’s Gaza plan could be an opportunity to build interfaith understanding

By Peter Mandaville

Peace efforts don’t need more gleaming Abrahamic baubles, they need a genuine commitment to supporting grassroots religious peacebuilding.

Civil Society Freedom and Prosperity

Iraq must maintain unprecedented stability

Amid continued regional turmoil, Iraq ended 2025 in a period of relative stability and security, avoiding being drawn into the Twelve Day War between Israel, Iran, and the United States—and holding successful parliamentary elections. The challenge for Iraqi political leaders in 2026 will not only be to maintain this unprecedented stability, but also to navigate Trump administration pressure to rein in Iran-aligned militias and avoid being pulled into the broader US maximum pressure campaign against Iran. Iraq is also likely to continue its efforts to appeal to the Trump administration through investment, pitching new energy deals to US companies, but it is not yet clear whether these efforts will be successful.

With Iranian influence in the region at an all-time low, Iraqi leaders have an opportunity to forge a more independent foreign policy that prioritizes continued partnership with the United States and differentiates Iraqi from Iranian interests. Core to this effort will be progress toward Iraq’s regional integration and strengthened political and economic ties to the Gulf and other regional partners such as Jordan and Egypt. In the face of Iraqi efforts to challenge the militias and strengthen partnerships with the United States and the Gulf, 2026 may bring attempts by Iran and Iran-aligned militias to act as spoilers who obstruct Iraq’s progress and imperil Iraq’s stability. Iraq’s next prime minister has an opportunity to transform the country.

The next year will be critical in determining whether the Iraqi government can seize the opportunity and whether the United States and other regional partners will support it in doing so.

Victoria J. Taylor is the director of the Iraq Initiative in the Atlantic Council’s Middle East program.

Related reading

Dispatches

Dec 10, 2025

Dispatch from Iraq: The biggest challenge awaiting the country’s next prime minister

By Victoria J. Taylor 

A recent visit to Iraq following parliamentary elections reveals a growing divide between the political elite and the people.

Elections Iraq

A political transition in Iran approaches

Political transitions are hard to predict, but there is no doubt Iran is approaching one. With a frail, unpopular, eighty-six-year-old Supreme Leader Ayatollah Ali Khamenei nearing his actuarial and conceivably political limits, 2026 could be the year.

Any transition has the potential to unleash dramatic changes in Iran, across the region, and in relations with the United States. The potential positive implications of new Iranian leadership and a change of approach are massive: relief from brutal suppression for the Iranian people, new possibilities in nuclear diplomacy and toward normalization with the United States, broadened detente with Iran’s Arab neighbors, and an end to the arming of violent terrorist proxies across the region that have squandered hundreds of billions of dollars of Iranian resources—driven by an ideological crusade to destroy Israel—while the Iranian people endure manmade water and electricity shortages. The beneficial effects would be felt from Iran to Lebanon to Gaza to Yemen and beyond.

None of this is preordained or automatic. A transition could cement a new generation of the Islamic Republic’s clerical leadership, bring to power an even more hardline Islamic Revolutionary Guard Corps, or devolve into chaos and civil war with massively destabilizing effects. What Washington should engage in through 2026 is transition planning—not in order to cause a regime change, which must be left to the Iranian people, but to be prepared to provide support for the Iranian people, resources and expertise, potential sanctions relief, and coordination with international partners to assist in steering a transition when it comes toward one of the better possible outcomes. The United States has moved smartly in 2025 to support a stable Syrian transition, and while the jury is still out on long-term stability there, there has been significant progress. An even more consequential transition awaits in Iran. Washington must not be caught flat-footed.

Daniel B. Shapiro is a distinguished fellow with the Atlantic Council’s Scowcroft Middle East Security Initiative.

Will the Israel-Iran cease-fire hold?

Following the Twelve Day War in June, Iran retains large quantities of highly enriched uranium and advanced centrifuges, without oversight by the International Atomic Energy Agency. At the same time, while Iran’s missile program and support for nonstate proxies were diminished, Iran is rebuilding its capabilities and still threatens US, Israeli, and regional security.

After initially declaring Iran’s nuclear program obliterated, Trump has also repeatedly called for resumed negotiations and a new nuclear deal with Tehran. Although still nominally implementing the US “maximum pressure” campaign, Trump also made a high-profile gesture by inviting Iranian President Masoud Pezeshkian to the Gaza Peace Summit in October.

For its part, Iran appears to remain in a largely reactionary posture. It is attempting to rebuild its missile and defense capabilities but is not currently enriching uranium or advancing its nuclear program (that we know of). Foreign Minister Abbas Araghchi says Iran is open to talks at the United Nations, but also foolishly rejected the Cairo invitation. Israeli Prime Minister Benjamin Netanyahu has responded by reminding the world of the Iranian missile threat and increasingly targeting Iranian proxies. There is no written cease-fire in place, and continued peace is partially reliant on Trump holding Netanyahu back. As Israeli elections approach, will Trump’s “complete and total ceasefire” hold? Will Iran do something that gives the Israeli’s an excuse or opportunity to re-engage Iran militarily? Or will Iran give negotiations another chance? Either way, 2026 should make for a pivotal year for Iran.

Nathanael Swanson is a resident senior fellow and director of the Iran Strategy Project at the Atlantic Council’s Scowcroft Middle East Security Initiative.

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By Daniel B. Shapiro

The Israeli prime minister’s preferred path to survive a treacherous election will be to show Israeli voters that he is advancing their country’s regional integration and staying within the US president’s embrace.

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A duality of possible trajectories

2026 is a year of potential opportunity—and potential peril—for the Middle East.

Gulf states are determined to advance their political, economic, and security autonomy. Syria and Lebanon could either emerge as models of forward movement from instability or revert to sectarian strife and conflict. Pockets of normalcy could continue to advance in Iraq as exists today in parts of Baghdad and other cities, or it could descend back into political stasis and conflict. Israel could find itself more secure in the region by continuing to undertake kinetic strikes, or it could choose the path of less violence by completing meaningful security and cease-fire agreements with its neighbors. Choose the wrong option, however, and Israel could find itself more vulnerable to threats on its borders, not less. Palestinians could find space to grieve and begin to rebuild after two years of devastation—or face continued violence from West Bank settlers and a renewed war in Gaza, as well as some intra-Palestinian conflict. Jordan and Egypt will continue to muddle through their economic challenges and associated domestic social and political pressures, or this will be the year that they face collapse, and the world will look back and say the warning signs were there, we just missed them. 

Most of the region has an opportunity at this moment in which it can seize and advance its desire for greater autonomy, global influence, and further integration. The Middle East can envision a calmer, more prosperous region driven by technological opportunity across sectors, including by leveraging artificial intelligence and US-exported advanced chips, while taking advantage of the economic integration pathways that are being developed, such as IMEC.

But the duality of possible trajectories laid out above reflects that in the Middle East, more often than not, positive opportunities are interrupted by internal or exogenous factors that regional capitals have to manage in a manner they did not expect. How the region grapples with the enduring and emerging risks of 2026 will determine whether it can prosper as a whole or whether only some will thrive while many continue to struggle. But if those regional countries that are advancing economically, politically, socially, and in their security only look inwards and do not seek to stabilize their neighbors facing social and physical insecurity, they will risk the latter impeding their development, as well. And then 2026 will once again be a year of missed regional opportunities instead of progress.

Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East programs.

The post What will 2026 bring for the Middle East and North Africa? appeared first on Atlantic Council.

On November 8, Mercedes Sappuppo, nonresident fellow at the Atlantic Council’s Eurasia Center, was quoted in Kyiv Post on the one-year exemption for Hungarian imports of Russian gas.

Fellow

Mercedes Sapuppo

Nonresident Fellow

Eurasia Center

Belarus Civil Society

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The decision to impose a complete ban on Russian gas is the latest stage in ongoing efforts to exclude the Kremlin from European energy markets. Since Russia began its full-scale invasion of Ukraine in February 2022, Moscow has lost nearly 80 percent of its European market share after curtailing supplies to undermine Western support for Ukraine. Even so, Russia has earned no less than €215 billion during the wartime period through the reduced but ongoing sale of gas to some EU clients.

EU policymakers now say European consumers can no longer bankroll Russia’s war budget. The move is timely because Europe could soon benefit from an abundance of liquefied natural gas (LNG) as the United States and Qatar are set to double their production in the upcoming years. However, there are still many challenges and possible loopholes that could stymie the process.

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.

A number of legislative complexities will need to be addressed during negotiations to determine the final version of the ban, with talks expected to continue into next year. The European Commission published the first draft of the phaseout roadmap for imports of Russian pipeline and liquefied natural gas during summer 2025. The document stipulated that short-term contracts of less than a year would be discontinued in 2026, while longer-term contracts would be terminated by January 2028.

The draft proposal raised some eyebrows, particularly due to the introduction of an article suggesting that the ban could be temporarily lifted in case of market emergencies. Contrary to expectations, the clause was not pushed through by Hungary and Slovakia, the EU’s most Kremlin-friendly Russian gas buyers. Instead, it was introduced under pressure from Spain, where several companies still hold long-term LNG import contracts with Russian producers.

The text has been reviewed by both the European Parliament and the Council of Ministers, with the former pushing for even more ambitious terms. For example, MEPs would like to see all imports terminated by 2027, a year earlier than initially stated by the European Commission. They also insist on closing loopholes by targeting circumvention risks.

The draft version adopted by the Council of Ministers aligns to a large degree with the version circulated by the European Commission and continues to include an emergency brake. The final text will have to be negotiated as part of talks involving the European Parliament, Council of Ministers, and European Commission.

To further complicate matters, the EU recently adopted its nineteenth Russian sanctions package, which includes a ban on Russian LNG imports from 2027, a year earlier than the deadline proposed by the EU’s own phaseout roadmap. This fast-tracked LNG ban was likely introduced in response to pressure from US President Donald Trump, who has singled out Europe for continuing to buy Russian fossil fuels.

While this sanctions-mandated ban may lead to an earlier block on Russian LNG exports, many observers fear that it is insufficiently robust and could be overturned, since EU sanctions are up for review every six months and require unanimous backing in order to be extended. This means the fast-tracked LNG ban could be vulnerable to opposition from any individual EU member.

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While the legislative path toward a full EU ban on Russian gas imports remains long and complex, enforcement may prove even more difficult. The ban enjoys strong political backing across Europe, but there are widespread concerns that the Kremlin will try to identify potential loopholes to evade the ban.

Russian gas is currently exported to Europe via the Black Sea and Turkey, using a dedicated pipeline transporting the gas to the Balkans and Hungary. The EU has included this entry point in legislation and notes that flows must stop from 2028, but Russian gas arriving in Turkey via an interconnection point nearby could be relabelled and sold under a different name. The risk of relabelling Russian gas also extends to the entire bloc because there are still a number of companies with large import portfolios which hold long-term LNG contracts with Russian producers.

Regulations related to the enforcement of the EU ban, including penalties for potential breaches, will need to be reviewed and tightened up. Existing EU proposals may not be sufficient, while it is still unclear how violations will be penalised. This must be addressed in order to deter non-compliance.

EU officials are well aware that Moscow will fight efforts to exclude it from lucrative European markets. Deprived of fossil fuel revenue and with its economy facing mounting difficulties, the Kremlin will seek any opportunity to continue selling oil and gas to Europe. Allowing loopholes to remain could create large grey areas in European energy markets that would fuel Russia’s war in Ukraine and allow the Kremlin to retain leverage over Europe.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

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North America stands at a pivotal juncture as the United States, Canada, and Mexico navigate shifting policy priorities around economic and industrial sovereignty in the energy sector. At the same time, North America boasts an abundance of energy resources in both production and manufacturing capacity. With a solid trilateral trade foundation already in place, Mexico can play a unique role in bolstering regional security resilience through deeper coordination on cross-border supply chains, manufacturing, and energy trade.

Strategic integration of regional energy resources will be critical to realizing North America’s full potential as an energy powerhouse. With its expanding natural gas sector, growing LNG export capacity, and increasing integration and leadership into advanced manufacturing sectors such as semiconductors and electric vehicles, Mexico can strengthen North America’s energy resilience and competitiveness. Enhanced cross-border cooperation on energy infrastructure, supply chains, and technology transfer would drive local energy stability while lowering regional costs and stabilizing the grid.

As global energy value chains become more concentrated and China continues to dominate them, North American energy security takes on a renewed importance. The upcoming United States-Mexico-Canada Agreement (USMCA) review offers an opportunity to advance policy coordination, align industrial strategy, and build out more integrated energy markets, securing North America’s collective position as a global energy powerhouse. 

Juan José Gómez-Camacho is a member of the board of directors of Citibank Mexico and the Board of Trustees of the Migration Policy Institute. He provides strategic advice to companies investing and operating in North America, particularly in light of the current political and economic climate.

Additionally, he is a professor and senior fellow at the Johns Hopkins University School of Advanced International Studies, where he teaches and lectures on global challenges and North American affairs.

Liliana Diaz is a nonresident senior fellow with the Atlantic Council Global Energy Center. She is also an adjunct professor of energy, climate policy, and markets in the Americas at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University, a lecturer at leading energy industry conferences, and a contributor to journals on the development of energy sources and markets, as well as clean technologies and innovation.

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The post Forging North America’s energy advantage: Mexico’s pivotal role appeared first on Atlantic Council.

The timing of this sudden activity is no coincidence. Iraqi Prime Minister Mohammed Shia al-Sudani has discovered what the Kurdistan Regional Government (KRG) learned long ago: Oil and gas deals buy political influence in Washington. He is also hoping that the new deals will buy him US backing for a second term. Thus, at least in part, the latest activity reflects a calculated political dance between Baghdad and Washington.

But it is unclear whether this strategy will bear lasting fruit for either al-Sudani or the oil companies—largely because everything will depend on the outcome of Iraq’s upcoming elections and the messy government formation that will follow. As such, the surge in US company interest represents both opportunity and risk in a country where political calculations can override commercial logic overnight.

Why US firms are suddenly interested

The commercial logic for the companies themselves is straightforward. Iraq offers some of the world’s cheapest-to-produce oil, on a scale that matters to the biggest international oil companies. Few places can match Iraq’s combination of low extraction costs and massive reserves. For companies facing depletion elsewhere and needing to build long-term supply, Iraq represents one of the last great opportunities.

ExxonMobil and Chevron have an additional motivation, as they seek insurance against potential problems in Kazakhstan—where their operations represent sizeable assets for both firms. The current government there is seeking to modify contracts to secure more revenues for the state, and if ExxonMobil’s or Chevron’s ventures in Kazakhstan do face difficulties, Iraqi production could provide crucial backup.

But what has really changed the game in Iraq for US firms is the new contracts on offer. The old technical service agreements first introduced by Iraq’s oil ministry in 2009—with their per-barrel fees and limited upside—drove away many US investors, including Chevron, which many in the oil industry had regarded as the partner of choice in postwar Iraq. The recent deals signed by the US firms are different. Companies negotiated directly with Iraq’s oil ministry based on a contractual formula that offers the firms a larger share of overall profits and grants them access to physical barrels of crude that they can trade to their advantage. These are not just better terms; they are fundamentally different agreements that will improve the oil companies’ bottom line.

Baghdad’s political calculus

Commercial considerations only tell half the story. Al-Sudani’s rush to sign deals with US firms over the past few months is fundamentally about political survival, both his own and Iraq’s.

Energy deals, beginning with earlier agreements inked with TotalEnergies in 2023 and BP* in 2024, have been an important element of the prime minister’s ambitious capital investment agenda, which he has used to project the image of an effective administrator among Iraqis as he pushes for a second term in office. With elections fast approaching, he needs more wins to maintain his political momentum, which he hopes to turn into votes.

Al-Sudani’s emphasis on building partnerships with US firms also reveals deeper anxieties. Rising tensions with Washington since the summer over Iraq’s long-standing economic, political, and security ties to Iran—including allegations that Iraqi groups were smuggling Iranian crude—have sparked genuine fear in Baghdad about potential sanctions on Iraq’s oil industry (the country’s economic lifeline and a major supplier to global oil markets). The Iraqi government also fears that Israeli military strikes against Iran-supported Islamist Shia militias in Iraq remain a possibility and that only the United States can keep Israel at bay. Consequently, the prime minister has sought to appeal to US President Donald Trump’s transactional instincts by delivering what his administration often values most: commercial opportunities for US companies.

The strategy is borrowed directly from the KRG’s playbook. For years, the KRG has parlayed relatively minor energy deals to bolster its already outsized political influence in Washington. Al-Sudani is attempting the same maneuver on a grander scale, using major oil contracts as both shield and sword—protection against US economic punishment and leverage for political support. His calculation appears to be that US companies with billions at stake will become important de facto lobbyists for Baghdad in Washington, arguing against policies that might destabilize their investments.

So far, the results of this strategy have been mixed. While the Trump administration has not imposed the harshest measures al-Sudani feared, such as sanctions on senior political figures or on officials in the State Oil Marketing Organization, Iraq has not escaped unscathed as Washington pushes Baghdad to disarm Iran-linked militias. In its latest sanctions move, the US Treasury earlier this month targeted an Iraqi state firm for the first time (al-Muhandis General Company), which Washington alleges is associated with the US-designated group Kataib Hezbollah. The move was a stinging rebuke to al-Sudani, and it embarrassed him domestically in light of his efforts to court the Trump administration. The complicated political and security relationship between the Iran-linked militias and the Iraqi government makes disbanding the armed groups unlikely in the short term, which in turn could lead to more punitive measures if Iraq and Iran hawks in Washington get their way. The oil card, it seems, only buys so much protection.

The election wild card

The upcoming elections in November, and the government-formation circus that is expected to follow, could further complicate things for US investors. Indeed, Iraq’s attractiveness could quickly diminish depending on the outcome.

Al-Sudani’s alliance is favored to win a simple majority, and he is campaigning hard on promises to accelerate his national investment program. Behind closed doors, my sources in Iraq also argue that only he can manage the relationship with Washington. Given his track record so far, a second al-Sudani term would likely mean continued momentum for US investment and perhaps even better terms for US investors.

But Iraqi politics rarely follow simple scripts. Government formation traditionally takes months of horse-trading, as all of Iraq’s major parties seek to reach consensus on powersharing and appointments, paralyzing decision-making in the interim. More importantly, the main Shia Islamist factions—who ultimately choose the prime minister—mostly want al-Sudani gone. It is quietly understood that al-Sudani’s rivals see him as too independent, too powerful, and therefore as a potential threat to their parochial interests and patronage networks. Al-Sudani’s success in centralizing decision-making, and his domestic popularity, have made him dangerous in their eyes. Washington also seems lukewarm about him, despite his commercial overtures, viewing him as too willing to accommodate Iranian interests when necessary.

The electoral math is crucial. Iraqi politics is not about simple majorities but intra-sectarian dynamics. Al-Sudani needs to win not just an incontrovertible majority of “Shia” seats but the right Shia political configuration as well. If al-Sudani fails to win the majority he needs, and his rivals among the established Islamist Shia parties unite against him, a simple majority will not matter. He will be pushed aside in favor of a more pliable and less dangerous alternative.

Al-Sudani’s departure will not necessarily end efforts to attract US investment, but it will remove the most administratively effective post-2003 Iraqi premier. Through personal oversight and a strengthened prime minister’s office, al-Sudani has fast-tracked negotiations with US firms and pushed deals to completion and implementation in ways his predecessors—including previous US favorites—never managed.

This effectiveness is precisely what his rivals fear and want to eliminate. The risk for US companies is getting a new prime minister who embodies the administrative ineffectiveness of past Iraqi leaders, resurrecting the bureaucratic problems that drove many of these same firms away before. Without Sudani’s administrative experience, centralized authority, and political will to push things through, Iraq’s energy bureaucracy risks reverting to its natural state: gridlock punctuated by occasional decision-making.

The bigger picture

Even with increased US investment, Baghdad may find itself at odds with the Trump administration. US strategic interest in Iraq continues to diminish. If oil deals no longer provide political protection, Baghdad’s incentive to prioritize US companies diminishes. Worse, if Washington perceives that the new government in Baghdad is tilting more towards Iran—or even that it simply has the wrong factional balance—the United States could trigger some of the very sanctions al-Sudani has worked to avoid.

If relations do sour, US firms could pay a price. Investment opportunities are not just carrots for Baghdad to offer Washington; they can also become sticks to signal displeasure. While the United States holds most of the leverage, Iraq has shown it is willing to play this game when pushed.

The fundamental reality is that above-ground factors—politics, personalities, and US-Iraq relations—will continue to matter more than geology or commercial terms for US firms in Iraq. Al-Sudani has created a window of opportunity, but windows in Iraq have a habit of slamming shut unexpectedly.

US energy companies returning to Iraq are betting that political winds will remain favorable. They may even be banking on al-Sudani’s survival, continued accommodation between Baghdad and Washington, and their ability to navigate Iraq’s fractious politics. It is a gamble because the next phase of Iraqi politics is uncertain, and elections throw up surprises. The question is not whether Iraq offers attractive opportunities (it does), but rather how the political risks unfold to shape the investment environment.

So, for now, US firms are back in Iraq. Whether their outlook is as propitious a year from now depends entirely on how Iraq’s political drama develops.

Raad Alkadiri is managing partner at 3TEN32 Associates, an international advisory group that assists corporations and governments in navigating the complex political, economic, and social trends that shape the energy sector. Its clients include BP.

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In the long run, a weakened Russia and a Ukraine that succeeds in reclaiming as much of its occupied territory as possible is in line with Turkey’s interests, as it would reinforce Ankara’s strategic role in the Black Sea and the Mediterranean Sea. This would encourage both the United States and the European Union (EU) to include Turkey in bilateral and multilateral defense projects, as well as to supply Turkey with the military equipment it needs.

But in the short term, Turkey’s close energy cooperation with Russia presents a challenge. Trump’s demand that Europe and NATO allies end their energy trade with Russia, which he repeated both in his United Nations General Assembly (UNGA) opening speech and in front of the press with Erdoğan, is actually something that Turkey has been taking precautions about for a long time. However, Trump’s call to stop importing Russian oil comes as Washington and Ankara are expanding their energy cooperation. In the same week as the White House meeting, the United States and Turkey signed a Memorandum of Understanding on Strategic Civil Nuclear Cooperation and Turkey’s state-owned BOTAŞ signed a major agreement to import US liquefied natural gas (LNG). In addition to its agreements with US companies, Turkey has signed LNG deals totaling 15 billion cubic meters (bcm) with several global firms.

From now through 2028, Turkey could source up to 36 percent of the gas it imported from Russia in 2024 from new suppliers. This diversification is significant, as Turkey’s twenty-five-year, 16 bcm annual gas agreement with Russia is set to expire in 2026. This step will substantially weaken Russia’s position as a natural gas exporter to Turkey and increase Ankara’s bargaining power. However, in the near term, it does not seem likely that Turkey will completely end its energy relationship with Russia. Thus, the increasing energy and trade cooperation between Turkey and the United States should be read as both a furthering of Turkish-US bilateral relations and an effort to curb Russian influence.  

With political leadership in Turkey and the United States doing the groundwork, companies from both countries can explore opportunities to cooperate in the South Caucasus, Iraq, Syria, and Libya, potentially contributing to prosperity and peace in these areas.

Turkey’s efforts to diversify its energy sources

Long before Russia’s full-scale invasion of Ukraine, Turkey realized that Russia wouldn’t hesitate to use energy as a weapon. It learned this lesson when Gazprom cut Turkey’s gas supply by 50 percent during the harsh winter of 2016 in retaliation for the downing of a Russian jet. In response, Turkey took steps to ensure its own energy security while contributing to that of Europe.

Turkey significantly diversified its energy sources and mix by increasing renewables and importing LNG, becoming the second-largest importer of US LNG in Europe in 2017. It also increased its gas storage capacity, ranking second in Europe in terms of LNG regasification capacity in 2024, with three floating storage regasification units and two LNG terminals.

Turkey has also diversified its pipelines, with the Trans-Anatolian Natural Gas Pipeline (TANAP) delivering Azerbaijani Shah Deniz gas to Turkey since 2018 and the Trans-Adriatic Pipeline (TAP), operational since 2020, carrying that gas to Europe. This solidified Turkey’s role as a key transit country, especially after European countries reduced their Russian gas imports following Russia’s full-scale invasion of Ukraine.

Last year, Turkey increased its LNG purchases from the United States, both for domestic consumption and for trade with third countries. A major LNG import and trade deal was signed in 2024 between Turkey’s state-owned BOTAŞ and ExxonMobil, signaling a growing US share in the Turkish market over the next decade. In March of this year, Turkey also signed an agreement with US firms to develop its own shale fields.

During the UNGA meetings last week, the team led by Turkish Energy Minister Alparslan Bayraktar concluded additional energy deals. Turkish state-owned BOTAŞ and Mercuria signed an agreement for the import of approximately 70 billion cubic meters of US LNG over twenty years. This agreement also includes distributing US-sourced LNG to Europe and North Africa, contributing to a gradual shift in Europe from Russian to US gas. Similarly, the Memorandum of Understanding on Strategic Civil Nuclear Cooperation, signed during Erdoğan’s Washington visit, will contribute to Turkey’s energy security and reduce its dependence on Russian energy through the transfer of US small modular reactors and nuclear technology.

Lingering dependence on Russia

Despite Turkey’s efforts to reduce dependence on Russian gas, imports from Russia increased after 2022. According to Turkey’s Energy Market Regulatory Authority (EPDK), Russian gas accounted for 39.5 percent of total gas imports in 2022, 42.27 percent in 2023, and 41.3 percent in 2024.

After halting crude oil and petroleum product imports from Iran in 2019, Turkey has increasingly relied on Russia for oil. According to EPDK data, the shares of imports from the top two suppliers, Russia and Iraq, were respectively: 40.75 percent and 26.39 percent in 2022, 51 percent and 20 percent in 2023, and 66 percent and 9.8 percent in 2024. This increase is likely due to two reasons: First, European countries purchased Russian oil indirectly through Turkey. Second, the Kurdistan Regional Government of Iraq (KRG) halted oil exports over the past two-and-a-half years due to a revenue-sharing dispute between the central Iraqi government and the KRG that resulted in an arbitration case in the International Criminal Court between Turkey and Iraq. Now that this issue has been resolved, oil exports through Turkey’s Ceyhan port have resumed. Combined with the EU’s commitment to halt imports of Russian fossil fuels by the end of 2027, this could lead to a significant decline in Turkey’s oil imports from Russia in a few years.

US-Turkey cooperation in challenging regions

The United States’ efforts to support US business interests in regions where US military presence has declined provide opportunities for energy cooperation with Turkey in third countries. Trump’s fossil fuel-friendly policies are encouraging US oil and gas companies to enter new markets, creating an opportunity to collaborate with Turkish firms.

Turkey played a key role in Azerbaijan’s victory over Armenia in 2020 and the return of Nagorno-Karabakh to rule from Baku in 2023, providing critical military and strategic support. Turkey advocated the opening of the so-called “Zangezur Corridor,” which it sees as part of the Middle Corridor, linking Azerbaijan to Nakhichevan and ultimately to Turkey—thereby connecting Europe to Central Asia and eventually to China. However, Armenia delayed implementation of the corridor provision from the 2020 deal, likely due to concerns from Russia and Iran, as well as due to Azerbaijan’s insistence that it get the control of the road without Armenian border or customs checks on Armenian territory. After US mediation, the corridor was rebranded the Trump Route for International Peace and Prosperity, which could check Russian and Iranian influence in the region. If the project succeeds, the US and Turkish companies which have already played a significant role in regional infrastructure projects are expected to collaborate in building and operating the route.

Turkey also played a major role in the overthrow of the Bashar al-Assad regime in Syria. Throughout the Syrian civil war, Turkey secured a key region near its border in cooperation with Syrian opposition forces and is expected to play a critical role in strengthening the new regime’s military and administrative capacities. If successful, a US-mediated agreement between the Syrian Democratic Forces (SDF) and Syria’s interim government, as well as efforts to broker an agreement between Israel and Syria, would reduce tensions in the country. Turkey and Gulf countries are expected to contribute significantly to Syria’s reconstruction, including via energy projects. In May, Turkish, US, and Qatari companies signed a $7 billion agreement to build natural gas and solar power plants in Syria, aiming to meet much of the country’s energy needs with a combined 5,000 megawatts over the next three years.

In Iraq, with the mission of the US-led Global Coalition to Defeat ISIS nearing its end, US troops are shifting from Baghdad and western Iraq to Erbil. In 2024, Turkey deepened ties with Baghdad by providing military training and capacity-building, conducting joint exercises, and lending support in areas such as electronic warfare and cybersecurity. Given its long fight against the Kurdistan Workers’ Party (PKK), and its support for the KRG’s Peshmerga during ISIS’s occupation of Iraq from 2014 to 2017, Turkey has over one hundred military installations in the KRG as of 2024.

Both Turkey and the United States played a critical role in resolving the oil revenue dispute between Baghdad and the KRG, thus enabling the resumption of operations for US and Turkish companies in Iraq. In May, the KRG signed major oil and gas deals with two US companies during their visit to Washington.

Turkish and US companies are expected to work more closely with both the KRG and the Iraqi federal government on new energy and infrastructure projects. Given Turkey’s extensive military presence in the KRG and its recent diplomatic initiatives—including Foreign Minister Hakan Fidan’s meeting with Iran-backed militias in Iraq last month—Turkey seems poised to play a leading role in ensuring security and stability in the region, in partnership with the United States.

Recent developments suggest that Libya is emerging as another area of potential energy cooperation between Turkish and US companies. Turkey has shifted from solely supporting the Tripoli-based Government of National Unity to also engaging with the Benghazi-based administration in eastern Libya led by Khalifa Haftar. The first sign of this shift came in April, when Haftar’s son Saddam visited Turkey and met with the Turkish defense minister and senior military officials. This engagement has made it more likely that Benghazi’s parliament will approve Turkey’s 2019 exclusive economic zone agreement with Tripoli. This would mark a milestone for Turkey’s sovereign rights and energy exploration efforts in the Eastern Mediterranean. Following Turkish intelligence chief İbrahim Kalın’s meeting with Haftar in Libya in early September, there are growing rumors that Haftar may soon visit Turkey.

Through its maritime and defense cooperation agreements with the Tripoli government, Turkey has established itself as a key political and military actor in Libya, operating from two military bases—a naval and land base at Misrata and an air base at Al-Watiya —since May 2020. It currently supports the Tripoli-based government’s forces, including by providing unmanned aerial vehicles, troops, military advisors, electronic warfare systems, air defense units, and tactical missiles. Turkey’s broader goal is to leverage this military footprint to support the reconstruction of Libyan state institutions, facilitate national reconciliation—a policy promoted by the Turkish Defense Ministry under the slogan “One Libya, one Army”—and ensure Turkey’s economic rights in the Eastern Mediterranean.

In August, Libya’s National Oil Corporation (NOC) signed a memorandum of understanding with ExxonMobil. Given ExxonMobil’s prominent role in Eastern Mediterranean gas exploration, cooperation between the NOC, ExxonMobil, and Turkey’s BOTAŞ appears increasingly likely.

***

Looking across all these regions of cooperation, a clear pattern emerges: In areas of past or ongoing conflict where US companies are looking to establish or expand their presence, Turkey is playing a crucial role in ensuring the security and stability necessary for trade and investment. Moreover, Turkey is expected to collaborate with US firms in these regions. As Turkey increases energy collaboration with Washington, diversifies its energy imports away from Russia, and increases its military presence in regions where the United States is reducing its footprint, a new model of US–Turkey cooperation is emerging. This model is based on shared commercial interests, strategic regional presence, and burden-sharing that leverages the United States’ and Turkey’s complementary soft and hard power capabilities.

Pınar Dost is a nonresident fellow at Atlantic Council Turkey Program and a historian of international relations. She is also the former deputy director of Atlantic Council Turkey Program. She is an associated researcher with the French Institute for Anatolian Studies.

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

The post How energy and trade are redefining US–Turkey regional cooperation appeared first on Atlantic Council.

At one level, the deal is a technical and legal arrangement to restart flows through the ITP. At another, it is a political experiment in reconciling federal sovereignty, regional autonomy, and contract sanctity in one of the world’s most complex political landscapes.

Ultimately, it is the politics surrounding the deal that made its negotiation so complicated—and its survival even more precarious. Oil remains a hyper-sensitive political issue in Iraq, and the agreement is already under strain.  

Whether the framework will be a tactical stopgap or the first credible blueprint for a permanent settlement will likely become clear as Iraq enters the election and the budget year comes to an end in three months. 

Details of the deal 

The pipeline has been closed since March 2023, when the International Chamber of Commerce ruled that Turkey had violated the 1972 treaty between Iraq and Turkey that governs the pipeline. The court ordered Ankara to pay Baghdad $1.5 billion for unauthorized exports as the pipeline allowed the Iraqi Kurdistan Region to independently export its crude. While it was Turkey that closed the pipeline in response to the ruling, the primary obstacles to reopening the pipeline have been centered around the disputes over sovereignty and natural resources between Erbil and Baghdad, the powers of the federal government versus regional autonomy in Iraq, the sanctity of the contracts of the IOCs in the Kurdistan Region, the competing financial and political interests of the KRG, and contending political forces in Baghdad. The Association of the Petroleum Industry of Kurdistan estimates that more than $35 billion has been lost in revenues to the Kurdistan Region due to the shutdown. 

The technical and legal mechanics of the current agreement are highly complex, reflecting the balance between multiple competing constitutional, historical, political, commercial, and even geopolitical interests. The deal obliges the KRG to hand over a minimum of 230,000 barrels of oil per day to the federal government’s Ministry of Oil, while allowing the KRG to retain fifty thousand barrels per day for domestic use. The Iraqi government has accepted in-kind compensation from oil operators in the Kurdistan Region, shoulders pipeline transit fees, and agreed to international arbitration with a waiver of sovereign immunity. Erbil has relinquished its claim over oil exportation, curtailed its independent marketing, and the oil produced from the Kurdistan Region’s fields will be lifted as “Kirkuk oil crude, not Kurdish oil.” The IOCs have gained a guarantee of payments for production and transportation costs, with the production costs to be appraised later by an international consulting firm hired by the Ministry of Oil. 

Politically, the arrangement represents both a victory and a concession for each side. The deal also notably represents a victory for the US government and its bid to bring more oil to the global market. Washington has been pressing to reopen the pipeline since its closure—and with US investors among the IOCs, the deal has removed a significant bilateral irritant. 

With legislative elections slated for November, Shia political factions opposed to Prime Minister Mohammed Shia al-Sudani are likely to weaponize the agreement against him just as they worked against its conclusion. Al-Sudani invested significant political capital to reach this deal, which is a reflection of intense advocacy for it by the US government and his desire to maintain strong relations with the United States.   

For those politicians opposed to al-Sudani, the Baghdad–Erbil oil arrangement offers a potent narrative: that the government has conceded too much to the KRG, or compromised national sovereignty to secure short-term fiscal stability. If the agreement becomes a campaign issue, al-Sudani will face pressure to revisit—or even repudiate—elements of it, regardless of its technical merits. In this sense, the upcoming November 11 parliamentary election represents as much of a threat to the deal as any operational or legal dispute. The overlap between the election cycle and the end of the budget year further compounds the risk, creating a moment when the government’s ability to shield the deal from partisan attacks will be at its weakest.

Baghdad has regained oversight of exports and embedded Erbil’s barrels within the federal budget law, satisfying a long-standing objective. The KRG has held on to its energy sector domestically, secured recognition of its production costs, and retained the ability to sell oil abroad at least for now, albeit under the State Organization for Marketing of Oil’s umbrella. Oil companies are seeing partial relief with the resumption of exports, and will receive their entitlements and costs reimbursed after a long hiatus.  
 
However, uncertainty abounds—the deal is renewable every thirty days until December 31, 2025, underlining an absence of trust and leaving it exposed to vulnerabilities from potential political turnover, operational disruptions, and external shocks. In fact, the chains are tied together in a way that any technical issue or political hiccup could have a cascading impact, undermining months of negotiations. Although parties cannot back out unilaterally until the fixed end date in December 2025, the deal is more of a transitional truce rather than a final settlement. 

Enduring challenges  

Moreover, the agreement is unlikely to guarantee an uninterrupted flow of budget to the KRG. The Iraqi Ministry of Finance will continue to scrutinize KRG financial records, revenues, and audits. While Erbil hoped the deal would prevent Baghdad from withholding or delaying budget transfers under the pretext of oil-related disputes, challenges remain ahead. A senior Kurdish official noted to the author that the KRG tried to meet Baghdad’s terms to eliminate all excuses pertaining to budget delays, but emphasized that there are still fears regarding budget issues. This means that the unresolved budgetary issue could become a spike down the road. 

The expiration of the ITP also poses an external threat to the agreement. Turkey has already indicated that a new treaty to govern the ITP must be negotiated by July 2026 for oil to continue to flow. Thus, even if the trio agreement holds, the looming expiry of the ITP could raise serious questions about the medium-term future of northern exports. Turkey may be seeking a broader energy arrangement that includes both gas and electricity, as well as demanding greater flexibility to contract other users, such as the KRG. This could mean that technical and/or financial disputes between Baghdad and Erbil may be overshadowed by negotiations with Ankara in the near future. Therefore, summer’s deadline is a hard stop: without a new treaty, the entire system risks a complete halt. 

Will the deal survive the winter? 

The coming months will illuminate the long-term viability of the agreement. On the one hand, the monthly renewals and the end date suggest a temporal nature of the deal. On the other hand, the structure introduces mechanisms that could endure. In-kind compensation avoids political disputes and reduces trust deficit. International arbitration with immunity waiver provides enforceability and a level of confidence not just to the IOCs, but to the whole Iraqi investment landscape.  

Regardless, the stakes extend far beyond the mechanics of the agreement. The Kurdistan Region, and in fact the entire country, has already lost billions of dollars in revenue during the suspension of northern exports, and investor confidence in Kurdistan has plummeted. The resumption of flows could stabilize the federal budget and provide Erbil with some measure of fiscal stability. Yet the fragility of the deal should not be underestimated. A production shortfall, technical and legal issues, political turnover in either Baghdad or Erbil, or disputes between Iraq and Turkey over the arbitral award could quickly unravel the agreement. And even if those challenges are managed, the end of the ITP treaty in 2026 could emerge a structural cliff. Yet, If Baghdad and Erbil use this breathing space to negotiate a broader constitutional settlement on hydrocarbons and revenue sharing beyond these three months, this agreement may be seen as a turning point. If not, it will join the long list of short-lived oil bargains in Iraq’s turbulent history. 

Victoria J. Taylor is the director of the Iraq Initiative in the Atlantic Council’s Middle East program. She served most recently as deputy assistant secretary for Iraq and Iran in the State Department’s Bureau of Near Eastern Affairs, where she advised senior State Department leaders on Iraq and Iran in the aftermath of the Gaza conflict. 

Yerevan Saeed is a nonresident senior fellow with the Iraq Initiative in the Atlantic Council’s Middle East programs. Saeed is the Barzani scholar-in-residence in the Department of Politics, Governance & Economics at American University’s School of International Service, where he also serves as director of the Global Kurdish Initiative for Peace.

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• I. Introduction
• II. Durable competitiveness goes global
• III. Still building for tomorrow

I. Introduction

In 2024, the Atlantic Council commenced a research series centered on the future of US industry in a decarbonizing world. This project considered if and how US policy might support a more sustainable, efficient and effective industrial base. Its goal was to assess how the United States could remain competitive in a global market where friends and competitors are increasingly motivated to invest in decarbonization and incentivizing domestic companies to produce lower carbon products. This project particularly focused on how the US industrial base might respond to these developments without the expectation of new major budget expenditures. In other words, what constitutes durable competitiveness?

The project involved multiple workshops including the perspectives of dozens of stakeholders throughout the public and private sectors, and ultimately produced two major research reports: Reducing US industrial emissions under budgetary uncertainty (published November 2024) and Building for tomorrow: Preparing US industry to compete in a lower-carbon global economy (published June 2025). 

Issue Brief Jun 12, 2025

Building for tomorrow: Preparing US industry to compete in a lower-carbon global economy

By David L. Goldwyn, Andrea Clabough

The question for US policymakers is not whether to compete, but how.

Energy & Environment Energy Markets & Governance

Issue Brief Nov 4, 2024

Reducing US industrial emissions under budgetary uncertainty

By David L. Goldwyn, Andrea Clabough

The pathway to deep decarbonization remains unclear for “hard to abate” sectors in the United States. By addressing three key challenges, US industry can decarbonize despite financial constraints and political uncertainty.

Energy & Environment Energy Markets & Governance

Though we published these pieces in disparate political contexts, each analysis offered perspectives on the unique challenges to enhancing sustainable competitiveness in each of the sectoral pillars of US industry. The second paper prioritized what actions might be taken to address them. Fundamentally, we argued that the United States should maintain, and ideally expand, its industrial decarbonization toolkit as a matter of both economic competitiveness and geostrategic interest given the resurgent importance of industrial policy throughout the world. 

Since the publication of the second report, however, the wider context around US industrial and energy policy has shifted further. The second Trump administration has, at the executive level alone, introduced policies intended to bolster the role of fossil fuels, including coal, while also initiating efforts to reverse  climate analyses foundational to US policy on the subject since the Obama administration (notably the Endangerment Finding), and thus reshape how the US government crafts related regulations and policy decisions. At the legislative level, meanwhile, the recent passage of the administration-endorsed budget reconciliation law (One Big Beautiful Bill Act) saw substantive curtailments of several federal incentives for clean energy, clean fuels, and emerging technologies—programs previously identified in our research as significant to ongoing sustainability developments in major industries like iron, steel, chemicals, aviation and more.

Amid such a seismic shift, it is tempting to question if furthering US industrial decarbonization remains a plausible or even a valuable objective—or, if a reversion to business as usual prior to the emergence of a (now lost) political consensus on the importance of this issue is the only realistic option left. 

We approach this question from a different perspective: rather than call for the return of business as usual, we argue that the drivers behind industrial decarbonization on a global scale represent the “new normal,” and US companies must stay the course to ensure both the durability and long-term competitiveness of the country’s industrial sector. Regardless of endlessly shifting events in Washington, DC, the challenge of durable competitiveness always was—and remains—a global issue. The present moment represents a turning point in which the United States can still assert leadership in a rapidly changing industrial space, or risk being left behind as others take the proverbial wheel and craft the future of industry without us. Because industrial sustainability will matter in 2030, 2040, and 2050, it matters all the more in 2025. Put simply, we are still building for tomorrow. 

II. Durable competitiveness goes global

Why is durable competitiveness, enabled by industrial decarbonization, still important despite a changed political and geopolitical context? We contend that four major trends affirm that these issues are only increasing in importance when understood within a wider lens. 

A. Competitors are moving ahead of the United States—and setting future terms of engagement 

A key point that emerged from our prior analysis was the degree to which industrial decarbonization efforts, coupled with the adoption of low-emission and emerging fuel sources, have become part of strategic goals in multiple major economies. These include those of US partners, such as the European Union (EU), but also (perhaps especially) competitors like China. This has not necessarily occurred for altruistic or environmental reasons, but rather as a response to wider conditions. Since the mid-2010s, surging economic protectionism, resource nationalism, and efforts to de-link and deglobalize the major economies have forced policymakers the world over to redefine economic and energy security in the modern age. The apparent acceptance of 15 percent broad tariffs in the Trump administration’s most recent trade agreements (apart from separate, punishing sectoral tariffs) is only the latest example affirming that such protectionism is now understood as a normal facet of international economic relations. 

For energy importers—like the EU, China, Japan, South Korea, and India—dependence on conventionally traded fossil fuels sourced from foreign suppliers enhances the appeal of homegrown energy. Each of these countries place high economic and political importance on domestic production in one or more of the traditional industrial sectors, such as steelmaking; in turn, these sectors have historically relied on a mixture of domestic and/or imported fossil fuels. This context makes fuel diversification and improving efficiency in the industrial sectors more appealing. Examples of such policies, still being pursued in other major economies, include the EU’s Net-Zero Industry Act, the United Kingdom’s Invest 2035 plan, Japan’s Green Growth Strategy, and South Korea’s Framework Act on Carbon Neutrality and Green Growth among dozens of regional, sectoral, and fuel-specific (e.g., hydrogen and ammonia) programs. 

For countries that enjoy domestic energy abundance, like the United States, this consideration may seem less urgent—but these industrial decarbonization technologies are themselves a growing source of industrial production growth, export revenue, and employment. China already dominates the global solar and wind sectors and has a growing edge in electric vehicles—clean technology exports together worth $177 billion for China’s economy in 2024. Much the same pattern is underway with heat pumps (40 percent sold globally in 2023 were manufactured in China), electrolyzers (China boasts two-thirds of global manufacturing share) and low-emission steel and aluminum (China controls 32 percent and 62 percent of manufacturing capacity respectively). The Chinese government bet—correctly—that improving and reducing costs for now-mature low-carbon technologies would facilitate their adoption in markets where they were previously unaffordable. Once a degree of cost parity with traditional fuels was achieved, their other advantages (namely, offering a fast-track homegrown energy supply) would enable rapid scaling of demand. With an estimated $2.2 trillion in investment this year alone targeted at low-emissions fuels and infrastructure (double that of coal, oil, and gas combined), there remains a clear direction of travel, and the next generation of decarbonization technologies stands to benefit. Now, China is preparing to once again build and sell the future toolkit to the world even as the United States walks back its own incentives and credits for similar products. Those skeptical of a push for US industrial decarbonization may see little near-term gain for US economic interests—but on the longer horizon, there may be a great deal to lose indeed. 

Another factor is the proliferation of emissions trading systems (ETSs) and border carbon adjustment (BCA) measures. These measures are already shaping the future of international trade. Our prior analysis noted the profound galvanizing impact that the arrival of the EU’s Carbon Border Adjustment Mechanism (CBAM) has had for other economies to adopt similar measures in order to retain that market access without penalties. Crucially, the EU system will begin with regulating high-emissions intensity, heavy industrial products. An updated report from the International Emissions Trading Association (IETA) assesses that the global forward march of such programs continues even in 2025: thirty-eight ETSs are in force, covering 58 percent of global emissions. Seventeen members of the Group of Twenty (G20) have an existing or planned ETS system, while carbon pricing is being installed or expanded in major economies including Brazil, India, and Turkey in response to the incoming European penalties for suppliers in countries that lack such mechanisms. Brazil, host to the United Nations Climate Change Conference, COP30, later this year, is reportedly preparing an “international climate coalition” proposal for that convening, which would inaugurate a climate club of countries that charge foreign imports an emissions fee.

All of this has occurred amid significant changes in the global trading system, driven in part by the Trump administration’s stated goal of rebalancing trade. However, the Trump administration has not yet achieved significant changes to the European Union’s policies such as border adjustment, carbon pricing, or its emissions trading scheme. The EU, for its part, has pursued internal simplification and rationalization measures upon its CBAM’s entry into force, but such sharpening of parameters was perhaps inevitable in the inaugural program. For now, the EU’s border adjustment plan and related efforts, such as its methane requirements for imported fuels and products, are fast becoming a reality of doing business. 

The United States retains the ability to engage on these fronts, but others appear to be setting rules of engagement. In the realm of border adjustment, there remains an intriguing opportunity to unify interests in industrial decarbonization and efficiency improvement within the Trump administration’s stated trade agenda—both encouraging positive emissions outcomes and producing new revenues. We recommended previously that Congress might adopt its own version of a US carbon border adjustment aligned with both aims; indeed, given US industry’s existing emissions intensity advantages in key sectors like steel-making, such an approach could benefit domestic producers while incentivizing improvements in other countries. The PROVE IT Act and Foreign Pollution Fee remain excellent starting points. But the future of industrial sustainability is being written in real time while the United States is all but absent from the conversation. Should the United States wait years to re-enter this dialogue, it may find itself on the outside looking in—and US industry less agile and competitive as a direct result.  

B. Private sector companies face evolving risks and incentives to pursue lower-emissions intensity and greater efficiency

An oft-repeated assurance from the Trump administration has been that its deregulatory actions will ultimately produce immense benefits for US industry and manufacturing. The argument is two-fold: First, undoing burdensome regulations (for example, weakened EPA oversight of methane emissions in the upstream oil and gas sector) will enable expanded production of domestic energy and thus reduce costs for industrial consumers. Likewise, industry will enjoy a lightened regulatory framework in areas like air emissions and water pollution controls as well as easier, faster permitting with limited litigation, sharpened environmental review, and reduced enforcement. Over time, these changes will lower costs and improve profit margins. 

These arguments may prove true—in the United States. Most major US industrial companies, however, are not solely operating within or supplying a US customer base; they supply the world, including the United States’ major trading partners. As a result, US companies with a multinational footprint are subject to overlapping foreign regulations and jurisdictions, complete with requirements that the US government has no direct control over. 

That wider environment, and its risks and pressures, is evolving as the world develops a vastly greater understanding of various types and sources of emissions associated with a given unit of a product. The EU’s CBAM, highlighted above, is one example, but the bloc’s Methane Strategy is another that scrutinizes the full life-cycle methane emissions associated with certain imports, including those of liquefied natural gas (LNG). These regulations are made possible through a rapidly improving data acquisition and verification framework for greenhouse gases, enabling a sprawling new analytical industry in the realm of emissions accounting. The advent of artificial intelligence (AI) will only expedite information acquisition and interpretation capabilities, especially through previously complex, opaque supply chains. 

Governments alone are not driving these trends: Private sector associations—such as the aviation industry’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and the maritime industry’s International Maritime Organization (IMO)—are taking steps to formalize emissions accounting within their sectors as a prelude to management and reduction efforts. A similar example within the steel industry is the recent announcement of a new consortium of producers and value chain stakeholders in Asia. Among other efforts, this private coalition will conduct a pre-feasibility study to assess carbon capture, utilization and storage (CCUS) opportunities and barriers in Asia ahead of establishing scalable “hubs” among the consortium members. The aspiration is to mitigate the emissions intensity of Asian steel operations—likely influenced by evolving trade dynamics around these issues. The financial sector is likewise taking notice: IBM asserts the importance of “finance-grade GHG [greenhouse gas] emissions data” for private businesses, adding: “Investors are increasingly scrutinizing sustainability performance alongside financial performance to inform investment decisions.” 

US businesses must contend with these pressures throughout global markets, and among their own investors and shareholders, which persist despite the Trump administration’s wholesale turn against environmental, social, and governance (ESG) criteria for financial sector decision-making. This tension is one driver of the “greenhushing” trend, wherein large corporations quietly maintain (but publicly minimize) their sustainability actions, investments, and internal initiatives. Recent data affirms that, regardless of the unsupportive US government perspective, major banks throughout the world (even those that have left umbrella groups like the Net-Zero Banking Alliance) are still steadily decarbonizing their portfolios. Even if scrutiny does not come from home, it may come from somewhere else. 

Moreover, public and consumer scrutiny over the societal impacts of major industries is hardly abating. The anxiety surrounding the AI buildup occurring throughout the country illustrates a warning for US industry: Intensifying opposition to new data centers and adjacent energy infrastructure is influenced by the emissions and water impactsfrom these new builds. Reasonable efforts to pursue sustainability remain a key aspect of attaining, and maintaining, social license to run a business. If anything, these considerations are set to intensify over the multi-year and multi-decadal outlook for most major operation and investment decisions. Private multinational companies must therefore contend with sustainability and decarbonization as an issue of global competitiveness right now, and for many years to come. 

C. The rise of AI could represent a new industrial revolution and accelerate decarbaonization—if US industry can take advantage  

Undoubtedly, the AI revolution represents a tremendous growth opportunity for the major industrial sectors—particularly in the face of the changing geopolitical, trade, regulatory and social environment discussed above. IBM refers to “Industry 4.0” which enables “digital transformation of the field, delivering real-time decision making, enhanced productivity, flexibility and agility.” Key AI and AI-adjacent developments already being adopted into the industrial sector include machine learning, advanced language processing, human-robot collaboration and cobots, digital twins and predictive maintenance. Given that the world is at the tip of the AI iceberg, and with quantum computing advances likewise gathering pace, there is vast potential for these transformative changes to put heavy industry on a different trajectory than its past development.

These technological adoptions could improve the ability of presently hard-to-abate sectors to decarbonize, as well as identify and implement efficiencies more quickly and affordably than has been possible before. A 2025 World Economic Forum white paper, considering the impact of AI in industrial and manufacturing operations, argues that “[s]ociety is entering the Intelligent Age…In this new era, industrial operations are being redefined as frontier technologies deliver advancements facilitating collaborative intelligence and amplifying human ingenuity.” This perspective can certainly be true with respect to industrial decarbonization. The paper notes, as one example, that autonomous industrial systems can optimize energy consumption and lower waste of resources while allowing efficient, real-time monitoring of previously complex environmental impact metrics. Moreover, the ability of major industrial stakeholders to understand and interpret data gathered throughout their supply chains is set to dramatically expand—as well as their ability to understand differing scopes of emissions involved with their production processes and the full life cycle of a given item or service. 

The AI revolution is also relevant to another key issue: infrastructure buildout. We have argued previously that the decarbonization challenge is fundamentally an infrastructure challenge—both in terms of resiliency to unavoidable climate change, adaptation of our existing infrastructure, and building the “new” pieces of the puzzle—new pipelines, transformers, cables, reinforcing steel (rebar) and much more. The addition of acres worth of data center infrastructure (and presumably a wholesale upgrade of the US power system to accommodate it) is just another layer of creation that will be foundational to a resilient and growing US economy in the years to come. Historically, such a moment would have mandated a swelling of the manufacturing workforce and enormous expenditure, as well as an ironic, immediate-term acceleration of emissions associated with an uptick in heavy industrial processes. 

The technological transformations now upon us, however, can change that 20th-century narrative for the better and break this established pattern. The World Economic Forum refers to these problems, which have made “large structure production” expensive, and energy- and emissions-intensive. However, “the urgency of decarbonization has created a window of opportunity to leapfrog outdated methods.” AI in this context acts as a force multiplier for other innovations like automation and digitalization, allowing optimization of all energy resources and inputs to a given process as well as faster, more granular repetition and replication of a facility or product design. Adapting these innovations into the heavy industrial sector can reduce the impact of this incoming generational infrastructure surge, making it possible to enhance sustainability on both sides of this proverbial equation. 

To be sure, other benefits (particularly in overall cost, waste, and workforce preparation) will make this new era of technological integration appeal to private businesses and other stakeholders. That integration, and accessing its full potential, will not occur in a vacuum or by accident; conscious preparation and motivation to access all these positive implications will be necessary. Sustainability may not be the foremost driver of AI integration and adoption in the industrial sector, but it is already part of the conversation with clear, tangible outcomes.

D. Political volatility—in the United States and elsewhere—is ever present, ensuring that incentives and opportunities will change again

Much of the present discourse around industrial decarbonization was first ignited during the Biden administration when the US government pulled many levers of its policy, regulatory, and fiscal power to encourage broad decarbonization throughout the US economy. Likewise, that same discourse has appeared to diminish as federal climate policy and decarbonization considerations have shifted under the Trump administration. 

We noted in our prior analysis that political time scales and those of major project developers and investors are rarely aligned. This misalignment perpetuates unclarity and uncertainty, especially around major decisions that could involve projects spanning years and with returns on investment planned past a decade of operation or longer. Of course, some degree of uncertainty is hardly new for US industry. After all, a new factory or plant in this sector regularly costs multiple millions of dollars to build and operationalize, but such facilities are expected to be operating for decades into the future amid a variety of economic and political changes. 

What is relatively new, however, is the degree of uncertainty in the future requirements and expectations for industrial products and services as they relate to emissions and environmental impacts. In other words, politics is increasingly influential on markets and elevating specific concerns and goals (in some instances) over others. Moreover, key policies and incentives can radically change not just within a domestic market but also within overseas markets—and those two sets of approaches may have disparate requirements. All of this poses elevated risks, greater instability, and a need for flexibility to manage varying, perhaps contradictory, mandates. 

Even within the domestic context (in this case US federal and state policies impacting industry) stability is far from guaranteed. Instability, whiplash, and volatility are increasingly the order of the day. At the federal government level, the shifts from 2016 to 2017, then 2020 to 2021, then again 2024 to 2025 were exceptional within American political history—especially with respect to energy and climate policy. While it would be tempting to argue that the personal influence of President Trump in these three transitions precipitated such sharp swings each time, it is also notable that the American electorate is far more polarized than at any other moment in recent history. These facts are borne out by the shrinking number of competitive congressional seats as well as the current Congress’s willingness to break with tradition and undercut major private sector incentives previously written into the Inflation Reduction Act (albeit by narrow margins). 

Sharp swings in American politics thus should not be laid at the door of one individual or administration but appear increasingly symptomatic of the entire polity. It is entirely conceivable, as a result, that future election cycles (never too far away, as any politician will readily admit) could produce swings in the opposite direction from the current dynamic. In this instance, that swing would push federal policy back in the direction of interest and focus on climate, and perhaps new and creative approaches toward energy system transformation and industrial decarbonization. 

Another key element to this conversation is the role of state and local governments, which retain extensive authorities when it comes to energy and decarbonization-adjacent regulations and priorities within their territories. Every federal administration has discovered this to some degree; thus far, the Trump administration’s efforts to limit state-led cap-and-trade systems, fossil-industry targeted laws, and climate-focused permitting requirements have had limited effect. This situation creates an additional layer of gubernatorial, mayoral, and legislative turnover against which businesses must invariably hedge. 

Where does this seemingly endless cycle of volatility leave the US industrial sector, particularly as it considers whether to pursue extensive investments and the immediate costs and risks associated with changing how to do business? In the end, the long-term view is what will ultimately matter the most. For major players in the industrial space, the next election cannot be predicted, and no one industry can fully insulate itself against shifting tides. That said, it may be possible to discern the wider trendlines and what considerations will matter over the extended horizon—indeed, the horizon over which most of the projects and process changes in question will actually begin to earn returns on investment. Flexibility, and a forward-looking posture, thus remains the most sensible approach amid the machinations of political machinery within and outside the United States. 

III. Still building for tomorrow

The puzzle around drivers, motivations, and factors that will facilitate industrial decarbonization has yet to be fully resolved. To be sure, more churn and change is inevitable going forward. The proposals, ideas, and policy solutions of today may not be those of tomorrow, and variability throughout the world on how to go about this generational project is perhaps the only certainty. With a variety of energy transitions (plural, not singular) taking place in different corners of the globe, developments in global industry are themselves likely to be highly varied and on different timetables. 

Even so, the direction of travel seems increasingly clear: If durable and competitive industry will ultimately include sustainability as a key, if not paramount, criterion, then US industry must retain the mindset of building for tomorrow regardless of the politics of today. Ultimately, this mindset is not about a particular vein of politics or moral conviction. Rather, it is intrinsically tied to understanding business growth prospects, seizing opportunities ahead, and applying thoughtful risk management to a changing world. To focus solely on the present-day state of play would be to risk the future of a core part of US economic strength and power projection. 

The trajectory for industrial decarbonization and the eventual winners are being decided by choices here and now. A failure of US industry to engage would effectively amount to unilateral disarmament at what could be a lynchpin moment. Such an outcome is avoidable but not by doing nothing at all. As ever, fortune favors the bold. US industry stakeholders should plan accordingly. 

Fellow

David L. Goldwyn

Nonresident Senior Fellow

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

Fellow

Andrea Clabough

Nonresident Fellow

Global Energy Center

Climate Change & Climate Action Energy & Environment

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The post Preparing US industry for a more competitive world appeared first on Atlantic Council.

Allocation of World Bank votes by region and organization

Multilateral development banks (MDBs) have drifted from their original mission of maximizing economic growth. Instead, they prioritize climate-first lending that restricts hydrocarbon investments. This approach fails to address the reality that emerging market and developing economies (EMDEs) will drive half of global energy demand by 2050, with hydrocarbon demand expected to grow significantly in these regions. 

These restrictive policies are creating a vacuum that China is filling through its Belt and Road Initiative and development financing. While MDBs allocated only $14.5 billion to oil and gas projects in 2023, China invested $107 billion in energy projects through its development finance institutions. This reliance of EMDEs on high-risk Chinese financing with opaque terms exposes recipients to debt-trap diplomacy. 

To provide a low-risk alternative to financing from China and to return to their original mandate, MDBs should adopt a flexible all-of-the-above energy investment strategy that includes both renewables and hydrocarbon development. MDBs should prioritize economic viability and scalability, strategic alignment with international norms, and a synchronization between renewables and base load power. 

In addition to reinstituting a more pragmatic financing strategy, coordinating investment strategies and leveraging existing institutional mechanisms such as sovereign wealth funds would aid MDBs in achieving their original mission of maximizing economic growth. This realignment would not only maintain MDBs relevance in EMDEs, it would counter China’s influence and ultimately support the sustainable development of affordable power for billions.

Fellow

Samuel Buchan

Nonresident Senior Fellow

Global Energy Center

Energy & Environment

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Landon Derentz

Vice President, Energy and Infrastructure

Global Energy Center

Energy & Environment Middle East

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Industrial decarbonization in the United States will be an important element in lowering global emissions. To limit the consequences of climate change, the United States must urgently advance a suite of efforts to guarantee the domestic and international industrial emissions reductions the world needs.

Americas Energy & Environment

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Energy investment in a time of inflation

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This paper briefly considers the macroeconomic drivers of inflation in late 2022, including Russia’s war in Ukraine and uncertainties around energy supply, supply-chain resets, and lingering COVID-19 disruptions, before examining the persistent energy underinvestment of the past decade and how this has left markets exposed to varying degrees.

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This report explores the pathways to decarbonize aluminum production through the increased use of recycled scrap metal, supplying more low-carbon energy to production facilities, and increasing efficiency through new technologies.

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Strategic energy realignment: Rethinking MDB policy for growth and global stability appeared first on Atlantic Council.

Details of the deal

The deal, which succeeded in easing trade tensions and averted a tariff war, places a 15 percent base tariff on most EU goods entering the United States, while select goods that Romania trades in (including aircraft, chemicals, pharmaceuticals, and semiconductor equipment) fall under a zero-for-zero tariff agreement or revert to pre-January tariff levels. In return, the EU has agreed to buy US products—including $750 billion worth of energy—and invest $600 billion in the United States. The terms have led many in Europe to worry that they disproportionately favor US interests, disadvantage EU industry, and expose member states to economic risks from reduced export competitiveness, price pressures, and increased US competition within the EU market.

For Romania, the risks from the deal lie less in the direct exposure of its firms to the US market and more from the country’s deep integration within European supply chains. The United States accounts for less than 2 percent of Romania’s total trade, while over 70 percent is with EU partners. Key Romanian exports, including electrical and electronic equipment, vehicles and machinery, depend heavily on close ties with major Western European manufacturers.  If increased US tariffs cause EU exporters lose ground in the US market, Western European firms may be forced to cut back production or rethink their sourcing strategies, and Romanian inputs could be displaced from regional networks. Moreover, EU firms could face additional pressure if US producers outcompete them in the single market due to fewer tariffs and regulatory hurdles. 

To make matters trickier, EU producers are still grappling with high energy prices, which impact their ability to remain competitive in energy-intensive industries. Liquefied natural gas (LNG) costs significantly more than pipeline gas, and it now accounts for over 50 percent of total EU gas imports, compared to just 23 percent in 2021. Moreover, US LNG, which is generally more expensive than LNG from any other supplier, accounts for 55 percent of EU LNG imports. Energy-intensive sectors in the EU face a clear competitive disadvantage against their US counterparts, which benefit from access to cheaper domestically produced natural gas. 

However, Romania can turn these challenges into advantages to stabilize and protect its economy and capitalize on growing demand for new opportunities in transatlantic trade.

Leveraging Romanian energy

With Romanian supply chains vulnerable to shifting global trade dynamics, Romania has a clear incentive to double down on developing its energy sector to buffer its economy against potential disruptions.

The EU’s $750 billion energy commitment under the trade deal underscores the importance of energy for both sides, as well as the urgent need for reliable and affordable energy in Europe as it moves away from Russian supply. The various zero-for-zero tariffs also encourage restructuring supply chains in energy-intensive industries, such as semiconductors, defense, aerospace, and critical minerals, which are central to strategic competition in the 21st century. These sectors will rely on both more efficient and modernized fossil fuel systems as well as domestically generated clean energy  to enhance long-term competitiveness and resilience and meet EU climate and diversification goals.

Romania is well positioned to meet these needs and to protect its own economic stability with its unique mix of energy assets and its location at the crossroads of key European energy routes. Its significant access to Black Sea gas reserves can complement US-sourced LNG imports from the United States and other suppliers that could link to EU markets through the Vertical Gas Corridor. Even as clean energy technology is developed to support the long-term goal of net-zero emissions, natural gas will continue to serve as a transition fuel that supports hard-to-abate heavy industry, strengthens energy security, and maintains industrial competitiveness. By investing in efficiency upgrades and affordable solutions for the supply, transportation, and infrastructure development of natural gas, Romania can expand its role in the energy market and stabilize its economy in the process.

Moreover, Romania is expanding its nuclear capacity with new conventional and small modular reactors, with support from US Export-Import Bank financing, US Trade and Development Agency grants, and partnerships with US firms. This approach aligns closely with the trade deal’s focus on nuclear technology within the EU energy purchase pledge and signals significant opportunities for Romania to deepen transatlantic cooperation and accelerate its nuclear development moving forward.

Further capitalizing on its energy resources, Romania is expanding its renewable capacity in hydropower, solar, wind, and green hydrogen, positioning itself to access EU financial support through the Green Deal and REPowerEU. This approach, which aims to surpass the EU target of 40 percent renewable energy consumption by 2030, promotes economic growth and job creation, modernizes its energy infrastructure, and develops integrated grids to support future electrification.

By leveraging its abundant energy resources and potential, Romania can play a critical role both domestically and within the EU, with far reaching impacts. By driving energy access, development, and security, Romania can boost overall production capacity and strengthen regional supply chains. It can also provide a sustainable foundation for growing its domestic energy-intensive sectors, especially its defense industry, a strategic priority given Romania’s role on NATO’s eastern flank. This would attract additional US and EU investment in Romanian military production, modernization, and mobility, which would further sustain the country’s economic stability.

Romania as a strategic energy hub

The US-EU trade deal reshapes the transatlantic economic playing field, and Romania must act decisively to turn expected challenges into long-term advantages. Increased competition and shifting supply chains within the EU present real risks. In response, Romania, with the EU’s support, should leverage its unique energy assets and strategic location, which offer a way to stabilize and grow its economy at a time of increased demand for reliable, regionally sourced, and clean energy. With a focused and proactive hybrid strategy for advancing nuclear, fossil, and renewable energy, Romania can transform this moment of uncertainty into a catalyst for sustainable growth as a multisource energy producer and exporter as well as a strategic energy transit hub.

Uliana Certan is a Program Assistant at the Atlantic Council Global Energy Center

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Staff

Uliana Certan

Assistant Director, European Engagement

Global Energy Center

Democratic Transitions Energy & Environment

EnergySource Jun 27, 2025

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The EU’s recently released Black Sea strategy will thrive only with robust transatlantic collaboration. This relationship will be crucial to stabilizing the region’s energy security, facilitating its energy transition, and ensuring that initiatives align with geopolitical and national security objectives.

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Press Release Jun 30, 2025

Atlantic Council expands global presence with a new regional office in Bucharest

BUCHAREST, ROMANIA – JUNE 30, 2025 – The Atlantic Council, one of the most influential and globally active think tanks in the United States, announced today the opening of a new regional office in Bucharest. This new office will foster bilateral and transatlantic cooperation on key priorities including energy, security, infrastructure, economics, and advanced technology, […]

The post Energy is key to Romania’s trade resilience appeared first on Atlantic Council.

The United States remains heavily dependent on imports for both raw materials and the capacity to process them. Not all supply chains are equally vulnerable, however, and not all interventions are equally helpful. A policy that works for rare earths may be counterproductive when applied to copper, and vice versa.

The Trump administration’s two recent policy interventions highlight the importance of tailoring mineral policy on a case-by-case basis. The copper tariff, though less dramatic than feared, uses a mismatched tool to address a minor part of the problem by tariffing trade in finished goods while leaving core processing gaps unaddressed. By comparison, the administration’s public-private partnership with MP Materials strikes at the heart of midstream supply chain challenges for rare earths (though it also raises real concerns about creating new forms of market distortion given its overly generous price floor). 

Together, they highlight a core truth in minerals policy: Success is dependent on correctly diagnosing the problem and picking the right tool for the right part of the supply chain. Getting that wrong doesn’t just waste public money and raise prices. It risks making US supply chains less resilient.

Different minerals, different markets, different challenges

Copper and rare earths policies need to navigate fundamentally different market challenges. Copper is a globally traded commodity with a competitive, liquid market and diverse suppliers. The US supply chain’s main vulnerability for copper lies in the poor economics of domestic smelting and refining, though stable trade with diverse partners helps bridge this gap. Rare earths, by contrast, are a niche market dominated by China at every stage. Due to the market’s immaturity, it is marked by high price volatility and opaque dynamics.

These differences mean copper policies need to focus on bolstering midstream economics and reinforcing stable trade partnerships. Rare earths policy, in contrast, should focus on de-risking private investment to help build a domestic supply chain from the ground up.

Copper: Right diagnosis, wrong medicine

The administration’s new copper policy is less sweeping than some analysts initially feared. The final rule imposes a 50 percent tariff on semi-finished and copper-intensive derivative products, while sparing imports of copper concentrates, cathodes, and other raw or intermediate inputs that US industry relies on. It also introduces a domestic sales requirement for all stages of the supply chain spared from tariffs and tightens export controls on high-quality copper scrap.

While this moderation is helpful and likely reflects industry feedback, the approach still misses the mark. The central constraint in the US copper supply chain isn’t semi-finished products; it’s the midstream. The United States produces almost as much copper ore as it consumes, but it lacks the capacity to process it. More than half of domestically mined copper is currently shipped abroad for smelting and refining. Once processed, generally by allies, it often returns as cathodes or wire rod for US manufacturers to fabricate into semi-finished products like pipes, tubes, and cables. The new 50 percent tariff targets these semi-finished copper products.

The 50 percent tariff, by contrast, targets semi-finished copper products such as pipes, tubes, and wires. These are already produced competitively in the United States, and the domestic industry is in relatively strong shape. Effectively, these new measures protect a segment of the copper supply chain that is already relatively healthy, while leaving the system’s weakest link—smelting and refining—largely untouched. To be fair, the tariffs will likely be effective in boosting some US manufacturers that make these products and in keeping more of the supply chain at home, but it is unlikely to spur new investment in smelting infrastructure to address the real strategic vulnerability. Worse, it may raise costs for downstream sectors, such as automotive manufacturing and construction.

The new domestic sales requirement for copper products (starting at 25 percent and rising to 40 percent by 2029) and export controls on copper scrap signal a worthy ambition to retain more copper for domestic use. But without addressing the economic barriers to expanding US smelting capacity, such as high operational costs and thin processing margins, these policies are likely an insufficient signal to incentivize more domestic smelting capacity. Without increased capacity, much of this feedstock has nowhere to go. The result could be a glut of unsellable material or rising costs for miners if export pathways shrink faster than new processing comes online.

In short, none of these measures tackle the real gap in the copper supply chain: midstream infrastructure. The United States has wisely realized that it can’t tariff its way out of its smelting deficit. However, it needs to widen its toolbox, focusing on financial incentives for domestic processing, permitting streamlining, and strategic partnerships with allies who help bridge midstream capacity gaps.

Rare earths: A more targeted approach—but just the beginning

In contrast, the Department of Defense’s multibillion-dollar partnership with MP Materials—a company that operates the only active US rare earths mine and is leading efforts to scale domestic magnet production—represents a more targeted attempt to shore up a deeply fragile supply chain. The United States is almost entirely dependent on China for rare earth separation and magnet production—two critical midstream stages that are vital for defense systems, automotive manufacturing, and advanced technologies.

To address this, the July 10 MP Materials deal ambitiously bundles a series of tools that go beyond traditional grants or procurement:

• A ten-year offtake agreement for permanent magnet purchase from MP’s announced “10x Facility,” a second manufacturing plant that will bring MP’s total permanent magnet manufacturing capacity to an estimated ten thousand metric tons in 2028
• A ten-year price floor ($110 per kilogram for neodymium-praseodymium [NdPr] oxide) to help de-risk market volatility
• A $150 million loan to expand MP’s heavy rare earth separation capabilities
• Acquisition of $400 million in preferred stock to boost rare earths separation and processing capabilities, as well as magnet production capacity
• Enough guaranteed demand to unlock $1 billion in commercial debt and a $500 million additional agreement with Apple

This is not just subsidy for subsidy’s sake; it’s a structured market-making intervention that tackles the clear chokepoints. MP Materials’ magnet facilities are expected to exceed defense demand by the end of the decade, helping to backfill commercial markets as well.

But the design isn’t without risk. First, anchoring a rare earths strategy around an intervention this large in a single company, MP Materials, could crowd out competitors and reduce the innovation pressure that comes with competition, slowing technical progress and driving inefficiencies over time. Encouragingly, recent White House meetings with a broader group of rare earths firms signal an intent to replicate key elements of the deal with a more diverse pool of domestic players. Only time will tell if the administration can foster enough competition to maximize the value of its investment, but if additional deals quickly materialize then it’s headed in the right direction.

Second, the price floor itself is strikingly high. At $110 per kilogram for NdPr oxide, it’s well above current market levels. Price supports are critical to launch a US rare earths industry (as we’ve written about here, suggesting a price floor tariff), but overgenerous price supports can create unhealthy dependencies. The United States might end up overpaying for supply or sustaining an artificial market that fails to mature.

Still, rare earths remain an exceptional case: The industry is small enough in dollar terms to justify large-scale intervention and concentrated enough that a well-structured group of domestic players can quickly shift the market. If successful, similar niche markets could benefit from a similar approach. However, scaling similar tools across more commoditized minerals would generally be prohibitively expensive and hard to justify.

Lessons for a smarter critical minerals strategy

These two cases lead to one resounding conclusion: The United States needs a mineral-by-mineral strategy that aligns policy tools with real-world constraints.

More niche materials, such as rare earths, require substantial government intervention because of acute geopolitical exposure, few global suppliers, and an extraordinarily volatile market. Smart policy here means managing demand risk, catalyzing capital, and stabilizing prices to nurture a strategic ecosystem.

For more commoditized minerals such as copper, supply chains would benefit more from regulatory reform, targeted infrastructure support, and diversified trade partnerships with allies who have more competitive smelting capacity.

As the US government continues its Section 232 investigations into tariffing other minerals, it must embrace differentiated, bold, and measured policy design. Even well-meaning interventions can misfire if they target the wrong supply chain segment. Tariffs are often a blunt instrument, and effective industrial policy requires precision.

What’s needed is a broader, more flexible playbook that can scale what works—strategic offtakes, fast tracking priority permits, supporting innovation—without locking the United States into rigid or inefficient solutions. Above all, policymakers must tailor the tool to the mineral.

Alexis Harmon is an assistant director at the Atlantic Council’s Global Energy Center.

Reed Blakemore is the director of research and programs at the Global Energy Center.

The post A tale of two supply chains: Comparing Trump’s new copper tariffs and rare earth investments appeared first on Atlantic Council.

This is lower than the initial rate of 39 percent that the Trump administration announced on “Liberation Day” back in April, but higher than the revised 10 percent base rate that applied to all countries when the Trump administration paused “Liberation Day” tariffs for ninety days, allowing room for negotiations that expired in July.

But the US trade deficit with Iraq is primarily a function of Iraqi oil exports, which are exempt from reciprocal tariffs. Thus, the first 39 percent rate, the 10 percent temporary rate, or the new 30 percent rate have no direct implications for the calculation. However, there will be indirect impacts resulting from lower oil prices, due to the expected decline in global oil demand that is likely to follow the potential adverse effects of the tariff on global trade. 

This piece will review the mechanics of the tariffs imposed on Iraq, a brief history of the trade between the two, and policy responses for a win-win relationship between Iraq and the United States—particularly with respect to the US-Iraq Strategic Framework Agreement, which is a key framework for the evolving relationship between the two towards one that is focused on political, economic, cultural, and security ties.

The mechanics of the tariffs

There is no public data on how the Trump administration decided on the 30 percent tariff rate for Baghdad, nor is there information on Washington’s assessment of their expected effect on its trade deficit— apart from Trump’s assertion that they are “far less than what is needed to eliminate the Trade Deficit disparity we have with your country,” he wrote in a July letter to Iraq’s Prime Minister Mohammed Shia’ al-Sudani.

Nevertheless, there is enough data to see how the initial 39 percent was calculated. On Trump’s so-called “Liberation Day,” the US Trade Representative (USTR) announced its rate formula, in which many variables canceled each other out. Thus, the formula effectively calculated the trade deficit with a country, divided by imports from that country. Then, the US reciprocal tariffs are 50 percent of that result in order to balance the deficit.

The US-Iraq trade relationship was estimated at approximately $8.8 billion in 2024, comprising Iraq’s exports to the United States of $7.4 billion (mostly oil) and the United States’ exports to Iraq of $1.4 billion—excluding re-exports of $0.3 billion through the United States. The top five US imported goods to Iraq account for 70 percent of the total, including cars at 39 percent, machinery at 16 percent, pharmaceuticals at 8 percent, electrical and electronic products at 8 percent, and optical, photographic, technical, and medical apparatus at 7 percent. However, the data does not capture all of the US exports of these same products that come via third countries in the region by Iraqi importers. There are no data on the value of these exports, as they effectively enter Iraq as exports from a third country; thus, it is not possible to identify them as US products.

With these numbers taken into account, the US-Iraq trade deficit—at least until Trump tariffs take effect—is worth about $5.8 billion, so its tariff and non-tariff barriers are 78 percent (5.8/7.4 = 78 percent), and thus, according to the Trump administration’s calculus, the reciprocal tariff rate of 39 percent (78/2= 39 percent) is correct.

A brief history of Iraq-US trade

In looking at the trading relationship this piece will consider Iraq oil exports in terms of barrels per day (bpd) and not in their amount in dollars in any given year, as changes in oil prices can alter the numbers meaningfully leading to false conclusions—for instance oil exports of 200,000 bpd, at $30 bpd lead to $2.1 billion in export revenues yet could lead to $4.2 billion in export revenues if oil prices were $60/bbl, but the barrels exported are the same.

The US exports to Iraq have been relatively small, averaging $1.4 billion a year between 2012 and 2024, with trade declining from $2 billion in 2012 to $1.4 billion in 2024; while overall exports to Iraq have almost doubled in the same timeframe. However, this is not a function of a declining relationship or a decline in demand for US products, but rather the evolution of Iraq’s economy towards a consumer-driven economy, in lockstep with the end of years-long conflicts. Iraqis are also increasingly importing the same consumer goods from China that the United States, Europe, and other regional consumers are importing. Crucially, this is not a function of tariffs or non-tariff barriers on US exports. As the International Monetary Fund (IMF) notes, Iraq has a low effective tariff rate, estimated at under 1 percent in 2023, which is significantly lower than in other Middle East and North Africa countries from 2012 to 2023.

Between 2012 and 2024, Iraq’s total oil exports grew by 39 percent, while its exports to the United States declined by 64 percent. However, this is not a function of a declining relationship, but rather a result of two factors specific to the United States. The first is that US oil consumption has been modest during this period, increasing by 8 percent, while its oil imports have decreased by 23 percent during the time frame. This is a function of the second US-specific factor, that is, the emergence and rapid expansion of its shale oil industry. This fundamentally altered the profile of the United States as an oil importer, with imports as a percentage of its oil consumption declining from 49 percent in 2012 to 35 percent in 2024.

Policy Implications

The promising aspect of Trump’s letter—that the tariffs are subject to revision and the evolving relationship with the United States—presents an opportunity that Iraq can seize to build up crucial aspects of the US-Iraq Strategic Framework Agreement.

Iraq can accomplish this through developing both its economic energy relationship with Washington, as well as securing Iraq’s energy independence by diversifying its sources of gas exports away from its dependence on Iranian gas imports. These go much beyond any specific Iraq trade policy with the United States, given its very low effective tariff rate of around 1 percent (earlier), or any Iraqi efforts or measures to increase US imports for its Public Distribution System (PDS) such as imports of rice, and grains—as crucial as these are for Iraq to pursue.

This can be done through a mega-energy deal with US companies. Such a deal should encompass multiple interlinked components, and unfold over multiple years; it can be larger and more strategic than, but along the same lines as, the $27 billion energy deal signed with TotalEnergies in mid-2023, or the $25 billion energy deal signed by BP in early 2025.

The framework of this mega-deal could include interlinked deals between multiple US companies, covering four sub-components. The first sub-component is alternative gas imports, to meet its demand for gas for power generation, through imports of US Liquified Natural Gas (LNG), in addition to its recent deal for pipeline gas imports from Turkmenistan.

This opens up and leads to the second subcomponent, which is the significant infrastructure development needed to develop Iraq’s LNG infrastructure by US companies. The sourcing of LNG from the United States and building LNG infrastructure can be complemented by the third sub-component, which involves increasing domestic gas production sources by capturing large amounts of flared gas using US technology and companies.

The gas produced from these three subcomponents leads to the fourth subcomponent, which effectively uses this gas for electricity generation to meet Iraq’s need to close the gap between supply and demand of electricity. Thus, the fourth sub-component completes the first three, through the upgrading and development of Iraq’s electricity grid infrastructure by US companies such as GE Vernova. For all these to happen smoothly, Iraq needs to facilitate access and secure investments from US companies across all aspects, especially in relation to any tariff and non-tariff obstacles, irrespective of its current low effective tariff rate.

Not only does this create the first large visible economic and energy aspect of their Strategic Framework Agreement, but the successful implementation of these four subcomponents can have substantial positive implications for Iraq’s economy, which in the process creates more investment and trade opportunities for US companies in Iraq’s evolving economic journey.

Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East Programs. He is an experienced capital markets professional with over 25 years of experience in the US and MENA markets, and serves as the chief strategist at the AFC Iraq Fund.

The post Beyond tariffs: Building a win-win relationship between the US and Iraq appeared first on Atlantic Council.

Click to jump to an expert analysis:

Graham Brookie: A deliberative and thorough plan—but three questions arise about its implementation

Trey Herr: If the US is in an AI race, where is it going? 

Trisha Ray: On international partnerships, the AI Action Plan is all sticks, few carrots

Nitansha Bansal: The plan is a step forward for the AI supply chain

Raul Brens: The US can’t lead the way on AI through dominance alone

Mark Scott: The US and EU see eye-to-eye on AI, up to a point

Ananya Kumar and Nitansha Bansal: The US plan may sound like those of the UK and EU—but the differences are critical

Esteban Ponce de Leon: The plan accelerates the tension between proprietary and open-source models

Joseph Webster: On energy, watch what the plan could do for the grid and batteries

A deliberative and thorough plan—but three questions arise about its implementation

We are in an era of increasing geopolitical competition, increased interdependence, and rapid technological change. No single issue demonstrates the convergence of all three better than AI. The AI Action Plan released today reflects this reality. Throughout the first six months of the Trump administration, officials have run a thorough and deliberative policy process—which White House officials say incorporated more than ten thousand public comments from various stakeholders, especially US industry. The resulting product provides a clear articulation of AI in terms of the tech stack that underpins it and an increasingly vast ecosystem of industry segments, stakeholders, applications, and implications. 

The policy recommendations laid out in the action plan are well-organized and draw connections between scientific, domestic, and international priorities. Despite the rhetoric, there is more continuity than it may appear from the first Trump administration to the Biden administration to this action plan—especially in areas such as increasing investment in infrastructure, hardware fabrication, and outcompeting foreign adversaries in innovation and the human talent that underpins it. The AI Action Plan will continue to scale investment and growth in these areas. The key divergence is in governance and guardrails.  

Three outstanding questions stick out regarding effective implementation of the Action Plan.  

First, in an era of budget and staff cuts across the federal government, will there be enough government expertise and funding to realize much of the ambition of this plan? For example, cutting State Department staff focused on tech diplomacy or global norms could undercut parts of the international strategy. Budget cuts to the National Science Foundation could impact AI priorities from workforce to research and development.  

Second, how will the administration wield consolidated power with frameworks to reward states it views as aligned and cut funding to states it sees as unaligned? 

Third, beyond selling US technology, how will the United States not just compete against Chinese frameworks in global bodies, but also work collaboratively with allies and partners on AI norms? 

Given the pace of change, the United States’ success will be based on continuing to grow the AI ecosystem as a collective whole and for the ecosystem to iterate faster to compete more effectively. 

—Graham Brookie is the Atlantic Council’s vice president for technology programs and strategy. 

If the US is in an AI race, where is it going?  

The arms race is a funny concept to apply to AI, and not just because the history of arms races is replete with countries bankrupting themselves trying to keep up with a perceived threat from abroad. The repeated emphasis on an AI “race” is still ambiguous on a crucial point—what are we racing toward?  

Consider this useful insight on arms racing in national security: “Over and over again, a promising new idea proved far more expensive than it first appeared would be the case; yet to halt midstream or refuse to try something new until its feasibility had been thoroughly tested meant handing over technical leadership to someone else.”    

 Was this written about AI? No, this comes from historian William H. McNeill writing about the British-German maritime arms race at the turn of the twentieth century. The United Kingdom and Germany raced to build ever bigger armored Dreadnoughts in an attempt to win naval supremacy based on the theory that the economic survival of seagoing countries would be determined by the ability to win a large, decisive naval battle. Industry played a key role in encouraging the competition and setting the terms of the debate, increasingly disconnected from the needs of national security  

 So, to take things back to the present, what are we racing toward when it comes to AI? The White House’s AI Action Plan hasn’t resolved this question. The plan’s Pillar 1 offers a swath of policy ideas grounded more in AI as a normal technology. Pillar 2 is more narrowly focused on infrastructure but still thin on the details of implementation. Tasking the National Institute of Standards and Technology is a common refrain and some of the previous administration’s policy priorities, such as the CHIPS Act and Secure by Design program have been essentially rebranded and relaunched. Pillar 3 calls for a renewed commitment to countering China in multilateral tech standards forums, a cruel irony as the State Department office responsible for this was just shuttered in wide-ranging layoffs announced earlier this month.  

The national security of the United States and its allies is composed of more than the capability of a single cutting-edge technology. Without knowing where this race is going, it will be hard to say when we’ve won, or if it’s worth what we lose to get there.    

—Trey Herr is senior director of the Cyber Statecraft Initiative (CSI), part of the Atlantic Council Technology Programs, and assistant professor of global security and policy at American University’s School of International Service.  

On international partnerships, the AI Action Plan is all sticks, few carrots 

The AI Action Plan’s strongest message is that the United States should meet, not curb, global demand for AI. To achieve this, the plan suggests a novel and ambitious approach: full-stack AI export packages through industry consortia. 

What is the AI stack? Most definitions include five layers: infrastructure, data, development, deployment, and application. Arguably, monitoring and governance is a critical sixth layer. US companies dominate components of different layers (e.g. chips, talent, cloud services, and models). But the United States’ ability to export full-stack AI solutions, the carrot in this scenario, is limited by a rather large stick: its broad export control regime, which includes the Foreign Director Product Rule and Export Administration Regulations. 

Governance remains the layer the United States is weakest on. The AI Action Plan does emphasize countering adversarial influence in international governance bodies, such as the Organisation for Economic Co-operation and Development, the Internet Corporation for Assigned Names and Numbers, the Group of Seven (G7), the Group of Twenty (G20), and the International Telecommunication Union. However, the plan undermines the consensus-based AI governance efforts within these bodies, including an apparent jibe at the G7 Code of Conduct. If it seeks real alignment with allies and partners, the White House must outline an affirmative vision for values-based global AI governance. 

—Trisha Ray is an associate director and resident fellow at the Atlantic Council’s GeoTech Center, part of the Atlantic Council Technology Programs. 

The plan is a step forward for the AI supply chain

The AI Action Plan’s focus on the full AI stack—from energy infrastructure, data centers, semiconductors, and the talent pipeline to acknowledging associated risks and cybersecurity concerns—is welcome. The plan has adopted an optimistic view of the open source and open weight AI models, and it has built in provisions to create a healthy innovation ecosystem for open source AI models along with strengthening the access to compute—which is another positive policy realization on the part of the administration.

The administration appears to be cognizant that competitiveness in AI will not be achieved solely by domesticating the AI supply chain. Competitiveness in this ecosystem needs to be a multi-pronged strategy of translating domestic AI capabilities into national power faster, more efficiently, more effectively, and more economically than adversaries—driven by faster chips, smarter and more trustworthy models, a more resilient electricity grid, a robust investment infrastructure, and collaboration with allies.

This emphasis on securing the full stack means that the near-term policy will target not just innovation, but the location, sourcing, and trustworthiness of every component in the AI pipeline. The owners and users of AI supply chain components have much to look forward to. The new permitting reform could reshape the location of AI infrastructure; recognition of workforce and talent bottlenecks can lead to renewed focus on skill development and training programs; and emphasis on AI-related vulnerabilities in critical infrastructure could translate into more regular and robust information sharing apparatuses and incident response requirements for private sector executives.

In all, achieving AI competitiveness is an ambitious goal, and the plan sets the government’s agenda straight.

—Nitansha Bansal is the assistant director of the Cyber Statecraft Initiative.

The US can’t lead the way on AI through dominance alone

The AI Action Plan makes one thing clear: the United States isn’t just trying to win the AI race—it’s trying to engineer the track unilaterally. With sweeping ambitions to export US-made chips, models, and standards, the plan signals a cutting-edge strategy to rally allies and counter China. But it also takes a big gamble. Rather than co-design AI governance with democratic allies and partners, it pushes a “buy American, trust American” model. This will likely ring hollow for countries across Europe and the Indo-Pacific that have invested heavily in building their own AI rules around transparency, climate action, and digital equity. 

There’s a lot to like in the plan’s push for infrastructure investment and workforce development, which is a necessary step toward building serious AI capacity. But its sidelining of critical safeguards and its dismissal of issues like misinformation, climate change, and diversity, equity, and inclusion continues to have a sandpaper effect on traditional partners and institutions that have invested heavily in aligning AI with public values. If US developers are pressured to walk away from those same principles, the alliance could fray and the social license to operate in these domains will inevitably suffer. 

The United States can lead the way—but not through dominance alone. An alliance is built on the stabilizing forces of trust, not tech stack supply chains or destabilizing attempts to force partners to follow one country’s standards. Building this trust will require working together to respond to the ways that AI shapes our societies, not just unilaterally fixating on its growth. 

—Raul Brens Jr. is the director of the GeoTech Center. 

On energy, watch what the plan could do for the grid and batteries

Two energy elements in the AI Action Plan hold bipartisan promise: 

1. Expanding the electricity grid. The action plan notes the United States should “explore solutions like advanced grid management technologies and upgrades to power lines that can increase the amount of electricity transmitted along existing routes.” In other words, advanced conductors, reconductoring, and dynamic line ratings (and more) are on the table. Both Republicans and Democrats likely agree that transmission and the grid received inadequate investment in the Biden years: The United States built only fifty-five miles of high-voltage lines in 2023, down from the average of 925 miles per year between 2015 and 2019. The University of Pennsylvania estimated that the Inflation Reduction Act’s energy provisions would cost $1.045 trillion from 2023 to 2032, but the bill included only $2.9 billion in direct funding for transmission. 

2. Funding “leapfrog” dual-use batteries. Next-generation battery chemistries, such as solid-state or lithium-sulfur, could enhance the capabilities of autonomous vehicles and other platforms requiring on-board inference. Virtually all autonomous passenger vehicles run on batteries, and the action plan mentions self-driving cars and logistics applications. Additionally, batteries are a critical military enabler: They are deployed in drones, electronic warfare systems, robots, diesel-electric submarines, directed energy weapons, and more. Given the bipartisan interest in autonomous vehicles and US military competition with Beijing, there may be scope for bipartisan agreement on funding “leapfrog,” dual-use battery chemistries. 

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center and the Indo-Pacific Security Initiative. 

The US and EU see eye-to-eye on AI, up to a point

Despite the ongoing transatlantic friction between Washington and Brussels, much of what was outlined by the White House aligns with much what EU officials have similarly announced in recent months. That includes efforts to reduce bureaucratic red tape to foster AI-enabled industries, the promotion of scientific research to outline a democracy-led approach to the emerging technology, and efforts to understand AI’s impact on the labor force and to upskill workers nationwide.

Yet where problems likely will arise is how Washington seeks to promote a “Make America Great Again” approach to the export of US AI technologies to allies and the wider world. Much of that focuses on prioritizing US interests, primarily against the rise of China and its indigenous AI industry, in multinational standards bodies and other global fora—at a time when the White House has significantly pulled back from previously bipartisan issues like the maintenance of an open and interoperable internet.

This dichotomy—where the United States and EU agree on separate domestic-focused AI industrial policy agendas but disagree on how those approaches are scaled internationally—will likely be a central pain point in the ongoing transatlantic relationship on technology. Finding a path forward between Washington and Brussels must now become a short-term priority at a time when both EU and US officials are threatening tariffs against each other.

—Mark Scott is a senior resident fellow at the Digital Forensic Research Lab’s Democracy + Tech Initiative within the Atlantic Council Technology Programs.

The US plan may sound like those of the UK and EU—but the differences are critical

The new AI Action Plan—like its peers from the European Union (EU) and the United Kingdom—is focused on “winning the AI race” through regulatory actions to direct and promote innovation, new investments to create and advance access to crucial AI inputs, and frameworks for international engagement and leadership. Winning the AI race is, in effect, the top priority of all three AI plans, albeit in different ways. While the EU’s AI Act wants to be the first to create regulatory guardrails, the United States’ AI plan has a strong deregulation agenda. In a significant break from other policy measures from this administration to ensure US dominance, this action plan moves away from a purely domestic orientation to the international sphere, flexing the reach of traditional US notions of power. This includes international leadership in frontier technology research and development and adoption, as well as creating global governance standards. It’s a testament to the scarcity, quality, and sizable nature of the inputs needed for global AI dominance that even the Trump administration is thinking through its strategy on AI in terms of global alignment. 

Even as each jurisdiction, including the United States, seeks to position itself as the dominant player in the AI race, there is no common scoreboard for deciding a winner for the game. Each player has devised an ambitious but distinct understanding of this “competition,” and each competition will play out through harnessing a unique combination of industrial, trade, investment, and regulatory policy tools. As the race unfolds in real time, the challenge for US policymakers is to simultaneously create the rules of the game while playing it effectively. A broad range of stakeholders, including AI companies, investors, venture capitalists, safety institutes, and allied governments seek clarity and stability. They all will watch the implementation of the US plan closely to determine their next moves.  

There are two encouraging signs in this action plan when it comes to strengthening US competitiveness:  

First, by prioritizing international diplomacy and security, the United States is positioning itself to influence the global AI playbook that will ultimately determine who reaps economic benefits from AI systems. Leading multilateral coordination on AI positions the United States to secure open markets for AI inputs, shape global adoption pathways, and protect its private sector from regulatory fragmentation and protectionism. 

Second, the plan creates a roadmap for ensuring that the United States and its allies assimilate AI capabilities faster than their adversaries. In this vein, the plan emphasizes the importance of coordinating with allies to implement and strengthen the enforcement of coordinating export controls. 

—Ananya Kumar is the deputy director for Future of Money at the GeoEconomics Center. 

—Nitansha Bansal is the assistant director of the Cyber Statecraft Initiative. 

The plan accelerates the tension between proprietary and open-source models

The White House’s AI Action Plan explicitly frames model superiority as essential to US dominance, but this creates profound tensions within the US ecosystem itself. As better models attract more users—who, in turn, generate training data for future improvements—we may see a self-reinforcing concentration of power among a few firms. 

This dynamic creates opportunities for leading firms to set safety standards that elevate the entire industry. A clear example is Anthropic’s “race to the top,” where competitive incentives are directly channeled into solving safety problems. When frontier labs adopt rigorous development protocols, market pressures force competitors to match or exceed these standards. However, the darker side of innovation may emerge through benchmark gaming, where pressure to demonstrate superiority incentivizes optimizing for benchmarks rather than genuine capability, risking misleadingly capable systems that excel at tests while lacking true innovation. 

Yet the AI Action Plan’s emphasis on open-source models highlights a more complex competitive landscape than market concentration alone suggests. Open-source strategies are not just defensive moves against domestic monopolization; they also represent offensive tactics in the global AI race, particularly as Chinese open-source models gain traction and threaten to establish alternative standards with millions of users worldwide. 

This dual-track competition between concentrated proprietary excellence and distributed open-source influence fundamentally redefines how firms must compete.  

Success now requires not only racing for capability supremacy but also strategically deciding what to keep proprietary and what to release in order to shape global standards. The plan’s call to “export American AI to allies and partners” through “full-stack deployment packages” suggests that the ultimate competitive advantage may lie not in the superiority of a single model, but in the ability to build dependent ecosystems where US AI becomes the essential infrastructure for global innovation. 

—Esteban Ponce de León is a resident fellow at the DFRLab of the Atlantic Council. 

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The bill sets a foundation, but one bill won’t be enough

Trump’s “big, beautiful bill” represents a pivotal moment for US energy policy. Rather than serving as a final word on American energy dominance, the legislation initiates a new dialogue in Washington, DC, about how the nation’s energy system should be recalibrated to prioritize energy security—emphasizing reliability, domestic capacity, and system integration. 

As artificial intelligence–driven electricity demand threatens to eclipse 100 gigawatts and accelerate exponentially during Trump’s second term, the bill underscores the urgency many Republicans feel to bolster US generation with dependable, dispatchable resources. Within this framework, technologies such as natural gas, nuclear, and geothermal are not only strategic choices but also reflect the United States’ comparative advantages. 

Notably, the legislation cements nuclear energy as a foundational element in the nation’s future energy mix. Years of incremental, bipartisan support have matured into formal policy momentum. By positioning nuclear as a central pillar, the United States joins a growing global consensus on its strategic value, particularly as energy systems become more complex. 

This direction reflects a Republican policy view that ensuring reliable, affordable power in an era of artificial intelligence, electrification, and geopolitical competition requires anchoring national energy strategy in long-term physical and industrial resilience. That means investing in infrastructure capable of withstanding shocks and in a domestic industrial base strong enough to supply the technologies needed to sustain it. To that end, the legislation includes provisions aimed at limiting the use of Chinese-manufactured components in the US grid, reflecting heightened concern over foreign influence in critical energy systems. It also responds to perceived shortcomings in other advanced economies. Countries with aggressive renewable rollouts, such as Germany and the United Kingdom, have faced high energy costs and reliability challenges in part because of fragmented grid planning and complex system integration. 

Still, the legislation is only a starting point. Congress faces unfinished work—chiefly, permitting reform. Without streamlined processes to support the build-out of transmission, advanced nuclear, gas infrastructure, and geothermal projects, the nation risks falling short of the very objectives this bill sets in motion. 

In this sense, the megabill serves not as a capstone but as a foundation for the next era of US energy leadership. In a decade likely to be defined by soaring digital power demand and strategic competition with China, the real test is not whether the United States has selected the right tools, but whether it can deploy them at the speed and scale required. And for those left outside the immediate strategy—particularly solar and wind proponents—new opportunities to shape the country’s energy future are all but assured. 

—Landon Derentz is vice president, energy and infrastructure, senior director and Morningstar Chair for Global Energy Security at the Atlantic Council Global Energy Center.

This bill is not the way to US energy dominance

The final version of the “big, beautiful bill” is likely to undermine the Trump administration’s goal of energy dominance. 

First, by cutting short the tax preferences enshrined in the Inflation Reduction Act (IRA) before their prior legislative deadline in 2032—an extraordinary precedent that will unsettle investors—Congress has created uncertainty in the reliability of all energy tax preferences. Rather than stepping back on the US roller coaster, investors are much more likely to wait to see what the next election brings, at least through the midterms.  

Second, the bill egregiously wastes the billions in commitments made for hydrogen, carbon capture, battery, wind, and solar investments, as well as significant sums spent by companies whose business plans relied on the durability of the IRA tax preferences. Modest improvements in the Senate bill—such as a slightly longer begin-construction runway extended to mid-2026 for renewables projects—still leaves the medium- and long-term potential of these industries’ revenues, as well as their employment potential, severely undercut. 

Third, Congress is essentially ceding the future of wind, solar, hydrogen, and battery investment to China. This legislation represents a stunning acquiescence to globally concentrated development and supply chain systems for these technologies in the hands of a US competitor. Rather than encouraging European and Asian allies to invest in their own industries or become customers for US-made components for these technologies (which are expanding everywhere else in the world), the bill will tempt other buyers to simply opt for the cheaper and already more mature Chinese components. This is catastrophic for the durability and diversity of these supply chains and US technological influence more generally.  

Finally, the bill will undermine the speed and cost of providing new power generation for artificial intelligence and data-center hyperscalers. Major hyperscalers have already made commitments to zero-emissions firm power (based on nuclear power and other fuel combinations) for the post-2030 period. But with gas turbines largely subscribed through 2028, even integrated power generators, such as NextEra, have made clear that renewables with grid-scale battery storage make up the cheapest and fastest power they can access right away. 

Rather than lowering the cost of all forms of energy supply to provide as much low-cost power as possible right now, Congress has gratuitously raised the cost of the source of power generation that can be delivered most quickly and cheaply before 2030. This will drive up the cost of renewable power, increase demand for gas turbines, and likely raise the cost of gas-fired generation, as well. The higher the price hyperscalers have to pay for power, the higher the price regular consumers will have to pay as they compete with them for who gets the next kilowatt. 

The preceding Biden administration bill was called the Inflation Reduction Act; this one would be better named the Inflation Promotion Act, as its energy provisions are likely to raise the cost of electricity for industry and consumers alike. Likewise, the three-trillion-dollar increase to the national debt is likely to drive up interest rates throughout the economy and raise the cost of borrowing for all forms of energy and associated infrastructure. This includes the critical infrastructure the Trump administration claims it wishes to expedite permitting procedures for.  

In short, the bill is a recipe for energy submission rather than energy dominance. 

—David Goldwyn is president of Goldwyn Global Strategies, LLC, chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group, and the former special envoy and coordinator for international energy affairs at the US State Department.  

—Andrea Clabough is an associate at Goldwyn Global Strategies, LLC, and a nonresident fellow with the Atlantic Council Global Energy Center.

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Will this agreement succeed in halting the fighting? And what does this mean for the US role in the region? Below, our experts read between the lines of the peace agreement.  

Jump to an expert reaction

Frannie Léautier: This deal could redefine peace and power

Tressa Guenov: This deal could help resolve a complex conflict—and pose a challenge to China 

Alexandria Maloney: A pivotal moment for Africa’s stability and the global energy transition

Will Mortenson: To ensure peace leads to prosperity, the DRC must prioritize the rule of law 

This deal could redefine peace and power

This agreement, focused on responsibly sourcing and processing critical minerals, is about much more than mining. It is about recasting the narrative of Central Africa—from one of endless conflict to one of integrated opportunity. And it comes at a time when the world is racing toward a clean energy future that must be built not just with sustainable materials but with shared values.

For decades, the DRC’s substantial mineral riches have been both a blessing and a curse—fueling violence, enabling illicit trade, and entrenching poverty. This new agreement, however, links mineral access to governance, traceability, and regional cooperation. By recognizing Rwanda’s role in regional logistics and committing to a jointly managed, transparent minerals corridor, the deal offers a pathway out of zero-sum geopolitics and toward a model of mutual gain.

Like the recent US–Ukraine minerals agreement, this US–DRC deal aligns resource access with political stabilization. It signals a growing recognition in Washington that supply chain resilience is not just a commercial imperative—it’s a diplomatic and security one.

For the African continent, the most exciting prospect may be the acceleration of regional integration. This trilateral deal strengthens the case for the African Continental Free Trade Area by showing that cross-border cooperation is not only possible—it is strategic. The mineral corridor envisioned in this agreement could become a backbone for industrial zones, green energy clusters, and cross-border infrastructure linking East, Central, and Southern Africa.

It also opens the door for a new kind of diplomacy: one grounded not in competition for resources, but in shared stewardship. If successful, this model could be adapted elsewhere—from Guinea and Liberia to Mozambique and Tanzania.

This matters for several reasons:

• Security: By conditioning mineral trade on peace and governance benchmarks, the agreement could change the incentive structures that have enabled armed groups to thrive. If monitored and enforced with local buy-in, it could become a precedent-setting model for responsible sourcing in fragile contexts.
• The energy transition: With the West seeking alternatives in battery supply chains, Africa’s resource-rich nations are no longer peripheral—they are pivotal. A stable, ethically sourced stream of critical minerals from the DRC could anchor a new era of cleaner, more secure energy production.
• Technology and trade: This deal could lay the foundation for deeper US–Africa industrial cooperation, helping African countries move up the value chain through refining, battery assembly, and tech partnerships—rather than remaining exporters of raw materials.
• Peace-building. If designed for the long haul, this deal could help demonstrate that diplomacy and development are not side issues in energy policy—they are central to it.

What comes next? To turn this vision into reality, three imperatives must guide the path forward:

• Sustained US engagement: Beyond the initial announcement, the United States must invest in follow-through—technical support, financing tools, and diplomatic accompaniment.
• Local leadership and governance: Success hinges on the empowerment of Congolese and Rwandan actors—especially civil society and local businesses—who can ensure that mineral wealth is equitably shared and responsibly managed.
• Transparent and inclusive implementation: Trust will be key. Independent monitoring, grievance redress mechanisms, and community consultation must be embedded from day one.

—Frannie Léautier is a nonresident senior fellow at the Atlantic Council’s Africa Center and chief executive officer of SouthBridge Investment. She previously served as chief of staff to the president and vice president at the World Bank Group and senior vice president at the African Development Bank.

This deal could help resolve a complex conflict—and pose a challenge to China 

The US-brokered peace agreement signed today in Washington between the DRC and Rwanda is welcome news that could begin to resolve this complex and bloody conflict. Previous peace efforts over numerous US administrations have been elusive, so successful implementation will depend on all parties fully committing to the long-term work that is needed for lasting peace.  

The deal hinges on what is by now a familiar theme with the Trump administration: access to critical minerals for the United States. Chances are the device you are reading this on contains rare materials such as tantalum, tungsten, or coltan mined in the DRC or Rwanda. Critical minerals from these countries also go into nearly every form of high-end defense equipment manufactured today. But technology is not without consequences. Funds from the mines that extract these valuable metals have been diverted toward fueling the conflict and associated corruption. 

China, which holds a monopoly over the DRC’s vast cobalt industry, will be watching this deal closely, as it too has a rapacious demand for critical minerals for its processing industry and for commercial and defense applications. China has reportedly supplied weapons to both the DRC and Rwanda. The deal could test China’s ability to navigate the region. Russia also has a strong history with the DRC and will surely be at the ready with misinformation about US intentions with the deal. 

Paradoxically, if not carefully managed, any new critical mineral extraction and access that the United States seeks from the deal could further perpetuate the factors that have enabled the conflict to endure for so long (such as child labor, corruption, devastating violence, and environmental plunder). The nature of US participation in the long-term diplomatic and economic implementation of the deal is unclear. It will be made harder by the recent cuts to the US capacity for aid and development programs, which would be a vital tool in assisting with peacebuilding. The inclusion of women, who have suffered greatly in this conflict, and other disenfranchised groups will also be crucial for securing a lasting peace. Today’s announcement is an essential step in the right direction. Now the real work begins. 

—Tressa Guenov is the director for programs and operations and a senior fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security. Previously, she was the US principal deputy assistant secretary of defense for international security affairs in the Office of the Under Secretary of Defense for Policy at the US Department of Defense. 

A pivotal moment for Africa’s stability and the global energy transition

The announcement of a peace and critical minerals deal between the United States and the DRC marks a pivotal moment—not just for bilateral relations, but for Africa’s long-term stability and the global energy transition. If successful, the deal could demonstrate how diplomacy, development, and strategic resource management can align to benefit all parties involved. 

This agreement may provide a platform for stability and strategic cooperation by de-risking mineral supply chains essential for clean energy, formalizing governance in conflict-affected regions of the DRC, and empowering African stakeholders to shape global narratives around resource development. It could also bolster US commitments to mutual partnership as outlined in the US Strategy Toward Sub-Saharan Africa. 

However, any optimism must be tempered with realism. The deal will be vulnerable if systemic challenges remain unaddressed. Fragile governance structures in eastern DRC, particularly weak institutional capacity and fragmented local authority, could undercut enforcement or public trust. If the agreement leans too heavily on extraction without corresponding investment in infrastructure, human capital, or environmental safeguards, it may risk deepening economic disparities rather than resolving them. Additionally, China’s entrenched footprint in the DRC’s mining sector may complicate implementation and heighten geopolitical tensions. Perhaps most critically, the exclusion of local communities or civil society organizations from negotiations could foster resentment and erode legitimacy, leading to long-term instability. 

What cannot be missed is this: The opportunity here is not simply to secure minerals, but to establish a new model for engaging fragile, resource-rich states. That model must prioritize peace as the foundation, not the byproduct, of economic growth.  

—Alexandria Maloney is a nonresident senior fellow with the Africa Center, president of Black Professionals in International Affairs, and a visiting lecturer at Cornell University

To ensure peace leads to prosperity, the DRC must prioritize the rule of law 

The DRC-Rwanda peace deal is an incredible landmark in a long history of cross-border conflict that has prevented the DRC from truly capitalizing on its vast mineral resources. In no small part due to the persistent violence in eastern DRC, the country is one of the poorest and least prosperous countries in Sub-Saharan Africa, according to the 2025 Freedom and Prosperity Indexes.   

While the foundational commitment to peace and to collaboratively stamping out militia activity in eastern DRC is undoubtedly the bulwark of this agreement, the importance of the joint commitment in enhancing trade and investment opportunities through existing regional frameworks cannot be overlooked. If peace does indeed prevail, the DRC stands to reap tremendous rewards from an enhanced ability to attract foreign investment. Multinational corporations and foreign governments (namely the United States, which helped broker the agreement) are chomping at the bit to access the country’s mineral resources, many of which are critical for emerging military and civilian technologies.  

However, in order to capitalize on this opportunity to attract foreign investment and to ensure that the Congolese people benefit from it, the government of President Felix Tshisekedi must tackle corruption and establish a more robustly articulated and enforced rule of law. Establishing stability through the rule of law, low levels of corruption, and an efficient judiciary is essential for attracting outside investment. The DRC ranks among the lowest in the world in these metrics, placing 154th out of 164 countries covered in the legal subindex of the 2025 Freedom and Prosperity Indexes. Thus, only by initiating essential domestic reforms can the DRC take full advantage of the peace that this historic agreement promises to bring. 

—Will Mortenson is a program assistant at the Atlantic Council’s Freedom and Prosperity Center, where he supports the center’s research, programming, and outreach. 

The post Experts react: The DRC and Rwanda agreed to a US-backed peace deal. Can critical minerals help end this conflict? appeared first on Atlantic Council.

The document, though not exhaustive, establishes a strategic framework for the region, characterizing it as a “hub of security, stability, and prosperity.” Central to this dynamic is the region’s role in broader European energy security, which Russian aggression has demonstrated is essential to national security. What the plan fails to recognize, however, is the significance of the transatlantic partnership in empowering Black Sea nations—home to major energy infrastructure and untapped gas and renewables resources—to maximize their capacity in this role.  

Despite the current challenges in EU–US relations, the number of strategic partnerships and international alliances in the Black Sea region demands a thorough evaluation of how transatlantic cooperation could enhance regional and broader European energy security. 

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Bridge over troubled water – Why the transatlantic partnership matters more than ever  

The Black Sea region stands at the convergence of multiple geopolitical and economic blocs, including NATO, the European Union, and the Energy Community (for prospective EU member states). The region also serves as a battleground for great power competition, characterized by Russia’s persistent use of hybrid tactics, China’s growing interest as an entry point to the EU markets, the EU’s ambitions for an expanding and unified single market, and the US’s emphasis on strategic partnerships. 

Figure 1. Three geopolitical and economic blocs converge in an extended region around the Black Sea

The collaboration between the European Union and its transatlantic partners is essential for improving energy security preparedness and the resilience of critical infrastructure.  Although Brussels and Washington may currently have differing perspectives on various matters, the strategic energy significance of the Black Sea region, particularly in light of current security and geopolitical challenges, cannot be overlooked.  

Similarly, the region’s resources present a significant opportunity for Black Sea nations (specifically EU member states) to leverage energy diplomacy. The win-set between the EU’s energy targets and the United States’ energy policy goals, though arguably limited, achieves an optimal equilibrium in the region, with objectives serving as either joint EU-US priorities (e.g., infrastructure and connectivity, geothermal, clean manufacturing technologies) or being tacitly endorsed by them (e.g., nuclear development, gas explorations in the Black Sea). 

The successful implementation of the EU’s new Black Sea strategy, which leverages a diverse range of internal mechanisms, will significantly hinge on proficient transatlantic coordination.  The United States and NATO provide essential resources, strategic weight, and credibility to a region where robust energy infrastructure resilience is critical for national security. 

Collaboration with transatlantic allies is essential for reinforcing the EU’s initiatives in energy infrastructure protection, which includes maritime safety, cybersecurity, and hybrid threats preparedness. NATO members in the region already play frontline roles, and the recent NATO summit’s increased attention on dual-use civilian and military applications corresponds with the EU’s initiative for improved mobility, energy connectivity, and infrastructure resilience in the area. Furthermore, evaluating (and later auditing) dual-use investments and their expected contribution to the 5 percent defense spending goal relies on recognizing synergies between the European Union and the North Atlantic alliance. Strategically aligned investments in rail, ports, and energy infrastructures that facilitate logistics and defense goals will be essential. In this context, collaboration between the EU’s mechanism and other US-supported platforms, such as the Three Seas Initiative, would bolster the region’s strategic priorities, rather than increasing the risk of redundant investments. 

Transatlantic alignment would also enable the EU’s other energy security objectives. It would facilitate the bloc’s development of energy transmission lines, including a green energy corridor through the Black Sea. Leveraging US expertise in critical infrastructure would expedite the deployment of cross-border capacities. Collaborative strategic planning—particularly in Moldova, Georgia, and even more so in Ukraine—would enhance supply diversification and strengthen regional resilience against energy weaponization. Furthermore, the United States’ leading expertise in nuclear energy and its regional partnerships would substantially enhance the European Union’s energy security while complying with the EU’s 2050 climate neutrality objectives. Similarly, offshore gas explorations in the Black Sea would guarantee the stability of supply security in the short to medium term, facilitating the transition to cleaner energy by 2050. 

Ultimately, Turkey’s intricate status as a NATO ally and EU partner (and long-term candidate) highlights the necessity of transatlantic unity. Turkey’s roles in Black Sea security, its significant position as an EU partner for energy security, and its regional diplomatic capabilities render it an essential ally; thus, alignment between Brussels and Washington is crucial to foster constructive engagement while addressing geopolitical sensitivities.    

Uncharted territories

The EU’s enlargement, including Ukraine’s reconstruction, is another essential factor in its energy landscape and demands substantial collaboration between the EU and its member states on the one hand and the US on the other. The process is evolving into a strategic tool for enhancing energy security and regional resilience in the Black Sea, transcending mere political alignment—it facilitates the integration of vital partners into the EU’s energy market structure, climate efforts, and energy security frameworks. Prospective members’ energy systems face considerable technical and environmental obstacles; thus, transatlantic support is crucial to expedite energy investments in alignment with the EU’s 2040 and 2050 energy and climate goals. 

The reconstruction of Ukraine will serve as a pivotal case study: revitalizing its energy infrastructure with an emphasis on cross-border connectivity and clean energy technologies, while harnessing the nation’s vast onshore and offshore resources, will not only facilitate its integration into the EU but also enhance regional energy stability and promote decarbonization.   

In this context, the transatlantic partnership is indispensable. Financial and technical support from the United States—through public and private collaborations—would help mitigate risks tied to investments in grid modernization, resource exploration, and cross-border infrastructure in Ukraine, as well as in neighboring countries contributing to the reconstruction process. Furthermore, collaborative EU-US support can guarantee that reconstruction adheres to European regulatory standards and overarching strategic interests, establishing a foundation for a more robust and integrated Black Sea energy sector. 

Andrei Covatariu is a nonresident senior fellow with the Atlantic Council Global Energy Center. 

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What transatlantic energy cooperation looks like under America First

The panel “Partnership for prosperity: Can the US and Europe both win in the America First era?” addressed the evolving landscape of transatlantic relations, focusing on both the challenges and opportunities that lie ahead. The discussion was moderated by Olga Khakova, deputy director for European energy security at the Global Energy Center (GEC), panelists included Amb. Richard Morningstar, founding chairman of the GEC and former US ambassador to the European Union (EU), Torgrim Reitan, chief financial officer of Equinor, Toby Rice, president and chief executive officer (CEO) of EQT, and Klaus Wiener, member of the German Bundestag.   

A central theme throughout the conversation was the enduring connection and shared values between the EU and the United States, grounded in a long-standing alliance. Wiener affirmed “we are very strong allies,” while Reitan added, “we belong together.” These comments underscored the historical and strategic ties between the United States and Europe. 

While acknowledging the relationship’s current difficulties, all panelists agreed on the need to find common ground and foster a forward-looking agenda rooted in mutual interests. The panelists raised liquefied natural gas (LNG) as a focal point of transatlantic cooperation. “Europe needs security and flexibility and US LNG can provide for that,” said Rice, highlighting LNG as a central issue in US-EU negotiations. 

Morningstar emphasized that other energy technologies, including nuclear and fusion, should also be considered. He noted that the development and deployment of these technologies will depend not only on political will but also on private sector engagement. When asked about the future, Reitan responded, “we need to build predictability and overcome barriers.”  

Nuclear energy has global momentum. What’s next?

Jennifer T. Gordon, director of the GEC’s Nuclear Energy Policy Initiative, moderated “The role of nuclear energy in global energy security,” a discussion featuring Sama Bilbao y León, director general of the World Nuclear Association, Aleshia Duncan, deputy assistant secretary for international cooperation at the US Department of Energy’s Office of Nuclear Energy, Amb. Georgette Mosbacher, co-chair for Three Seas programming at the Atlantic Council Europe Center and former US ambassador to Poland, Jeremy Pocklington CB, permanent secretary at the United Kingdom’s Department of Energy Security and Net Zero, and Robert Rudich, chief business development officer of Synthos Green Energy. 

Gordon began by highlighting that the conversation takes place at an exciting time for nuclear both globally and in the United States, where four recent nuclear power-focused executive orders demonstrate “an ambitious agenda for civil nuclear partnerships.” Duncan detailed US government efforts to ensure those partnerships succeed. Nuclear power is “a 100-year relationship,” Duncan said, noting the pitfalls inherent with such timescales.  

Bilbao y León provided a global tour of the nuclear sector’s momentum, citing reversals of opposition to nuclear power in European states and at the World Bank, a long list of projects underway across the Global South, and efforts to lead in the technology by both the United States and China. Bilbao y León lauded the progress of a 31-nation “coalition of the ambitious,” which is mobilizing to realize the COP28 objective of tripling global nuclear capacity by 2050. 

Pocklington focused on the United Kingdom, which is building new conventional and advanced reactor capacity in addition to prolonging and maximizing existing nuclear power generation. “The single greatest challenge,” he said, “is figuring out what we can do to speed up the process,” citing financial innovations that the country is pioneering to make projects a reality. 

The next two panelists discussed US nuclear partnerships in Poland and Central Europe. Mosbacher praised Poland’s foresight in reducing its reliance on Russian gas even before the full-scale invasion of Ukraine. Today, she argued, US policymakers must exercise similar foresight in fostering partnerships to keep pace with nuclear-exporting adversaries in Russia and China: “if we don’t scale up fast, we will be left behind.” Rudich offered a private sector perspective, elaborating on Polish firm Synthos Green Energy’s efforts with North American partners to build advanced reactors that will eventually “go beyond Poland and construct the Green Wall.” This zone, stretching from the Baltic states to the Black Sea, would use nuclear power to eliminate dependency on Russian energy. Helping to enact this ambitious plan, Rudich argued, is profoundly in the US national interest: “energy dominance,” he said, “means exports.”  

Gordon concluded the conversation by asking what participants would like to see changed in nuclear energy before the 2026 Global Energy Forum. As stakeholders increasingly realize “energy security is national security,” Duncan suggested, “we should fund it as such.” Duncan and Bilbao y León both emphasized the importance of leadership for the deployment of reactors at scale. Rudich concluded by stressing the need for funding to translate into action: “we need to start doing projects and move away from talking about doing projects.” 

Can quick wins in critical minerals reduce reliance on China?

The final panel of the Global Energy Forum, “Critical minerals, critical decisions: Quick wins in critical mineral supply chain partnerships,” was moderated by Audrey Hruby, Atlantic Council Africa Center senior advisor, and featured Helaina Matza, chief strategic development officer of TechMet, Stephen Rowland, head of North America copper at Glencore, Reggie Singh, director of the US Department of State Bureau of Energy Resources’ Critical Minerals and Energy Technology Office, and Imad Toumi, chairman and CEO of Managem. 

Hruby began by elucidating the central goal of the conversation: “in a long-term sector like mining, we want to look for quick wins.” The fundamental challenge? “We rely too much on one major player for all our critical minerals: China,” continued Singh, who elaborated on how the US government is working to initiate international partnerships that diversify supply while meeting rapidly rising minerals demand.  

Matza, delivering a financial sector view of government initiatives, commended bipartisan efforts to “operate a little more like US Government, Inc.,” and make use of unique capabilities among partners to bring more supplies to market. Toumi, who runs a Moroccan minerals company, shared an African perspective: “we no longer want to export raw materials; we need to refine.” He provided an overview of his company’s efforts to work with African partners to build holistic supply chains able to compete with China.  

Rowland zeroed in one key mineral—copper—which is faced with spiking demand from electrification and data centers. Despite this challenge, Rowland suggested resource availability is not the issue: “it’s hard to say if the bottleneck is copper or power,” pointing out the inadequate scale of extraction. 

Hruby concluded by posing a rapid-fire question to the panel: “what can we achieve in 24 months rather than five-to-ten years?” Participants responded with measures such as pushing forward shovel-ready projects, fostering innovation and recycling, and legislative changes in the United States and globally to fast-track development. 

 
Equinor and EQT are sponsors of the Atlantic Council’s Global Energy Forum. Managem is a sponsor of the Atlantic Council’s Africa Center. More information on Forum sponsors can be found here.  

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center. 

Paddy Ryan is a former assistant director with the Atlantic Council Global Energy Center. He is a senior writer/editor at the University of California Institute on Global Conflict and Cooperation. 

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Elena Benaim

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EnergySource Jun 17, 2025

The energy system is more complex than ever: Navigating AI, competitiveness, and growth

By Elena Benaim, Paddy Ryan

The Atlantic Council’s flagship Global Energy Forum opened today in Washington, DC, bringing together top energy and policy leaders at a critical moment for global energy strategy. These experts and policymakers weighed in on the increasingly complex landscape of energy policies amid intense competition to win the artificial intelligence (AI) race, rising geopolitical tensions, and divergent national priorities.

Africa Americas

EnergySource Jun 2, 2025

MDBs must finance nuclear power—or Russia and China will

By Juzel Lloyd

The growing influence of Russia and China in global nuclear energy financing threatens to reshape the future of energy geopolitics. To address this, multilateral development banks must recognize nuclear energy as a vital tool for expanding energy access, and modernize outdated policies to support deployment.

China Energy & Environment

EnergySource Jun 16, 2025

US global leadership in the age of electricity

By Robert F. Ichord, Jr.

Amid shifting geopolitics and the emerging “age of electricity,” the United States has an opportunity to assert global leadership in energy and security. Through foreign policy, the Trump administration can leverage US strengths in natural gas, nuclear power, and emerging energy technologies to engage allies in building a secure and resilient global electricity system.

China Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Energy security is only achievable through global partnerships appeared first on Atlantic Council.

Global Energy Forum

The tenth Atlantic Council Global Energy Forum will be held June 9-10, 2026 in Washington, DC. Please check back regularly for updates on our programming.

“Our greatest rival is China, I would argue, and they now in many cases dominate the refining of critical minerals, in addition to the extraction,” said US Senator John Hickenlooper (D-CO) at the 2025 Global Energy Forum on Wednesday. 

“We definitely in this country need to be able to demonstrate a certain capacity to deliver and refine critical minerals, but we cannot do it by ourselves,” said Hickenlooper, emphasizing the importance of partnering with US allies on energy security. “We have an alignment of countries that share certain values and have historically worked very well together despite differences.”

The discussion came amid debate in the US Senate on the One Big Beautiful Bill Act, which would phase out many clean energy tax credits and investment incentives.

Below are more highlights from this discussion, which was moderated by David L. Goldwyn, chairman of the Atlantic Council Global Energy Center’s Energy Advisory Group. 

Big bill, big debate

• “As the one scientist in the Senate,” said Hickenlooper, a geologist by training, “I hold myself to account that we’ve got to do a better job of explaining” to his Republican colleagues “why there needs to be a sense of urgency around climate change.”
• Hickenlooper said he supports an “all-of-the-above” approach to US energy policy, including producing and exporting liquefied natural gas. “But at the same time, climate change is real,” he said, adding that “we’ve also got to be willing to push every source of energy we can that is cleaner.”
• “It’s not just wind and solar, it’s geothermal” and hydrogen power that would be negatively impacted by the One Big Beautiful Bill Act’s revocation of tax cuts and incentives, Hickenlooper said. “All these different sources of energy are going to get sliced to pieces,” he said, warning that this would cost jobs and fuel inflation.
• However negotiations in Congress end up, Hickenlooper said that the bill “looks almost certain to abandon many billions of dollars that are invested in wind, solar, [and] batteries.” He added that he hoped “we’ll be able to balance that out with innovations like what we’re seeing with geothermal.”

An “alignment of self-interest” on mining

• When it comes to permitting mining operations in the United States, said Hickenlooper, “there should be an alignment of self-interest that we’ve got to go faster.”
• “We don’t have the luxury to litigate and slow down these types of investments,” he said, citing efforts by environmental groups to slow the development of mines. “If we’re going to be able to address climate change successfully, we need to develop mines faster, and we’ve got to make sure that we provide a level of environmental certainty.”
• The United States hasn’t passed “a real mining law” in over one hundred years, said Hickenlooper, who called this situation “pathetic, because that means that we don’t have a framework that the rest of the world can use. Usually, we take the environmental progress we make in this country, and the rest of the world follows us.”

The future of US scientific leadership

• Domestic decisions on investments in science have an impact on US partnerships, Hickenlooper noted. Cutting back on investments in scientific research “corrodes the trust that many in the scientific community have in how America has always led the way in research and development.”
• “What we need is more of our young people to get involved in technology and science,” Hickenlooper said, noting that China produces significantly more mining engineers than the United States. China is “creating the workforce that’s going to help them lead in critical minerals,” he said, adding that the United States needs to invest in creating more “entry points” for young Americans to become interested in pursuing scientific careers.

Daniel Hojnacki is an assistant editor at the Atlantic Council.

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On AI and energy: ‘Infrastructure is destiny‘

In the first panel of the Forum, “Thinking big and building bigger,” Global Energy Center (GEC) Senior Director and Morningstar Chair Landon Derentz led a conversation on meeting the energy demands needed to power AI. The discussion featured Mariam Almheiri, group chief executive officer of 2PointZero and chair of the international affairs office of the Presidential Court of the United Arab Emirates (UAE); Chris James, founder, chief investment officer, and chairman of Engine No. 1; Chris Lehane, OpenAI’s chief policy officer and vice president of global affairs; and Chase Lochmiller, co-founder, chief executive officer (CEO), and chairman of Crusoe. 

“AI and energy are inextricably linked,” began Derentz, outlining the challenge that industry and policymakers face in needing to “smash through the bottlenecks” to enable technological progress. Lehane reflected on the energy-related challenges OpenAI grappled with as it became the fastest digital platform in history to reach 100 million users. On lessons learned, Lehane stated that “infrastructure is destiny,” and that AI breakthroughs can only happen when providers are able to bring together “chips, data, talent, and energy” to facilitate this game-changing technology. Lochmiller suggested that AI can help unlock a “new era of abundance”—but before material abundance can be reached, energy abundance is needed to make that a reality.  

James continued by defining the obstacles in meeting AI’s energy demands. “Energy is a fairly linear system, but the demand for compute is exponential.” James advised that if policymakers and industry can overcome bottlenecks such as project permitting, outdated regulations, and credit availability, they can foster “an enormous amount of reindustrialization across the United States.”  

Almehri then contextualized the international trends that preceding speakers had identified. “When I think of creating AI clusters, there are certain elements that regions have to combine,” she said, ranging from their ability to channel strategic investments to having adequate infrastructure and energy. Citing the UAE’s relevant advantages, Almehri counseled that “for this AI megatransition, we need a transformation on the energy side”—to do that, she continued, requires partnerships. 

Derentz continued by asking panelists about the timelines, regulatory hurdles, and geopolitics associated with AI growth. “The age of intelligence is incredibly resource intensive,” noted Lehane, “and this resource intensity is where we’re seeing bottlenecks.” Lochmiller cited Crusoe’s work in Texas as showing not only that “every aspect of the economy is required,” to realize AI’s potential, but that “every aspect of the economy will benefit.” Regarding international AI rivalry, Almehri highlighted that while the UAE has “made it clear to everyone that we are partnering with the United States,” it is important for major players to cooperate on global tech governance and “work together to build standards.”  

Derentz concluded by asking participants the top of the policy wish list. They identified regulatory adaptability, innovative capital solutions, public-private partnerships, and international collaboration. Most fundamentally for the future of AI, is a change in perspective. “It’s a mindset,” said James. “This country is at its best when it thinks big, acts big, and builds big: we need to get back to that.” 

Pathways to industrial competitiveness and trade

The panel “Pathways to industrial competitiveness and trade,” moderated by Saphina Waters, director of stakeholder engagement and communication at the Oil and Gas Decarbonization Charter (OGDC), explored the complex intersection of trade, competitiveness, and climate policy—something panelists described as a puzzle with one thousand pieces. 

Emphasizing the urgent need to reshore US manufacturing, Sarah Stewart, CEO of Silverado Policy Accelerator, called for an aggressive agenda to “build, protect, and promote” that aligns policy tools with clear construction objectives.  

Sasha Mackler, senior vice president and head of strategic policy at ExxonMobil Low Carbon Solutions, noted that the company is focused on strengthening domestic manufacturing and expanding energy exports. He stressed that climate policy must evolve from being just a matter of regulation to one integral to business models. 

Participants criticized the absence of a clear, concise, and universally accepted carbon accounting system. Without that system, panelists said international collaboration is hindered and domestic implementation becomes more challenging and that a harmonized, interoperable framework would help simplify climate-related policy and economic planning. 

On the European Union’s Carbon Border Adjustment Mechanism (CBAM), Stewart expressed concerns about potential discriminatory effects. She argued that while identical systems are not necessary, interoperability is essential to ensure fairness and global cooperation. 

The panelists argued that creating a level playing field for US manufacturers is not just a climate issue—it is a matter of national and economic security. They held that ensuring American industries are not unfairly disadvantaged must be a policy priority. 

The makings of a manufacturing powerhouse

The panel “The makings of a manufacturing powerhouse: Legacy strength and new frontiers,” moderated by Neil Brown, nonresident senior fellow at the GEC and managing director of KKR Global, explored how manufacturers are navigating today’s complex geopolitical landscape, focusing on capital flows, project financing, and talent development. 

One of the central topics of discussion was the strategic role of emissions accounting. Karthik Ramanna, co-founder and principal investigator at the E-Liability Institute, suggested that when carbon accounting is viewed merely as a reporting requirement, it tends to become a burden. He argued, however, if reframed as a tool for product differentiation, it can become a source of value creation. Brandon Spencer, president of the motion business area at ABB, added that using emissions data in a strategic—not just operational—way can become a real competitive advantage for companies. 

Catherine Hunt Ryan, president of manufacturing and technology at Bechtel, presented a two-part framework for managing complexity: “what to continue” and “what to consider.” Companies should prioritize core competencies, she said, particularly in engineering and subject-matter expertise, while also identifying and managing critical supply chains and building data-driven execution models. At the same time, organizations must consider their ability to embrace change in a dynamic global environment. 

Looking ahead to the next decade, the panel discussed which regions are likely to emerge as manufacturing leaders in this new geopolitical context. Julian Mylchreest, executive vice chairman at Bank of America, remarked that the United States is well positioned to be among the winners. 

Leveling the global playing field

In a leadership spotlight moderated by Dan Brouillette, former US secretary of energy, Sen. Bill Cassidy (R-LA) emphasized that the world must adapt to new geopolitical realities. China has gained a competitive edge by not enforcing environmental or pollution standards, allowing it to strengthen both its economy and military. Meanwhile, the United States and European Union have adopted stringent climate regulations, putting their industries at a relative disadvantage. Cassidy also argued that differing regulatory regimes have created an unfair global marketplace. He proposed leveling the playing field with a US version of CBAM: a foreign pollution fee. This fee would apply to imports from countries that do not adhere to US environmental standards, helping to protect domestic industry and workers. 

Cassidy highlighted the strategic importance of producing natural gas domestically. He noted that natural gas supports manufacturing, replacing coal and thereby reducing emissions. Moreover, argued Cassidy, by producing gas domestically, the United States can support economic policies, which supports US working families. 

Unlocking energy abundance to enable equitable access

To wrap the first day’s panels, Phillip Cornell, GEC nonresident senior fellow and principal at the Economist Impact, moderated a discussion on creating abundant, affordable, and reliable energy to sustain economic growth, foster innovation, and promote national security. The panel featured Jude Kearney, member of the board of advisors at the African Energy Chamber; Tarik Hamane, CEO of Morocco’s National Office of Electricity and Drinking Water; Thomas R. Hardy, acting director of the US Trade and Development Agency (USTDA); and Bob Pérez, Baker Hughes’ vice president for strategic projects. 

Cornell framed achieving abundance as “one of the most consequential energy questions of our time.” With 800 million people across the globe still lacking access to electricity while technology-related demand grows rapidly, Cornell said it is crucial to “build systems that can deliver energy abundantly, equitably, and affordably.”  

Hardy discussed USTDA’s role in fostering energy abundance through international partnerships. While administrations change, Hardy noted, USTDA continues to work on projects that contribute to US security and prosperity, “working with our partners and meeting them where they are” to grow different forms of energy supply. 

Next, Kearney elaborated on Africa’s role in achieving abundance. Advising that access is key, he highlighted the need for an “abundance of thoughtfulness and good governance.” Pérez, offering a private sector view, added that the formula for abundance, ultimately, is rather simple: “I’ve never seen a good project not get money,” he said, “the question is how you get to a good project.”  

Finally, Hamane expanded on the theme of partnerships by sharing lessons from Morocco. The country has achieved near-universal rural electricity access, up from less than a quarter only three decades ago. As Morocco looks to build infrastructure that can connect its growing renewable production to new markets in Europe and Africa, Cornell concluded by lauding these projects as a “a physical manifestation of the integration needed to achieve abundance.”   

2PointZero, ABB, Baker Hughes, Bank of America and ExxonMobil are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here. 

Elena Benaim is a nonresident fellow with the Atlantic Council Global Energy Center.

Paddy Ryan is a former assistant director with the Atlantic Council Global Energy Center. He is a senior writer/editor at the University of California Institute on Global Conflict and Cooperation.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Elena Benaim

Nonresident Fellow

Global Energy Center

Energy & Environment

Former staff

Paddy Ryan

Global Energy Center

Energy & Environment Energy Transitions

EnergySource Jun 2, 2025

MDBs must finance nuclear power—or Russia and China will

By Juzel Lloyd

The growing influence of Russia and China in global nuclear energy financing threatens to reshape the future of energy geopolitics. To address this, multilateral development banks must recognize nuclear energy as a vital tool for expanding energy access, and modernize outdated policies to support deployment.

China Energy & Environment

EnergySource Jun 16, 2025

US global leadership in the age of electricity

By Robert F. Ichord, Jr.

Amid shifting geopolitics and the emerging “age of electricity,” the United States has an opportunity to assert global leadership in energy and security. Through foreign policy, the Trump administration can leverage US strengths in natural gas, nuclear power, and emerging energy technologies to engage allies in building a secure and resilient global electricity system.

China Energy & Environment

EnergySource May 21, 2025

Replace the Inflation Reduction Act with FUEL-AI

By Joseph Webster

To compete in the global AI race, the United States must dramatically expand its power supply. Replacing the Inflation Reduction Act with the FUEL-AI Act would reorient energy policy toward national security, fast-tracking domestic energy production and infrastructure to power America’s AI future.

Energy & Environment Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post The energy system is more complex than ever: Navigating AI, competitiveness, and growth appeared first on Atlantic Council.

Global Energy Forum

The tenth Atlantic Council Global Energy Forum will be held June 9-10, 2026 in Washington, DC. Please check back regularly for updates on our programming.

For Sultan Al Jaber, the United Arab Emirates’ minister of industry and advanced technology, the race to establish artificial-intelligence (AI) supremacy is “essentially an energy play.”

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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Global Energy Forum

The tenth Atlantic Council Global Energy Forum will be held June 9-10, 2026 in Washington, DC. Please check back regularly for updates on our programming.

Event transcript

Uncorrected transcript: Check against delivery

SULTAN AL JABER: Good morning, everyone. It is indeed a great pleasure to be back here in Washington, DC. And it’s a real pleasure to see so many friends, colleagues, and partners at this very important forum.

Let me begin by thanking my dear friend and partner Fred Kempe for his commitment, and his guidance, and his support throughout the years. And allow me also to thank his team for working very closely with us and for hosting this very important and relevant forum. With your focus on energy security, economic competitiveness, and global prosperity, this forum could not be more on point.

Colleagues, before I continue allow me to address the evolving situation in our part of the world. The United Arab Emirates stands for dialogue, for de-escalation, and diplomacy. We call on all parties to show restraint. And we reaffirm our belief in peace over provocation, calm over confrontation, and progress through partnership, and only partnership.

Colleagues, moments like these remind us that energy is not just the engine of progress. It is a cornerstone of peace, stability, and ensuring prosperity. And as we say—or, as we stay committed to dialogue and diplomacy, we must also stay focused on the opportunities that lie ahead. Because while the world seeks calm, a new chapter in human progress is being written. And this chapter is defined by two simple truths. The first is that artificial intelligence is driving the next stage of evolution. And the second is that AI is driven by energy. In short, AI supremacy is essentially an energy play.

And the race for AI is not just about code. In fact, it’s about gigawatts. Every advance in AI uses more energy. A single ChatGPT query uses ten times the energy of Google search. AI generated video, one hundred times more. And we are now entering the era of the one gigawatt hyperscaler, where a single datacenter consumes as much electricity as a city of the size of Pittsburgh. And over the next five years, the US alone will need anywhere between 50 and 150 gigawatts of new installed capacity.

And meeting this demand is not just a technical challenge. It is a once-in-a-generation investment opportunity. In fact, it is an opportunity that will require a system-wide shift, with energy, technology, finance, and policy all operating in sync. That’s why yesterday, and here in Washington, DC, and in partnership with The Atlantic Council and MGX, we brought together leaders from all these relevant sectors to the second ENACT forum. And we do this in an effort to answer the fundamental and pressing questions, and to help build an integrated roadmap for a systemwide action.

Our first recommendation may seem obvious, but in my view, it is very urgent: In the age of hyperscalers, we must hyperscale energy. That means reliable baseload like gas, renewables backed by storage, breakthroughs from [small modular reactors] to fusion, and perhaps most critically a pragmatic pause on early retirements of existing power plants while we bring back nuclear to be part of mainstream energy mix.

Power generation is only half of the story, though. Getting the power to the end user is the other half. And in fact, it’s the most—it’s the more complex part of that equation. The fact is, you can’t run tomorrow’s technology on yesterday’s grid. And many—and that’s a fact—many of our grids were built for a completely different century and a completely different circumstance.

Wait times for key components like transformers and turbines can take more than three years to make them available. And this is not just a supply chain problem; it is a bottleneck to industrial growth, and that’s how we should view it. It is a bottleneck to economic prosperity and to industrial growth.

And solving it will require an investment surge of up to 300 billion US dollars annually in the US alone. We must de-risk major capital investments, and here policy can and must help. Policy cannot hold up progress. And we must take the gridlock out of the grid.

Currently, there are about 2,600 gigawatts of planned capacity around the world waiting for a proper grid connection. We must fast-track permitting and unlock that great potential. Let us train the one million electricians needed for a twenty-first-century power system. And let’s not forget that AI can unlock its own energy challenge by managing peaks and dips in demand, optimizing grid flows, and supercharging operational efficiency.

Friends, colleagues, and partners, the opportunity ahead is massive, but the window to act is very narrow. And the key to success is cooperation and true partnership. That is why the UAE is wasting no time in taking our powerhouse energy partnership with the US to the next level.

Over the next ten years we plan to grow our US energy investments sixfold, from the existing 70 billion US dollars to 440 billion US dollars. And we will do this through XRG, our international energy investment company. We are an anchor investor already in the largest LNG plant here, in Texas, and we produce specialty chemicals across the United States of America through Covestro and Nova Chemicals. And through Masdar, we have developed 5.5 gigawatts of renewable energy and storage capacity from coast to coast, and we are just getting started.

And to help harness our ambition, we just opened and activated our XRG-Masdar offices here in Washington, DC. Because, for us, the United States is not just a priority; it is more of an investment imperative. This is not just capital. It’s conviction in a shared future.

Partners, colleagues, and friends, to realize the full power of AI we must give it the power it needs. And this starts with a coordinated roadmap, a holistic approach, a comprehensive, cohesive roadmap that can be applied locally and scaled globally. We need policy that clears the path, infrastructure that carries the load, and investment that meets the moment. AI and energy are the twin engines of human progress—two engines, one direction, fast-forward into the future. And I’m here to invite you all to help shape that future together. I thank you.

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The post The AI race ‘is not just about code,’ it’s ‘about gigawatts,’ says the UAE’s Sultan Al Jaber appeared first on Atlantic Council.

This paper draws on my professional experience working on energy and climate issues in the Eastern Mediterranean, as well as many conversations with policymakers, technical experts, and civil society stakeholders from Athens to Beirut and from Istanbul to Cairo. The renewable energy revolution offers both cleaner power and a practical foundation for cooperation through shared infrastructure and capital flows. The region’s energy future is as much about finance, diplomacy, and institutional trust as it is about technology. My aim here is to explore how financial mechanisms can bridge historic divides and support a shared energy transition. My hope is that this paper contributes to reimagining the Eastern Mediterranean not as a collection of competing interests, but as an interconnected energy community bound by mutual prosperity and resilience.

• Introduction
• Rising tides: Meeting the Mediterranean’s surging energy needs
• From pledge to power: Speeding the region’s renewable revolution
• Beyond borders, beyond banks: Innovative financing for regional energy
• Shared foundations: Creating a regional energy community
• Shared horizon: Finance and diplomacy for a unified Eastern Mediterranean energy landscape

Introduction

The Eastern Mediterranean region stands at a critical juncture in its energy development. Positioned as a geopolitical crossroads with significant renewable energy resources and strategic importance, the region encompassing Greece, Cyprus, Turkey, Syria, Lebanon, Israel, Palestine, Jordan, and Egypt has the potential to become a leader in sustainable energy while strengthening regional cooperation and economic integration.

This study examines how the Eastern Mediterranean can secure a sustainable energy future through a two-pronged approach: strategically financing next-generation grid technologies that leapfrog legacy infrastructure challenges, while simultaneously developing integrated financing mechanisms that foster cross-border cooperation. This dual strategy aligns technological innovation with regional stability and market integration needs, creating a framework for sustainable development that transcends political boundaries.

The Eastern Mediterranean’s abundant renewable energy potential, particularly in solar and wind resources, presents a transformative opportunity. The region could generate approximately 144 percent of its projected 2050 electricity demand through renewable energy sources.¹ Yet despite this potential, significant challenges persist. Aging and fragmented grid infrastructure, geopolitical tensions, and uneven regulatory frameworks hinder energy integration.

Additionally, ongoing political conflicts, geopolitical tensions, and maritime boundary threats in the region complicate the development of cross-border infrastructure, while the region remains heavily dependent on fossil fuels at a time when global climate commitments push for rapid energy transition.²

Meeting these challenges requires more than traditional approaches. This paper argues that innovative financing mechanisms can serve dual purposes: funding advanced infrastructure development while simultaneously functioning as instruments of regional cooperation. By strategically structuring financial tools that encourage cross-border collaboration, the Eastern Mediterranean can transform its energy landscape while creating economic interdependencies that help overcome historical political tensions.

The analysis unfolds in four parts. First, it examines the regional context—focusing on power demand trends, the state of grid infrastructure, and the region’s renewable energy potential. Second, it analyzes how COP28 commitments (made at the 2023 climate conference) intensify the need for rapid renewable integration and technological leapfrogging. Third, it evaluates the financing mechanisms available to fund this transition, from multilateral development banks and green bonds to Islamic finance and bilateral investment. Finally, it explores how these financing tools can support frameworks for regional collaboration, including physical infrastructure development, regulatory harmonization, energy diplomacy, and governance structures.

Rising tides: Meeting the Mediterranean’s surging energy needs

The region’s energy landscape is characterized by growing demand, aging infrastructure, and untapped renewable potential against a backdrop of complex geopolitical relationships. These interrelated factors explain why the strategies of technological leapfrogging and regional integration are necessary for sustainable energy development in the Eastern Mediterranean.

Regional power demand trajectory

Electricity demand across the Eastern Mediterranean is expected to grow substantially in the coming decades. Turkey, a pivotal economy in the region, saw its electricity consumption reach 348 terawatt hours (TWh) in 2024, marking a 3.8-percent increase from the previous year.³ Projections indicate a rise to 380 TWh in 2025, 455 TWh by 2030, and 510 TWh by 2035.⁴

This growth trajectory is mirrored in Egypt, Syria, and Lebanon, driven by population growth, urbanization, and economic development. Meeting this demand sustainably requires a massive expansion of renewable energy capacity and modernized infrastructure to support it.

Recognizing the potential and cost competitiveness of renewable energy systems, countries in the region have established ambitious renewable energy targets. Turkey aims to double its electricity capacity by 2035, with renewable energy providing nearly 65 percent of power.⁵ Egypt has set a target of renewable energy providing 42 percent of its power by 2030 and 58 percent by 2040, while Greece plans to cover at least 60 percent of its power needs with green electricity by 2030.⁶

Untapped renewable potential

The Eastern Mediterranean possesses immense renewable energy potential that remains largely untapped, though Turkey and Greece have made progress in this area. The whole Mediterranean basin’s current renewable capacities stand at 90 gigawatts (GW) for solar photovoltaic and 82 GW for wind energy, with a potential exceeding 3 TW for the whole basin—a figure that underscores the opportunity for rapid expansion.⁷

The Eastern Mediterranean’s total renewable energy capacity in 2023 was around 90 GW, with research suggesting that the region could potentially generate 144 percent of its projected 2050 electricity demand through renewable energy sources.⁸ Egypt could produce 188 percent of its demand from solar and wind energy, with 76 GW of surplus electricity production. Syria could produce 592 percent of its total demand, while Turkey and Greece could produce 105 percent and 96 percent, respectively, of their 2050 demand.⁹

According to the author’s estimates, if the pipeline of solar, wind, and hydropower projects in Egypt is fully implemented—including projects that are announced, planned, or under construction—its renewables generation capacity would grow twelvefold, in line with those of other North African nations. If the pipeline of solar, wind, and hydropower projects in Greece is fully implemented, this would result in a sevenfold increase in renewable energy generation capacity.¹⁰ These estimates are not just an opportunity to enhance energy security and accelerate the energy transition. They are also an economic opportunity with the potential to create jobs, stimulate investment, and position the region as a global leader in the growing clean energy sector.

The rapidly growing power demands across the Eastern Mediterranean necessitate expanding renewable energy capacity while also fundamentally rethinking how electricity is transmitted and shared. Addressing this challenge requires examining the current state of interconnection infrastructure and identifying opportunities to transform the region’s fragmented grid systems into an integrated network.

The interconnection imperative

Cross-border transmission grid interconnections are of cornerstone importance in the development of power systems. Grids that depend on intermittent renewable energy sources, such as solar and wind, benefit greatly from interconnections for balancing the intermittent nature of renewable sources. Because different countries have varying electricity demands throughout the day, spare capacities and shortfalls can be balanced between different grids.

The Eastern Mediterranean’s grid infrastructure presents a fragmented landscape in which cross-border electricity trade is limited. Northern countries such as Greece benefit from advanced energy grids, while southern and eastern regions lag behind. Across the whole Mediterranean, northern-shore countries have sufficient, albeit underutilized, interconnections, while southern-shore countries lack interconnection infrastructure and synchronization. ​Additionally, there are few north-south interconnections, with only a link from Spain to Morocco and another from Turkey to Syria.​¹¹ This disparity creates both a challenge and an opportunity for leapfrogging conventional development paths.

Eastern Mediterranean countries continue to prioritize energy self-sufficiency through domestic power generation rather than regional power trading. With the exception of the Palestinian territories, which import nearly all (99.4 percent) of their electricity due to minimal local generation capacity, several countries maintain exceptionally low power import levels—around 1 percent of their total consumption—including Cyprus (0 percent), Lebanon (0.078 to 3.61 percent), Jordan (0.29 to 2 percent), and Egypt (0.29 to 0.41 percent). Similarly, with the exception of Greece and its integration into the European electricity market, power exports remain negligible throughout the region, with most countries exporting less than 1 percent of their generated electricity. This self-contained approach stems from incompatible technical systems among national grids that impede synchronous operation, difficulties in maintaining grid stability across borders, and persistent political tensions that discourage deeper energy integration.¹²

Some interconnections exist in the Eastern Mediterranean but are underutilized or nonoperational. Many of the interconnections are used purely on an emergency basis to cover unexpected or scheduled outages, or are not in operation at all. Key connections such as Turkey-Syria (400 kilovolts (kV)), Jordan-Syria (400 kV), and Lebanon-Syria (400 kV, 220 kV, and 66 kV) are currently inactive, largely due to regional conflicts and technical incompatibilities between national grids, including different frequencies and control systems.¹³

Yet some progress toward greater regional integration is under way. A “super grid” is slowly emerging across the Mediterranean. The Mediterranean Master Plan 2022 outlines several Eastern Mediterranean interconnectors including: the Great Sea Interconnector between Greece, Cyprus, and Israel (1000 MW); the EuroAfrica interconnector to link Cyprus and Egypt (1000 MW), the Green Energy Interconnector (GREGY)  between Greece and Egypt (3000 MW of primarily renewable power); and a number of capacity-expansion proposals such as the ones between Egypt and Jordan (1100 MW), Jordan and Syria (800 MW), Syria and Turkey (600 MW), and Jordan and the Palestinian territories (100 MW).¹⁴

These projects are designed to enhance electrical integration, facilitate renewable energy exchange, and improve security of supply. The Great Sea Interconnector, which is under construction, is expected to be operational by 2030 with a capacity of up to 2 GW, while the GREGY project is expected to be completed by 2031.¹⁵ These developments have been planned for more than a decade. An older proposal, the Mediterranean Electricity Ring, aimed to connect Mediterranean countries via a circle of interconnections to facilitate cross-border power exchange. In the Eastern Mediterranean, this included connecting Egypt, Jordan, Syria, Lebanon, Turkey, and Greece.¹⁶

However, significant challenges remain. Tensions caused by maritime disputes between regional countries such as Greece, Turkey, and Cyprus, the unresolved Cyprus question, and the protracted Israel-Palestinian conflict, all impede the development of cross-border infrastructure.¹⁷

In addition, the geopolitical diversity, uneven political stability, and limited political trust among Eastern Mediterranean countries dampen some national governments’ interest in exploring partial reliance on external electricity. Reasons cited often include the potential for electricity being used as a geopolitical lever, the risk of disruption caused by internal conflict, infrastructure failure, governance breakdown propagating across borders, and concerns about expanding cybersecurity vulnerabilities by exposing national grids to transboundary breaches.

Additionally, many countries maintain vertical monopolies in their electricity sectors—e.g., utilities such as Electricité du Liban (EDL) in Lebanon, Israel Electric Corporation (IEC) in Israel, and, to some extent, various companies in Jordan—which enable them to control generation, transmission, and distribution, thus limiting market competition and cross-border electricity flow.

Technical barriers are equally significant, as systems have evolved separately with different standards and technologies. Alternating-current (AC) interconnections require high degrees of technical compatibility and operational coordination, creating stability risks when disturbances in one location impact other areas of the network. These challenges are compounded by insufficient regulatory frameworks and governance structures needed to support cross-border trading.¹⁸

From pledge to power: Speeding the region’s renewable revolution

Developing renewable energy capacity and establishing physical interconnections form the backbone of regional energy integration, and these efforts need to rapidly scale up due to the urgency of the climate crisis. Global climate commitments and obligations provide a framework for measuring progress and highlight the gap between current trajectories and required outcomes.

Meeting COP28 targets

The commitment at COP28 to triple the world’s installed renewable energy generation capacity by 2030 provides a clear imperative for action in the Eastern Mediterranean. Nations collectively committed to this target as part of the global stocktake of the 2015 Paris Agreement.¹⁹ In addition, 130 nations—including Greece, Cyprus, and Turkey—also joined the Global Renewables and Energy Efficiency Pledge, a voluntary coalition committing to triple their renewable energy capacity and double the rate of energy-efficiency improvement.²⁰ In September 2024, nine northern Mediterranean countries (often known as the MED9) agreed to collaborate on making the region a renewable energy hub, aligning with this global target.²¹

A growing grassroots initiative known as TeraMed is seeking to mobilize Mediterranean countries to triple their renewable energy capacity and reach 1 terawatt in combined generation capacity.²²

As of 2023, Eastern Mediterranean countries had an installed renewable power capacity of 90 GW, accounting for 42 percent of their total electricity generation.²³ To meet the COP28 target, the region must reach 405 GW of capacity by 2030, requiring a steep annual growth of 45 GW. Unsurprisingly, the region is not on track. With the exceptions of Greece and Egypt, all Eastern Mediterranean countries must accelerate their efforts if they are to meet the threefold-increase target.²⁴

In my view, meeting these ambitious renewable targets requires more than simply adding generation capacity. The Eastern Mediterranean needs advanced infrastructure solutions that can both accommodate the tripling of renewable energy and overcome existing grid fragmentation. Smart grid technologies represent the critical connective tissue that will enable this rapid transition.

Smart grid innovation: The digital backbone of renewable integration

To effectively integrate the growing share of renewables and enhance grid stability, the Eastern Mediterranean must leapfrog conventional infrastructure by investing in smart grids. In addition to interconnections, smart grid technologies enable better management of intermittent renewable sources, improve reliability, and reduce losses. These technologies include battery storage, advanced metering infrastructure, dynamic line rating, and other network automation, data management, and analytics technologies for real-time monitoring and control.

Battery storage is particularly crucial for managing the intermittency of renewable energy sources, ensuring grid stability as the share of renewables increases. However, large-scale battery storage projects are still nascent in the Eastern Mediterranean—with the exception of Turkey, which set a target for battery energy storage capacity to reach 7.5 GW by 2035.²⁵

Flexibility mechanisms, including demand response and renewable hydrogen production, further enhance grid stability. Technologies such as electrolysis using solar and wind electricity for hydrogen production are gaining traction. Turkey has plans to develop 5 GW of electrolyzer capacity for green hydrogen production by 2035, and to expand capacity to a staggering 70 GW by 2053.²⁶ Similar applications are being explored in Egypt, which plans to become a transit route for renewable hydrogen.²⁷

Smart meters also help manage the grid better through demand-side management. In the Eastern Mediterranean, Greece is leading on smart meters. It plans to roll out 3.12 million units by 2026, funded by the European Investment Bank, to enhance energy efficiency and support demand response.²⁸

Deploying advanced grid technologies across borders also requires moving beyond identifying technical requirements to addressing the fundamental question of funding this transition. Additionally, this paper argues that the financing challenge is not merely about capital mobilization but also the creation of financial structures that simultaneously enable technological leapfrogging and regional cooperation.

Beyond borders, beyond banks: Innovative financing for regional energy

The transition from technical requirements to financial realities necessitates examining the substantial capital investments needed to realize the Eastern Mediterranean’s energy transformation. While technological solutions provide the roadmap, financing mechanisms will determine the pace and scale of implementation, particularly when the magnitude of required investment exceeds traditional national budgetary capacities.

Quantifying the investment challenge

The Eastern Mediterranean’s energy transition demands significant capital to expand limited renewable energy capacity, modernize aging grids, and develop cross-border interconnections.

Renewable energy projects typically cost around $1 million per megawatt of installed capacity. Their costs are already competitive, and they are the cheapest form of new generation capacity across the region. Moreover, those costs are expected to continue falling and renewables are expected to be the cheapest source of electricity in most countries—including for storage—by 2027.²⁹

However, given the sheer scale of buildup required to meet COP28 commitments, the enormity of the financing required cannot be overstated. If the region is to build 45 GW of renewable energy capacity this year, this would require approximately $45 billion just for generation capacity at current costs, excluding transmission and storage infrastructure.³⁰

Transmission infrastructure is another challenge, especially given how its cost is often borne by grid operators rather than by private developers. The Great Sea Interconnector, for example, is estimated to cost approximately €1.9 billion ($2.08 billion).³¹

By 2030, the region’s total investment needs for sustainable energy transition could well exceed $300 billion. The magnitude of investment required highlights why ordinary national financing approaches are insufficient for the Eastern Mediterranean’s energy transformation. Instead, the region needs to scale finance beyond national resources and to explore financing instruments that mobilize capital at scale and also create structures for regional cooperation, serving as both financial tools and diplomatic instruments in a region where political tensions have historically impeded collaboration.

Financing the energy transition

The Eastern Mediterranean’s sustainable energy future will require mobilizing diverse financing sources and mechanisms. A mix of public and private funding sources—ranging from multilateral lenders and climate funds to innovative partnerships and financial instruments—can bridge the investment gap and accelerate the energy transition.

In developing countries within the Eastern Mediterranean, this challenge is made more difficult by the higher cost of capital, as investors demand high-risk premiums due to country, currency, or sector uncertainty.

This section outlines key financing sources and provides case studies and examples of how each source is being applied (or could be applied) in the Eastern Mediterranean. Each financing mechanism not only brings capital but can also serve as a catalyst for regional cooperation and innovation in energy infrastructure.

1. Multilateral development banks

Multilateral development banks (MDBs) provide a foundational source of capital and risk mitigation for large-scale energy projects in the region. Institutions such as the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), and the World Bank offer concessional loans, grants, guarantees, and technical assistance to support renewable energy and grid modernization. For example, the EBRD has invested more than €3.8 billion in renewable energy across emerging markets, supporting 119 projects totaling more than 6 GW of capacity.

In the Eastern Mediterranean, MDB financing often underpins ambitious projects. For example, the EBRD and partners launched a $500-million framework that helped finance sixteen solar plants (750 MW) in Egypt, including in the Benban solar park.

Another notable initiative with a renewable energy component is the Southern and Eastern Mediterranean Sustainable Energy Financing Facility (SEMED SEFF), a joint program of the EBRD, EIB, Agence Française de Développement, and KfW, a German state-owned bank. With a €141.7-million budget, SEMED SEFF catalyzed investments in Jordan and Morocco to cut more than 150,000 tons of carbon dioxide annually and boost renewables (25 percent of its funds went to renewable energy projects).³²

MDBs not only supply affordable long-term loans; they also crowd in other investors. In Egypt’s Benban project, for instance, the EBRD, the International Finance Corporation (IFC), the AIIB, and the African Development Bank (AfDB) cofinanced solar plants alongside private developers, dramatically lowering financing costs and risk.³³ By leveraging MDBs’ preferred creditor status and technical expertise, such involvement signals to markets that projects are bankable.

By providing concessional finance, convening power, and technical and policy assistance, MDBs help Eastern Mediterranean countries undertake projects that might otherwise be too costly or complex, from large wind and solar farms to regional grid interconnectors. Their financing comes with due diligence and policy guidance, encouraging reforms (such as market liberalization or improved procurement frameworks) that improve the overall investment climate. Going forward, scaling up MDB capital—including through their climate-focused funds and guarantees—will be crucial to meet the region’s renewable investment needs at the pace demanded by global climate commitments.

2. Green finance and investment

Green finance refers to capital raised for climate-friendly and sustainable projects through instruments such as green bonds, green loans, and ESG (environmental, social, governance) investments. In the Eastern Mediterranean, green bonds specifically are emerging as an important tool to tap global capital markets for renewable energy and low-carbon infrastructure. The global green bond market has expanded rapidly to more than $2.5 trillion outstanding by 2024.³⁴

Eastern Mediterranean nations have started to issue their own green bonds to fund clean energy, often with strong investor demand. Egypt was an early mover, launching a $750-million sovereign green bond in September 2020.³⁵ Cyprus followed in 2022, issuing a €1-billion green bond. In 2023, Israel and Turkey debuted their first sovereign green bonds, raising $2 billion and $2.5 billion, respectively.³⁶ Greece signaled plans to issue a sovereign green bond as well. While a national issuance expected for 2024 remains pending, the Bank of Greece issued a €500-million green bond in 2020.³⁷

Other private institutions have also issued green bonds, including banks and other businesses such as renewable energy companies. Lebanon’s Fransabank SAL issued its first green bond in 2018, valued at $60 million, with support from the IFC and EBRD. The proceeds were directed to support sustainable finance initiatives. Jordan’s Kuwait Bank followed in 2023 and, in collaboration with the IFC, issued its first green bond, valued at $50 million. The funds were allocated to renewable energy, low-carbon transport, and sustainable water and wastewater projects. ​ Additionally, Arab Bank in Jordan issued a $250-million sustainable bond in October 2023 to support green and sustainable initiatives.³⁸

However, the market remains nascent and fragmented. Strengthening regulatory frameworks, standardizing green taxonomies, and building technical capacity among issuers and investors will be key to unlocking green capital at scale. For instance, Turkey developed its own sustainable finance framework in 2021, while IFC support enabled Egypt to develop green bond guidelines and the Amman Stock Exchange to produce sustainability reporting guidelines.³⁹ The European Union recently introduced the European Green Bond Standard, a voluntary framework to ensure transparency and combat greenwashing, which could serve as a model to harmonize practices in the region.⁴⁰

3. International climate finance

International climate finance refers to dedicated funds and initiatives aimed at supporting climate change mitigation and adaptation in developing countries. For Eastern Mediterranean nations (many of which are middle-income or emerging economies), these funds are an important supplement to domestic resources. Key global climate funds include the Green Climate Fund (GCF), Climate Investment Funds (CIF) such as the Clean Technology Fund, and the Global Environment Facility (GEF). Historically, the Middle East and North Africa (MENA) region has underutilized these funds: MENA has received only about 6.6 percent of cumulative financing from the major global climate funds through 2023.⁴¹

Eastern Mediterranean countries are now working to improve their access to these pools of finance by developing strong project proposals and institutional capacity. Egypt has been notably successful in tapping climate funds, securing about one-third of all GCF resources allocated to MENA as of 2023. About 85 percent of Egypt’s GCF funding has been in the form of loans. Jordan has also received international climate finance, accounting for roughly 10 percent of GCF funding in MENA (with around half in loans). Meanwhile, Turkey has benefited from World Bank funding via the Türkiye Green Fund (TGF), receiving a $155-million loan for the greening of firms through equity financing, while Lebanon has benefited from GEF grants, receiving about 8 percent of GEF’s MENA allocations.⁴² These funds often work by blending with multilateral bank financing or by de-risking projects to attract private investors (through instruments like guarantees and concessional tranches).

4. Islamic finance

Islamic finance is a growing source of funding for the energy transition and is particularly relevant in the Muslim-majority countries of the Eastern Mediterranean. Islamic finance follows sharia principles, such as prohibition of interest, and typically uses profit-sharing or asset-backed structures.⁴³ Green sukuk (sharia-compliant bonds earmarked for environmental projects) have emerged as a key instrument to raise capital for renewables while tapping into Islamic investor pools. The global sukuk market has seen strong growth and greening in recent years. The first half of 2024 set a record, with $9.9 billion in green and sustainability sukuk issuances, indicating accelerating interest.⁴⁴

While most green sukuk so far have originated in Southeast Asia and the Gulf, Eastern Mediterranean nations are starting to consider them.⁴⁵ Egypt, for example, has been considering sukuk as a financing tool. It passed a Sovereign Sukuk Law in 2021 and could issue green sukuk to fund projects under its renewable energy and sustainable transport plans.⁴⁶

Importantly, major finance institutions are steering toward climate action. In 2021, Emlak Katılım issued the first green sukuk in Turkey with a total value of 51.8 million Turkish lira.⁴⁷ The Islamic Development Bank (IsDB) has also issued sukuk to raise funds for green projects. For example, in 2024 it issued a $2-billion benchmark sukuk earmarked partly for green development programs.⁴⁸

Beyond sukuk, Islamic finance can support renewable energy through Islamic banks and funds investing in project equity or providing sharia-compliant loans (such as profit-sharing and loss-sharing musharakah (a joint-venture structure) or lease-based Ijarah financing). Islamic finance also opens opportunities for waqf (endowment funds) or zakat (charitable contributions) to be structured for community-level clean energy access or climate resilience projects, although such models are still in experimental stages.

5. Bilateral investment

Financing and development support from one country to another plays a pivotal role in the Eastern Mediterranean’s energy landscape. Bilateral investment often comes either directly from foreign governments (through aid, export credits, or state-owned banks) or via government-backed companies and sovereign wealth funds pursuing projects abroad. In the push for renewables, several powerful bilateral actors have emerged: notably the Gulf states (such as the United Arab Emirates (UAE) and Saudi Arabia) and China. They view renewable energy projects not only as commercial opportunities but also as avenues to strengthen strategic ties and influence in the region.

The UAE and Saudi Arabia have invested significantly in Egypt’s renewable energy projects, using investors such as ACWA Power, Masdar, and AMEA Power to fund new wind and solar capacity.⁴⁹ For example, Masdar has partnered with Egyptian firms to develop a gigantic 10-GW onshore wind farm, one of the world’s largest, which it announced on the sidelines of COP27.⁵⁰

China is increasingly becoming a major bilateral financier in Eastern Mediterranean energy. Chinese state-owned enterprises and funds have targeted renewable energy acquisitions and projects, especially in economies where financing gaps exist. In Egypt, Chinese banks and companies have supported the Benban solar complex; for example, the AIIB provided $210 million in debt financing for eleven solar plants (totaling 490 MW) in Benban’s second phase.⁵¹ Chinese firms have also supplied solar panels and construction for many Benban projects. China also has energy investments in Turkey, Lebanon, and Greece. China’s Silk Road Fund has acquired a 49-percent stake in ACWA Power’s renewable energy portfolio.⁵² These investment patterns are part of the increasing “greening” of China’s Belt and Road Initiative (BRI) and reflect China’s willingness to invest in lower-income Eastern Mediterranean nations, though these investments often serve dual purposes of commercial returns and strategic positioning.⁵³

The European Union (EU) and its member states also act bilaterally through programs like the EU-funded Neighbourhood Investment Platform, which gives grants to complement loans for energy projects in the Mediterranean neighborhood.⁵⁴ Europe often emphasizes grid interconnections and market integration (e.g., funding studies for a EuroAfrica interconnector between Egypt and Greece), Gulf countries favor high-profile generation projects, and China is active across the value chain from generation to transmission.

Bilateral investments bring substantial capital and can fast-track projects, but they also entail geopolitical balancing as recipient countries in the Eastern Mediterranean navigate offers from multiple suitors. When managed well, bilateral financing can complement multilateral efforts. It also can foster regional cooperation. For instance, the UAE not only invests in Arab neighbors but has discussed energy deals involving Israel (such as solar facilities in Jordan exporting power to Israel as part of a desalinated water and solar energy swap between Israel and Jordan).⁵⁵

6. Debt financing

Debt financing (i.e., borrowing funds to be repaid with interest) is one of the predominant ways to fund energy infrastructure, including renewable projects, worldwide. In the Eastern Mediterranean, debt financing takes multiple forms: loans from commercial banks or international institutions, bonds issued in capital markets, export credits or supplier credits for equipment, and concessional and blended debt.

Given that debt is cheaper than equity, developers typically seek debt to cover most of the project costs. For investors and lenders, renewable energy projects can be attractive debt opportunities because they generally generate steady cash flows once operational.

Finance for regional cooperation

A comprehensive financing strategy leveraging all of the above mechanisms is crucial for the Eastern Mediterranean to realize its energy transition ambitions. Multilateral and climate funds provide scale and patient capital, green and Islamic finance tap new investor pools, and bilateral investments bring in strategic funding.

Additionally, financing structures such as project finance, public-private partnerships, power purchase agreements, and blended finance can help reduce risk. Green investment banks can help mobilize funding for green projects, while innovative tools like fintech and results-based financing fill niche gaps.

In my view, the region’s success in meeting COP28 goals hinges less on the availability of technology and more on the ability to align financial incentives across borders.

By structuring these financing approaches with regional cooperation as their foundation, these instruments create shared financial interests across borders, incentivizing collaboration and helping overcome entrenched political obstacles. Financial mechanisms explicitly requiring cross-border participation serve as powerful diplomatic tools in addition to their capital mobilization function.

For instance, multilateral investment funds that mandate co-investment from multiple Eastern Mediterranean countries establish joint ownership stakes in critical infrastructure, creating a financial incentive to maintain peaceful relations. Similarly, blended finance structures offering preferential terms for projects with cross-border components make cooperation economically advantageous compared to purely national approaches. For example, a Mediterranean renewable energy fund requiring participation from Greece, Turkey, and Cyprus could provide a neutral financial platform in which shared economic benefits supersede maritime disputes.

The strategic design of these mechanisms must include governance frameworks that span national boundaries, with representation requirements ensuring all stakeholders have meaningful input in investment decisions. Interconnection-specific project bonds co-issued by multiple countries can create shared liability structures in which default risks are mutually borne, fostering accountability across traditional divides.

When properly implemented, these tools can transform abstract diplomatic goals into concrete economic incentives. Countries with historical tensions can begin to view their neighbors not as competitors but as essential partners in accessing capital markets and achieving energy security. Countries that once viewed energy resources as potential flashpoints for conflict can instead develop economic interdependencies that make continued cooperation the most rational choice.

Shared foundations: Creating a regional energy community

While innovative financing mechanisms provide the tools for transformation, their successful implementation depends on creating supportive physical, institutional, and diplomatic frameworks. The mobilization of capital through green bonds, MDB funding, climate finance, and other financial instruments discussed above is necessary but insufficient on its own to achieve regional energy integration.

Having participated in several regional energy dialogues, I have observed that trust between regulators remains limited. Finance can be the tool that enables cooperation in more sensitive policy areas. Yet it must be paired with robust infrastructure development, harmonized regulatory environments, diplomatic initiatives that overcome historical tensions, and coordinated governance structures that span national boundaries. The implementation of regional energy integration requires establishing concrete structures for collaboration that can transform the Eastern Mediterranean’s abundant renewable resources into a shared, resilient energy architecture that benefits all participating nations. These efforts must include

• physical infrastructure development and grid integration;
• interconnected energy markets and regulatory alignment on grid codes, tariff structures, and cross-border trading;
• regional cooperation and diplomatic engagement; and
• regional governance frameworks.

Scaling cross-border initiatives for a connected grid

Cross-border energy cooperation in the Eastern Mediterranean is advancing through several key initiatives aimed at integrating renewable energy sources and enhancing grid connectivity. There are nine interconnection projects and proposals at different stages of development across the region. If implemented fully, they can help create a more unified energy market capable of efficiently distributing energy across the Mediterranean while addressing the intermittency challenges of solar and wind.

The Great Sea Interconnection, set to link Cyprus, Greece, and Israel, is perhaps the region’s flagship project and will facilitate the trade of renewable electricity across borders. Similarly, Egypt and Greece are exploring the GREGY interconnection. Beyond the Eastern Mediterranean, Italy and Tunisia are advancing the ELMED interconnection between them, which is expected to be operational by 2027.⁵⁶ Technologies already exist to manage some of the perceived risks of interconnections. Using high-voltage direct current (HVDC) transmission lines offer greater controllability and can be isolated more easily than traditional AC interconnections. Interconnections can also be directed to non-critical loads or areas in order to reduce risk to cross-border disruptions, while robust cybersecurity standards and protocols can help protect critical infrastructure.

Harmonizing regulations for seamless market operation

Achieving a fully integrated energy market in the Eastern Mediterranean requires harmonized regulations to ensure fair access to grids, promote investment, and reduce the cost of risk capital. Countries involved in interconnection projects need to have the regulatory framework in place to allow for successful entry of foreign electricity into domestic electricity markets and successful export of their electricity to foreign markets. This is especially difficult for countries in which electricity utilities hold vertical monopolies in all sectors of the economy. Turkey, Cyprus, Greece, and Egypt have unbundled or are on the way to unbundling their electricity markets; meanwhile, Jordan, Lebanon, and, to a lesser extent, Israel have electricity utilities that hold vertical monopolies and are responsible for generating and supplying electricity to all sectors in the economy.⁵⁷

The EU’s internal energy market policies are a model for regulatory convergence, emphasizing transmission ownership unbundling between electricity generation or supply companies and transmutation ones, consumer rights, and the role of regulatory actors such as the Agency for the Cooperation of Energy Regulators (ACER).⁵⁸ The EU’s Electricity Directive 2019/944 mandates nondiscriminatory access to transmission and distribution systems, a principle that could be adapted for the Eastern Mediterranean to attract private investment.⁵⁹

However, this EU model cannot be fully replicated in the Eastern Mediterranean due to different system maturity levels. The Association of Mediterranean Energy Regulators (MEDREG), comprising twenty-seven energy regulators from twenty-two countries, recommends that regulatory frameworks must be tailored to specific subregional contexts, and that Eastern Mediterranean countries need to develop more regulatory solutions independent from those of the EU.⁶⁰

Progress in regulatory harmonization could also increase infrastructure investments significantly in the Eastern Mediterranean. However, this progress is slow due to the region’s diverse regulatory environments, with countries such as Syria, Lebanon, Turkey, and Egypt maintaining state-controlled energy sectors, while others like Greece and Cyprus align with EU directives to liberalize the energy market. Overcoming these disparities will require sustained dialogue, capacity building, and incentives for alignment.

Energy diplomacy: Transforming geopolitical challenges into opportunities

Geopolitical tensions are another major barrier to cooperation in the Eastern Mediterranean. Political and security dynamics significantly influence energy cooperation in the region. Long-standing disputes—such as those between Greece, Turkey, and Cyprus over maritime boundaries, the Syrian civil war, the unresolved Cyprus question, the recently intensified Israeli-Palestinian conflict, and the Israel-Lebanon conflict—have all historically hindered regional collaboration and the development of cross-border infrastructure, particularly affecting projects like the EastMed Gas Pipeline.⁶¹ Overcoming these challenges will require financial resources as well as diplomatic engagement and innovative governance structures.

However, the shift toward renewable energy and the EU’s focus on a green energy economy present new opportunities for cooperation. Initiatives such as the East Mediterranean Gas Forum (EMGF)—established in 2019 as a platform focused on natural gas development, it includes Egypt, Greece, Cyprus, Israel, Jordan, and the Palestinian territories, along with France and Italy—can be both reformed to become more inclusive of all Eastern Mediterranean counties and expanded beyond natural gas to include renewable energy, power infrastructure, and advancing electricity interconnection and trading.⁶² Some energy policy experts have advocated for renaming the EMGF as the East Mediterranean Energy Forum (EMEF) to reflect this broader mandate.⁶³ Such a forum should include a regulatory platform, in which each country is represented by its national regulatory authority or electricity governing body, to jointly promote greater harmonization of regional energy markets and legislation.

Energy cooperation is increasingly recognized as a tool for regional stability and economic integration. The development of renewable energy projects and interconnectors can create shared economic interests, reducing the potential for conflict.⁶⁴ This approach transforms energy from a source of competition to a platform for collaboration, potentially easing long-standing tensions through mutual economic benefits and shared climate goals.

An increased shift toward renewable energy sources not only ensures long-term sustainability and economic benefits for the region, but also has higher potential than gas diplomacy. Unlike natural gas and other tradable commodities, renewable energy systems are an undisputed resource. Additionally, collaboration on renewable energy projects through interconnections provides synergies between partnering countries due to the benefits they provide to both grids.

Shared horizon: Finance and diplomacy for a unified Eastern Mediterranean energy landscape

The Eastern Mediterranean stands at the cusp of a transformative energy transition in which innovative financing can simultaneously advance technological leapfrogging, economic development, and regional cooperation. By strategically structuring investment mechanisms that require collaboration, the region can convert financial transactions into diplomatic bridges.

Financial innovation offers three distinct diplomatic dividends beyond its direct economic benefits.

First, joint financing creates structured engagement opportunities that maintain dialogue even during political tensions. When countries coinvest in renewable infrastructure through mechanisms such as regional green bonds or mixed-ownership projects, they establish technical and financial communication channels that persist through diplomatic fluctuations. These ongoing interactions build relationships among technical experts and financial officials that can later facilitate broader cooperation.

Second, shared financial liabilities transform political calculus by creating mutual dependencies. When neighboring countries with historical tensions become co-guarantors of infrastructure loans or joint issuers of project bonds, they develop a tangible economic interest in maintaining stable relations. The economic costs of diplomatic ruptures become quantifiable and immediately visible to stakeholders on all sides.

Third, financial innovation creates positive-sum narratives in a region often characterized by zero-sum competition. By enabling countries to collectively tap into previously inaccessible capital pools—such as global ESG funds seeking large-scale sustainable investments—regional financial mechanisms demonstrate that cooperation delivers benefits unattainable through individual action.

If the Eastern Mediterranean realizes this vision of financially driven integration, it could emerge as a global model for how innovative capital structures can overcome entrenched geopolitical challenges. The region’s abundant renewable resources, which have the potential to generate more electricity than its projected future demand, provide the natural foundation, while innovative financing creates the institutional architecture for a sustainable energy future that transcends historical divisions and creates shared prosperity across borders.

The path forward requires financial creativity, diplomatic persistence, and technical expertise—but the potential rewards extend far beyond renewable kilowatts to include a fundamental reconfiguration of regional relationships built on shared economic interests rather than historical grievances.

The Atlantic Council would like to extend special thanks to Limak Holding for its valuable support for this report.

Karim Elgendy
Executive Director,
Carboun Institute;
Associate Fellow,
Chatham House

Karim Elgendy is an expert on energy transition and climate policy in the Middle East and North Africa. His research examines the intersection of climate diplomacy, energy geopolitics, and sustainable development across the region. Elgendy investigates how countries navigate energy transitions and climate change impacts within shifting geopolitical landscapes, and analyzes how regional and global power dynamics influence climate action and policy implementation. He possesses deep expertise in energy and climate policies across the Eastern Mediterranean and Gulf Cooperation Council states, with particular focus on renewable energy, climate resilience, and diplomacy.

Elgendy has authored numerous articles and policy publications in leading journals and platforms. He has presented at over one hundred public speaking engagements and has delivered guest lectures at several prestigious universities. His expert analysis is regularly featured in broadcast, print, and digital media outlets, and he has appeared in most mainstream media outlets.

The Atlantic Council Turkey Program 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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The post Great sea connections: Financing the Eastern Mediterranean’s energy transition appeared first on Atlantic Council.

The gap between actual and needed global investment in renewable energy is projected to grow to tens of trillions of dollars over the next ten to thirty years while the costs of climate change continue to compound. Public finance alone—via governments, multilateral development banks, and international financial institutions—is insufficient to meet the challenge. To bridge this widening investment gap and attract private investors that will have to provide most of the funding, what’s needed is a combination of innovative financial tools that are tailored to local contexts and mitigate risk, enhance creditworthiness, and attract private capital at high leverage rates. Guarantees are especially important because of their reputation for their efficacy and effectiveness in mitigating real and perceived risks of projects, which enhances project creditworthiness and often attracts investment from the private sector.

This paper provides a comprehensive overview of investment gaps in the renewable energy industry at the global level as well as in EMDEs to achieve the global net-zero targets and discusses the risks and obstacles facing private investors in the renewable energy industry. It also reviews various de-risking, risk-reduction, and risk-transfer financial mechanisms that could boost private investment in clean energy infrastructure and nature-based solutions projects centered around a discussion of a guarantee proposal called the Emerging Market Climate Investment Compact (EMCIC). The EMCIC is a proposal for a guarantee facility funded primarily by wealthy governments that would provide guarantees to major global investors to mobilize $100 to $500 billion in private investment in climate mitigation investments, namely clean energy infrastructure and nature-based solutions, in EMDEs over ten years. The structure of the facility would be simplified so that qualified investors would assemble portfolios that would be broadly guaranteed (against most political and commercial risks), would do their own due diligence subject to standards set by the EMCIC, and would generally not require recipient country guarantees.

Finally, the paper includes case studies on clean energy investment in Brazil and South Africa—and country-specific mechanisms available for scaling up this investment.

Amin Mohseni-Cheraghlou was the macroeconomist with the GeoEconomics Center (2021-2024) and a Senior Lecturer of Economics at the American University in Washington, DC. 

Frank Willey is a program assistant at the Atlantic Council Global Energy Center. 

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The post Scaling up private capital for climate investment in emerging markets appeared first on Atlantic Council.

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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. 

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Robert F. Ichord, Jr.

Nonresident Senior Fellow

Global Energy Center

Nuclear Energy Energy Transitions

Issue Brief Mar 21, 2025

To win the AI race, the US needs an all-of-the-above energy strategy

By Joseph Webster

To ensure US AI leadership, the United States must harness all forms of energy, allow a level playing field, and remove red tape constraining the buildout of critical enablers, especially transmission lines and grid enhancing technologies.

Artificial Intelligence China

EnergySource May 21, 2025

Replace the Inflation Reduction Act with FUEL-AI

By Joseph Webster

To compete in the global AI race, the United States must dramatically expand its power supply. Replacing the Inflation Reduction Act with the FUEL-AI Act would reorient energy policy toward national security, fast-tracking domestic energy production and infrastructure to power America’s AI future.

Energy & Environment Energy Transitions

EnergySource May 5, 2025

Make critical mineral spending matter this time  

By Ashley Zumwalt-Forbes

The United States has a crucial opportunity to translate large-scale funding into critical mineral stockpiling and resilient supply chains—but only if Congress structures spending to create durable markets. Without clear demand signals, real commercial offtakes, and price stability, proposed funding risks falling short of delivering on its potential.

Energy & Environment Energy Markets & Governance

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post US global leadership in the age of electricity appeared first on Atlantic Council.

The Arabian Sea and Indian Ocean (ASIO) megaregion occupies a pivotal position in the global energy landscape, both as a key transit route and as home to some of the greatest energy suppliers and consumers worldwide. This sprawling region encompasses the Gulf Cooperation Council (GCC) states, South Asia and the Association of Southeast Asian Nations (ASEAN), as well as East Africa and, further afield, Australia.

Energy cooperation within ASIO is a linchpin of economic and geopolitical stability. The GCC, with vast hydrocarbon reserves and increasing investments in renewable energy, serves as a cornerstone of energy supply for South and Southeast Asia. At the same time, the ASIO region’s energy relationships transcend supply and demand dynamics. Decarbonizing energy systems, securing critical trade routes, and addressing energy poverty all imply a growing degree of regional and interregional strategic collaboration.

The energy landscape of the ASIO region is also a key component of broader, global geopolitical and strategic change. Critical maritime chokepoints link energy trade routes with regional and international security considerations. Global powers including China and the United States actively shape the region’s energy and political dynamics, creating both opportunities for collaboration and risks of competition.

With heightened concerns about Chinese ambitions, and with a less dependable and more protectionist US partner, many ASIO countries are in a mood to balance. Geopolitical change and the need for energy are driving deeper cooperation within the bloc and prompting outreach to second-tier powers.

This publication explores the energy relationships that define the ASIO region, focusing on three key interregional dynamics: GCC-South Asia, GCC-Southeast Asia, and South Asia-Southeast Asia. It also examines the broader regional issues shared by all ASIO countries, as well as the roles of East Africa and Australia within this vast energy ecosystem. The memo also situates this discussion within the context of broader global partnerships, particularly with the United States and Western allies.

Fellow

Phillip Cornell

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Energy Markets & Governance

Global Energy Forum

The tenth Atlantic Council Global Energy Forum will be held June 9-10, 2026 in Washington, DC. Please check back regularly for updates on our programming.

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Energy strategy across the Arabian Sea and Indian Ocean appeared first on Atlantic Council.

The importance of an effective US industrial strategy is growing amid rapid technological change, rising energy demand, and geopolitical uncertainty. In response, policymakers are focused on how US industry can stay competitive in an era of electrification, digitalization, and AI, as well as global conflict.

Key industrial sectors like steel, aluminum, cement, and chemicals must meet rising global demand for low-emissions products while countering unfair trade practices, especially from countries like China that use state support and low environmental standards to undercut competitors. Durable US competitiveness will depend on supportive policies and transparent markets that reward higher environmental and labor standards.

The question for US policymakers is not whether to compete, but how. Industrial policy is a bipartisan priority, even if strategies differ, and a national security imperative. Given its fiscal constraints, the United States must find ways to ensure its industries thrive globally while avoiding new spending.

Over the past year, the Atlantic Council engaged dozens of industrial stakeholders from private, public, and nonprofit sectors to assess how the United States can lead in sustainable industrial development. The consensus: although no specific outcome is assured, the country is well-positioned to lead if it acts decisively. This study concludes with near-term recommendations to overcome barriers and lay the foundation for a revitalized, competitive, and sustainable US industrial strategy.

David Goldwyn is the chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

Andrea Clabough is a nonresident fellow with the Atlantic Council Global Energy Center and an associate at Goldwyn Global Strategies, LLC.

Global Energy Forum

The tenth Atlantic Council Global Energy Forum will be held June 9-10, 2026 in Washington, DC. Please check back regularly for updates on our programming.

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Building for tomorrow: Preparing US industry to compete in a lower-carbon global economy appeared first on Atlantic Council.

China dominates the rare-earth supply chain, with Beijing supplying about 60 percent of global rare-earths output and controlling up to 90 percent of refining capacity. For the United States, which needs neodymium and dysprosium for F‑35 fighter jet engines as badly as it needs lithium for electric vehicles, continued dependence on Beijing is impossible. The solution is not wishful “onshoring” to the United States alone; it is establishing a portfolio of reliable partners. Kazakhstan, already the world’s leading uranium producer and a top‑ten copper and zinc exporter, is a prime candidate for such a partnership.

Rare earths have become a geopolitical flashpoint. In practice, that means Beijing can throttle supply at will. In April, for example, China abruptly restricted exports of several important rare earths and permanent magnets—actions triggered by trade disputes with the United States under the pretext of “energy security.” US firms and strategists described the move as China’s latest attempt to weaponize its rare-earths dominance.

Supply shocks will recur, not recede. After Beijing halted exports of rare-earth refining technology to the United States in late 2023, it spent 2024 steadily ratcheting up export-license requirements on strategic rare-earth oxides or outright banning its exports. These moves culminated in April of this year, with Beijing placing export restrictions on seven heavy and medium rare-earth elements (samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium) on dual-use national-security grounds.

The United States has only just begun to free its high-tech supply chain dependence on China. Over the past few years, for example, US policymakers have launched some domestic projects and lured allies in Europe and Australia to develop alternatives, but many of those efforts are still nascent. New supply lines will take years to mature. Washington needs a long-term partnership strategy that goes beyond homespun mining; it needs countries capable of supplying rare earths at scale. Since 2020, Kazakhstan has ramped up rare-earth mining, increasing its exports nearly fivefold by 2024. Still, both in 2023 and 2024, 100 percent of its rare-earth output is exported to China—a telling indicator that the resource is there, but does not currently flow to the West. By moving swiftly, the United States could hedge against future Chinese disruptions—and help build a secure, diversified global supply chain for these critical minerals.

Kazakhstan’s rare earths

Unlike some prospective supplier countries, Kazakhstan already knows it has rare-earth wealth. In early April, geologists in the country announced the “Zhana Kazakhstan” discovery: an estimated twenty million metric tons of rare-earths‑bearing ore in the Karagandy region, including sizable heavy‑rare‑earth concentrations. If even 10 percent of the ore proves recoverable at today’s grades, that equates to around 200,000 tons of rare-earth oxide content—enough to meet current US neodymium magnet demand for a dozen years. If validated, the site would give Kazakhstan the world’s third‑largest rare-earth element reserves, trailing only China and Brazil. While promising, these preliminary findings are no sure thing and will require deeper study.

This find is not an outlier. Soviet‑era data and recent airborne surveys point to additional prospects across southern and eastern Kazakhstan. The geology has been there; what was missing was investor certainty. That is changing fast. In just the past few years, the government has opened scores of new exploration projects.

Kazakhstan is no newcomer to big mining. In 2024, the country led the world in uranium output (about 38 percent of global supply) and ranked among the top ten producers of copper and zinc. The national mining concern, Tau-Ken Samruk, consolidates dozens of mines and has global joint ventures in everything from gold to base metals. Kazakhstan’s energy and transport infrastructure likewise favors large-scale mining, as it already accounts for 14 percent of the country’s gross domestic product.

Kazakhstan’s “multivector” diplomacy also plays a factor. Kazakh President Kassym-Jomart Tokayev courts Beijing and Moscow, yet he also seeks deeper ties with Washington and Brussels to balance against those giants. That instinct makes Astana a willing partner for the United States, and a less risky one than conflict-scarred alternatives such as Myanmar and the Democratic Republic of the Congo. At the same time, the United States should not expect Kazakhstan to choose only Western partners over the major powers along its eastern and northern borders.

Since 2018, Astana has overhauled its subsoil code on a “first come, first served” model. New legislation helps promote fiscal stability, offers value-added tax holidays on exploration equipment, and caps royalties. As a result, majors from Rio Tinto to Fortescue have launched joint ventures, while US‑backed Cove Capital began drilling rare-earths targets near Arkalyk in 2024.

Kazakhstan also has an edge in infrastructure. The Middle Corridor rail‑and‑port network—which runs from western China through Kazakhstan to the Caspian Sea and onward to Europe—was expanded last year with European Union (EU) financing. Aktau’s Caspian port already handles uranium concentrate bound for Canada and France; rare-earths concentrates could follow the same route with minimal modification.

In short, Kazakhstan offers what many mining countries do not: favorable geology and the business environment and infrastructure to exploit it. Kazakhstan already has smelters and refineries for many ores, and it boasts production of advanced materials such as purified manganese sulfate and titanium metal. It even produces gallium (used in semiconductors) and recycles rhenium, though admittedly it still lacks deep processing for rare-earth oxides.

The way forward

Washington has learned the hard way that pledges alone won’t break Beijing’s monopoly, and its next move should elevate quiet deals into an explicit strategy. On the Kazakh side, top leaders have made it clear that developing mining for Western markets is a priority. For example, Tokayev has called critical minerals the country’s “new oil,” and he has signed a number of memoranda with foreign partners on exploration and processing. Kazakhstan’s September 2024 “Kazakh-German” forum alone produced twenty-three agreements in mining, including rare-earth joint ventures.

Here are the three critical steps Washington and Astana should take next:

1. Unlock normal trade by repealing the Jackson-Vanik Amendment and grant Permanent Normal Trade Relations (PNTR) to Kazakhstan. The United States should finish what H.R. 1024 has already teed up: removing Kazakhstan from the Soviet-era Jackson-Vanik Amendment and extend PNTR to Kazakhstan. Scrapping this relic costs no money, instantly signals strategic seriousness, and eliminates the legal ambiguity that still shadows US financing and offtake contracts with Kazakh mines. PNTR lets both sides write binding long-term supply agreements.
2. Set up a US–Kazakhstan rare-earth task force to drive the deals. The United States and Kazakhstan should co-chair a cabinet-level task force comprised of the US State Department and US Commerce Department, as well as Kazakhstan’s Ministry of Industry. This task force would set annual, public targets for the number of exploration licenses issued to Western consortia, the amount of pilot separation plants financed and built on Kazakh soil, and the export tonnage of heavy and medium rare-earth elements to non-Chinese markets. The task force could instruct the US International Development Finance Corporation and Export-Import Bank of the United States to prioritize Kazakh rare-earth projects, while Kazakhstan fast-tracks permitting and guarantees site security. Early co-location of processing near the mine head would lock in long-term offtake for US buyers and complement EU infrastructure money already pledged for the Aktau port.
3. Deploy a blended-finance and technology package along the full value chain. Washington should pair loan guarantees with technical assistance from the US Geological Survey, Oak Ridge National Laboratory, and the Department of Energy’s Critical Materials Institute. Kazakhstan should match that support by streamlining visas for engineering teams and auctioning new mine blocks on transparent terms. The Pentagon’s National Defense Stockpile could start purchasing Kazakh oxides, while the Department of Energy and Nazarbayev University co-fund recycling research and development to close the loop at home.

To be sure, there are challenges ahead, and mining remains a difficult, uncertain venture. Bringing a greenfield rare-earths mine to commercial output can take more than a decade. But doing nothing cements Beijing’s leverage for that same decade and beyond. By acting now, Washington can buy future resilience and signal to market actors that rare-earths diversification is real.

Miras Zhiyenbayev is the advisor to the chairman of the board for international affairs and initiatives at Maqsut Narikbayev University, Astana, Kazakhstan. He is also co-sponsoring the June 4 US-Central Asia Forum at the Atlantic Council.

The post How Kazakhstan can anchor a resilient rare‑earth supply chain for the West appeared first on Atlantic Council.

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.

Will 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.

Issue Brief Feb 19, 2025

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GeoTech Cues May 8, 2024

One hundred years of energy transitions

By Mahmoud Abouelnaga

Thousands of energy leaders, technology developers, and climate advocates gathered in Rotterdam, Netherlands from April 22-25 along the 26th World Energy Congress. Looking back at the first Congress, then called the World Power Congress, in London in 1924, global energy systems looked very different. In 1924, global oil production was around 2.8 million barrels per […]

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The post To build tomorrow’s power grid, the United States should look to geothermal energy appeared first on Atlantic Council.

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

Nonresident Senior Fellow, Nuclear Energy Policy Initiative

Global Energy Center

Energy & Environment Nuclear Energy

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The post The United States’ role in managing the nuclear fuel cycle appeared first on Atlantic Council.

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1. Investment in US energy and manufacturing

Last month, the United Arab Emirates (UAE) committed to investing $1.4 trillion in the United States over the next decade. Some of the investments in the package have already been announced, including a recent commitment by Emirates Global Aluminum to fund the construction of a smelter in the United States. If built, it would be the country’s first new aluminum smelter in thirty-five years and could potentially double US production. Trump will likely push the UAE to announce additional plans to invest in US manufacturing, infrastructure, and energy production, with petrochemicals, steel, and battery production likely targets.

Trump is expected to press Saudi Arabia to announce where it intends to invest the $600 billion that Crown Prince Mohammed bin Salman committed to during a post-inauguration call in January. Just like during his first term, Trump said that if Saudi Arabia agreed to large purchases of US products, he would make the country his first foreign visit. Now, he will look to hammer out the specifics, which will likely include purchases of military equipment in addition to investments in infrastructure, technology, and mining.

2. Nuclear energy cooperation

Saudi Arabia has tried to start a domestic nuclear power program since 2006. It has signed multiple agreements with various contractors and consultants—but with very little progress other than a small research reactor in Riyadh due to come online soon. Saudi Arabia has engaged with Chinese companies to explore domestic uranium mining and enrichment—a potentially problematic move from the perspective of the International Atomic Energy Agency (IAEA) because it can easily lead to weapons production.

However, there are signs that Saudi Arabia is now interested in complying with IAEA standards. Last August, Riyadh agreed to IAEA spot inspections designed to ensure that weapons are not being developed, potentially paving a pathway for cooperation with the United States. Last week, the Trump administration announced that it was dropping the Biden administration’s demand that Saudi Arabia normalize relations with Israel as a condition for civil nuclear cooperation negations, putting Saudi nuclear power back on the table. At stake may be commitments from Saudi Arabia to use US companies and American-made materials to build future reactors, as well as deals to supply Saudi-produced critical minerals to US customers.

3. Pumping more oil

Trump has been extremely vocal about his desire to lower oil prices. While US producers don’t want to see prices fall below the sixty dollars per barrel range (breakeven prices in the most productive shale basins are currently in the low to mid sixty dollars per barrel range), consumers would welcome lower gasoline prices this summer. Middle East producers seem eager to help, as OPEC+ recently committed to increase production by 411,000 barrels per day in June and is expected to recommit to gradually put more oil on the market at its ministerial meeting at the end of May. It is unlikely that Trump will press the Gulf countries to make additional commitments, but he will expect them to follow through—and will likely say so to the press.

4. LNG purchases

Trump is likely to push Gulf countries to expand their orders for US liquefied natural gas (LNG). Kuwait and Iraq already import US LNG and Bahrain just received its first cargo last month. Both Kuwait and Bahrain want to buy more LNG to meet high domestic electricity demand over the summer while natural gas outputs decline. Trump should push them to sign long-term offtake agreements with US LNG companies rather than rely on spot market purchases. This will ensure that these countries continue buying US gas even when more LNG become available from nearby Qatar, which is expanding its production.

This should be an easy sell to Kuwait, which is already in talks with the Australian company Woodside to buy a 40 percent stake in its Louisiana LNG terminal. Kuwait is aiming to secure LNG supplies from this project, but even with assistance from the Trump administration, it won’t be fully operational until the early 2030s. Trump should push Kuwait to sign additional offtake agreements, with the idea that if Kuwait does find itself oversupplied with LNG in the future, it can always resell cargos on the spot market.

Strategically, announcing at least two new LNG agreements with Middle Eastern countries will help the Trump administration’s position as it presses Europe to move forward with long-term offtake agreements for US LNG. Europe has been dragging its feet over concerns about emissions reporting, even though Europe needs US gas to replace the Russian LNG it currently buys. Trump can use LNG deals with Middle Eastern consumers to pressure Europe to commit to US purchases before winding down imports of Russian LNG. This would also help Trump pressure Russia to negotiate on Ukraine, as it would further squeeze Moscow’s income.

It isn’t just business

The focus of Trump’s visit to the Middle East may be on strengthening economic ties, but it is tough to ignore the backdrop of rising geopolitical tensions, particularly regarding Israel, Iran, and the Houthis. Business, trade, and energy markets are important to both the president and the leaders of the Gulf countries he will be meeting, but so are security and diplomacy. In Trump’s mind, business and geopolitics operate in tandem and everything is up for negotiation.  It should not come as a surprise to see energy deals, trade negotiations, sanctions enforcement and even weapons sales materialize in concert.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Three years of Russia’s senseless aggression in Ukraine have caused monumental, unnecessary human suffering but also an irreversible impact on Russia’s energy sector. Sanctioning Russian LNG at the source is the most effective way to prevent future supply blackmail from Moscow.

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The post Four energy deals Trump will look to make on his Middle East trip  appeared first on Atlantic Council.

As part of the $150 billion defense funding boost that the House Armed Services Committee is including in the budget reconciliation bill, approximately $2.5 billion is specifically earmarked for the domestic production and stockpiling of critical minerals. An additional $20 billion is allocated to strengthening munitions manufacturing and the broader defense industrial base, which will also indirectly benefit critical minerals supply chains. 

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While this is a welcome and overdue move, the real test isn’t whether Congress can authorize new spending—it’s whether that spending can be structured in ways that create durable, investable markets. 

This wouldn’t be the first time that funds are announced with great fanfare, but lacking clear commercial pathways, private sector follow-on investments never materialize. Projects stall, supply chains remain fragile, and strategic vulnerabilities persist.  

To truly improve critical minerals security, Congress must structure these funds to create durable markets with sustainable demand signals, real commercial offtakes, and price stability. Merely handing out subsidies and building stockpiles that gather dust is not enough. 

Here’s how Congress can get it right: 

1. Use stockpiling wisely: Build “bid windows,” not just warehouses 

Stockpiling critical minerals is essential for national defense, but traditional government stockpiles have often operated outside normal market dynamics. Congress must avoid designing a system where the US government simply buys and stores metals at opaque and inflexible prices, inadvertently distorting already underdeveloped markets. 

Instead, a “bid window” structure—similar to how the Japan Organization for Metals and Energy Security (JOGMEC) operates—could ensure the stockpile acts as a price floor, rather than a ceiling, for market development. The United States could commit to buying minerals at a transparent, indexed floor price for a set volume each quarter, giving miners and refiners the demand certainty they need to invest while still letting private markets function freely above that level. 

This approach would reduce the risk for business and investors of a price collapse, thereby attracting private investment and stretching taxpayer dollars further by stabilizing—rather than dominating—the market. 

2. Focus on processing first: Without midstream, nothing works 

Many policymakers are tempted to fund new mines, but without midstream processing capacity, mines are destined to become stranded assets. 

Instead, Congress must prioritize refining, separation, and chemical conversion capacity inside US borders. It’s not glamorous work—but it’s the missing middle where China dominates and the West remains frighteningly dependent. 

The reconciliation bill’s funds should catalyze small-to-midscale batch processing plants for metals like cobalt, rare earths, gallium, and tungsten that are faster and cheaper to deploy than megaprojects. The midstream is where the supply chain bottlenecks—and geopolitical leverage—truly lie. 

A mine without processing isn’t a supply chain—it’s an orphan. The middle of the supply chain needs to be fixed first. 

3. Use the right tool for the right stage: Grants where needed, blended finance where possible 

Grants have been—and will continue to be—essential for building the critical mineral supply chain. Early-stage projects, new technologies, and first-of-a-kind facilities often cannot attract private financing without meaningful public support. Programs like the Department of Energy’s battery material processing and manufacturing grants have catalyzed activity where private capital alone would not step in. 

But as projects mature, this funding model should evolve. Wherever possible, blended finance tools—such as partial guarantees, credit enhancements, or first-loss capital—can stretch public dollars further and bring private investors alongside. 

Right now, there is not yet enough private capital chasing critical minerals to worry about crowding out investments with public spending. The bigger risk is failing to attract it at all. Structuring public funding in a way that can de-risk projects enough to make them bankable can crowd in private investment without making government funding the only path forward. 

Otherwise, critical mineral projects will survive only as long as government grants flow, instead of becoming durable parts of national security supply chains. 

4. Target strategic chokepoints: Not everything is “critical” 

Finally, not every mineral deserves public backing. Defense dollars must focus on true chokepoints: materials heavily controlled by adversaries where supply disruptions would cripple US capabilities. 

Tungsten, antimony, heavy rare earths, cobalt, and graphite fit this billing, but not commodities like aluminum or gold where deep, liquid global markets exist. 

By staying disciplined about which materials—and which segments of the value chain—the US government funds, it can maximize strategic leverage without diluting impact. 

A historic opportunity 

The United States has a rare window to reset its critical minerals strategy. The $150 billion reconciliation bill could be the start of something transformative—but only if it is structured to create a real market pull, not just government push.  

If prices can be stabilized without destroying private incentives, if the middle of the supply chain can be bolstered, and if private investment can be attracted in a durable way, the reconciliation bill may prove a real turning point. 

Done right, this bill could lay the foundation for resilient, investable critical mineral supply chains that support national security long after the headlines fade. 

Ashley Zumwalt-Forbes is a former US Department of Energy deputy director for batteries and critical minerals, co-founder and former president of Black Mountain Metals and Black Mountain Exploration, and co-founder and former senior advisor of Metals Acquisition Corp.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Apr 3, 2025

Profitability and power: Fixing US critical minerals supply chains

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The illicit trade of mined materials is fueling the M23 insurgency in the eastern Democratic Republic of the Congo (DRC), threatening regional stability and hindering development. As the United States considers a minerals-for-security agreement with the DRC, international engagement, ethical sourcing practices, and strengthened oversight are critical to fostering long-term peace in this resource-rich region.

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By Haley Nelson and Natalia Storz

Central Asia holds vast critical mineral resources, but limited export capacity and complex environmental, geopolitical, and legal risks make large-scale US investment unfeasible. The US should instead focus its efforts on allied nations with established mineral export industries.

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The post Make critical mineral spending matter this time   appeared first on Atlantic Council.

It was a state-ment. Canadian voters returned the Liberal Party to power on Monday after a stunning political comeback fueled by tensions with the United States—including an election-day message from US President Donald Trump calling for Canada to become the “fifty-first state.” Prime Minister Mark Carney declared in his victory speech that the United States will never “own” Canada. “But we also must recognize the reality that our world has fundamentally changed.” Our Canada-watchers are here to diagram what this new world looks like as Carney prepares to form a government.

• Christopher Sands (@USCanada_Sands): Adjunct lecturer and the director of the Hopkins Center for Canadian Studies at the Johns Hopkins School of Advanced International Studies
• Imran Bayoumi (@BayoumiImran): Associate director at the Atlantic Council’s Scowcroft Center for Strategy and Security
• Maite Gonzalez Latorre: Program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center

Flag waving

• The election was essentially a referendum on the Canada-US relationship, Chris tells us, as “a surge of nationalist sentiment swept the country, including in Quebec,” which historically has maintained its own identity.
• Carney, who took over from Justin Trudeau in March, and the Liberal Party appear to have fallen short of a hoped-for majority of 172 seats. Meanwhile, the Conservative Party stumbled—with its leader Pierre Poilievre losing his own seat. “Carney outperformed expectations, but the appetite for change remains strong. Canadians are still divided on who should lead,” Chris says.
• The Trump administration, Chris says, could view a minority government as “weak.” Therefore it could ratchet up “pressure on Canada to meet NATO’s 2 percent of gross domestic product defense spending target, strengthen border security, and unlock its critical minerals—goals first promised by Trudeau in 2019 with little progress.”

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Let’s make a deal

• Given Ottawa’s ongoing tensions with Washington, Imran says we should expect Carney “to look beyond the traditional defense partnership with the United States and to forge new, smaller defense deals with a variety of nations.”
• We got a few hints during Carney’s first overseas trip, when he went to Paris and London rather than Washington and said Canada was reconsidering its decision to purchase F-35 fighter jets from the United States. Imran also points to a radar deal with Australia, a potential submarine deal with South Korea, and a proposed closer partnership with Nordic countries. 
• Carney’s Ottawa will distance itself from Washington on defense, “except where needed,” Imran predicts, “such as on North American Aerospace Defense Command (NORAD) modernization.”

Rocky Mountain low

• Though Carney called for unity in his victory speech, that will be put to the test in the Conservative stronghold of Alberta, Maite notes, where the Liberals won just two ridings. “With blue-collar Albertans significantly impacted by US tariffs, Carney now faces a critical opportunity to demonstrate his commitment to all Canadians, not just Liberal supporters or Ontario residents.”
• Carney and Trump-aligned Alberta Premier Danielle Smith, Maite points out, “have not started their relationship on solid footing.” But the Edmonton native Carney “may leverage his Alberta connections to build bridges with Smith and provincial voters.” 
• Alberta will also be the site of global intrigue in June, when Canada hosts Trump and other world leaders for the Group of Seven (G7) Summit in Kananaskis. That trip to the Canadian Rockies, followed by a flight to the Netherlands for the NATO Summit, represent “two defining tests” for Carney, Chris says: “How he performs will shape Canada’s standing abroad—and at home.”

The post Canada’s voters send a message to Washington—and the world appeared first on Atlantic Council.

There are first the legal barriers, particularly with respect to the Nord Stream 2 pipelines. The European Union (EU) Gas Directive of 2024 imposes a supply security test on non-EU asset owners—clearly a problem for Gazprom. However, US investors may be able to take advantage of EU rules to push forward their proposal for the acquisition of Nord Stream pipelines (possibly one, two or all the pipelines) arguing they are more likely to pass such a test than any Russian entity.  

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However, there is potentially a major second barrier: civil damages. A range of multibillion dollar claims against Gazprom are now underway because of its refusal to supply gas to its long-term customers during the energy crisis of 2021–22. There is not much point in investing in a pipeline if the gas or the revenues will then be seized by Gazprom’s former customers.

Furthermore, if Chinese tariffs on US liquefied natural gas (LNG) remain, US producers will likely want to keep Russian gas out of the EU market. This factor may weigh decisively on the Trump administration.  

The Nord Stream Pipelines

The Nord Stream pipelines consist of two sets of pipelines, Nord Stream 1 and 2, which run along the seabed of the Baltic Sea. Prior to the full-scale invasion of Ukraine in February 2022, Nord Stream 1 was fully operational, while Nord Stream 2 was awaiting German and EU authorization.  Each set in turn consist of two pipelines: Nord Stream 1A and B, and Nord Stream 2A and B. Each has a total annual capacity of approximately 27.5 billion cubic meters (bcm), amounting to 110 bcm in all—equal to two thirds of pre-2022 Russian gas exports to the EU.  

Leading up to the full-scale invasion of Ukraine, Gazprom progressively cut the flow of gas to the EU via all pipeline routes—not just Nord Stream 1, but also the Yamal pipeline and Ukrainian transit routes. These supply cuts sent EU gas prices spiraling to over €340 per megawatt hour by August 2022, well over the 2009–19 range of €9–29. By early September 2022, no gas flowed through Nord Stream 1, and Nord Stream 2 remained unauthorized. Later that month, explosions ruptured three of the pipelines leaving only Nord Stream 2A intact. 

The EU responded first by providing social protection for its consumers and businesses and funding gas purchases, principally from LNG providers. This cost the EU and member states approximately €500 billion. Subsequently, the EU significantly diversified its gas market, increasing pipeline supplies from Norway and LNG from the United States, Qatar, and even Russia. The EU plans to prohibit all Russian pipeline gas by April 2027. With the end of Russia’s Ukrainian transit contract in December 2024, the only Russian pipeline gas arriving in the EU is the 15 bcm which flows via the Turk Stream 2 pipeline principally to Hungary and non-EU Serbia. 

Can Nord Stream restart?

The major US figure pushing for a restart is investment banker Stephen Lynch, who has focused particularly on the still-intact Nord Stream 2B pipeline. Lynch has also suggested that repairing the other NS2 pipeline would cost less than $700 million.  

It is natural that one would start with the intact pipeline. However, the fundamental regulatory problem is that neither Nord Stream 2 pipeline has been authorized under German or EU law. The 2024 Gas Directive imposes two key requirements on pipeline owners. First, the owner must demonstrate that it is not also the supplier of the gas. Second, a non-EU owner person must show that certification will not risk the energy or overall security of any member state or the EU itself. 

One can see how the Lynch proposal could work with the EU law provisions. A US-owned pipeline would be far more likely than Gazprom to obtain certification under the supply security test, given Gazprom’s behavior during the energy crisis. Furthermore, as the US investors would own the pipeline but not provide the gas, they would be able to pass the separation of ownership and supply test. 

However, for such a proposal to work, the sale would need to be at full arm’s length—at market prices and with no Russian money or Russian state connections on the US side. The 2024 Gas Directive imports a very broad definition of control from the EU Merger Regulation. Any below-market-price transaction or Russian participation could raise the prospect of a legal challenge against the certification of the new non-EU owner—some EU member states would certainly launch a challenge if there were any suspicion of Russian involvement on the US side. 

One also must ask whether Gazprom—which has never willingly sold one of its long-distance pipeline systems—would be prepared to do so now. Gazprom ran a half-decade campaign to get Nord Stream 2 authorized so it could run the pipeline, and it would be unprecedented for Gazprom to surrender it. 

A further problem is that in response to the prospect of Nord Stream 2 restarting, the EU could seek to deauthorize Nord Stream 1, which was authorized under an older assessment regime which did not include the supply security test. As both Nord Stream 1 pipelines are ruptured and have not been repaired in over two years, the European Commission could propose amending legislation to the 2024 Gas Directive which could provide that any significant and lengthy rupture to a major piece of gas infrastructure would require the application of the supply security test.  

Adopting such legislation would potentially strengthen US investors’ hands with Gazprom. It would mean the only way that Russian gas could flow through the pipelines would be if they were sold. However, Gazprom would probably be even more reluctant to surrender all of its pipelines to outside hands. Taking that position, however, would mean that Nord Stream 1 could never be revived. 

The damages barrier

Perhaps the most formidable barrier to US investment in the Nord Stream pipelines is the fact that Gazprom would have difficulty selling its gas in the European Union, stemming from its behavior during the 2021–2022 energy crisis.  

From spring 2021—presumably as a means to weaken Europeans’ resolve to assist Ukraine once the full-scale invasion got underway—Gazprom progressively cut gas flows to the EU. This started with a failure to respond to demand for more gas on the European spot market as COVID restrictions lifted. Then, Gazprom did not fill its own European-based gas storages and indeed drew from them as the winter heating season began. By early winter 2021–22, some of Gazprom’s EU storages were as little as 5 percent full.  

Following the invasion in February 2022, Moscow went much further. In March, the Kremlin issued a presidential decree requiring all of Gazprom’s long-term customers to pay in rubles rather than in euros or dollars as per their contracts. Because it was difficult to be sure that payments would be cleared, many customers refused to pay in rubles. By May, Gazprom began systematically cutting off its long-term customers, starting with Poland in May and finishing with Italy in October. Over the summer, Gazprom progressively cut gas flows via Nord Stream 1, reducing supplies even for those continuing customers it was nominally still supplying.  

This led to at least twenty long-term customers suing Gazprom. As these arbitration proceedings are private, it is not possible to know how many cases there are or the scale of their claims. However, it is known that Germany’s Uniper has been awarded €13 billion by the Stockholm Court of Arbitration, and that Austria’s OMV is pursuing several claims and has so far received awards amounting to €330 million. In addition, Poland’s Orlen has said publicly it has a claim outstanding for €1.45 billion.  

The problem for Gazprom is that such awards create a major barrier to returning to the EU market. Gazprom will face seizures of its gas as it enters the EU market or more likely its customers payments will be seized to satisfy outstanding arbitration awards such as that handed down to Uniper. 

However, it is not only the long-term customers of Gazprom who have claims. Gazprom was the dominant gas supplier in most of Central and Eastern Europe and parts of Western Europe. Given that refusal to supply is an antitrust abuse of dominance under EU law, and indirect purchasers (including energy-intensive industrial users) as well as consumers are able to bring claims, the potential scale of damages against Gazprom may be enormous. 

With its long-term customers, Gazprom could potentially offer very cheap gas as a means of compensation. It could adopt a divide-and-conquer strategy by doing similar low-price compensation deals with high-volume users while seeking to contest consumer cases. The question remains however, as to whether the scale of compensation that Gazprom may have to pay undermines the economic case for entry to the EU market—and thereby the economic case for US investors to acquire one, two or all of the Nord Stream pipelines. 

Chinese tariffs and US LNG interests

With the imposition of Chinese tariffs on US LNG, US gas shipments are already being redirected toward the European market. If the current tariff regime is sustained, then US producers will want to maximize access to alternative markets. This then raises the question as to whether the US government would be willing to support any Russian gas flows returning to the EU.   

Potentially, Chinese tariffs may give Beijing greater incentive to finally consent to a version of the Power of Siberia 2 pipeline, which would, for the first time, bring natural gas from the Western Siberian gas fields—the main supply fields for the EU—to China.  

If this ends up being the case, one can see the potential reshaping of global gas markets. Russia would increase its gas flows to China, while the United States—via long-term LNG contracts—would supply the EU market. In such a world there would only be a limited role—if any—for the Nord Stream pipelines. Given the formidable obstacles, restarting Nord Stream may simply be one pipe dream too far.  

Alan Riley is a nonresident senior fellow at the Atlantic Council Global Energy Center and a Professor at the College of Europe, Natolin.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Alan Riley

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Europe & Eurasia

EnergySource Apr 28, 2025

If Russian gas returns to Europe, it must go through Ukraine

By Sergiy Makogon

The resumption of Russian gas supplies to Europe as part of a potential cease-fire agreement in Ukraine is under discussion, but any such flows would need to transit through Ukraine rather than Nord Stream or other routes. To safeguard regional stability, the EU, Ukraine, and the US must enforce strict safeguards to avoid renewed dependency and prevent Russia from once again weaponizing its energy exports.

Energy & Environment Energy Markets & Governance

EnergySource Mar 28, 2025

Nord Stream could divide Europe yet again 

By Michał Kurtyka

Washington’s potential reset with Moscow, amid Ukraine peace negotiations, has revived discussions on the future of Nord Stream 2. Whether the Trump administration would cede its LNG market in Europe to Russian pipeline exports remains to be seen. For Europe, however, reopening the pipeline would be a costly mistake.

Eastern Europe Economy & Business

EnergySource Mar 7, 2025

The US can reduce Russia’s nuclear energy—and geopolitical—influence

By Marina Lorenzini

As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

Energy & Environment Energy Markets & Governance

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Can Nord Stream really rise from the dead?  appeared first on Atlantic Council.

Nearly three months of zero gas flows have shown that Europe can manage without the volumes of Russian gas that previously transited Ukraine—only 15 bcm in 2024, compared to 84 bcm in 2019. Nevertheless, rumors of possible restoration of Russian gas deliveries to the European Union (EU)—either via Nord Stream or through Ukraine—continue to circulate in the press. Resuming this trade could be a potential Russian condition for halting hostilities as Russia desperately needs gas export revenues. If that is the case, resumed flows might be a necessary step to create peace. But they must be routed through Ukraine and under conditions that will ensure energy security and full transparency. 

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Russia is extremely interested in resuming supplies to the premium European gas market. Since 2021, Russia has lost more than 100 bcm per year of gas exports to Europe, undermining Gazprom’s financial stability. Desperate attempts by Gazprom to redirect exports to Central Asia and China have not brought significant financial returns, as prices there are two-and-a-half times lower than European prices. Moreover, pipeline export capacity to those markets is very limited. Russia’s direct pipeline export capacity to China currently stands at 38 bcm per year via Power of Siberia. This infrastructure is not connected to the large gas fields historically used to supply European markets. Additionally, Russia’s ability to export liquefied natural gas (LNG) faces significant constraints due to US sanctions. To cushion the loss of the European market, the Russian government has been forced to raise domestic prices, an unusual and very unpopular move in the country.  

Additionally, the Kremlin is eager to maintain its political influence over Europe, including through export revenues. Hungary and Slovakia are clear examples of how this influence manifests—both nations have repeatedly opposed or diluted EU sanctions against Russia and blocked critical financial and military support for Ukraine. 

The Russian government and several members of the German far right regularly raise the issue of resuming Russian gas supplies to Germany via the surviving branch of the Nord Stream 2 pipeline, which has a capacity of 27.5 bcm per year. However, German authorities categorically rule out the possibility of such a resumption. Other Northern European countries, as well as Poland and the Baltic states, also strongly oppose restoring transit through Nord Stream, fearing increased militarization of the Baltic Sea and the potential reversion to EU dependence on Russian gas. Resuming transit through Poland is also unlikely, for both political and technical reasons, as the Yamal–Europe pipeline has now been almost fully integrated into Poland’s domestic gas system and can no longer handle flows from Russia. 

This leaves Ukraine as the most feasible route for resuming Russian gas deliveries to Europe.  

EU officials and most member states officially do not support the idea of resuming gas transit through Ukraine. However, the EU has not imposed sanctions on Russian pipeline gas or LNG, allowing Russia to retain a significant market share in Europe. The European Commission continues to reaffirm its commitment to phasing out Russian gas completely by 2027, and this month plans to present a detailed roadmap for this process. 

Unfortunately, the European Commission has been unable to fully ban Russian gas imports. Combined pipeline and LNG imports from Russia accounted for less than 19 percent of total EU gas inflows in 2024. However, there may be concern that a complete ban could significantly impact gas prices in Europe. Given that the Commission has outlined a plan—not a binding commitment—to fully phase out Russian gas by 2027, it might opt to delay sanctions on Russian gas until then in exchange for peace. The anticipated influx of new LNG volumes from the United States, Canada, and Qatar between 2026–28 could mitigate EU concerns about price volatility during this transitional period. 

The position of the United States will be determinative. On one hand, the Trump administration consistently demands that EU countries increase purchases of US LNG and may not welcome significant increases in Russian gas imports to Europe. However, for the sake of a peace deal, Trump may agree to limited imports of up to 15 bcm annually—a volume that flowed via Ukraine in 2024 and would have only a minor impact on US exports to Europe. 

As for Ukraine, estimated annual revenues of $400–600 million from Russian gas transit are a miniscule contribution to the economy. Therefore, the question of resuming transit should be considered in a broader context of cease-fire agreements and establishing long-term peace. Continued transit of Russian oil and renewed gas transit through Ukraine could allow Russia to earn up to $12 billion annually. Accordingly, Ukraine is entitled to expect not only transit fees of around $200 million for oil and an estimated $400–600 million for gas, but also significant additional concessions from Russia. 

These concessions should include Ukrainian control over the Zaporizhzhia nuclear power plant, which can produce 6 gigawatts of electricity annually, but was occupied by Russia in 2022. This would help balance Ukraine’s power system, large parts of which have been destroyed by Russian missile and drone attacks, and eliminate the need to import electricity from the EU. It is worth noting that Russian control over the plant has little economic sense, as Russia cannot restart the plant without restoring the Kakhovka Reservoir, which is unlikely without Ukrainian cooperation. 

Additionally, Ukraine has the right to demand 15–20 percent of Russian oil and gas exports—either in monetary terms or in kind—as a transit tax. These funds should go into a special fund for the restoration of Ukraine’s energy production, which has been destroyed by Russian attacks. The proposed percentage is reasonable, given the existing discounts on Russian oil and gas which, as sanctions are lifted, should disappear.   

In order to limit Kremlin’s influence on the European gas market and on political processes within Europe, the EU should place red lines on its reengagement with Russian energy. 

First, import volumes of Russian gas should be capped, both for the entire EU and for individual member states, to prevent any renewed dependency on Russian energy supplies. 

Second, gas purchases should be carried out collectively through the AggregateEU initiative, with the delivery point for European buyers located at the Russia–Ukraine border. This would eliminate Gazprom’s ability to offer politically motivated pricing to more loyal countries and energy companies. 

Finally, the EU and Ukraine should create an international consortium to manage Ukraine’s gas transmission system. This idea was explored in 2018, and its revival could increase European traders’ confidence in transit reliability through Ukraine.  

Conclusion

If a cease-fire necessitates resuming Russian gas flows to Europe, it must flow via Ukraine and be conditional on key concessions from Russia. These must include safeguards to ensure that the EU does not become dependent on Russian gas again and that Moscow can no longer use gas as political leverage. Ukraine should also regain control over vital energy assets like the Zaporizhzhia nuclear plant and secure a substantial transit tax for reconstruction of its energy infrastructure. Policymakers in Kyiv, Brussels, and Washington must remain resolute in demanding these terms to ensure any peace agreement reinforces, rather than undermines, regional stability and energy security. 

Sergiy Makogon is a non-resident senior fellow at the Center for European Policy Analysis and the former CEO of GasTSO of Ukraine (2019-2022).

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Mar 28, 2025

Nord Stream could divide Europe yet again 

By Michał Kurtyka

Washington’s potential reset with Moscow, amid Ukraine peace negotiations, has revived discussions on the future of Nord Stream 2. Whether the Trump administration would cede its LNG market in Europe to Russian pipeline exports remains to be seen. For Europe, however, reopening the pipeline would be a costly mistake.

Eastern Europe Economy & Business

EnergySource Mar 7, 2025

The US can reduce Russia’s nuclear energy—and geopolitical—influence

By Marina Lorenzini

As the Trump administration outlines its energy priorities, strengthening the US nuclear industry remains a point of bipartisan agreement. Revitalizing this sector will lead not only to domestic economic growth, but also a reduction in Russia’s dominance in global nuclear markets and its geopolitical leverage.

Energy & Environment Energy Markets & Governance

EnergySource Feb 24, 2025

US energy dominance is Putin’s worst nightmare as Russia enters its fourth year of war crimes

By Olga Khakova, Haley Nelson

Three years of Russia’s senseless aggression in Ukraine have caused monumental, unnecessary human suffering but also an irreversible impact on Russia’s energy sector. Sanctioning Russian LNG at the source is the most effective way to prevent future supply blackmail from Moscow.

Central Europe Eastern Europe

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post If Russian gas returns to Europe, it must go through Ukraine appeared first on Atlantic Council.

As landmark negotiations unfold between the government in Tehran and the new administration of US President Donald Trump, the prospect of a new US-brokered agreement with Iran could serve as a turning point—not merely another iteration of the Joint Comprehensive Plan of Action (JCPOA), but a wider strategy encompassing nuclear compliance, regional de-escalation, and energy collaboration. Such a deal would reframe negotiations from an exclusive focus on uranium enrichment and arms controls to a broader architecture centered on commerce, infrastructure, and regional integration.

If implemented with foresight, transparency, and inclusive governance, establishing a regional gas corridor could transform the Middle East’s fractured geopolitics into a system of mutual benefit.

Mapping a “Gas Peace Corridor”

At the center of such opportunity is South Pars, Iran’s share of the world’s largest natural gas field. Straddling the maritime border with Qatar, where it’s known as the North Dome—South Pars, holds an estimated 14 trillion cubic meters of gas and eighteen billion barrels of condensate. That’s more than forty percent of Iran’s proven gas reserves and nearly eight percent of the world’s total.

Despite this immense resource, South Pars remains significantly underutilized due to international sanctions, underinvestment, and outdated infrastructure. Although Tehran launched a seven billion dollar initiative in March 2025 to sustain pressure levels in the aging field, the scale of South Pars demands much more: international partnerships, modern technology, and access to global markets.

This is where diplomacy and energy intersect.

Under this framework, Iran would commit to placing its nuclear energy program under comprehensive International Atomic Energy Agency (IAEA) monitoring, curbing support for regional proxies, and opening its natural gas sector to foreign investment. In return, Tehran could gain access to up to $120 billion in frozen assets, kickstart its economy, and begin exporting gas at scale to neighboring countries and Europe.

The blueprint envisions a “Gas Peace Corridor,” serving as the primary conduit for this transformation—connecting Iran’s South Pars field through Iraq and Syria to the Mediterranean, with links extending into Turkey and the European grid.

An Iranian pivot from military to markets

Iran, for its part, stands to gain enormously. Home to the second-largest proven gas reserves in the world, second only to Russia, Tehran has long been isolated from the global energy economy. Its domestic sector suffers from inefficiencies, periodic blackouts, and reliance on unsustainable subsidies. Despite sitting atop the world’s second-largest proven gas reserves—33.8 trillion cubic meters—Iran struggles with domestic shortages. In winter 2023–2024, peak demand exceeded 800 million cubic meters per day, while supply hovered around 700 mcm/d, leading to rolling blackouts and industrial shutdowns. A foreign investment–backed development of South Pars would allow Iran to rebalance domestic demand and redirect surplus toward exports, reducing pressure on internal subsidies that cost the government an estimated $63 billion annually.

A strategic pivot away from militarization toward markets would allow Tehran to modernize its energy infrastructure, reenter global trade networks, and redefine its international image. A successful transition from isolation to integration could open Iranian markets to US and Gulf Cooperation Council (GCC) investment, expand regional trade, and reduce the economic rationale for military adventurism.

This would mirror and modernize the long-dormant Iran–Iraq–Syria pipeline, also known as the Friendship Pipeline, which was initially proposed in 2011 but was derailed by civil war, sanctions, and political resistance. Today, with the region searching for stability and energy markets desperate for alternatives to Russian gas, the geopolitical logic of that project is stronger than ever. A re-imagined peace corridor would also be an economic lifeline to post-conflict states and a bridge between long-divided regional powers.

In economic terms, transit revenues and associated infrastructure investments could inject billions of dollars annually into transit countries like Iraq and Syria, serving as a stabilizing force amid reconstruction efforts.

Global opportunity

This corridor has clear benefits for the West, too.

For Washington, backing such an initiative could reassert US leadership in a region where its influence has waned. If designed, financed, and operated by US and allied firms, the pipeline could generate significant long-term returns through tariffs, service contracts, and equity stakes, embedding American business interests into the region’s energy future.

Once fully operational, the Gas Peace Pipeline could transport up to one billion cubic meters of natural gas (bcm) annually, equivalent to nearly one-fifth of Europe’s current import needs. Such capacity could rival existing corridors like the Nord Stream system and significantly bolster Europe’s energy diversity and resilience.

At its peak, Russian gas accounted for over 40 percent of the European Union’s imports; even after sanctions and supply disruptions, the continent remains vulnerable to shortages and price fluctuations. By enabling the flow of Middle Eastern gas, particularly from a reserve as vast as South Pars, Europe could stabilize prices, reduce dependency on Russian supply, and align with its climate goals by replacing coal and oil with cleaner-burning gas.

Expanding gas exports from South Pars also aligns with the EU Green Deal and global net-zero ambitions, with the potential to displace an estimated 100–150 million tons of CO₂ emissions annually, particularly by substituting coal in power generation across Europe, Asia, and Africa. Natural gas emits approximately fifty to sixty percent less CO₂ than coal per unit of energy produced.

The war in Ukraine and subsequent energy crisis underscored the fragility of relying on a single dominant supplier. South Pars gas, transported through a modern regional pipeline system, would offer a reliable alternative, especially since Europe’s gas demand is projected to remain significant well into the 2030s. By aligning with this Middle Eastern initiative, the EU could secure long-term supply agreements while promoting cleaner alternatives to coal in countries like Poland and Germany, thereby supporting its own decarbonization strategy.

In March 2024, the Gas Exporting Countries Forum (GECF) released its Global Gas Outlook 2050, forecasting a 34 percent rise in global natural gas demand. Meanwhile, Europe, with approximately ninety percent of its consumption sourced from imports, would benefit from a diversified and secure energy supply at a time when energy geopolitics returns to the forefront.

Yet this vision also carries risks. Russia is unlikely to welcome a pipeline that competes for its most critical market. Moscow may respond by deepening ties with Tehran or by fostering instability in key transit zones to derail the project. Conversely, the deal could pressure Russia diplomatically, creating leverage for Washington and its allies in negotiations over Ukraine and broader European security.

A regionally stabilizing force

Turkey, already a key energy transit hub, would gain geopolitical capital as the linchpin between the Middle East and Europe. Hosting a major leg of the gas corridor would increase its negotiating leverage with both Brussels and Washington, particularly on contentious issues like NATO expansion and regional security. It would also deepen Turkey’s economic ties with Iraq and Iran, strengthening its regional position at a time of multipolar competition.

The gas peace pipeline would also serve as a stabilizing force for Syria and Lebanon—both economically and in terms of security—under the joint guarantee of the United States and Iran, whose cooperation would be anchored in their investment agreement. Syrian reconstruction efforts could be jump-started by pipeline development and transit revenues, gradually shifting the country from battleground to bridge. For Iraq, with its central geography and ties to both Tehran and the West, this project could accelerate its emergence as a regional energy corridor.

The GCC would also stand to benefit. Joint ventures in Iranian gas development would allow the GCC to diversify their portfolios, export routes, and hedge against volatility in oil markets. Economically, such cooperation would foster interdependence, while politically, it could cool long-standing rivalries.  The political dividends for all stakeholders, including Turkey and Qatar, would be no less significant than the commercial ones. Regionally, the project could foster greater cohesion and economic integration in the Middle East. Internationally, it would offer Europe a viable alternative to Russian gas, reinforcing energy security across the continent.

The broader regional effects would also be notable. Reduced Iranian support for groups like the Houthis could de-escalate the conflict in Yemen, increasing security in the Bab al-Mandab Strait—a vital chokepoint for global shipping. Jordan and Lebanon could gain access to affordable energy, easing economic crises and supporting development goals.

The pathway forward lies not in reviving failed doctrines of containment or conflict, but in embracing a pragmatic doctrine of peace and commerce. Energy, in this vision, is not merely a commodity—it is a diplomatic instrument, a stabilizer, and a platform for cooperation.

Rather than trench lines and warships, the region could be connected by pipelines and trade routes. Rather than exporting instability, it could export energy and opportunity. And rather than cycling through confrontation, regional powers—under the facilitation of the United States, and in alignment with European interests—could craft a new era where shared prosperity becomes the foundation of durable peace.

Energy talks, while unconventional, mirror the kind of transactional diplomacy that characterized the Trump administration’s foreign policy, focused on tangible economic outcomes and energy price relief for American consumers. While the stakes of energy diplomacy are high, so is the potential for a lasting impact—economically, strategically, and diplomatically. The convergence of energy needs, geopolitical shifts, and strategic opportunity makes this not only feasible but urgent. What is required now is leadership—bold, strategic, and clear-eyed enough to see that the path to peace may run through a pipeline.

Luay al-Khatteeb is the former Minister of Electricity in Iraq and a member of Iraq’s Federal Energy Council. He can be found on X @AL_Khatteeb.

The post Gas diplomacy: A blueprint for Middle East peace and global energy security appeared first on Atlantic Council.

US energy producers are growing increasingly wary of Trump’s policies and are calling 2025 the year of “uncertainty.” They see geopolitical uncertainty, volatile oil prices, and erratic tariffs as reasons to exercise capital discipline, potentially shut in production, and forgo planning for future operations. One executive told the Dallas Federal Reserve that he has “never felt more uncertainty about our business in my entire forty-plus-year career.”

The National Energy Dominance Council must act quickly to restore stability to the energy industry. The council can take advantage of this juncture to craft reasonable, achievable energy strategies that aren’t driven by ideology or underpinned by untested technology. To ensure real progress toward energy security, the council should follow these seven principles.

1. Move quickly

Energy infrastructure is a long game. The council needs to figure out its plan in the next two months, because four years is considered short-term in energy development. For example, it can take a decade or more from the time a discovery well is drilled to bring a new onshore oilfield online, and it can take seven to nine years to build a new natural gas pipeline. The Trump administration is operating in a new paradigm for energy policy, in which there are no guarantees from one administration to the next. With the stroke of a pen, permitting processes can be suspended, funding can be eliminated, and lease auctions can be canceled. The council doesn’t have a year to come up with a policy—it needs a well-articulated strategy in place before this summer.

2. Communicate with industry

The energy industry needs to know what to expect over the next four years, and, if possible, beyond that. The council should publish and publicize a timeline laying out the administration’s plans for energy regulation, permitting, funding, and leasing. This would allow businesses to make concrete plans and allocate capital effectively. The best way to encourage industry participation in domestic energy growth is to provide a clear map of the administration’s goals and intentions. Otherwise, lack of trust will either keep businesses and financial institutions from investing in US projects or force them to gamble on the accuracy of information they’ve obtained from inside sources. Oil company executives are already facing tremendous uncertainty due to the Trump administration’s tariff policies. The council could help alleviate this by establishing open, direct communication channels with industry.

3. Establish regulatory stability

Streamlining and stabilizing permitting processes doesn’t mean eliminating or scaling back environmental reviews. It means that when a company applies for a permit from the federal government, it should have reasonable certainty that, if the application meets the guidelines set by the agency, then it will be approved in a timely manner. This process was disrupted during the Biden administration, first when it halted all auctions to lease federal land for drilling just after taking office in 2021, and then when permits to drill on land already leased were held up in a bureaucratic backlog. The Biden administration further delayed the process by agreeing to reevaluate National Environmental Policy Act reviews that had already been completed for a large portion of the land leased during the first Trump administration in five western states. This prolonged an already lengthy process for oil and gas development, disincentivizing companies from exploring new land. Streamlining and simplifying the permit-review process would help reestablish industry confidence and encourage investment in US energy production.

Regulatory stability also means issuing new regulations in a timely manner and adhering to the deadlines those regulations establish. In recent years, the White House has not met this benchmark. The Biden administration, for example, delayed finalizing new methane emissions rules to oil and gas producers and new vehicle emissions standards to car manufacturers and dealerships well past its established deadlines. Today, the Environmental Protection Agency under Trump is reconsidering the Biden administration’s tailpipe regulation, which would have forced car dealerships to sell increasing numbers of electric vehicles regardless of consumer demand. No replacement regulations have been proposed, so the vehicle industry has no idea what to expect. New regulations need to be set so businesses can prepare, and federal agencies need to stop delaying the process beyond established deadlines. Regulatory uncertainty is extremely problematic for the auto and energy industries. Even when standards are stricter than industry would like, business leaders still prefer regulatory certainty to ambiguity.

4. Prioritize legislation over executive action

It is much more difficult, onerous, and time-consuming to pass legislation through Congress than it is to implement policy through executive orders or through regulatory agencies. But cementing policies through legislation ensures their implementation long after the sitting president leaves office. The council should push for legislation to secure future lease offerings for oil and gas drilling and for wind and solar farms so that no future administration can cancel or delay them for political purposes. The market should determine whether companies wish to bid for the rights to drill or build on this land, not politics. Likewise, land that should be protected from any energy development should be protected by law, not just the whim of the executive.

5. Develop strategic reserves of certain critical minerals

The United States has known for nearly a decade that China controls a startlingly high percentage of the world’s critical-mineral resources and that it is actively working to expand that control. Many of these resources, such as battery-grade lithium and cobalt, are critical to energy storage. There is bipartisan agreement that the United States needs to diversify its critical-mineral sources, but policies encouraging domestic production have been slow to emerge. Trump’s March executive order on critical minerals calls for fast-tracking the permitting process for new mining operations in the United States, but any new hard-rock mining operation will take many years to come online. To help secure supplies of the materials the United States needs to maintain its energy infrastructure and military readiness, the Trump administration should establish a strategic reserve for key critical minerals. Such government-controlled reserves would act as a cushion that could be used to temporarily alleviate supply shortages.

This would be especially valuable if Trump expects to continue to employ tariffs as a foreign-policy tool. For example, in February, China banned the export of certain critical minerals to US and allied defense companies in retaliation for tariffs. US weapons manufacturers, which rely on Chinese supplies of the metal tungsten, are now scrambling to find other sources. With 90 percent of the world’s tungsten supply controlled by China, Russia, and North Korea, a US strategic tungsten reserve would help keep the market from experiencing severe dislocation.

Likewise, copper is necessary for electrical wiring, semiconductors, and military hardware. The United States should establish a strategic reserve of copper to stabilize US copper supplies. This would be especially useful if, for example, Canada were to impose retaliatory tariffs on copper exports to the United States. The United States imports over one quarter of its copper from Canada, and the mere threat of tariffs is already upending the global copper market as companies increase imports to create their own stockpiles. A strategic reserve that could be released to combat the impact of potential future Canadian tariffs would likely help prevent panic buying and combat price spikes.

6. Incentivize investment in long-term oil and gas production

Production from conventional oil resources in the United States has been on a downward trajectory since 1986. The major increase in production since 2011 has come from unconventional resources, such as hydraulic fracturing, or fracking. Generally, production from fracking wells can be brought online more quickly than production from conventional wells. However, production from fracked wells declines more rapidly than production from conventional wells.

There isn’t much the federal government can do to incentivize companies to invest in oil and gas production in the United States outside of offering land, tax incentives, favorable regulation, government stability, rule of law, infrastructure, and predictability. The National Energy Dominance Council should examine each of these areas and find ways to improve their implementation. For example, it could recommend to Congress and the president that they amend the 1970 National Environmental Policy Act to include specific requirements for environmental assessments and environmental impact statements so that groups can no longer bring lawsuits demanding that permits and lease sales be invalidated because a government agency did not include a particular energy-market forecast. Lawsuits play an important role in checking corporate power in the United States, but the recent rise in frivolous lawsuits and lawsuits based on technicalities just to stall production disincentivizes companies from investing in long-term projects in the United States because they increase uncertainty. Changing the law could reduce the number of wasteful lawsuits and allow operations to move forward with reasonable environmental assessments.

7. Modernize infrastructure

While energy production is a major component of energy security, it is useless without the infrastructure to transport and transmit energy to consumers safely. The federal government should support the development of new pipelines to safely deliver natural gas to consumers. It should also support modernizing and improving electricity transmission infrastructure, including building long-distance transmission lines so that communities can access the cheapest and most efficient sources of electricity available, when they need them. Grants to study the state of the United States’ electricity infrastructure and government-backed loans to fund upgrades and modernizations that will improve safety and reliability should be made available to state and local governments.

The National Energy Dominance Council has the unique opportunity to recommend policies that could restore stability to the US energy sector and help ensure the United States’ energy security into the next century, but it needs to act soon. The council’s policy agenda should remove barriers to energy production without jeopardizing environmental protections, resolve regulatory uncertainties, streamline regulatory and permitting processes, build new strategic reserves for critical minerals, and modernize electricity transmission and pipeline infrastructure. Its most urgent task is to offer a sense of assurance and stability to energy producers that have been buffeted by regulatory, market, and geopolitical uncertainty.

Ellen Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the president of Transversal Consulting.

The post How the National Energy Dominance Council can set the US on the path to energy security appeared first on Atlantic Council.

Through the C5+1 Critical Minerals Dialogue, the Group of Seven’s (G7’s) Partnership for Global Infrastructure and Investment (PGII), and bilateral memoranda of understanding signed with the region, the United States has begun to explore Central Asia’s untapped critical mineral wealth. However, the political ambition has not necessarily reflected the logistical difficulties inherent in Central Asia-originated supply chains.

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Central Asia’s untapped potential

Much has been written on Central Asia’s position as a “new frontier” in the global contest for critical minerals. The region has a wealth of lithium, copper, aluminum and uranium, although some reserves require further exploration as existing data was collected during the Soviet era.

But just because the region has critical minerals, does not mean the United States can easily access them. Taking a closer look at the region, infrastructure, governance, topography, and geopolitical complexities presents numerous challenges for US companies to navigate.

Regional energy grids are not well equipped to handle expanded mineral production. Mining is highly energy intensive, accounting for 69 percent of Kazakhstan’s industrial energy use. Central Asia’s power system already struggles to balance generation and distribution, suffering high transmission losses and frequent blackouts. To improve the grid and ensure that reliable power is supplied to mines and enrichment facilities, modern power plants and upgraded high-voltage transmission lines are needed, which would cost an estimated $25–49 billion.

Subpar resource governance is also impeding Central Asia’s mineral potential. The region is home to inconsistent tax regimes, lacks government transparency, and has a history of nationalizing or renegotiating contracts with foreign companies. Stronger regulatory protections are needed to ensure investor confidence. 

Beyond these challenges, newcomers to this frontier market face deeply entrenched Chinese and Russian influence in regional supply chains. Soviet-era pipelines, highways, and railways initially pulled trade northward after the collapse of the Soviet Union. But, since 2013, China’s Belt and Road Initiative (BRI) has reoriented trade eastward through infrastructure projects like the China-Kyrgyzstan-Uzbekistan railway. Through partnerships with regional transit operators like Kazakhstan Railways (KTZ), and investments in locomotive production and Caspian ports, Beijing has bought out regional transit infrastructure and skewed the investment bidding process. US businesses may face challenges in securing contracts in a region where critical infrastructure is controlled by Chinese and Russian entities.

In the critical mineral sector, China holds the majority of mining permits in Kyrgyzstan and Tajikistan, Russia has monopolized regional uranium enrichment, and several Central Asian mining companies have been sanctioned  by the United States for their close relationships with Russia. These geopolitical and regulatory barriers not only limit Western access to critical mineral resources, but also reinforce China and Russia’s control over the region’s strategic industries.

Moreover, the primary bottleneck in the critical minerals supply chain is processing, not mining. While Kazakhstan can refine copper, zinc, and lead, the region lacks processing capacity for energy minerals like lithium, uranium, nickel, and cobalt. Most of these raw metals end up in China or Russia for further enrichment.

Promises and pitfalls of the Middle Corridor

For Central Asia’s critical minerals to reach Western markets at scale, new export routes must be established; energy infrastructure issues must be addressed; mineral survey maps must be modernized; and local enrichment facilities must be developed.

Raw minerals can be shipped to processors in the West, but westward routes are largely underdeveloped. Because the region is surrounded by sanctioned and adversarial states—Afghanistan, China, Iran, and Russia—the Middle Corridor, a multimodal transport route that links Central Asia to Europe via the Caspian Sea and South Caucasus, is the only way to ensure secure, sanction-free export. However, due to regional infrastructure inefficiencies, checkered contractual practices, and rapidly developing environmental issues, Western investors have been slow to develop the route’s capacity.

Infrastructure issues have kept the route’s container capacity low, the shipping times unpredictable, delays frequent, and prices volatile. Caspian ports are restrained by low vessel capacity; there are significant, time-consuming “break-of-gauge” issues across Central Asian railways; and unaligned tariff regimes, cargo regulations, and customs procedures impede the flow of goods across borders.

While climate-driven water loss could see the Caspian’s shoreline lower by 21 meters by 2100, port capacity is expected to shrink further, and ports could be pushed back at least one kilometer from the shoreline, necessitating major redevelopment and causing billions of dollars in economic losses. Rising temperatures and the construction of dams along Russia’s Volga River, the Caspian’s main source of water, have seen the average sea level drop to its lowest point in 400 years, reducing cargo ship capacity by 20 percent. In the northeast Caspian, where waters are shallowest, ships leave ports before they are fully loaded to reduce ship depth. If waters decline further, northeast Caspian ports will likely be unusable. Desalination projects have been implemented by Kazakhstan, Azerbaijan, and Turkmenistan to slow the declining water levels of the Caspian. However, the energy-intensive desalination process has unintended negative impacts on marine life and water quality, and its ability to slow declining water levels has been highly debated. Therefore, the region needs investment in new forms of water-saving technologies, like atmospheric water harvesting, in order to prevent shrinkage that will eliminate the feasibility of the Middle Corridor.

Can this frontier be tamed?

In its current state, the Middle Corridor is incapable of accommodating the United States’ critical mineral needs. Its limited capacity and higher-than-average transit costs would offer little strategic benefit to US businesses while exposing investors to significant financial and geopolitical risks.

For investors to see the benefits of Central Asian critical mineral mining, improved transit routes are necessary; some studies have estimated €18.5 billion is required to ensure commercial viability. Transport costs remain high, delays create logistical uncertainty, and limited domestic processing forces reliance on neighboring markets. Without addressing these bottlenecks, the region’s potential as a critical mineral hub will remain constrained.

Unified tariffs and cargo regulations and the digitalization of regional transit could help to reduce delays along the Middle Corridor, helping to set the groundwork for additional infrastructure investments. Kazakhstan, Azerbaijan, and Georgia have already begun working towards a unified customs system after signing a trilateral union in 2023 to establish a jointly owned logistics company. However, with China Railway Container Transport Corporation (CRTC) joining the joint venture at the end of 2024, the corridor is beginning to look like another BRI project.

China’s formal involvement in the Middle Corridor Multimodal Joint Venture, its agreement with Kazakhstan to construct the Tacheng-Ayagoz railway line, and China’s construction and management of Georgia’s Anaklia deep-sea port underscore the importance of this route for China. Any increase in the route’s capacity will help increase the capacity of China’s westward exports. Investing billions into the westward export of Central Asia’s critical minerals will benefit Chinese transit and open more opportunities for the dumping of Chinese goods into Western markets.

Although the United States strategically benefits from engaging with Central Asia and offering an alternative partner, investing billions of dollars into regional transit routes may lead to negative unintended consequences. Not only does the route require massive infrastructure investments and significant regulatory improvements to benefit Western markets, but from a US national security perspective, investments will undoubtedly encourage westward Chinese transit.

The reality of a US-Central Asia critical mineral partnership

Quickly securing critical mineral partnerships is vital to US efforts to reduce dependence on China. However, the United States should be wary of unrealistic expectations for what Central Asia can provide. Regional infrastructure development is incomparable to any other region in the world. Central Asia is uniquely burdened by its encirclement between US-sanctioned countries. In the short and medium term, low export capacity, high transit costs, geopolitical volatility, and a high-risk investment environment significantly reduce the region’s commercial viability.

The United States should choose its battles wisely. Political will is not enough to move billions of dollars’ worth of minerals across oceans. Infrastructural, logistical, environmental, and legal complexities should guide decision-making. With the time-sensitive nature of US critical mineral needs, efforts should start closer to home with US-allied countries with established mineral export industries, like Canada or Chile. US supply chain efforts need to be driven by capacity, reliability, and economic viability, rather than political pipe dreams.

Haley Nelson is assistant director at the Atlantic Council Global Energy Center.

Natalia Storz is program assistant at the Atlantic Council Global Energy Center.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Former staff

Haley Nelson

Former Assistant Director, European Energy Security

Global Energy Center

Central Europe Energy & Environment

EnergySource Apr 3, 2025

Profitability and power: Fixing US critical minerals supply chains

By Ashley Zumwalt-Forbes

The global critical minerals race is well underway, and the American supply chain is behind. To regain momentum, the US must make this industry viable by creating a financial framework that attracts and retains capital.

Critical Minerals Energy & Environment

New Atlanticist Mar 21, 2025

Four critical questions (and expert answers) about Trump’s new critical minerals executive order

By Alexis Harmon, Reed Blakemore

On March 20, US President Donald Trump signed an executive order intended to increase crucial mineral production in the United States. Atlantic Council experts dig into the details.

Critical Minerals Economy & Business

EnergySource Jan 22, 2025

China’s lithium-ion battery exports: Why are US prices so low?

By Joseph Webster

Export prices for Chinese batteries entering the US are lower than for any other market, suggesting that China may be engaging in anti-competitive behavior. As batteries grow in importance for commercial and military applications, the US should increase tariffs on Chinese battery imports to bolster US and allied manufacturing capabilities.

China Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Central Asia’s geography inhibits a US critical minerals partnership appeared first on Atlantic Council.

In this Atlantic Council issue brief, authors Sachin S. Desai, Michael Y. Hua, Amy C. Roma, Jessica A. Bufford, Jacqueline E. Siebens, and J. Andrew Proffitt explore pathways to address regulation, nonproliferation, and export considerations for fusion technologies. They argue that fusion power plants should be regulated in a pathway that is separate from the regulatory pathways established for fission reactors, especially since the materials and processes involved in fusion power plants are significantly different from fission reactors.

Report Feb 24, 2025

Atoms for Appalachia: The role of nuclear energy in economic development

By Lauren Hughes

Advanced nuclear technologies can drive economic security and energy security within Appalachian states.

Economy & Business Energy & Environment

EnergySource Jan 15, 2025

Tripling global nuclear energy capacity is in reach—if the world seizes the moment

By Amy Drake

At COP28, nations and corporations committed to tripling global nuclear energy capacity by 2050, underscoring its essential role in achieving net-zero emissions. Looking ahead to COP30, global leaders must strengthen multilateral collaboration, engage the financial sector, and provide support for new partnerships with the nuclear industry to meet this goal.

Energy & Environment Nuclear Energy

Global Energy Agenda Feb 20, 2025

The small reactor revolution can transform African energy systems 

By Lassina Zerbo

Africa faces a dual challenge of ensuring reliable access to energy while contributing to global net-zero goals. Nuclear energy—and in particular small modular and micro reactors—can revolutionize the African energy landscape and promote sustainable development.

Africa Energy & Environment

Nuclear Energy Policy Initiative

The Atlantic Council’s dedicated home for the exploration of nuclear energy’s future.

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Building a path toward global deployment of fusion: Nonproliferation and export considerations appeared first on Atlantic Council.

Without a clear pathway to sustainable profits, taxpayer and private sector investments risk becoming financial sinkholes. If the United States wants to secure a resilient supply chain, it must create a financial framework that attracts and retains capital.

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The economics of critical minerals

A functional critical minerals supply chain requires three key stages: mining, midstream processing, and downstream manufacturing. China dominates all three, not because it has better resources, but because it has a better economic strategy.

Through state-backed subsidies, China shields its companies from market forces, allowing them to endure losses in pursuit of long-term control. Meanwhile, the United States expects each player—miners, processors, and manufacturers—to be independently profitable, creating higher costs, greater risk, and systemic fragility. If one link in the chain collapses, the entire system fails.

This fractured approach discourages private investment. Unlike large, transparent markets such as oil or copper, critical minerals markets are relatively small, opaque, and highly volatile. Many key minerals trade on spot markets dominated by China, which can manipulate prices at will. If China wants to eliminate competition, it simply floods the market, driving prices down and making Western projects financially unviable.

To break free from this cycle, the United States must focus not just on developing mines, but on ensuring that the entire supply chain is profitable and attractive to investors.

A market-based strategy to compete with China

The United States has the strongest capital markets in the world. Rather than defaulting to top-down industrial planning, Washington should treat private capital as a strategic asset. With the right risk-adjusted incentives, US capital markets can outcompete China’s state-directed model. To do so, the United States should focus on four pillars: targeted supply chain construction, pricing power, investment risk reduction, and policy stability.

1. Stand up integrated supply chains through strategic funds

To accelerate development, the United States should launch government-backed, private-sector-managed funds focused on building single, vertically integrated supply chains (for example, a supply chain for antimony or gallium). These funds should be designed with strict performance conditions: they receive incentives only if they successfully stand up an end-to-end supply chain. This structure ensures quasi-vertical integration and forces offtake agreements to be part of the business model from the outset.

2. Build pricing power by raising domestic commodity prices for sensitive materials

To reduce vulnerability to China’s market manipulation, the United States must break away from artificially depressed price structures. This can be achieved through two levers: (a) targeted tariffs on mineral imports that benefit from unfair subsidies and (b) tighter domestic sourcing requirements across clean energy and defense sectors. By raising the floor on US commodity prices, these policies would insulate domestic producers and make long-term investments more financially viable.

3. Reduce investment risk via demand guarantees and price floors

Price volatility and uncertain offtake remain top deterrents to private investment. The United States should implement mechanisms to stabilize both. This could include government-backed trading houses or public-private stockpiles that establish price floors for particularly vulnerable minerals. Long-term offtake agreements, brokered through private-sector consortia, would provide stable revenue streams that investors need.

4. Ensure long-term policy certainty

The most important determinant of private investment is confidence in the rules of the game. Critical minerals development is a multi-decade endeavor. If the United States wants capital markets to play a leading role, it must offer long-term policy stability. That means preserving existing tax credits, grants, and loan programs—not just as temporary stimulus but as enduring pillars of the investment environment.

Building a market, not a monopoly

China has not just secured mineral resources—it has built a financial system that allows it to manipulate markets and suppress competition. The United States must construct an alternative, leveraging free enterprise and innovation as strengths. Identifying deposits and opening mines, though critical, is not enough. Without a financial strategy that ensures profitability, the United States will remain dependent on China for the materials that power its economy and national security.

It’s time to stop treating critical minerals as just a resource problem—and start treating them as the economic battle they truly are. The solution lies not in more short-term government intervention, but in structuring a market that incentivizes investment, ensures financial viability, and ultimately secures the United States’ position as a leader in the critical minerals race.

Ashley Zumwalt-Forbes is a former US Department of Energy deputy director for batteries and critical minerals, co-founder and former president of Black Mountain Metals and Black Mountain Exploration, and co-founder and former senior advisor of Metals Acquisition Corp.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Mar 31, 2025

The future of global energy policy is abundance 

By Charles Hendry

The United States and Europe are diverging on energy policy, with the United States prioritizing low costs and economic growth while the United Kingdom and the European Union focus on decarbonization. But reconciling these approaches is possible through the lens of energy abundance—each country must leverage its most plentiful resources to drive down costs, enhance security, and support sustainability without burdening consumers.

Energy & Environment Energy Markets & Governance

New Atlanticist Mar 21, 2025

Four critical questions (and expert answers) about Trump’s new critical minerals executive order

By Alexis Harmon, Reed Blakemore

On March 20, US President Donald Trump signed an executive order intended to increase crucial mineral production in the United States. Atlantic Council experts dig into the details.

Critical Minerals Economy & Business

EnergySource Jan 22, 2025

China’s lithium-ion battery exports: Why are US prices so low?

By Joseph Webster

Export prices for Chinese batteries entering the US are lower than for any other market, suggesting that China may be engaging in anti-competitive behavior. As batteries grow in importance for commercial and military applications, the US should increase tariffs on Chinese battery imports to bolster US and allied manufacturing capabilities.

China Energy & Environment

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Profitability and power: Fixing US critical minerals supply chains appeared first on Atlantic Council.

Removing the natural gas waiver, however, would have a more significant impact as it accounts for more than forty percent of the total supply. By making Iranian energy more costly, the United States hopes to incentivize Iraq to diversify its energy sources and reduce its dependency on Iran, a goal that the Iraqi government has long delayed despite being aware of its necessity.

The view from Baghdad by Ahmed Tabaqchali

Iraq’s power conundrum is essentially a large gap between supply and demand.  

2023 estimates suggest that supply satisfies 82 per cent of demand, but almost forty per cent of generated electricity is lost during the transmission and distribution phases from an aging infrastructure, reducing supply to an estimated 53 percent of demand.  

Moreover, high population growth and infrastructure recovery after decades of war are exacerbating this gap as power demand growth outpaces supply growth.

Iran’s first electricity exports in 2004, followed by its natural gas exports in 2017, have been crucial in addressing Iraq’s chronic electricity shortages. Starting with a 1 percent share of electricity supply in 2004, it reached a peak of about 41 percent in 2020. That share declined to about 31 percent in 2023, and it is projected to decline further in 2024.

Iraq is facing a coming summer demand surge that threatens to significantly exacerbate this shortage, paired with the loss of Iranian electricity, and potentially gas. Tehran will blame this on US President Donald Trump’s administration, but a significant loss of gas exports would have happened anyway this summer as Iran itself is forecast to have its own electricity crisis. 

For Baghdad, diversifying its energy sources is critical to ensure a reliable supply. In other words, achieving energy security is not simply replacing current Iranian electricity and gas exports, but diversifying sources so Tehran’s exports become one of many sources, which in the process removes its, and any other supplier’s, leverage over Iraq.

This is a long-term process that demands significant investments across Iraq’s whole power infrastructure, including power plants that generate electricity, its transmission system that delivers electricity to population centres, and distribution networks that then ship this electricity to end users.  

This opens significant, multi-year collaboration and investment opportunities for Iraq, its neighbours and its international stakeholders, especially the United States. 

The first arena includes electricity imports from Baghdad’s neighbors, such as from Jordan  , the Gulf Cooperation Council Interconnection Authority (GCCIA) and close to home from Kurdistan Region of Iraq (KRI). The second is increasing gas supply sources like the expansion plans of Basra Gas Company and the Total Energies deal, developing untapped gas fields, and KRI gas potential through a resolution of the long-standing conflict over the development of the country’s oil and gas resources along the lines proposed by KRG and the Government of Iraq in 2023. Alos, the import of piped gas from Turkmenistan, and the import of Liquified Natural Gas (LNG) from either Qatar or the United States which in turns required significant infrastructure development. The third and fourth areas are to upgrade its transmission systems distribution grids, both responsible for the up forty percent of losses of the electricity generated.

Thus, embarking on joint long-term investments in the above areas is a win-win strategy for Iraq, its neighbors, and its international stakeholders. 

The view from Washington by Anthony Pfaff

Ending the waiver on Iranian electricity imports, but not natural gas, is a smart strategic move for Iraq. 

Removing these waivers is part of the Trump administration’s effort to impose “maximum pressure” on Iran. But the funds Iraq paid for Iranian electricity never directly reached Tehran—their use was proscribed but for limited categories of humanitarian trade overseen by the Treasury Department pursuant to the procedures in place since Trump’s first term in office. Still, these waivers enabled Iraq’s dependency on Iran for its energy needs, which may have made sense when ISIS was the primary threat to Iraq’s stability; however, it may not now, as that threat has receded and Iran’s threat to regional stability becomes more urgent.  

The first Trump administration reimposed sanctions on Iranian energy exports in 2018 after withdrawing from the Joint Comprehensive Plan of Action (JCPOA) that restricted Iran’s ability to enrich uranium to develop nuclear weapons. To prevent destabilizing the Iraqi economy, the U.S. has granted waivers to the Iraqi government, allowing them to import Iranian electricity and gas to meet their short-term energy needs. Former president Joe Biden’s administration extended these waivers, requiring funds paid to Iran to go to accounts that could be monitored and used only for humanitarian purposes. As a condition for the waivers, the United States pushed Iraq towards its own energy self-sufficiency, including through agreements with French and Qatari energy companies and ongoing work to connect Iraq’s energy grid to the GCC’s. 

Iraq may not need much incentive to diversify, especially considering the impending summer shortage. Even though the gas waiver remains intact, Iraq is already seeking to diversify its natural gas supply. That includes a deal with Turkmenistan, though the fact that its gas would travel through pipes going through Iran has limited its effectiveness. Baghdad has also sought agreements with Qatar and Oman to import natural gas, and recently signed an agreement allowing integration into the GCC electric grid, which will provide an additional 3.94 terawatt-hours of electricity. In fact, in a recent phone call with US National Security Advisor Mike Waltz, Iraqi Prime Minister Mohammed Shia al-Sudani reportedly underscored Iraq’s ambition to become energy independent and interest in greater involvement by Western and US energy companies.

By leaving the gas waiver intact, the United States ensures that Iraq can mitigate any resulting energy crisis, while giving Baghdad the flexibility it needs to pursue energy diversification without risking social instability or exacerbating the country’s energy shortages. Whether removing just one sanction will facilitate this transition will depend on Iraq’s Western and GCC partners increasing energy investment and cooperation while also enabling Iraq to endure any backlash from Iran or its proxies.  

Despite concerns that decreasing Iraq’s access to any energy sources, especially during the summer in an election year, could increase instability, the removal of the electricity waiver can be a prudent measure for Washington to encourage both Iraq’s self-sufficiency and its Arab partners to support Iraq’s ultimate independence from Iran.  It is in Washington’s interest, together with removing the waiver, to do whatever it can to help support those ongoing trends.

 Impacts, and a way forward 

 The immediate effect of the loss of waivers to import electricity and potentially natural gas is almost zero, as Iran effectively halted its exports in late 2024, diverting its gas exports to its own domestic market.  

Such diversions occurred a few times in the last few years, as a consequence of the negative cumulative effects of years of mismanagement, irrational consumption, and underinvestment in an aging infrastructure made worse by sanctions. However, this time, it’s much worse than any prior year, as Iran had rolling power blackouts across the country from November 2024, and natural gas was diverted from electricity generation to home heating to stave off social unrest. 

But ending the waiver on Iranian electricity imports, while preserving the natural gas waiver, allows Iraq to break free from Iranian energy dominance at a manageable pace, reducing risks to its energy security and fostering regional cooperation. Meanwhile, it signals to Iran and the world that the United States remains committed to countering Iranian influence but in a way that prioritizes stability and pragmatic solutions. This measured approach is a necessary step in Iraq’s path toward energy independence, national sovereignty, and long-term prosperity. 

Despite Iraq’s willingness, budgetary constraints can significantly hinder its efforts to diversify its energy sources. The government’s fiscal challenges are primarily due to its heavy reliance on oil revenues, which constitute approximately 90 percent of state income. A decline in global oil prices has exacerbated this issue, leading to reduced national income and fiscal pressures. In response, the Iraqi government has increased public spending, particularly on salaries and pensions, which account for over 40 percent of the budget, to maintain social stability.  

This allocation limits funds available for infrastructure projects, including those aimed at energy diversification. Given that limited funds increase the likelihood of Iraq not living up to its financial commitments, foreign investors will disincentivize investing in projects to diversify and stabilize Iraq’s energy sources. So, without a finalized budget, the allocation of funds for these critical projects remains uncertain, delaying progress and perpetuating Iraq’s dependence on limited energy sources. 

Another potential challenge is Iran-backed militias who smuggle Iraqi oil, diverting it from power generation. Given these interests, the political parties backing these militias may take action in parliament that impedes Iraq’s ability to diversify. Moreover, as Iran feels less secure due to the combination of regional setbacks, increasing Iraqi independence, and economic pressure due to sanctions, these militias may become more disruptive and further impede diversification by, if nothing else, making foreign investment too costly.  

Given the budgetary, political, and security challenges described above, it is less clear whether Iraq can achieve energy diversity on its own. To alleviate those challenges, Iraq’s Western partners can facilitate this transition by taking the following steps:  

•  Condition Cooperation. As the US nudges Iraq towards energy diversification, it should condition any concessions or other support on continued investment in domestic energy infrastructure, renewable energy sources, and alternative regional partners, such as leaving the gas waiver intact.  

• Encourage Regional Cooperation and Energy Alternatives. As described above, Iraq has been seeking new partnerships with the West as well as countries like Qatar, Oman, Turkey, and Saudi Arabia to provide alternative energy sources through electricity imports or investment in infrastructure projects. However, Iraq’s inconsistent payment record, coupled with expectations that there will be budget shortfalls in the near future, may limit interest, impeding Iraq’s transition to independence. Iraq’s partners may need to consider investment guarantees to sustain that investment.  

• Contain Backlash. US pressure and Iraqi cooperation will likely place Iran in a position where it must disrupt Iraqi energy diversity or lose influence. While Iran-backed militias may play a role, Iran will also utilize political and economic means that could have unexpected impacts that may be difficult for the Iraqi government to manage. Efforts to make Iraq resilient should also be part of a comprehensive policy to incentivize its energy diversification efforts. 

Despite these diversification efforts, Iraq’s way forward is clear: continue increasing effective investment in energy infrastructure while diversifying its energy suppliers so that it is not dependent on any one supplier. Improving energy efficiency can also help speed up Iraq’s transition to energy independence.  

Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East Programs. He is an experienced capital markets professional with over 25 years of experience in the US and MENA markets and is the chief strategist at the AFC Iraq Fund.

C. Anthony Pfaff is a nonresident senior fellow with the Iraq Initiative in the Atlantic Council’s Middle East Programs and the research professor for the Military Profession and Ethic at the Strategic Studies Institute (SSI), US Army War College in Carlisle, PA. A retired Army colonel and Foreign Area Officer (FAO) for the Middle East and North Africa, Pfaff recently served as director for Iraq on the National Security Council staff. 

The post Washington halted the Iraq-Iran electricity waiver. Here is how it’s perceived by Washington and Baghdad.  appeared first on Atlantic Council.

But the round is set to occur against the backdrop of a decade-old stalemate between the Tripoli-based Government of National Unity (GNU) and Tobruk-based House of Representatives (HoR). Since 2014, the warring factions have failed to agree on a pathway for national elections and a political reconciliation process. 

The crisis is one that the US and Italy may be uniquely postured, and incentivized, to quell. 

Absent a thawing of that frozen stalemate, Tripoli is unlikely to attract an influx of energy investment. Even more, the stalemate risks plunging Libya into a deeper web of maligned foreign intervention. Both Washington and Rome could leverage their global positions to combat the country’s rabid kleptocracy and facilitate a Libyan-led technocratic political process. The carrot, of course, for this US-Italian stewardship is the opportunity for greater cooperation in countering Russia and China’s growing ambitions in Libya.  

Libya’s volatile energy output 

Libyan National Army (LNA) Commander Khalifa Haftar—who is also a US citizen—has held a monopoly over national energy resources for nearly a decade, bringing increased volatility to the country’s oil production. He has demonstrably leveraged his monopoly to negotiate arms deals and grow his access to a foreign support network. A recent Telegraph report uncovered a deal between Haftar and China where the latter reportedly shipped one billion dollars in Wing Loong military drones in exchange for crude oil. Haftar used the arms shipment to further project his power, by using United Nations-affiliated officials to facilitate it, in direct violation of the 2011 UN arms embargo. The move further signaled his rejection of any UN-facilitated process that could threaten his access to power.

As the stalemate stands, there is no guarantee for potential investors that Haftar or his affiliated militias will not force a shutdown of exploration or production. The bidding on the country’s largest petroleum reserves, the Sirte Basin, is largely under the control of Haftar’s LNA. It’s hard to imagine any company winning the exploration rights without buy-in from Haftar’s camp in exchange for security guarantees. Haftar could then leverage the exploration findings—if proven to be promising—to negotiate more favorable drilling approval and production plan contracts, growing his consolidation of the country’s shared institutions as defined by the 2020 ceasefire agreement. This could further open the door for increased foreign intervention in the country as both the GNU and Haftar have continued to leverage existing international partnerships to bolster their grip on the country’s wealthy energy resources.  

That includes an increasing closeness with Russia as Moscow pivots from Syria in the aftermath of the ousting of Bashar al-Assad. Such coziness portends that Haftar is likely to seek Russian and Chinese investment in the Libyan energy sector over Europe or the US. Already, in July 2024, Haftar signed a deal with Russian Railways Company to develop a railway connecting Sirte to Benghazi, a route critical to resupplying LNA weapons as well as shipping oil for export. Coupled with his smuggling of Russian oil into Europe, Haftar and Russian President Vladimir Putin demonstrate a keenness to collaborate and circumnavigate existing sanctions on Russian energy resources.  

Russia could ensure that its oil continues to be sold while Haftar would bank on Russia’s security backing to negotiate a more favorable role in the country’s future. By working with Russia and China, Haftar is more poised to use the contracts to retain his access to illegal arms shipments in exchange for oil. With little international oversight, he may seek to use the upcoming public tender as an opportunity to gain influence with maligned foreign actors and solidify his grip on power. 

Investment opportunities amid growing foreign ambitions 

At the end of 2024, the NOC defied global expectations and increased its production to an eleven-year high of 1.422 million barrels per day (BPD). By attracting investment, Libya hopes to repair existing refineries and work with international companies to re-establish its pre-war production output. Libya’s oil minister, Khalifa Abdulsadek, told Reuters in January that the country needs three to four billion dollars in foreign investment to reach a 1.6 million BPD output.

This has already raised some eyebrows among energy investors, and Libya is increasingly considered a hub of investment opportunity with promises of reforms and greater transparency. As Haftar continues to cozy up to China and Russia in search of weapon sales, the GNU has grown closer to Turkey. In 2019, they established an exclusive economic zone between the two countries. The GNU also signed a deal in January with Turkey to grow its cooperation in the renewable energy sector, and has attracted investment interest from Ankara’s state-owned Turkish Petroleum Corporation (TPAO). 

At the 2025 Libya Energy & Economic Summit held in Tripoli, General Manager of TPAO Ahmet Turkoglu indicated Turkey’s readiness to invest in the country’s energy sector, telling reporters “We are here because we see great potential. I am sure Libya will achieve much more,” specifically referring to offshore fields as part of a 2019 Memorandum of Understanding. 

Turkey’s ambitions in the eastern Mediterranean are neither secret nor uncontroversial. Similar to signing its fate with Syria’s Hayat Tahrir al-Sham, Turkey placed its bets on Tripoli’s GNU in hopes of solidifying its ambitions to become a regional hegemon. Paired with Ankara’s growing involvement in facilitating Israel-Hamas negotiations, Turkey’s President Recep Tayyip Erdogan is playing a regional chess game, one that has already proved successful in Syria and in its initial 2020 intervention in Libya. By growing investments in energy projects in Libya, Turkey seeks to gain influence in the country’s economic and political recovery. 

Renewing US-Italian engagement in Libya  

Any international reengagement on Libya short of a clear US role in facilitating an agreement risks plunging the country into a deeper web of maligned foreign intervention and spoiling development potential. 

US President Donald Trump, along with his transatlantic ally and personal friend Italian Prime Minister Georgia Meloni, are key international players in Libya. Only their absence and lack of diplomatic engagement allowed Russia and China to expand their operations there. By leading the facilitation of a renewed political process, the US and Italy could benefit from securing exploration contracts for the country’s energy resources, assist Europe in meeting its energy needs, while ensuring that Libyans get the democracy they have wanted since 2011. 

Italy is already developing a framework that Trump could assist in—positioning itself to become Europe’s energy hub, helping to facilitate the sale and transport of oil and gas from Africa to the rest of the continent as it pivots from Russian natural resources. Meloni’s “Mattei Plan”, named after Italian oil giant Ente Nazionale Idrocarburi’s (ENI) founder Enrico Mattei, could help Italy achieve its ambitions in becoming Europe’s main energy broker, and Libya could prove to be a helpful provider of the key to that opportunity. 

Tripoli’s energy potential remains untapped. It could offer Italy and wider Europe cheaper production rates and a higher quality of “sweet crude” oil compared to its neighbors.  

Italy’s investments in Libya have been relatively limited amid concerns about government instability. Rome has pursued energy contracts with other North African energy partners like Tunisia’s ELMED interconnector and Algeria’s Sonatrach. However, ENI has already resumed drilling in areas of the Ghadames basin late last year after a nearly ten-year hiatus, signaling its willingness to invest in  Libya’s energy potential. Furthermore, its proximity to Italy could also provide cheaper transport rates, making Libya a highly attractive energy investment partner for Italy. 

Meloni knows that without a clear political solution in sight for Libya, there is a significant risk in any investments in the country’s energy sector. Both the HoR and the GNU have failed to achieve their mandate of getting the country to elections, and have lost legitimacy for many Libyans after years of disengagement in determining their country’s future.  

The US and Italy could help a new political process by sanctioning Libya’s kleptocrats, who have stalled a solution at the cost of Libyan lives. Their participation and inclusion in any political process should be limited as they risk spoiling the process in exchange for a future role in the country. The US and Italy may instead focus on engaging the country’s civil society and array of economic and political experts in Libya and abroad, to head a transitional process with clearly defined mandates, deadlines, and limitations on power to help get the country towards elections. 

This renewed process would have to include negotiations over Haftar’s future role in the country, a subject for which no one has more leverage to bring the military leader to the table than the United States, considering his citizenship there and continued assets in the greater Washington area. Haftar also established a friendly working relationship with President Trump from his first term in office, which could allow the Trump administration an unprecedented opportunity to negotiate on Libya with Haftar’s camp.  

There is additional appeal in Libya for Trump, as the country is an important member of the Organization of the Petroleum Exporting Countries (OPEC). Earlier this year, the US president said he would demand that OPEC bring down the cost of oil, blaming high prices on the Russia-Ukraine war.  

Tripoli could assist in cutting oil costs by increasing and stabilizing production output. Libya’s acting oil and gas minister, Khalifa Abdulsadek, has already signaled his goal of increasing production from 1.5 million to 2 million BPD by December 2025. Oil production has already recovered and increased in recent months, and by attracting investments, the country’s energy sector could rebound to its pre-2011 output. By diversifying foreign investment in the country away from maligned foreign actors like China and Russia, who have spoiled the peace process in pursuit of their own interests, Libya could ensure investors greater transparency and compliance with international regulations, including the existing arms embargo. However, this cannot be achieved through the current status quo. It’s time for a renewed US-Italian engagement on Libya in search of innovative solutions to its prolonged stalemate. 

Trump has already proven he is not afraid to think “out of the box” on foreign affairs during his second term, a posture that could help clinch a deal to end the stalemate. From his attempts in facilitating a ceasefire in Ukraine, to imposing strict tariffs on Canada and Mexico, the US president is interjecting a new strong-armed approach to global issues that could reignite a post-Benghazi attack dormancy on US engagement. Nine years after he used the 2012 terrorist attack as a campaign issue against Hillary Clinton, Trump now has an opportunity to rewrite the fate of Washington’s mission in Libya and bring about a much-needed “win” in the region.  

Yaseen Rashed is the assistant director of media and communications at the Atlantic Council’s Rafik Hariri Center & Middle East Programs and a Libya researcher.  

The post ​Libya’s political deadlock endures. There is a case for Trump and Meloni to challenge the status quo. appeared first on Atlantic Council.

To paraphrase US Energy Secretary Chris Wright, energy policy should be about enriching people, not making them poorer. With some of the largest gas resources in the world, the United States has shifted fundamentally to an approach which prioritizes low costs and economic growth over decarbonization. 

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This pivot is having consequences around the world. European—and especially British—energy prices are now a multiple of those in the United States. The risk to Europe is that major energy users will move away from the continent if those price differentials cannot be narrowed. 

But while the US narrative is that cheap energy delivers security, in the United Kingdom (UK), the government insists that decarbonized energy delivers security. Britain is still seeing the consequences of the enormous price spikes following Russia’s full-scale invasion of Ukraine. The argument is that had the UK been less reliant on gas, the price increases would have been less dramatic. 

While it seems that these two approaches at loggerheads, they are in fact possible to reconcile. 

For years, many have spoken about the energy trilemma: the balance between security, affordability, and sustainability. It’s time to reframe that debate—and focus instead on energy abundance.   

A decade ago, when the American shale revolution was beginning, the sheer enormity of gas production, combined with an inability at that time to export significant quantities, brought prices crashing down for US businesses and consumers. 

Similarly, the global rollout of solar power has enabled the cost to be brought down to under 1 percent of what it was just a few years ago. 

Abundance enables costs to come down. Abundance offers energy security. And abundance helps make space to decarbonize without penalizing consumers. 

Different countries are abundant in different fuel stocks or technologies, so each country needs to play to its strengths. Consumers are best served by harnessing the resources which are most abundant and most affordable, rather than endlessly pursuing costlier resources just because they happen to be around. 

The United States would understandably focus on gas, but that does not mean that all countries should do so. If a country lacks significant gas resources of its own, it is foolhardy to build an energy policy that relies on imported gas, especially from a single source, as the Ukraine war has so clearly shown Europe. To paraphrase Winston Churchill, security comes from diversity, and diversity alone. 

Therefore, the UK and Europe need to look at where they have the most abundant resources and allow the genius of innovators and industry to work to drive those costs down. 

For the UK, that could be offshore wind, where prices have dropped by two thirds in a decade. It also makes sense to continue to use Britain’s North Sea gas resources for as long as possible, as the original investment costs have long since been recovered. While the North Sea basin is in long-term decline, the rate of decline can be reduced with sensible, pro-business policies. The UK should then be applying carbon capture technology when the gas plants are run as baseload rather than as peaking plants, which operate for only a small number of hours per year. 

In sunnier countries, solar is the answer. Nuclear, too, can provide energy abundance, especially if next-generation small and advanced modular reactors (SMRs and AMRs) are developed in sufficient quantities to deliver real economies of scale. Each country needs to chart it owns course, based on the resources and skills available to it. 

The first element of energy policy should be to develop abundant and affordable resources. Where that is not be sufficient to meet demand at all times (as abundance is not necessarily the same as self-sufficiency) then the policy should be to secure alternatives in the most affordable way. Interconnection can bring cheap electricity from many hundreds of miles away. Imported gas—from reliable partners and backed by sufficient levels of domestic storage—provides resilience when the wind is not blowing and the sun is not shining. And as the cost of batteries continues to fall, they can provide short-term reserves at grid scale. 

Policymakers’ rhetoric suggests a large gulf between the approaches in the United States and Europe. But just as there is no one-size-fits-all approach to every country’s needs, policy approaches must reflect the unique circumstances of individual countries. 

Faced with the imperative to keep costs down, governments need to be wary about open-ended commitments to provide subsidies. In the UK, the contract for difference model provides price guarantees to enable large energy infrastructure to be built. But unlike a subsidy, when the wholesale price of electricity rises, the support drops away and even becomes negative. If subsidies are used, then there must be a clear degression from the outset to make sure that they are a mechanism for driving costs down rather than keeping them artificially high. 

The cooperative optimism displayed at COP26 and COP28 is long gone. The response should be to rethink how to deliver the energy security the world needs in the most affordable way. The principle of abundance should be at the heart of it. Abundance enables countries with dramatically different supply and demand conditions to find common cause. There is security in diversity—and diversity alone. 

Charles Hendry is a distinguished fellow of the Atlantic Council Global Energy Center and a former UK minister of state for energy. 

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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Charles Hendry

Distinguished Fellow

Global Energy Center

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The post The future of global energy policy is abundance  appeared first on Atlantic Council.

It’s an open question whether the United States, whose natural gas producers now rely on European liquefied natural gas (LNG) sales to boost profits and support investments, would ultimately cede that market—and the political influence that comes with it—to Russian pipeline exports. Perhaps Washington will concede its newfound dominance in Europe’s energy system as a cost of attaining peace in Ukraine—and extricating itself from the continent to focus on the Indo-Pacific theater.  

But for Europe, allowing Russia back into its gas market through Nord Stream would be a costly mistake. It would furnish the Russian war machine with an additional $5 billion, open the temptation for German manufacturers to extract a 1.5 percent competitive advantage over other Europeans, and leave 100 million Europeans in geopolitical limbo. 

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No reason for Nord Stream nostalgia 

There is an obvious temptation for Europe to try to return to the seemingly halcyon world before COVID-19 and war in Ukraine. Elevated gas prices have threatened the continent’s long-term industrial competitiveness. In 2023—after the price spikes of 2022 subsided—industrial gas prices remained a whopping four-and-a-half times higher than in the United States. The European average in 2019, by contrast, was a modest 70 percent higher than US prices. 

But Europeans should not view the pre-war status quo through rose-colored glasses. Europe was vulnerable to supply shutoffs, such as happened during Russo-Ukrainian disputes in 2006 and 2009. And supposedly cheap Russian gas proved to be very expensive in the end—mitigating the energy crisis cost Europe a historic price of nearly €700 billion just by mid 2023, on top of nearly €250 million in aid to Ukraine by 2025. All in all, the cost of dependence amounted to more than €1 trillion.   

Europe can neither forget the lessons learned from Russia’s weaponization of gas supply in the lead up to and during the war; nor can it ignore the new geopolitical realities that define its relationship with Russia.  

Paying off the arsonist

First, if Europe were to restore Russian pipeline imports, that would greatly increase cash flow to Gazprom. Currently, Russia is selling gas mostly to China, supplying the country with 30 billion cubic meters (bcm) of gas in 2024 and aiming to hit 38 bcm in 2025 with the opening of a new eastern pipeline. But those volumes pale in comparison to the record 179 bcm shipped by pipeline to Europe in 2019. Even the amount of gas exported via the now-destroyed Nord Stream 1 alone—which had the same nameplate capacity as its successor—totaled 58.5 bcm in 2019, far more than total Russian pipeline and LNG shipments to China in 2024.  

Chinese buyers can’t make up for the loss of European markets. There exists no infrastructure to bring the gas from Russia’s massive European fields to Asian consumers. China has slow walked completion of the 50 bcm Power of Siberia 2 pipeline and appears to be hesitant about becoming too reliant on Russian gas. Losing the European market has severely hurt Gazprom, which posted a net loss of $12.9 billion in 2024—after seeing record profits of $29 billion in 2021. 

This has profound implications for Russia’s ability to wage war in Ukraine—and elsewhere. If Gazprom were to attain an additional $15 billion from Nord Stream 2 sales—based on a pre-war estimate of the pipeline’s potential revenue generation—and another $15 billion from restarting the damaged Nord Stream 1 pipeline, one might assume that half would go to Russia’s state budget. Of that $15 billion, one third would go to the military, based on the proportion of Russia’s 2025 budget dedicated to defense. This would mean $5 billion more to Russia’s military, a 4 percent increase in the Russian war chest. 

Distorting European competition 

Moreover, making Germany the primary entry point for Russian gas into Europe would provide German industry with a temptation to take advantage over its neighbors, as was the case in the early 2000s, constantly threatening European unity at a trying time. A primary reason why other Western European countries had opposed Nord Stream 2 even before the war was fear that Germany monopolizing Russian gas flows would give it a competitive advantage over manufacturers in Italy and France. 

Indeed, a 2012 investigation by the European Commission into Gazprom found that Russian gas was cheaper for Germany than it was for the average European country by at least 15 percent. Data released by Russian news agency Interfax in 2010 revealed that Gazprom was charging France 10 percent and Italy 25 percent more than Germany for gas. Further, the Commission found in 2018 that Gazprom had violated European Union (EU)  antitrust rules to divide national markets, potentially allowing it to overcharge five Central European member states—countries which paid even more than France and Italy.  

For the most energy-intensive sectors in Europe, energy can account for over 10 percent of manufacturing costs—so if German industry gets a 15 percent discount, the country gains up to 1.5 percent advantage in profitability over the European average.  

A dagger at the heart of European unity 

Last but not least, Nord Stream 2 would deliver Russian gas in a route that bypasses most of the Central European transit states, allowing Russia to leverage energy supplies to these countries separately from Western Europe and leaving 100 million Europeans in geopolitical limbo.  

Whereas Moscow’s disputes with Kyiv in the 2000s over gas supply meant that cutting off Ukraine would cut off the rest of Europe, Nord Stream 2’s reopening would allow Russia to more effectively divide and conquer the continent. In a new era of full-scale war to readjudicate the political borders of Europe, this would leave substantial portions of the EUand NATO at the mercy of the Kremlin’s imperial whims. 

Three numbers that should frighten Europe 

Ultimately, regardless of how Washington decides to proceed on Nord Stream 2, Europe must take responsibility for its own decisions on whether to buy gas from the pipeline or not. In weighing that choice, it must remember three key numbers: $5 billion in additional money for the Russian military; 1.5 percent of additional profitability for German industry over its EU neighbors; and 100 million Europeans left vulnerable to renewed Russian aggression. 

Michał Kurtyka is a distinguished fellow with the Atlantic Council Global Energy Center and was formerly Poland’s minister of energy, climate, and environment. 

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

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EnergySource Mar 7, 2025

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The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Nord Stream could divide Europe yet again  appeared first on Atlantic Council.

The agreement that was under discussion with the Biden administration would have guaranteed that the United States would open the valve on arms sales to Saudi Arabia and maintain a troop and equipment presence to deter Iran-backed action against the kingdom. It would also have started a US-Saudi partnership to develop Saudi Arabia’s civil nuclear energy program (enrichment was still a point of debate) and to cooperate on artificial intelligence and emerging technology.  

These discussions seemed oddly devoid of benefits to the United States. One benefit touted was locking Saudi Arabia into a commitment to buy weapons platforms from the United States instead of from China. However, achieving this does not require a commitment of US troops in the region nor a joint nuclear program. It only requires that the United States approve its own arms sales and speed up its own epically slow foreign military sales process.

The reason for this lopsidedness was that the United States saw the biggest prize as Saudi normalization with Israel, which would unlock economic and social integration projects across the Middle East, South Asia, and parts of Southeast Asia and Africa. However, Israel’s opposition to a path toward a Palestinian state is as intransigent now as Saudi Arabia’s insistence on it as part of any normalization.

With Trump now in office, charging aggressively into foreign policy dealmaking on a number of fronts, the narrative has shifted on whether a Trump presidency could deliver a stronger security agreement with Saudi Arabia that includes the hefty asks from the kingdom but does not include normalization with Israel. Yes, it is possible that Trump can secure such a deal. But should he? 

A stronger US-Saudi relationship would be beneficial for both countries across a host of issues and sectors, but alliances imply mutual responsibility. Saudi Arabia is not asking for the equivalent of a NATO Article 5 security guarantee, because the responsibility to defend the United States would then apply to Riyadh. Saudi Arabia would ideally like the United States to guarantee its security but does not want to commit to supporting US security or to making hard choices about China. The latter would have to change.

Without normalization with Israel, the previously proposed agreement with Saudi Arabia requires too much and offers too little. The deal will need to be sweetened. Here are some ways to do so.

Gain greater Saudi support for US policy on Iran

Short of normalization, Saudi Arabia should be asked to stop using rhetoric about Iran or Israel that creates any confusion about the kingdom’s allegiances. For instance, at a November Arab League summit, Saudi Crown Prince Mohammed bin Salman spoke about the need for international actors (read: Israel and the United States) to respect Iran’s territorial integrity. Such statements are a message to Washington that the lack of an upgraded US-Saudi defense agreement is pushing Riyadh further toward Tehran as a hedge. A US security guarantee should require unequivocally picking a side. 

Saudi Arabia’s détente with Iran should be encouraged in the interest of regional stability, but the relationship should not deepen in any way that puts the US military or economy at risk. A cold peace is fine unless and until the Trump administration signs a deal with Iran. Any suggestion that Saudi Arabia’s détente with Iran creates the opportunity for the kingdom to serve as a mediator in potential US-Iran talks is a fallacy; Iran will not trust Saudi Arabia to play this role. 

Because the future of US-Iran relations is unknown, the ask of Saudi Arabia on its Iran policy should be twofold: First, in the event that US military action against Iran is necessary, a US-Saudi agreement should stipulate that the kingdom will permit the use of its airspace, bases, ports, and other logistics mechanisms for US military operations.

To discourage Saudi leadership from engaging in risky behavior vis-à-vis Iran, a US security guarantee for Saudi Arabia should also require a degree of Saudi skin in the military game. The agreement should stipulate that the kingdom will support any US military operations in the defense of Saudi Arabia with some level of troops, equipment, and funding.

Second, if Trump secures a new deal with Iran, the United States should request that Saudi Arabia pledge to support the US plan to roll back Iran’s nuclear program and its network of proxies. Such a deal might ask Saudi Arabia to invest in Iran, which would likely be welcomed in Riyadh. Iran presents a large potential market for products including aluminum, phosphate-based fertilizers, refined petrochemical derivatives that Iran does not have the technology to produce, and even high-end dates.

If the Trump administration strikes a deal with Iran, the possibility of bringing Iran’s oil onto the legitimate market would drop the per-barrel price, barring other global disturbances in the supply chain. While this would go against Saudi Arabia’s economic goals, this could be offset by the prospect of Saudi-Iran joint ventures to upgrade Iran’s extraction and refining industries for a number of products.

Help stabilize the Middle East

Saudi Arabia has worked with the United States on stabilizing the Middle East throughout the years on a host of issues involving Lebanon, Syria, the Palestinians, Iraq, Iran, and Sudan. Saudi Arabia has been at the political table in good faith in Yemen for over two years now, per the United States’ request. One notable divergence from this record was Riyadh’s rift with Qatar, which benefited Iran, as the first Trump administration repeatedly reminded Saudi Arabia. As part of a US-Saudi agreement, the kingdom could be asked to commit to participation in future regional stabilization efforts and, as importantly, to refrain from those that contradict US objectives.

Strengthen the US-Saudi diplomatic partnership

The United States and Saudi Arabia have successfully cooperated in pursuing mutual foreign policy goals for years. This diplomatic cooperation could be enshrined as part of a new US-Saudi agreement.

The first US-Saudi joint global diplomacy was to rally international support for kicking the Soviets out of Afghanistan in the early 1980s. This joint work was expanded to counter Soviet influence in Africa. In recent years, the United States and Saudi Arabia have divided and conquered, engaging the countries with which they hold sway, to build coalitions like the Global Coalition to Defeat ISIS and the Saudi-led Islamic Military Counter Terrorism Coalition. For a while, Saudi Arabia helped the United States keep Bashar al-Assad’s Syria out of the Arab League. Saudi Arabia has to tried to convince Russia not to sell weapons to Iran and tried to get a cease-fire in Sudan when the United States effectively lacked a Sudan policy. For several years now, the United States and Saudi Arabia have worked together to try to convince Israel to agree to a plan for a Palestinian state. 

In other instances, like the 1973 oil crisis and on topics like military intervention in Iraq, backing of parties in the Syrian Civil War, Saudi Arabia’s war in Yemen, and Saudi military acquisition projects with Russia and China, Saudi Arabia has pursued foreign policy goals that counter US interests. A US security guarantee for Saudi Arabia should come with a Saudi guarantee that Riyadh will not contradict US efforts on the ground in places where the United States has stated and clear foreign policy goals. This acknowledges the valid Saudi complaint that US policy has lacked clarity in recent years on files including Syria and East Africa. This lack of clarity is for the United States to fix.

Encourage Saudi Arabia to expand defense cooperation with the US—not China or Russia

While the predominant obstacle to US arms sales to Saudi Arabia has been executive and congressional holds and the cumbersome US foreign military sales process, there are important asks the Trump administration can make of the kingdom in this arena. 

First and foremost, Saudi Arabia’s cooperation with China in the defense space should be curtailed. China and Saudi Arabia have joint manufacturing facilities for drone and missile component production and collaborate on counter-drone technology and cybersecurity. If the United States is to provide a security guarantee of any sort to Saudi Arabia, there can be no space for China in these sensitive areas. The premise, oft-cited by Saudi interlocutors, is that the United States is the kingdom’s security partner while China is the economic partner. This feeds the faulty assumption among isolationists in Washington that Riyadh’s economic partnership with China does not bleed into the defense space. This hasn’t been the case for years now, and Saudi-Chinese cooperation in the defense sector should not be allowed to continue as part of any US-Saudi security partnership.

Likewise, any potential deal for Riyadh to collaborate with Russia to domestically produce advanced air or land defense systems in Saudi Arabia should be prohibited. In the past, Saudi Arabia flirted with purchasing the S-400 air-defense system from Russia and used this possibility as a lever in conversations with Washington about other policy issues. The potential for such purchases should be prevented as part of a US-Saudi agreement.

The United States competes for arms sales in the Gulf even with longtime allies, and this sector dominance is important because this purchased military equipment serves as plug-and-play capability augmentation for the US military in the region when necessary. The United States should certainly not cede this market to Russia, even as its relations with Moscow shift. The good news is that Saudi Arabia does not want to go the Russia route. But the United States has stood in its own way. I’m told that the National Security Council Policy Coordinating Committee has recently started conversations about reforming the US foreign military sales process. That will hopefully make it easier for US Central Command to increase interoperability with partners that have been asking for this, including Saudi Arabia.  

Saudi Arabia seeks to develop a domestic defense industry. This goal should complement but not compete with US arms sales to the kingdom. US companies are active in joint ventures with Saudi Arabia’s state-owned defense contractor SAMI to build and maintain aircraft, drones, and missiles, as well as to integrate systems, in line with Riyadh’s National Industrialization and Military Logistics Program. Yet, Saudi Arabia has made offset requirements more difficult for US companies to meet, demanding technology transfer in areas where US companies have invested heavily in research and development. The United States should ask that these offset requirements for US firms be relaxed.

To ensure that Saudi Arabia’s development of its own defense industry does not run afoul of US interests, the United States could request as part of a security agreement deal that Riyadh vet future defense partnership and purchase arrangements with third countries through a joint US-Saudi steering committee.

Make Integrated Air and Missile Defense a reality

Integrated Air and Missile Defense (IAMD) is a specific long-time objective of the United States that should be cemented in any US security guarantee granted to Saudi Arabia. The goal of creating a common operating picture for missile defense capabilities across the Gulf, and creating a central command-and-control mechanism for responding to threatening missile arsenals in the region, first emerged in the early 2000s and was codified in the 2019 National Defense Strategy. The kingdom is not alone in dragging its feet on this project; mistrust among Gulf Cooperation Council (GCC) states has made them all wary of exposing vulnerabilities in their air defenses and sharing intelligence with their neighbors. Saudi Arabia has had additional concerns about being expected to foot the majority of the bill for establishing this defense umbrella across the Gulf. But as the largest landmass of the GCC, this is inevitable; Saudi Arabia has more airspace that needs protecting.

Saudi Arabia previously invested in Chinese and Russian radar and counter-drone systems such as the Silent Hunter and Pantsir that cannot be integrated into a US-led IAMD network. Saudi Arabia can be asked not only to participate fully in IAMD advancement but to act alongside the United States in encouraging progress on it. In December 2024, the Department of Defense awarded the Johns Hopkins University Applied Physics Lab a contract for research and engineering support to the IAMD project, showing that the Pentagon is putting its own money where its mouth has long been. Saudi Arabia could be asked to do the same, particularly since the overarching objective is making the Gulf, not the United States, safer. Without IAMD, the job of providing security to Saudi Arabia is a much larger lift. More robust participation in IAMD implementation should be a requirement in any upgraded US security assurances for the kingdom. 

Beyond IAMD, the Gulf states (except for Bahrain) have also dragged their feet on participation in maritime joint task forces to protect the waters of the Middle East. A US-Saudi security agreement should mandate full Saudi participation in existing and future US-led joint task forces and mechanisms like, for example, the Comprehensive Security Integration and Prosperity Agreement, focused on securing the land, air, seas and networks of the region.  

US firms should be the first choice in all contracts let in Saudi Arabia’s defense sector if Washington grants the kingdom a security guarantee. As part of the agreement, the two partners should agree on the conditions in which a non-US partner would be selected.

Cooperate on counterterrorism

It is unfortunate that indicators point toward an uptick in terrorist recruitment and planning in 2025. The United States will likely soon seek to reinvigorate coalitions to counter a resurgent terrorist threat. 

As part of a US-Saudi agreement, the United States could ask for a commitment from the kingdom to continue or upgrade intelligence sharing, financial cooperation, collaboration between law enforcement agencies, and joint counterterrorism task forces to conduct operations against terrorist organizations. In May 2023, the United States signed the latest iteration of the 2008 Agreement for Technical Cooperation to help the kingdom build skills to protect its critical infrastructure from terrorists. This could be reviewed for any desired edits or additions.

The United States should also ask Saudi Arabia to commit to a serious effort, both diplomatic and incentive-based, to bring other countries on board with future coalitions and task force efforts as necessary.   

Collaborate on a civilian nuclear program

Saudi action toward a civilian nuclear program has ebbed and flowed in the past decade, as has US openness to supporting it. A US refusal to work with Riyadh on its post-oil plans for nuclear energy production will not result in Saudi Arabia abandoning these plans. It will simply choose another partner, and several countries have offered to help, including China, South Korea, and France. It is in the United States’ interest to have a hand on the controls of a Saudi nuclear program rather than zero visibility into it. US involvement in building a Saudi civilian nuclear program would allow the United States to build in safeguards to the program that would not be possible if Saudi Arabia partners elsewhere. Chief among the benefits for the United States would be oversight of Saudi Arabia’s safety, security, and nonproliferation standards, as well as gatekeeping access to this program.

If the Trump administration agrees to the kingdom’s request to pursue a civilian nuclear energy partnership as part of a larger deal involving a security pact, the United States should have extensive oversight of the program.

The Saudi Aramco model, in which US technology and expertise (and US control over both) formed the basis of a company gradually turned over to Saudi management, can be a theoretical blueprint for maintaining US oversight of the program for a period and eventually handing the program over to host country control as US and Saudi comfort dictates.

A “123 agreement,” named after Section 123 of the US Atomic Energy Act of 1954, should be a requirement. A 123 agreement requires congressional approval as well as the partner country’s commitment to nonproliferation, adherence to International Atomic Energy Agency safeguards, and limits on enrichment before the United States can sell nuclear energy technologies to another country. The reason Saudi Arabia gave the United States for not agreeing to the additional “gold standard” protocol foregoing enrichment is that the limitations in the Iran nuclear deal were fewer than this protocol, and it made no sense for the United States to impose more restrictions on a partner than it imposed on Iran. This is fair. But the answer is not to downgrade the ask of Saudi Arabia but to aim in any negotiations with Iran for Tehran’s compliance with the same level of terms and commitments outlined in section 123 of the Atomic Energy Act. The United Arab Emirates (UAE) and Morocco, both members of the Abraham Accords, are US partners in 123 agreements. And the UAE and Taiwan, both with strong security agreements with the United States, are signatories to the US gold standard.

As a US security guarantee for Saudi Arabia would also be expected to protect civilian nuclear facilities that would present an enticing target for enemies, the United States should ask for a deciding vote on the activities that are conducted at the facility. A facility that does not conduct enrichment is a less attractive target for Iranian aggression than one that does. Saudi Arabia could perhaps become the breaker of ground and a model for small modular reactors, in partnership with the United States.

Lower energy prices

In Riyadh, a senior official with an energy portfolio told me, referring to oil prices, “Get ready. One hundred [dollars] is the new forty,” indicating that the kingdom would not make moves to lower oil prices for the foreseeable future. Trump has already challenged that stance.

Washington and Riyadh should start a renewed conversation about stabilizing oil markets, a goal Saudi Arabia says is its priority as the leader of the OPEC cartel. Saudi Arabia’s domestic development budget is tied to a price per barrel. Similarly, the Trump administration’s goals for boosting the US economy will require cheap oil to drive growth. As part of the security agreement, a sweet spot on oil prices should be agreed upon.

It is important to note here that if a US ask for increased Saudi oil production is tied to plans to remove Iranian oil from the market, Saudi Arabia will expect a US guarantee of the kingdom’s security to be in place before it boosts output. In October, Iran reiterated threats to retaliate for Israeli or US strikes on its homeland by striking Saudi Arabia, a threat the Saudis take seriously. If they are asked along with other Gulf neighbors to dip into spare capacity to replace Iran’s supply, they may only agree if the United States has signed on to robust levels of defense support to the expansive nation that exceed any previously provided. In this scenario, however, the United States would have less ability to make additional asks to Saudi Arabia, such as those outlined above and below.

Increase Saudi foreign direct investment

Saudi foreign direct investment (FDI) stock in the United States decreased by roughly five billion dollars between 2019 and 2023. Then in 2024, Saudi Arabia’s sovereign wealth fund lowered its US stock holdings by approximately fifteen billion dollars, a 41 percent reduction in its US stock portfolio, according to the Wall Street Journal. Saudi Arabia has been offloading US debt and looking to Africa and Latin America for investment opportunities. If the United States provides a security guarantee to the kingdom, Riyadh should be asked to reverse this trend. In January, Saudi Arabia announced plans to invest $600 billion into the United States. Saudi Arabia projects a nearly thirty billion dollar fiscal deficit in 2025 and has a shrinking balance of trade surplus. This, combined with pressure to keep oil prices low, may mean the $600 billion figure will be difficult to meet. But the United States can ask the kingdom for significantly increased FDI commitments in specific sectors and industries identified as key to US economic, national security, and supply chain resilience goals. Currently, the United States has a trade deficit with Saudi Arabia. The United States should ask the kingdom to purchase domestically manufactured US goods, which will bolster the US manufacturing base, a core aspect of Trump’s agenda.

Negotiations on an upgraded US-Saudi bilateral security agreement should stay within the parameters of actions that each side can realize on their own. A US-Saudi deal should not be contingent on the approval of plans for a Palestinian state or a regional security framework for the Middle East. This approach would toss the negotiations into a bureaucratic purgatory, where they will likely languish and die. Worse, it would make the achievement of US objectives subject to the whims of other nations and organizations. The United States should not put itself in that position.  

A new bilateral strategic alliance with the United States without having to normalize with Israel would be a big win for Saudi Arabia. And it could be for the United States, as well. But a bilateral deal raises one final question for US policymakers: If the United States grants all the kingdom’s asks that were originally intended to incentivize normalization with Israel, what will Washington have left to offer at the normalization table going forward?