In this special #BalkansDebrief interview, Congressman Mike Turner, co-chair of the Congressional Bosnia Caucus and head of the U.S. delegation to the NATO Parliamentary Assembly, discusses whether the United States is truly re-engaging in the Western Balkans under its new national security strategy released in late 2025.

The Republican Representative of Ohio’s 10th District – and former mayor of the city of Dayton, Ohio – Mike Turner speaks candidly with Ilva Tare, Resident Senior Fellow at the Europe Center, about U.S. sanctions, the Western Balkans Democracy and Prosperity Act included at the National Defense Authorization Act (NDAA), and Washington’s long-term commitment to peace, stability, and democratic institutions in the region. He reflects on 30 years since the Dayton Peace Accords, arguing that while Dayton ended the war, it was never meant to be a permanent governing framework.

The conversation also addresses Bosnia and Herzegovina’s fragile political balance, including concerns over Milorad Dodik’s secessionist rhetoric. Rep. Turner notes that sanctions remain a tool on the table if destabilizing behavior continues, while emphasizing the need for renewed international engagement to support reform and reconciliation.

The Debrief also discusses Serbia–Kosovo normalization and U.S. diplomatic leverage, Russian influence in the Balkans, NATO and EU enlargement, Montenegro as an EU frontrunner, U.S. cooperation with Albania and North Macedonia, and a message to young people who feel the region’s democratic transition is taking too long.

#BalkansDebrief is an online interview series presented by the Atlantic Council’s Europe Center and hosted by journalist Ilva Tare. The program offers a fresh look at the Western Balkans and examines the region’s people, culture, challenges, and opportunities.

Watch #BalkansDebrief on YouTube and listen to it as a Podcast.

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The post Is the U.S. Back in the Western Balkans? A Debrief with Congressman Mike Turner appeared first on Atlantic Council.

Although the protests are inspiring and potentially historic, some of the developments are being overshadowed by the United States. On January 2 (and again two days later), US President Donald Trump issued an unspecified threat to the regime not to use further violence against its citizens. It is admirable that the Trump administration is focusing attention on the Iranian people, but it is also inconsistent with the administration’s past decisions to cut funds for vital internet circumvention services in Iran and avoid speaking out against the regime’s human rights violations.

The United States should not miss this opportunity to reaffirm support for the Iranian people as a centerpiece of a more comprehensive approach to its Iran policy. With this context in mind, and drawing on our past experiences serving in various capacities for the US government working on Iran—including during the Mahsa Amini protests—we authors suggest a few key policy recommendations.

Recommendations for the United States and its partners

1. Pause all major non-protest-related policy initiatives. Now is not the time for renewed nuclear negotiations or military strikes. The Biden administration famously paused negotiations about resuming the Joint Comprehensive Plan of Action during the protests in response Mahsa Amini’s death. This does not mean diplomacy is dead, but any hypothetical nuclear talks between Washington and Tehran need to be postponed indefinitely. This is also not the time for Israel (or the United States) to restart military attacks. The Iranian people deserve the time and space to see these protests through. In June, the Iranian government benefited from an ill-conceived Israeli strike on Evin prison that attempted to liberate, but ended up killing, a number of prisoners. It is vital to not give the government a similar propaganda victory. 
2. The US government should designate a new Iran envoy. The Trump administration should immediately name or designate an envoy or senior official to engage with the Iranian diaspora and to more broadly focus on all aspects of Iran policy full-time. Regular engagement with this community and other Iran-focused government and nongovernment contacts is important to emphasize that the administration is serious about the Iranian people. This individual would not replace US Special Envoy to the Middle East Steve Witkoff but would report to him and other senior officials who remain focused on wider-ranging issues. Full-time attention on the portfolio would also help provide an internal advocate within an administration focused on budget cuts for low-cost, high-reward spending to advance a broader Iran policy, such as internet circumvention funding.
3. Partner governments should fund Iran initiatives that the administration ended. At the height of the Mahsa Amini protests, thirty million Iranians used US-funded circumvention services. Some of these services are being temporarily funded by private enterprises. Over the long-term, they require consistent support from a government entity. The same is also true of the Iran human rights programs that the current administration proposed cutting in its entirety in the Congressional Budget Justification. If the administration does not reconsider its cuts, other foreign governments would have an opportunity to pick up the technical and moral leadership that the United States has relinquished.
4. The international community should unite in backing the Iranian people. We authors have heard directly from Iranians who participated in past protests that a unified signal from the international community not only helped buoy sentiment within the movement but also served as a deterrent against human rights abuses by the regime. For instance, Iran significantly decreased its executions of drug offenders following sustained international pressure. Joint statements, including those issued by the Group of Seven and United Nations, have the best chance of impacting Iranian behavior. 
5. Create a nimble emergency funding mechanism. During the Mahsa Amini protests, several Iranian advocacy groups suggested to us that there was need for urgent funding, and they proposed possible emergency initiatives such as setting up funds to help pay striking workers living wages. Although we supported these ideas, the Biden administration was not nimble enough to fully evaluate and fund them in a timely manner. The United States or other partner nations should consider establishing a fund or program to explicitly facilitate crisis response operations. If the United States is unable or unwilling to fund it, the Treasury Department should, at a minimum, issue (or reissue) guidance to allow private individuals and organizations quick and legal ways to send money to protestors.
6. Increase human rights sanctions. The United States and partner governments should move quickly to issue targeted sanctions against human rights abusers and those involved in the crackdown against protestors. The 2024 bipartisan MAHSA Act provides the Treasury and State Department with new sanction authorities. To date, not a single designation has been imposed under this authority. Implementing MAHSA sanctions now—ideally in coordination with actions from our foreign partners—would send a symbolic, but powerful, message that the international community condemns Iran’s crackdown on protestors. 

Recommendations for nongovernmental actors

1. Minimize partisan politics. Iran policy has long been a victim of brutal partisan politics in Washington. Support for the Iranian people should be an approach that both parties should be able to get behind, as it aligns with US interests and values.  
2. More constructive engagement with the diaspora. As admittedly non-Iranian Americans involved in Iran policy, we authors will never fully understand the intricacies of the diaspora. From our past experiences, the online and in-person abuse directed at other members of the diaspora and at proposed policies limited government-diaspora engagement, and hindered the diaspora’s ability to effectively advocate for policy changes.
3. Provide clear and tangible recommendations. During the Biden administration, then-Vice President Kamala Harris led efforts to support the Iranian people’s call for the regime to be removed from the UN Commission on the Status of Women. This was a direct result of lobbying by civil society. Once the Harris team had a clear recommendation and knew it aligned with US policy priorities and values, the United States successfully led the campaign to remove Iran from the Commission.

A final recommendation for everyone: Keep the focus on Iran

The Iranian people themselves are bravely leading the current protests. It is essential to keep the focus on them, rather than on Washington politics and social media, to ensure the Iranian people get the support they need at this critical juncture.

Abram Paley is an incoming nonresident senior fellow at the Atlantic Council. He most recently served as acting special envoy for Iran from 2023 to 2025 and, before that, Middle East advisor to Vice President Kamala Harris.

Nate Swanson is a resident senior fellow and director of the Iran Strategy Project at the Atlantic Council. He most recently served as director for Iran at the National Security Council in the Biden White House and a member of the Trump administration’s Iran negotiating team.

The post As Iran protests continue, policymakers should apply these key lessons appeared first on Atlantic Council.

Commenting on the releases, US Special Envoy for Belarus John Coale confirmed that Washington planned to lift sanctions on Belarusian fertilizer exports. He also suggested that all remaining Belarusian political prisoners could be freed in the coming months, potentially in a single group. This prompted some talk of a potential thaw, but it is premature to draw such conclusions. In reality, the Lukashenka regime remains as authoritarian as ever and is not reforming. Instead, it is bargaining.

When assessing the significance of the recent prisoner releases, it is important to maintain a sense of perspective. The 123 people freed in early December represent only a relatively small portion of the more than 1100 political prisoners currently being held in Belarus. Meanwhile, more names are regularly added to the list. During November 2025, human rights group Viasna identified 33 new political prisoners in Belarus.

The Lukashenka regime has clearly learned from similar agreements with the United States earlier this year, which also saw prisoners freed in exchange for sanctions relief. This is fueling a transactional approach to what should be primarily a human rights issue.

While this year’s prisoner releases demonstrate that sanctions relief can produce welcome results, any further reduction in sanctions pressure by the United States should be approached with caution. If prisoner releases are rewarded without any expectation of broader shifts away from authoritarian policies, repression itself becomes a bargaining tool. In such a scenario, there is a very real danger that political prisoners could become virtually inexhaustible bargaining chips for Lukashenka.

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

In one if his first interviews following his release, Ales Bialiatski warned about the dangers of negotiating with Lukashenka without demanding wholesale change. He noted that releasing individual prisoners will not be enough to end repression in Belarus. The regime could easily exchange prisoners on a regular basis, he cautioned, freeing some and imprisoning others while asking for new concessions. Bialiatski’s insights should help inform international engagement with Belarus.

Looking ahead, the United States and European Union can play complementary roles in relations between Belarus and the democratic world. Washington’s sanctions tend to be intentionally more flexible. This makes it possible to offer targeted relief based on concrete humanitarian progress, while also allowing for an increase in pressure if Minsk backslides.

In contrast, European sanctions are more focused on systemic change. They are tied to ending policies of political persecution, embracing elements of democratic transition, and addressing Belarusian participation in Russia’s invasion of Ukraine. Any steps to weaken EU sanctions would reduce Europe’s ability to influence Minsk and rob Brussels of the tools to bring about more meaningful change.

Recent events have highlighted the lack of genuine progress toward constructive engagement between Belarus and the country’s European neighbors. Despite a number of goodwill gestures toward Belarus such as the reopening of EU border crossings, Minsk has continued to engage in provocative actions such as launching weather balloons into Lithuanian airspace.

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Lukashenka may have economic motives for seeking to secure sanctions relief in exchange for limited concessions. The Belarusian economy has benefited in recent years from a spike in wartime demand linked to Russia’s invasion of Ukraine, but this growth is now cooling. With less room to maneuver. the Belarusian dictator has good reason to engage in deals that can relieve the financial pressure.

He may also believe the time is right to reestablish his credentials on the geopolitical stage. As US-led negotiations to end Russia’s war against Ukraine continue, Lukashenka might see opportunities for a return to the mediator role he occupied during the initial stages of Russian aggression just over a decade ago. Many observers noted that during the latest prisoner releases, most of the freed detainees were sent to Ukraine rather than Lithuania, which has previously served as the main destination. This may have been an attempt to highlight ongoing cooperation between Kyiv and Minsk.

Greater engagement between the Lukashenka regime and the West could potentially be beneficial but a measured approach is essential. Future sanctions relief must be conditional and tied to verifiable steps such as the release of all political prisoners, an end to new politically motivated arrests, and the restoration of basic civic liberties. The rights of released prisoners must also be respected. This includes allowing them the option to remain in Belarus and providing them with full documentation.

Further steps to improve dialogue with Belarus should also be based on a realistic assessment of achievable goals. For example, it is wishful thinking to suggest that limited sanctions relief could somehow pull Minsk out of the Kremlin orbit. On the contrary, Lukashenka is now more dependent than ever on the Kremlin and will almost certainly never dare to distance himself from Russia, regardless of how skillfully sanctions are applied and relaxed.

What sanctions can do is constrain Lukashenka’s options and secure specific concessions. The ultimate objective should be an end to all human rights abuses and oppressive policies, rather than the targeted release of high-profile prisoners. Until that goal is within reach, the European Union in particular has a key part to play in maintaining pressure on Lukashenka.

Hanna Liubakova is a journalist from Belarus and nonresident senior fellow at the Atlantic Council.

Further reading

UkraineAlert Dec 10, 2025

Russian drones and blackouts test the resilience of Ukraine’s second city

By Maria Avdeeva

With Putin’s army now advancing to the east and the Russian bombardment of civilian targets intensifying, Kharkiv residents are now facing what may become the most difficult winter of the entire war, writes Maria Avdeeva.

Defense Technologies Drones

UkraineAlert Dec 16, 2025

‘Putin is lying’: Zelenskyy visits front to expose false claims of Russian gains

By Peter Dickinson

Ukrainian President Volodymyr Zelenskyy paid a personal visit last week to a front line city that Putin has repeatedly bragged of seizing in order to expose the Russian leader’s habit of lying about battlefield gains, writes Peter Dickinson.

Conflict Disinformation

UkraineAlert Dec 16, 2025

The only winner from Ukrainian wartime elections would be Putin

By Yuriy Boyechko

Ukrainians are fighting to defend their democracy against Kremlin authoritarianism, but they are also in no rush to hold wartime elections amid relentless Russian bombardment and with millions of Ukrainians displaced, writes Yuriy Boyechko.

Conflict Elections

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

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

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

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The post Prisoner releases are welcome news but talk of a Belarus thaw is premature appeared first on Atlantic Council.

Bottom lines up front

• The European Council meets this week to vote on a proposed “reparations loan” that would use billions of dollars of immobilized Russian assets to support Ukraine.
• Belgium, which holds the majority of the assets, and several other EU member states have raised concerns about the proposal.
• These states’ concerns should not be dismissed outright, but the proposed plan does not amount to confiscation of the assets—and it should therefore move forward.

WASHINGTON—Will this be the week where Europe takes its boldest step yet on Russia’s immobilized assets? 

The prize would be substantial. A financial commitment of €210 billion ($247 billion)—to be spread across regular spending, defense, and reconstruction—would be a lifeline to Ukraine. It could even enable Kyiv to resist pressure to accept a possible bad deal that would set it up for further Russian aggression. Take it from someone who’s argued against confiscating the assets: It’s a risk worth taking. 

Shortly after Russia launched its invasion of Ukraine in February 2022, the Group of Seven (G7) and like-minded partners imposed sanctions on Russia that immobilized between $300 billion and $350 billion in Russian central bank assets held in their jurisdictions. Most turned up in the European Union (EU), where the sanction underpinning the immobilization has had to be renewed every six months. Slowly, the EU has explored ways to mobilize their value to boost its support to Ukraine, first by siphoning off interest income, then by channeling that interest income into repayments on the $50 billion of the G7’s Extraordinary Revenue Acceleration (ERA) loans that have largely spared Kyiv from cash flow issues this year. The EU has resisted calls to take the irreversible step of seizing the assets. 

Now, as Ukraine looks likely to run out of money this coming spring, the European Commission is trying, with the support of key member states including France and Germany, to switch to a “reparations loan,” which mobilizes the principal now. If EU leaders agree to the plan this week, the scheme will not confiscate sovereign assets. Russia’s central bank and its National Welfare Fund will still be able to log into their proverbial online banking portals, and their claim on money stored in the EU will still be valid. And, importantly, they will still be unable to move the money. 

What will change is that the international central securities depository Euroclear, along with other institutions holding smaller piles of immobilized Russian cash than Euroclear does, will be able to swap this for zero-interest loans. Liberating the accumulated cash avoids the need to borrow money on the markets in the coming months for Ukraine’s needs. According to a document the European Commission produced to coax EU member states to support its preferred plan, if the bloc does not pass the “reparations loan” scheme, then the interest payments on new borrowing to support Ukraine would cost EU member states at least five billion euros per year. And finding a consensus on more joint borrowing may prove even more difficult.

This Thursday and Friday, EU heads of state and government will meet to discuss and vote on this plan. The meeting might not settle every question to do with the complex scheme, but it will reveal whether the plan has the necessary support to move forward. With another vote scheduled on the controversial EU-Mercosur free trade agreement for the same meeting, there are so many moving parts that it is reminiscent of some of the truly memorable summits during the Greek sovereign debt crisis, Brexit, and the COVID-19 pandemic. The Council Conclusions—which may only be published late at night on Friday or even Saturday—will be pored over down to the last comma.

What’s in the plan

The details are important. This vote follows the important EU decision last week to use Article 122, the “emergency” provision of the EU’s treaty, to make the release to Moscow of Russia’s immobilized assets conditional on a peace plan and Russia paying reparations. While this move lifted a key hurdle to the reparations loan, it doesn’t mean the plan is a done deal. Belgium, where most of the assets are held, has objected to the plan, and Italy, Czechia, Bulgaria, and Malta have called on the EU to use alternative funding arrangements for Ukraine instead.

One possible reason for this objection can be found in rumors that the Trump administration has told European capitals that it does not want the scheme to go ahead. One of the points in the Trump administration’s recently leaked twenty-eight-point peace plan noted that $100 billion of the immobilized assets should be returned to Russia with another $100 billion for “US-led efforts to rebuild and invest in Ukraine,” with the United States receiving “50% of the profits from this venture.”

The European leaders signaling skepticism about the plan may earn themselves some brownie points in Washington, but they must also understand that the Trump administration’s alternative plan was buried by the decision they supported last week to invoke Article 122. Henceforth, the immobilization cannot be lifted until Russia pays Ukraine reparations. 

What Belgium is thinking

The list of capitals expressing skepticism isn’t yet long enough to block the plans. But the arithmetic of qualified majority voting—which requires 55 percent of member states representing 65 percent of the EU’s population—isn’t the full story either. A “no” vote by Belgium could imply that member states can be forced to take steps that they perceive to be against their interests. So the main goal of the additional guarantees that are reportedly being prepared for Belgium is to convince its prime minister, Bart De Wever, at least to abstain from the vote. 

At the same time, De Wever’s objections to the scheme should not be dismissed out of hand. Much was made of his comments earlier this month suggesting that Ukrainian victory was a “a fairy tale, a complete illusion.” There are indeed few examples of reparations being paid by a country that has not lost a war to a country that has not won it. The scheme being discussed relies on there being some chance that Moscow will pay reparations, so it is not unreasonable to raise how likely this is—even if the initial draft offered to mutualize the risk so that the principal would be repaid by all EU member states and not Ukraine if Russia doesn’t pay. 

Russia is already wielding the threat of asymmetric retaliation against Belgium. Some of these risks also deserve to be mutualized, such as if Russia confiscates assets under Euroclear’s custodianship that have been immobilized inside Russia. While Euroclear has already built up a partial buffer against this, a stronger commitment by all EU member states would be fair. However, Belgium should not expect to be compensated for any asymmetric attack it may face, such as drone incursions. The EU should face the risks together but should not sponsor Belgium for doing its part against this collective threat.

On December 5, German Chancellor Friedrich Merz, who has invested a lot of political capital in this scheme, and European Commission President Ursula Von der Leyen met with De Wever to discuss these issues over dinner. The outcome appears constructive. The technical work to provide Belgium with assurances on some of its concerns has reportedly continued apace. Germany has even signaled that it is willing to cover more of the risk than its share of EU gross national product normally dictates, but there is still quite a way to go.

De Wever’s steeliness has fed a wave of Belgian pluckiness, and the derogatory press speculation on his motives has made reaching a deal more difficult. The unlikely prime minister’s entire career has been built on Flemish nationalism and yet even Francophones trust he is standing up for Belgium’s national interest. And so, it is vital to provide him with enough legal and financial assurances. The institutions in Luxembourg, France, and the United Kingdom that hold smaller amounts of the immobilized assets should also be required to make the same move to make a U-turn palatable for Belgium. There are, moreover, solid arguments available to them. Even in friendly jurisdictions, Russia will struggle to prove its assets have been seized thanks to the reparations loan’s design, which does not constitute confiscation.

Where the money will go

What the cash is used for is an important and underdiscussed question, and it is bound to come up during the summit this week. The figure that would be made available to Ukraine next year has varied because of the number of parameters at play. Of the €95 billion allocated to macro financial assistance, €45 billion will actually have to be used to repay the G7’s ERA loans, which were meant to be repaid using interest revenue generated by the cash now being put to work in a different way. The remaining €155 billion allocated to supporting Ukraine’s defense industrial capacities should remain the plan even if there is a peace deal, as the money will provide Ukraine with the resources to rebuild and maintain a credible defense. Within this portion of the budget, it is very reasonable for there to be a quota devoted to supporting Europe’s defense industrial base. The arguments this week will likely focus on the level of the threshold.

So how will this week play out? European Council meetings featuring heads of state and government from all twenty-seven member states are described as historic a little too often. But what’s decided in the coming days will say a lot about how the EU deals with a world in which it must fend for itself.

The post Europe’s battle over Russia’s blocked assets is nearing its endgame appeared first on Atlantic Council.

• Introduction
• Pivot to the East: How China has come to Russia’s rescue
• Guns over butter
• Regions
• Conclusions and recommendations
• About the authors

In the three and a half years since Russia launched its full-scale invasion of Ukraine, its economy has continued to grow, supported by increased militarization. This resilience is a far cry from Western governments’ prognosis in the early days of the war that sanctions would crash the Russian economy. Sky-high energy prices and hesitation on the part of Western leaders to push for stronger enforcement of sanctions kept the Russian economy afloat in 2022. Meanwhile, deepening economic integration with China has helped supplant the void left by the loss of the European Union (EU) as a market. Overall growth, however, is slowing markedly in 2025 as Russia is increasingly feeling the pressure of “guns versus butter,” the inherent tension between military and social spending. 

Fortunately for Ukraine and its Western partners, topline gross domestic product (GDP) figures tell only part of the story. The Russian economy has been overheating—demand is outpacing supply and economic activity is growing at an unsustainable rate—since late 2023. Stubbornly high inflation has forced the Central Bank of Russia (CBR) to raise interest rates to a peak of 21 percent.¹ In part, higher inflation (and growth) figures have been driven by Moscow’s wartime spending spree, often described as military Keynesianism. This has been exacerbated by an exceptionally tight labor market by Russia’s standards. The unemployment rate sits at just above 2 percent, less than half of its pre-pandemic levels—which, in addition to boosting inflation even higher, betrays the economy’s limited room left to grow. Demand has been pushed up by government spending beyond the point at which supply can keep up, whether through investment, labor, or productivity gains.

The sanctions landscape has, rather unsurprisingly, become more fractured since President Donald Trump’s return to the White House in 2025. While Ukraine’s partners in Brussels and London have applied additional economic pressure on Moscow, Washington had entirely refrained from doing so until October, when Trump announced sanctions on Russia’s two largest oil producers, Rosneft and Lukoil. On one side of the Atlantic, sanctions—which require constant monitoring and updating to remain relevant—have seemingly been reduced from a tool of economic statecraft designed to inflict costs for and deter bad behavior to a bargaining chip. On the other, the European Union and United Kingdom have continued to expand their sanctions regimes, including by lowering the price cap they impose on Russian oil, but are unable to replicate the reach that the United States Treasury Department has thanks to the dominance of the US dollar and the US ability to enforce secondary sanctions.

The Russian economy is, therefore, in a precarious but manageable position. Its growth has slowed, its oil and gas revenues have slid, and the latest US sanctions on Rosneft and Lukoil directly challenge the prevailing assumption that geopolitical risks and sanctions threats had subsided. Nevertheless, the economy might yet be saved by fickle White House policy. Unless the new sanctions escalation is genuinely sustained, or global oil markets see a further downturn, the current slow downward trends are likely to hold as Russia appears to have hit supply-side constraints in the labor market and investment. This makes a better understanding of where the Russian economy currently stands all the more important. The following sections explore three key wartime developments: the growing role of China, the prioritization of the defense sector, and the positive effects of the war on poorer regions.

Pivot to the East: How China has come to Russia’s rescue

When Russian President Vladimir Putin launched a full-scale invasion of Ukraine, he gambled his country’s future on a quick victory. When that goal proved elusive, he doubled down. Two developments helped make this economically feasible. The first was the spike in energy prices, particularly for natural gas, which was precipitated by the uncertainty that Putin had wrought upon global markets. The second was Russia’s burgeoning trade relationship with China and its role in helping Russia circumvent sanctions.

Economically and politically, Russia’s relationship with China is simultaneously deeply asymmetrical and mutually beneficial. While Moscow has not become Beijing’s vassal—at least not to the extent that it would attack NATO purely to distract the Alliance from a war for Taiwan—Russia is certainly the junior partner in the “no limits” partnership. China has served as a lifeline for Russia, while Russia has supplied China with cheap energy and raw materials.

On one hand, China has easily overtaken the EU to become Russia’s largest trading partner. On the other hand, Russia accounts for just 3 percent of China’s exports and 5 percent of China’s imports as of 2024.² Russia’s economic importance to China, to be sure, is not fully reflected in these figures; it became China’s top supplier of crude oil in 2023. But even in the case of oil, China buys from an intentionally diversified set of suppliers, in which Russia accounts for less than one-fifth of imports. With an economy nine times the size of Russia’s, China has the same leverage in market power over Russia as the EU, without the structural dependencies on Russian energy.³ Many EU members (including Germany, the bloc’s largest economy) grew structurally dependent on cheap Russian oil and gas for their economic growth in the twenty-first century.⁴ The Nord Stream 1 and 2 natural gas pipelines from Russia to Germany via the Baltic Sea, which together cost €18 billion to build, best symbolized the relationship.

Even Russia’s energy exports to China are comparatively far more important to Russia. Oil and gas revenues account for nearly one-third of Russia’s budget inflows. Until 2023, Europe was the most lucrative export market for Russian energy and, thus, for Russian state coffers. Nonetheless, by invading Ukraine, Russia slayed its irreplaceable golden goose, leaving it reliant on new partners. And China, well aware of Russia’s lack of alternatives, purchases both oil and gas at a steep discount.

Russia’s trade to and from China could hardly be more different. It sells oil, gas, coal, and raw materials to China, while it buys machinery, vehicles, and electronics (see below).⁵ In other words, Russia exports what it can extract from the ground and imports what it lacks the technology and industrial capacity to build itself—highlighting the deep asymmetry in the relationship. This is a complete and embarrassing reversal in the relationship compared to the 2000s, when Russia exported higher value-added goods to China. 

Automobiles have become a bellwether of China’s presence in the Russian consumer market and a rare case of the Russian market’s importance to Chinese industry. Before the full-scale invasion in 2022, Russia imported cars from a range of countries—including Japan, South Korea, Germany, China, and the United States—and a number of countries established production facilities in Russia, creating productivity spillovers. The West’s sanctions regime upended the market so thoroughly that Russia, although wary of provoking its more powerful neighbor, even increased duties on car imports in an attempt to slow the Chinese takeover.⁶ Chinese brands’ market share surged from below 10 percent in 2021 to above 60 percent in 2023, and they allegedly accounted for the vast majority (about 90 percent) of revenues in 2024. 

Russia had become the largest export destination for Chinese cars, which filled the void left by Western brands exiting the country—and though Russia’s protectionist measures might have chipped away at this, the Chinese automotive industry is among the largest beneficiaries of the expanded Sino-Russian trade relationship. The industry produces far more than the Chinese consumer market can absorb, so markets like Russia—which is both large and absent of Western competition—are highly beneficial. In contrast, China’s smartphone industry, which has taken over the Russian market in a rather visible manner (86 percent of sales in 2024), is hardly dependent on Russia.

China’s manufacturing industries—which are purposefully designed for overcapacity—need international markets, and Russia has become an increasingly important destination for them to sell their products. But automotive exports are the exception that proves the rule; even mutually beneficial exchanges are far more important to Russia than to China. This conclusion is not as trivial as it might sound—the European Union, with a combined GDP that surpasses China’s, was so reliant on Russian energy that the bloc is still working on phasing it out. In other words, structural dependencies on Russia were ingrained in European economies, making it more painful to cut off the trading relationship than key economic figures would have suggested; Russia does not have this leverage with China.

But from an economic point of view, China is not a better trading partner for Russia than the European Union was. It buys oil and gas at lower prices, it invests far less in Russia, and its products are often technologically inferior. Nor is China’s relationship with Russia equivalent to the West’s relationship with Ukraine; whereas Ukraine has received billions of dollars in grants and in-kind contributions from the West, Russia pays in full for its imports from China. But with no alternatives to speak of, China has served as an economic lifeline for the Russian economy.

China has also been central to Russia’s efforts to evade Western sanctions. Following the exodus of Western countries and the imposition of a strict export control regime in 2022, Russian importers turned to increasingly complex sanctions-evasion supply chains to continue buying prohibited products and components. This was particularly urgent for the military-industrial complex, as Russia sourced more Common High Priority Items List (CHPL) items—a set of fifty export-controlled products that the sanctioning coalition jointly determined to be key to Russia’s military industry—from the EU than from anywhere else. A look at Russia’s 2023 imports of these goods reveals China’s new centrality: In value terms, 90 percent of CHPL imports were facilitated by a Chinese firm in some way. Over time, China’s role in providing sensitive goods to Russia has also tilted from facilitator to manufacturer—by 2023, 49 percent of all CHPL imports were made by Chinese companies in China. Goods as complex as computer numerical control (CNC) machines and as simple as ball bearings are now sourced from China instead of the West, making export controls less effective or, at the very least, more difficult to enforce.⁷

Chinese machinery and components are predominantly supplied to the military-industrial complex, while domestically produced alternatives usually go to civilian firms. Moreover, shipments of domestically produced machinery and components have declined during the full-scale war, indicating that Chinese imports have supplanted Russian competition. In other words, despite all of the resources that have gone into import substitution programs—and the restrictions that sanctions have imposed—Russia’s machinery and components supply chains are more import dependent now than they were in 2021. With the Russian economy on a war footing, manufacturers have merely swapped out their European dependencies for Chinese ones.

Russia’s turn from Europe to China raises the question: Did the sanctions regime backfire? After all, Russia has continued its war against Ukraine and is now closer to China than it was at any other time in the post-Soviet period. 

Economically, sanctions have neither backfired nor achieved maximalist goals. The sanctions regime has ensured that every drone, artillery shell, and missile aimed at Ukraine is more expensive or more difficult to produce. Supply chains have needed to be reoriented, introducing friction costs and quality concerns—the lengths to which Russian firms have gone to acquire export-controlled technologies and machinery effectively reveal the inferiority of alternatives. Disappointment with the fact that sanctions have not brought about the collapse of the Russian economy has more to do with overzealous expectations combined with lax enforcement than it does with the failure of sanctions themselves.

However, the tightening Sino-Russian relationship carries weightier consequences for the practice of economic statecraft. Financial sanctions against Russia—including the disconnection of some major banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT)—have driven the country out of the dollar-dominated global financial system and toward its (much smaller) Chinese alternative. China and Russia now settle the vast majority of their trade in renminbi, which could theoretically pave the way for a Chinese-led, anti-Western global financial system. Combined with the Trump administration’s trade policies, risks of de-dollarization have grown, particularly in Asia. This remains hypothetical, however, and it is unclear whether Beijing is willing to bear the costs associated⁸ with taking up such a role. In reality, the Russian economy’s resilience is more of a wake-up call than a cautionary tale for Western governments. A sanctions regime that allows energy export revenues to continue to flow and leaves an economy the size of China’s as a safe haven is destined to disappoint.

Guns over butter

In the push and pull between civilian and military priorities, never has post-Soviet Russia so clearly veered toward the latter. In part, this is reflected in Moscow’s larger ambitions to revive its status as a regional hegemon in Eurasia, and in all the costs it is already bearing in pursuit of this goal—it sacrificed its most lucrative oil and gas customers in the name of dominating Ukraine. But Moscow’s priorities are more straightforwardly revealed by its wartime federal budgets.

The Russian federal budget is both convoluted and secretive, with almost one-third of all allocated funds classified, including more than 80 percent of the defense budget. Even classified expenditures are attributed to broad budget chapters (e.g., national defense), and some categories are easier to ascertain than others—the Ministry of Defense’s classified social support, for example, is likely made up of payments to families of soldiers killed or wounded in the war. Spending on the war has been immense (pegged at or above 8 percent of GDP) but not entirely straightforward to measure. Not all defense expenditures go to the war, while some large civil expenditures, such as investments in occupied territories, are directly related to it. Nevertheless, a few observations can be made about how the budget reflects today’s Russian economy. 

First, direct military spending is likely to plateau, if not decrease, in real terms this year. As spending grew well above inflation since the full-scale invasion, further increasing spending would need to come at the cost of noticeable cuts to social spending, as liquid reserves in the country’s National Welfare Fund (NWF) have been depleted substantially (down 59 percent), and military spending accounted for almost half of budget revenues in the first half of 2025.⁹ As is the case with much of the Russian economy, 2025 has shown that growth cannot continue forever.

Second, while budget deficits are well above expectations, Russia has not had difficulties financing its deficits. Russia’s federal budget nearly exceeded the planned target for 2025 in just the first six months of the year. The shortfall, which was driven by a drop in oil and gas revenues and a 20-percent rise in expenditures, is far bigger than previous wartime deficits. Nonetheless, Moscow has managed to finance the deficit thanks to strong demand for bonds from Russian banks. This is particularly important to maintain, as domestic banks are effectively the only remaining buyers of the government’s bonds.¹⁰

Third, much depends on the price of oil. A bit less than one-third of the federal budget is funded by oil and gas income, and the Ministry of Finance based its budget projections on a forecasted $69.7 per barrel average export price in 2025. The extent of the budget shortfall that falling oil revenues create will depend on two factors: global oil prices, which have been weighed down by sluggish global growth, and how steep a discount on Russian oil prices the Group of Seven’s (G7) oil price cap sanctions can create. With its eighteenth sanctions package in July 2025, the European Union both lowered the price cap for crude oil (from $60 per barrel to $47.6 per barrel) and introduced an automatic mechanism to adjust the cap to market conditions. While this is a welcome change, its effect will still depend on enforcement, which has been subverted by Russia’s shadow fleet of old and uninsured oil tankers.

Besides defense expenditures as a share of GDP, one of Russia’s most-watched financial statistics has been the bonuses that the government pays those who sign up to join the “special military operation.” To entice men to join the war effort despite the risks, regional and local governments have offered sign-on bonuses that far exceed annual salaries. By early 2025, more than 60 percent of Russia’s regions offered bonuses that exceeded 1 million rubles (about $12,000). In Sverdlovsk Oblast in the Urals region, prospective soldiers are offered about 3 million rubles—2.5 million rubles from the regional government, 400,000 from the federal budget, and more from individual municipalities—which is nearly three times the median annual wage. In Mari El, a poor ethnic republic 400 miles east of Moscow, a stunning 10 percent of the region’s total budget is spent on sign-on bonuses.

In Russia’s poorer regions, the combination of sign-on bonuses and killed in action (KIA) payouts has created a system of “deathonomics” in which dying on the battlefield in Ukraine can be more profitable than living to retirement age. The system is particularly appealing to men who are not economically productive—whether due to a lack of training and education or a poor local economy—and effectively acts as local stimulus. From a macroeconomic perspective, these payouts must be viewed in the context of a tight labor market and an overheated economy, in which employers in the civilian sector compete for workers with the army, a military-industrial complex that receives favorable treatment from the government, and each other. Moreover, they are indicative of a larger trend: Russia’s resources are being directed away from the civilian economy and toward the war. Every working-aged man who joins the army is one fewer factory worker or local business employee, and every government ruble spent on incentivizing his choice is one fewer ruble for social spending.

It is no coincidence, then, that war-related industries have substantially outperformed the rest of the economy. While war-related industries have boomed—their combined output has increased by around 50 percent—the rest of the economy has been largely stagnant. Much of Russia’s investment, which is already low, is directed to supporting the war. Because Russia has long struggled to translate its military-industrial complex spending to durable civilian-sector growth, this leaves few opportunities for medium- to long-term spillovers. And as Russian workers move to the military-industrial complex or leave for the front, they are not being replaced by migrant labor, which is at its lowest level in a decade.

There are some areas that allow for direct, “apples to apples” comparisons between the fates of the civilian and military sectors. Though both sides are impacted by sanctions, restrictions on military-industrial complex entities are more stringent. Nonetheless, it is the military-industrial complex that comes out ahead.

Russia’s aviation industry, historically reliant on Western planes and technology, has been hit hard by sanctions. Even before the full-scale invasion, Russia’s commercial aviation industry was so reliant on Western supply chains that it resorted to smuggling parts and components from the United States to get around sanctions, as nominally Russian-made airplanes still rely on foreign components. Sanctions forced Russian airlines to quickly seize jets that had been leased from the West and cannibalize older aircraft for spare parts. But measures have clearly been insufficient, as civil aviation incidents hit a record high in 2024 and plans to build more than one thousand commercial aircraft by 2030 are merely a fantasy. In talks with the Trump administration, Russia specifically brought up the aviation industry as a pain point and proposed a scheme to purchase Boeing planes with frozen state assets. 

Military aviation—which is a top-heavy sector led by companies Yakovlev, United Aircraft Corporation, and United Engine Corporation—has not suffered the same fate. Military aviation manufacturers have rapidly expanded their production capacity since the full-scale invasion, with Chinese imports playing an ever-increasing role in their supply chains. While the commercial aviation fleet steadily degrades, military aviation is continuing to produce both fighter jets and helicopters for the war effort. The diverging performance of the civil and military aviation industries, despite the substantial overlap in companies active in them, is further evidence of how Russia has prioritized military production at the expense of the civilian economy.

An indefinite expansion of the military-industrial complex, however, is not feasible. Moscow does not appear willing to make the sacrifices necessary to truly militarize society—for example, to direct the resources to defense that the Soviet Union did during the Cold War—which would be unavoidable during a broader economic slowdown. The more it spends on military-industrial manufacturing and infrastructure, the less the civilian economy can compete for labor and financing (i.e., the military-industrial complex is crowding out the rest of the private sector). Russia has now pushed the limits of how much the civilian economy can be neglected before it is forced into stagnation.

In the first two years of the full-scale war, the Kremlin was not forced to face the trade-offs it is facing today. Military-led economic expansion was not at odds with broader economic growth for a number of reasons that no longer hold true. 

First, high inflation has forced the CBR to raise interest rates substantially as it attempts to pump the brakes on the overheated economy. With a key policy rate of 16.5 percent (down from a high of 21 percent), fewer businesses can afford debt-fueled growth. Furthermore, a significant share of economic actors receive subsidized interest rate loans; one-sixth of all new loans issued in 2023 were subsidized at below-market rates. Russia’s subsidized mortgage program made up a majority of these funds and was more distortionary than preferential loans to the corporate sector, but it ended in July 2024. The remaining portfolio of subsidized loans, held primarily by large banks, ranges from innocuous recipients—the agricultural sector, small and medium-size enterprises, and strategic industries—to defense contractors and the military-industrial complex writ large, which the Kremlin funds with “hidden war debt.”

The bottom line is that these preferential loan programs force the CBR to hike rates more than it would need to otherwise, hurting the broader economy’s growth prospects in the process. This has led to open infighting among regime elites, with defense executives like Rostec’s Chief Executive Officer Sergey Chemezov repeatedly lashing out at CBR Governor Elvira Nabiullina for her stewardship of the Russian economy.¹¹ Nabiullina and the CBR have been critical of these programs, noting that the subsidized loans are paid for by all the individuals and corporations that must pay market rate. Thus far, the Kremlin seems to have sided with the bank. But the longer rates remain high, the more difficult the balancing act becomes.

Second, the external environment has deteriorated significantly. In Russia’s case, this is first and foremost a question of oil and gas exports. Soaring energy prices—and the delayed application of key measures such as the G7’s oil price cap—supported the Russian economy, the ruble, and the government budget in 2022. Natural gas prices were particularly crucial in 2022 because Russian oil has been sold with a risk premium (i.e., with a discount) ever since the full-scale invasion. Russia’s gas revenues more than doubled between 2021 and 2022—from $64 billion to $130 billion—but fell precipitously below pre-war levels thereafter. Now, three and a half years into what was envisioned as a three-day war, energy revenues have structurally changed (see the analysis above). Depressed oil prices amid a global oil glut, China’s unwillingness to import more Russian natural gas via stalled projects like the Power of Siberia 2 pipeline, the EU’s measures targeting India’s refining of Russian crude oil, and Washington’s sanctions against Rosneft and Lukoil all represent real challenges for Russia’s economic prospects.¹² Regular Ukrainian strikes on hydrocarbon processing facilities have also hit Russia’s bottom line and show no sign of letting up. None of these challenges are insurmountable or even permanent, but they compound on each other in the absence of other key buffers—most notably, liquid reserves and a large and stable current account balance.

Third, Russia has burned through the reserves that it built prior to its full-scale invasion. Russia’s most important buffer has been the NWF, its sovereign wealth fund. Moscow has heavily relied on the NWF for budget financing—withdrawing more than 7.5 trillion rubles ($93 billion) for fiscal financing, while more than $300 billion of CBR reserves were immobilized in sanctions coalition countries. The NWF’s liquid funds, holdings of foreign currency and gold, have dropped by nearly 60 percent and now consist of just renminbi and gold, as Russia sold all hard currency assets in 2022. Once again, this is not an existential threat to the Russian economy, as the government’s ability to fund its deficit with debt issuance has been consistent. However, the depleted NWF is a lost buffer that creates new trade-offs for the Kremlin. If Moscow continues its war-related spending spree, it must fund its deficit by selling even more debt to domestic banks; if it does not continue its fiscal expansion, it no longer has the NWF to cushion the fall for the general population.

The reality is that the Kremlin spent the first two years of the full-scale war kicking the can down the road, avoiding the trade-offs inherent to its policies. Fiscal expansion, a supportive external environment, and large buffers had the economy growing but running on fumes. At least in the economic sphere, the war was all carrots and no sticks. In 2024–2025, when the situation deteriorated significantly on all three fronts, the Russian economy did not collapse, to be sure, but the Kremlin began to face the trade-offs that it had long put off. Interest rates climbed, real wages fell, and subsidized mortgage programs were scrapped. Fears of looming stagflation—the combination of high inflation, low growth, and high unemployment—have been (perhaps prematurely) in the ether for quite some time. 

What does this mean for the most fundamental trade-off of all: guns versus butter? It is difficult to imagine a scenario in which the Russian government can sustain its current defense expenditures without social spending cuts that are pervasive and visible to the general population. Moreover, the broader economy can no longer support growth (in output and real wages) in both the military-industrial complex and the civilian sector simultaneously. This does not spell disaster, but it will likely chip away at the gains that the country’s poorer regions and citizens have seen during the war.

Regions

Parts of the civilian sector have benefited immensely from the wartime spending bonanza, and it has helped reshape the economy in surprising ways. In some cases, the war has served as an equalizer, injecting cash into poorer regions through army recruitment and casualty payments. Self-reported well-being and financial security measures have generally increased. In other ways, wartime spending has reinforced existing structural inequalities that favor privileged groups and areas, such as ethnic Russians, large cities, and regions with a strong military-industrial base.

The benefits that poorer regions have enjoyed during the full-scale war come at a cost, and they are unlikely to be permanent. Household incomes rise in exchange for killed and wounded men and high inflation; investment into the military-industrial complex crowds out more efficient investment into the civilian economy. Moreover, casualty payouts and defense spending are hardly sustainable drivers of economic growth. Regardless of their permanence, it is worth understanding the regional dynamics associated with Russia’s war.

Both before and during the war, Russia’s economy has been centered around a few economic centers: Moscow, St. Petersburg, Ekaterinburg, and regions with oil and gas extraction industries such as the Nenets, Yamalo-Nenets, and Khanty-Mansi autonomous okrugs.

But the war has brought unprecedented investment and income to Russia’s poorer regions. Two indicators—fixed investment and retail turnover—exemplify the geographic nature of wartime growth. Fixed investment, which includes assets that range from machinery to factories, has shown explosive growth in Russia’s poorer and far-flung regions. The Republic of Tyva, a small ethnic republic on the Mongolian border, has seen 190-percent growth in fixed investment and 74-percent growth in retail turnover—some of the highest in the nation. However, income is not evenly distributed within the region, with military-related incomes not trickling down to the rest of the population. In other words, the fiscal stimulus (from recruitment and KIA payouts) and demand in the military-industrial complex have not dispersed across the entire economy.

Tyva also tops the charts in a less desirable metric; it has the highest number of confirmed war deaths per capita of any region in the country. While Tyva’s sign-up bonuses are some of the lowest in the country—the region merely matches the federal government’s 400,000-ruble payout—it is worth remembering that these bonuses are generally dwarfed by the payments to soldiers’ families when they are killed in action. Consequently, the growth of household bank deposits in Tyva has massively outpaced national averages.

Households are generally faring better in regions that have contributed more soldiers to the war. The growth in household bank deposits is so visible, in fact, that it has even been used as a proxy to measure regions’ mobilization results. Notably, trends in household incomes and household expenditures somewhat diverge. While regions like Tyva show only relatively middling growth in household income despite strong employment growth, their household expenditures have risen just like their bank deposits. In other words, deposits and expenditures have risen precipitously—but not necessarily from standard income sources.

Of course, these poorer regions have had help. In late 2024, the federal government implemented a program to allow lower-income regional governments to write off up to two-thirds of their debt, provided that they spend the freed-up funds on social and communal expenditures or, in some cases, national projects. This effectively means that some regions’ exorbitant spending on the war in Ukraine, including sign-up bonuses and benefits for families of soldiers wounded or killed in action, has been subsidized by Moscow. The program exemplifies the difficulty of assessing how much the Russian government has spent on the war; the Kremlin uses arcane budget maneuvers to funnel money to the war through programs that are ostensibly designed for economic development in poor regions.

Another key development during the war is the renewed convergence between regions’ average wages.¹³ Between 2000 and 2014, as commodity prices and the market economy helped Russia grow substantially, the differences in wages across regions declined. This trend stagnated between 2014 and 2021 but then reemerged with the full-scale war. More important than the convergence itself, however, is what has driven it.

The dispersion of wages across Russia’s regions is visible in two distinctions—between the rich and middle-income regions, and between the middle-income and poor regions. Between 2000 and 2014, the convergence of average wages was primarily driven by the poorest regions catching up to middle-income regions. Since the full-scale invasion in 2022, the driver of convergence has been on the other end of the wealth distribution, with middle-income regions catching up to rich ones. Geographically, this means that the strongest wage growth does not extend much further east than the Urals.

Trends in investment betray a more complex and less optimistic picture. At face value, fixed investment has increased dramatically in some poorer parts of the country, including in the archetypal region of the Republic of Tyva. But while growth figures are useful metrics, they can obscure differences in scale. In reality, Russia’s poorer regions entered the war so far behind on fixed investment that these large increases (above 100 percent since 2021, in many cases) are dwarfed in scale by those in major metropolitan areas and export-driven (i.e., resource-rich) areas. In fact, dispersion of fixed investment per capita between regions has increased considerably since the full-scale invasion. This suggests that the wage gains in poorer regions relative to the rest of the country are unlikely to become a permanent feature of the economy.

Much of this post-2022 divergence can be attributed to regions with a heavy military-industrial presence; most of these regions fall into the Central, Ural, and Volga federal districts. Regional manufacturing growth is, of course, strongest there, and weakest where production relied on Western export markets. 

Sverdlovsk oblast, which hosts key heavy industry manufacturing hubs, saw fixed investment rise by more than 100 percent since 2021. Russia’s premier tank-producing facility, Uralvagonzavod, is based in Sverdlovsk oblast’s Nizhny Tagil. The Nizhny Tagil industrial cluster has doubled down on military-industrial production, including by ramping up hiring (and wages) for skilled and unskilled workers. It faces macroeconomic headwinds, including a shrinking workforce, but has been buoyed by defense procurement orders (gosoboronzakaz) and debt-fueled investment. Thanks to the expansion of production and the tight labor market, manufacturing wages in Sverdlovsk oblast increased by 78 percent between February 2022 and February 2025 (compared to 70-percent growth in all sectors). 

While the convergence of economic prospects across Russia’s regions might not be permanent, the inefficient allocation of resources—particularly to the military-industrial complex at the expense of the civilian sector—is likely here to stay for the foreseeable future. After the sign-up and war casualty payments stop flowing to the country’s poorest regions, the investments in the war machine will remain, fed by Moscow’s aggressive posture toward NATO.

Conclusions and recommendations

Unfortunately for those (the present authors included) who wish for Russia’s aggression to end as soon as possible, the bill is not yet coming due for the Kremlin’s war economy. Rather, we have argued in favor of a different lens through which to view the Russian economy—one of increasing trade-offs—as costs have mounted but remain manageable.

Slowing growth, depressed oil prices, harsher sanctions, and high inflation are the key macroeconomic challenges that the Kremlin and CBR face in late 2025. However, they are not the only trends worth considering. We have examined three structural shifts that Russia’s full-scale war against Ukraine has wrought upon the country’s economy: an external sector pivot from West to East, a clear prioritization of guns over butter, and a convergence of regional economic trends. Among these, regional convergence is the least likely to persist beyond the war.

Prescriptions for hindering the Russian economy vary depending on the specific goals and risk tolerances of sanctioning states. The United States and EU, for example, have long held the contradictory goal of reducing Russia’s oil and gas revenues without pushing up global market prices—hence the price cap—so as to avoid domestic and international backlash. With the current oil market glut, however, it is feasible to impose sanctions on Russian oil majors without spiking global prices. The true test of this theory will come only in time, as we wait to see what waivers the Treasury Department’s Office of Foreign Assets Control (OFAC) issues to potential customers of Rosneft and Lukoil (particularly India and China) and whether these sanctions remain in place for the foreseeable future.

The Trump administration’s punitive measures against China and India for their support of Russia, be they secondary sanctions or secondary tariffs, have thus far largely been half-hearted and inconsistently applied. This leaves policymakers, particularly in Europe, in a tricky situation. When Washington strikes a more conciliatory tone toward Moscow, sanctions enforcement is tougher. EU and United Kingdom efforts to sanction shadow fleet tankers have continued without the United States, and a growing willingness to interdict law-breaking vessels also put downward pressure on Russia’s oil export revenues, but they are less effective without the Treasury Department’s help. And in the only case in which Washington has imposed new restrictions—on Rosneft and Lukoil—it did so without coordination.

Economically, the two fundamental goals of the post-2022 sanctions regime have been to make it harder for Russia to produce materiel for its war and make it harder for Russia to pay for its war. Both come with their own costs and challenges—the former is hard to enforce, while the latter threatens to boomerang costs back to the sender—that reduce the coalition’s resolve.¹⁴ Nonetheless, we see no reason to deviate from these two guiding principles. 

Reducing Russia’s industrial production for its war can and should be accomplished in various ways. 

First, the sanctions coalition’s existing export controls regime must be better enforced and expanded. This would require more resources for investigations and a willingness to target third-country intermediaries that help Russian firms access export-controlled goods.¹⁵ As we have detailed, this will inevitably focus on China. 

Second, Chinese and North Korean supply chains to the Russian military-industrial complex must be disrupted. Chinese manufacturers sell dual-use goods and machinery to a wide range of firms in the military-industrial complex, while North Korea has been supplying Russia with more than half of its artillery shells. Targeting Chinese supply chains could entail sanctioning the logistics providers that facilitate the transactions on the Russian side or imposing secondary sanctions on the manufacturers and banks that do so on the Chinese side. Targeting North Korean supply chains, while more difficult due to the country’s international isolation, could entail sanctioning Russian or Chinese banks that facilitate trade with North Korea. 

Third, many entities in the Russian military-industrial complex remain unsanctioned, particularly those that maintain civilian pretenses. Rosatom and Roscosmos, two state-owned enterprises that have heavy ties to the military-industrial complex, are prime examples.

Reducing Russia’s ability to finance its war effort is, for all intents and purposes, a question of reducing its energy export revenues. Despite the fact that the United States has little direct role in the generation of these revenues, it might indeed have more leverage than Europe in the situation by virtue of its more powerful sanctions (and secondary sanctions) toolbox. In either case, the sanctions coalition can target the price of Russian energy exports or the volume of the exports; thus far, sanctions have almost exclusively targeted the former. Rosneft and Lukoil sanctions do appear to be the first major attempt to remove some Russian oil from the market entirely.

Once again, there are multiple paths that the sanctions coalition can take. The simplest step would be to align and expand sanctions against shadow fleet oil tankers, which circumvent the oil price cap. While US sanctions against shadow fleet tankers have generally been the most effective, Brussels and London should continue their efforts to force Russian oil off the shadow fleet and back to the mainstream fleet, where the price cap applies. Washington adopting the EU’s new, lower oil price cap would also hurt Russia’s oil revenues. More severe options could target Russian export volumes by embargoing a specific port, deciding not to grant waivers for Rosneft and Lukoil sanctions, or even applying secondary sanctions on buyers of Russian oil.

Whether by hitting Russia’s military-industrial capacity or its energy revenues, the United States and its European allies can surely hinder Russia’s ability to continue prosecuting its war against Ukraine economically. What is less clear, particularly in Washington, is whether the political will exists to do so.

Elina Ribakova has been a nonresident senior fellow at the Peterson Institute for International Economics since April 2023. She is also a nonresident fellow at Bruegel and a director of the International Affairs Program and vice president for foreign policy at the Kyiv School of Economics. Her research focuses on global markets, economic statecraft, and economic sovereignty. She has been a senior adjunct fellow at the Center for a New American Security (2020–23) and a research fellow at the London School of Economics (2015–17).

Ribakova has over twenty-five years of experience with financial markets and research. She has held several senior level roles, including deputy chief economist at the Institute of International Finance in Washington, managing director and head of Europe, Middle East and Africa (EMEA) Research at Deutsche Bank in London, leadership positions at Amundi (Pioneer) Asset Management, and director and chief economist for Russia and the Commonwealth for Independent States (CIS) at Citigroup.

Prior to that, Ribakova was an economist at the International Monetary Fund in Washington (1999–2008) working on financial stability, macroeconomic policy design for commodity-exporting countries, and fiscal policy. Ribakova is a seasoned public speaker. She has participated in and led multiple panels with leading academics, policymakers, and C-level executives. She frequently collaborates with CNN, BBC, Bloomberg, CNBC, and NPR.

She is often quoted by and contributes op-eds to the New York Times, Wall Street Journal, Financial Times, Washington Post, Guardian, Le Monde, El País, and several other media outlets.

Ribakova holds a master of science degree in economics from the University of Warwick (1999), where she was awarded the Shiv Nath prize for outstanding academic performance, and a master of science degree in data science from the University of Virginia (May 2023).

Lucas Risinger is an economic analyst and nonresident research fellow at the Kyiv School of Economics (KSE) Institute. His research focuses on the macroeconomics and military industrial complexes of Russia and Ukraine, as well as the Western sanctions regime against Russia.

Prior to joining KSE Institute, Risinger received his master’s degree from Harvard University’s Davis Center for Russian and Eurasian Studies, where his research centered around Ukraine’s modern economic development. He has studied and worked in Kyrgyzstan, Kazakhstan, Poland, Georgia, and Russia, and is fluent in Ukrainian and Russian.

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The most realistic financing option currently under consideration is a so-called reparations loan backed by frozen Russian assets. With more than $200 billion of immobilized Russian Central Bank assets currently held in Europe, this loan would be sufficient to bankroll Ukraine’s defense for the coming two years, with Russian reparations set to cover repayments. 

European officials are also mulling an alternative format that would involve a joint debt guaranteed by the EU budget. This approach would generate around $100 billion over the coming two years. However, while the reparation loan would place the financial burden on Russia, this approach would introduce new demands on the already overstretched budgets of individual EU member states. 

Using frozen Russian funds as security for a major Ukrainian loan would send a message to Moscow about Kyiv’s ability to continue defending itself for years to come. Advocates of the reparations loan see it as a justified move to make Russia pay for the invasion, but the proposal faces obstacles on both sides of the Atlantic.

The Trump administration has reportedly been working behind the scenes to obstruct the reparations loan. US officials argue that the frozen Russian assets should instead become bargaining chips during negotiations with Putin to end the war.

Belgium, which hosts the largest portion of immobilized Russian funds in Europe, remains the main obstacle. The Belgian government has complained that seizing the Russian assets will expose it to legal liabilities that could bankrupt the country. Meanwhile, Belgian Prime Minister Bart de Wever claims that Moscow has “let us know that if the assets are seized, Belgium, and me personally, will feel the effects for eternity.” 

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The debate over further funding for Ukraine comes at the precise moment when Russia’s own economic model is showing signs of fragility. Indeed, some forecasts indicate that Putin’s war economy will face mounting challenges in 2026 that could have a major impact on the Kremlin’s ability to continue the invasion. This may be a factor driving Moscow’s determination to block further EU funding for Ukraine.  

As Russian military spending reaches new highs, the Kremlin is rapidly burning through strategic reserves. At the same time, revenues from Russia’s economically crucial energy exports have recently fallen to multi-year lows amid mounting sanctions pressures and escalating long-range Ukrainian attacks on oil and gas industry infrastructure across the Russian Federation.

For now, Putin can still afford to pay his military. However, as Russia’s economic outlook worsens, he will have to prioritize the invasion of Ukraine over other state expenditures, while shifting the burden increasingly onto the Russian public. These trends do not imply imminent collapse, but they do expose a vulnerability reminiscent of the late Soviet era that Western governments could exploit in order to push the Russian dictator toward the negotiating table. 

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One of the best ways to pressure Putin is by backing Ukraine. Right now, Kyiv faces a massive funding gap for the coming year that could have serious implications for the war. Unless Ukraine can secure tens of billions of dollars in additional financing, it will be extremely difficult to pay for the military, rebuild battered energy infrastructure, and cover basic social expenditures.

Crucially, a lack of Western financial backing for Ukraine will also embolden Russia. Why should Putin consider ending the invasion when Ukraine is running out of money and Kyiv’s Western partners are showing such obvious signs of hesitation?

Europe’s reluctance to pay for Ukraine’s defense is shortsighted, to say the least. If Russia’s invasion succeeds, European governments will soon have to boost defense spending to levels that would dwarf the current cost of backing Ukraine.

A recent New York Post article highlighted the sheer scale of the likely price tag for Europe if Russia achieves victory in Ukraine. Citing research by Scandinavian think tanks, the report predicted that the expense of fortifying Europe’s eastern flank against a triumphant Russia would be approximately $1.6 trillion, or more than double the likely figure required to finance the Ukrainian war effort for four more years.

The EU’s reparations loan initiative is lawful, financially sound, and strategically necessary. By hesitating now, Western leaders risk repeating the same mistakes that shaped earlier phases of Russia’s invasion, when delayed decisions and piecemeal support only served to embolden the Kremlin and prolong the war. If European leaders are unable to act decisively on December 18, Putin will toast another strategic victory and the cost of stopping Russia will rise even further. 

Elena Davlikanova is a senior fellow with the Center for European Policy Analysis and Sahaidachny Security Center. Lesia Orobets is the founder of the Price of Freedom air defense initiative and a former member of the Ukrainian parliament.

Further reading

UkraineAlert Dec 4, 2025

Ukraine’s warning to the West: A bad peace will lead to a bigger war

By Myroslava Gongadze

It is delusional to think that sacrificing Ukraine will satisfy Russia. Instead, a bad peace will only lead to a bigger war, while the price of today’s hesitation will ultimately be far higher than the cost of action, writes Myroslava Gongadze.

Conflict Corruption

UkraineAlert Nov 27, 2025

While Trump talks peace, Putin is escalating efforts to erase Ukraine

By Peter Dickinson

Russian President Vladimir Putin has issued a decree this week calling for an escalation in efforts to erase all traces of Ukrainian identity from the approximately 20 percent of Ukraine currently under Kremlin control, writes Peter Dickinson.

Conflict Human Rights

UkraineAlert Dec 4, 2025

Russia has learned from Ukraine and is now winning the drone war

By David Kirichenko

Ukraine’s more agile army and vibrant tech sector initially gave the country an edge in the drone war against Russia, but Moscow has now regained the initiative thanks to an emphasis on mass and training, writes David Kirichenko.

Conflict Defense Industry

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

Read more from UkraineAlert

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

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

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The post Europe’s choice: Fund Ukraine now or pay a far higher price if Russia wins appeared first on Atlantic Council.

Trump’s team is now working with counterparts in Ukraine and the rest of Europe to agree on a potential common framework for a settlement with Russia. Despite tensions between Republicans in Congress worried by White House pressure on Kyiv, US efforts to end the war will only be strengthened by a more activist Congress that resumes legislating on foreign policy.

The original US plan envisioned a peace built on twenty-eight points. These included a cap on Ukraine’s armed forces, a ban on Ukraine joining NATO, and the surrender of some of the most heavily fortified land in eastern Ukraine to Moscow.

The proposal drew criticism from a number of congressional Republicans. “Those who think pressuring the victim and appeasing the aggressor will bring peace are kidding themselves,” wrote Senator Mitch McConnell, who likened the plan to “a capitulation like [former US President Joe] Biden’s abandonment of Afghanistan.”

“This so-called ‘peace plan’ has real problems, and I am highly skeptical it will achieve peace,” said Roger Wicker, chairman of the Senate Armed Services Committee.

A Wall Street Journal report that Trump would withhold arms sales to Ukraine if Kyiv didn’t accept the proposal by Thanksgiving elicited a rebuke from Rep. Brian Fitzpatrick, who wrote: “Correction: The United States wants Russia’s answer on an unconditional withdrawal of Ukraine by Thursday. This Russian-drafted propaganda must be rejected and disregarded for the unserious nonsense that it is.”

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.

Comments from US Vice President JD Vance indicate that the White House has received significant pushback from Republicans in Congress over its recent handling of the Russia-Ukraine peace process. “The level of passion over this one issue when your own country has serious problems is bonkers,” he posted on November 24.

Perhaps the biggest challenge to the Trump administration’s position on Ukraine peace talks has come from Fitzpatrick, who filed a discharge petition to force a vote in the House of Representatives on Russia sanctions once a majority of members have signed on. This is the same mechanism used in 2024 to pressure Speaker of the House Mike Johnson to pass a $61 billion aid package for Ukraine.

A more prominent congressional role in Russia-Ukraine peace efforts would mark a departure from recent trends. At present, 2025 is the first year since the start of Russia’s full-scale invasion that Congress has not passed any legislation to assist Ukraine. From the US-Ukraine minerals deal to shuttle diplomacy in Istanbul and arms sales to NATO, the White House has made it clear that ending the war in Ukraine is Trump’s portfolio.

This helps to explain why the Sanctioning Russia Act, introduced in April 2025 by Senators Lindsey Graham (R-SC) and Richard Blumenthal (D-CT), has gone nearly eight months without a vote despite pledges of support from 85 percent of senators. Originally written to signal strong congressional support for Russia sanctions, the legislation has since undergone technical changes to improve the effectiveness of the sanctions and gain Trump’s approval, according to congressional staff.

Eurasia Center events

Online Event Fri, January 30, 2026 • 9:00 am ET

How Russia’s winter warfare strategy targets Ukrainian civilians

Conflict Europe & Eurasia Geopolitics & Energy Security Human Rights

Fitzpatrick’s initiative could now change things. The discharge petition, which he says would force a vote on a version of the Sanctioning Russia Act and potentially also the Democrat-led Ukraine Support Act, which includes both sanctions and new military support for Kyiv, could mobilize Republicans uneasy with current peace efforts.

After nearly a year of deferring to Trump to manage a peace process, Republican criticism in Congress is growing. “The President’s appeasement plan to Russia is forcing our hand,” commented Rep. Don Bacon (R-NE), who says he considered resigning from Congress in protest over the recently proposed peace plan.

To force a vote, the discharge petition will require majority support from House members. Most Democrats will likely back the move, though some are privately sharing concerns about granting Trump increased authority to levy tariffs, should that provision remain in the final legislation attached to the petition. A handful of Republicans could push it over the line.

Further action to back Ukraine and pressure Russia is likely to find support among Trump’s base. Fresh polling from the right-leaning Vandenberg Coalition found that only 16 percent of Trump voters agree with the proposal that Ukraine should surrender territory to the Kremlin, while 76 percent support sanctioning Russia.

The reality is that without serious additional pressure on Russia, Putin is unlikely to agree to any of the peace frameworks currently being floated. However, if Congress pushes to enact crippling sanctions, extend military assistance to Ukraine, and codify security guarantees, the Trump administration’s peace efforts could finally bear fruit.

The last few days have shown that Congress is eager to help Trump force Russia to end its war in Ukraine. Capitalizing on the revised peace framework agreed by US and Ukrainian negotiators in Switzerland will now require action from both sides of Pennsylvania Avenue.

Doug Klain is a nonresident fellow at the Atlantic Council’s Eurasia Center. He also serves as deputy director for policy and strategy at Razom for Ukraine, a US-based nonprofit humanitarian aid and advocacy organization.

Further reading

UkraineAlert Nov 18, 2025

Vladimir Putin fears entering Russian history as the man who lost Ukraine

By Peter Dickinson

Throughout his reign, Kremlin dictator Vladimir Putin has become increasingly obsessed with the idea of erasing Ukrainian independence, but his decision to invade has backfired disastrously, eroding centuries of Russian influence and accelerating Ukraine’s European integration, writes Peter Dickinson.

Conflict Democratic Transitions

UkraineAlert Oct 23, 2025

Russia’s ‘human safari’ in southern Ukraine is a warning to the world

By Oleksandr Tolokonnikov

Russia’s escalating campaign of drone attacks on the civilian population of Ukraine’s Kherson region highlights the destructive power of modern drone technologies, writes Oleksandr Tolokonnikov.

Conflict Defense Industry

UkraineAlert Nov 20, 2025

Any serious Ukraine peace plan must address Putin’s imperial ambitions

By Mykola Bielieskov

The new US plan to end the war in Ukraine fails to recognize that Putin is not driven by limited political goals. He believes he is engaged in an existential struggle to revive Russia’s great power status and will never accept a compromise peace, writes Mykola Bielieskov.

Conflict Disinformation

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

Read more from UkraineAlert

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

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

Learn more

The post Trump’s latest Ukraine peace proposal sparks strong Republican reaction appeared first on Atlantic Council.

American and European security interests remain closely tied to Ukraine’s survival as an independent, democratic state anchored within the Euro-Atlantic community. This will require a combination of economic and military support for Ukraine along with tougher Western sanctions on Russia.

Western sanctions and military assistance to Ukraine have undoubtedly inflicted significant damage on the Russian economy, leading to an outflow of skilled labor, deepening technological isolation, growing Russian dependence on China, and other negative trends. However, Russia’s far larger population, considerable economic resources, and vast fossil fuel reserves have allowed the Kremlin to keep the war going.

While recent US sanctions on two Russian energy giants mark an important step forward in efforts to pressure Putin, their immediate impact is limited as China and India are unlikely to stop buying Russian oil. Moreover, sanctions alone will not force Putin to abandon an invasion that he regards as central to his entire reign.

The coming fourth winter of the war will arguably be Ukraine’s most arduous since the full-scale invasion began in February 2022. Ukraine faces a constant barrage of Russian missiles and drones, along with a persistently worsening economic outlook and acute manpower crisis on the front lines. Russian President Vladimir Putin is confident that he can wear down Ukrainian military and civilian resistance, and is also counting on Western support to dwindle.

The war is now as much a test of economic endurance as it is a military struggle. The United States and Europe should be under no illusions that Putin is unlikely to compromise on Ukraine unless he is forced to accept that continuing the war will be prohibitively costly.

The Kremlin dictator’s intransigence was underscored by a recent US intelligence assessment stating that he is more determined than ever to prevail. This makes it even more important to underline the West’s own unwavering determination to continue supporting Ukraine economically as well as militarily.

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.

To effectively support Ukraine, Washington and Brussels need to move beyond short-term crisis responses and embrace a longer term strategy. The goal should be to help Ukraine strengthen its wartime economy and put the country in a position to continue military operations throughout 2026 and beyond.

The most pressing issue is removing obstacles to the use of immobilized Russian assets. Before the end of 2025, EU leaders must resolve internal disagreements that are currently preventing Europe from utilizing these frozen assets to cover large gaps in Ukraine’s budget for the coming year.

Plans for a $160 billion reparations loan have so far been blocked by Belgium over concerns of retaliatory Russian lawsuits and other potential Kremlin countermeasures. In order to minimize the threat, Belgium wants all EU member states to offer political guarantees for the loan. One option is to have Norway step up as guarantor, but Oslo has so far refused to take on that role alone. The United States could use its influence and leverage to offset European concerns. Alternatives to the reparations loan are subpar and would signal a weakening of Western resolve to Moscow.

Any breakthrough on the issue of immobilized Russian assets would set the stage for a proposed “mega deal” that would see Ukraine purchase large quantities of arms from the United States using $90 billion backed by European partners. Washington’s weapons deliveries to Ukraine could also be accelerated by working with Brussels through the EU’s $170 billion Security Action for Europe (SAFE) funding mechanism. This kind of transatlantic coordination would ensure that Ukraine receives the weapons it so urgently needs while strengthening NATO’s industrial base.

Support for Ukraine’s energy sector will also be vital as Western partners seek to provide Kyiv with greater economic stability. The Kremlin has dramatically expanded domestic drone production over the past year, making it possible to increase the bombardment of Ukraine’s cities and energy infrastructure. This is leading to widespread blackouts that undermine Ukrainian morale while impacting economic activity and military production.

Brussels must do more to persuade EU member states including Romania and Slovakia to lift existing restrictions on gas exports to Ukraine. This would help Kyiv cover energy supply shortfalls. Increased funding is equally crucial. Energy experts currently estimate that it will take $2.5 billion for Ukraine to import enough gas to get through the coming winter heating season. Meanwhile, the US and EU should take steps to encourage investment in Ukraine’s energy security to help repair, replace, and upgrade critical infrastructure.

Eurasia Center events

Online Event Fri, January 30, 2026 • 9:00 am ET

How Russia’s winter warfare strategy targets Ukrainian civilians

Conflict Europe & Eurasia Geopolitics & Energy Security Human Rights

As Russia’s full-scale invasion approaches the four-year mark, policymakers in Washington, London, and across the EU must recognize that strengthening Ukraine’s wartime economy is a top strategic priority. Ukraine’s economic resilience will shape the outcome of the war and help determine European security for decades to come.

Funding Ukraine is expensive, but the arguments in favor of such an investment are convincing. After all, the cost of supporting the Ukrainian economy today would be dwarfed by the far higher price Western governments will have to pay in terms of increased defense spending if Putin’s invasion succeeds.

At present, there is little reason to believe a just and lasting peace is close. Ukraine is suffering on the battlefield, while the credibility of the country’s leadership has been seriously undermined by the largest domestic corruption scandal of the wartime period. Nevertheless, the public mood across Ukraine remains defiant and determined. In Russia, Western sanctions and Ukrainian airstrikes are causing real pain for Putin’s wartime economy, but his fixation on establishing political control over Ukraine far outweighs his need to address these mounting costs.

The United States and Europe must adopt a long-term perspective to effectively counter Moscow’s maximalist aims. Current efforts to broker a hasty peace deal risk emboldening Putin, sacrificing Ukrainian sovereignty, and compromising European security. Instead, Western leaders should send a clear message to the Kremlin that their own resolve is as strong as ever. Taking steps to strengthen Ukraine’s economic resilience would certainly underline this message, and could help to convince Putin that his hopes of outlasting the West are futile.

Zahar Hryniv is a Young Global Professional at the Atlantic Council’s Eurasia Center.

Further reading

UkraineAlert Nov 18, 2025

Vladimir Putin fears entering Russian history as the man who lost Ukraine

By Peter Dickinson

Throughout his reign, Kremlin dictator Vladimir Putin has become increasingly obsessed with the idea of erasing Ukrainian independence, but his decision to invade has backfired disastrously, eroding centuries of Russian influence and accelerating Ukraine’s European integration, writes Peter Dickinson.

Conflict Democratic Transitions

UkraineAlert Nov 10, 2025

Ukraine’s drone war lesson for Europe: Technology is nothing without training

By David Kirichenko

As Europe races to strengthen its defenses against the mounting threat posed by Russian drones, more and more countries are looking to learn from Ukraine’s unrivaled experience in the rapidly evolving art of drone warfare, writes David Kirichenko.

Conflict Defense Policy

UkraineAlert Oct 23, 2025

Russia’s ‘human safari’ in southern Ukraine is a warning to the world

By Oleksandr Tolokonnikov

Russia’s escalating campaign of drone attacks on the civilian population of Ukraine’s Kherson region highlights the destructive power of modern drone technologies, writes Oleksandr Tolokonnikov.

Conflict Defense Industry

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

Read more from UkraineAlert

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

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

Learn more

The post Strengthening Ukraine’s wartime economy can set the stage for peace appeared first on Atlantic Council.

For Nigerian President Bola Ahmed Tinubu, the designation and threat of military intervention couldn’t have come at a more politically fraught moment. With a population of more than 230 million people, Nigeria continues to grapple with inflation, a struggling currency, and widespread poverty despite recent reforms. With the CPC designation, Washington is questioning the government’s ability to protect its citizens from religiously motivated violence. The moment demands Nigeria to deliver a more coherent diplomatic posture toward the United States.

A relationship built on mutual interests

The US–Nigeria relationship has historically been one of pragmatic partnership. The United States is Nigeria’s largest foreign investor, with US investments concentrated in oil and gas, wholesale trade, and services. Bilateral trade surpassed thirteen billion dollars in 2024, and Nigeria ranks among the top African markets for US exports.

Washington also provides strategic security support, including military training, counterterrorism assistance, and limited arms sales to help Nigeria confront groups such as Boko Haram and the Islamic State West Africa Province, while also addressing piracy in the Gulf of Guinea. Nigeria, in turn, remains a strategic partner for US interests in West Africa, which faces overlapping crises of extremism, migration, and democratic backsliding. Under Tinubu, however, the relationship appears to be drifting—not through open hostility, but mutual disengagement.

A diplomatic drift

Since his inauguration in May 2023, Tinubu has not traveled to Washington and allowed a diplomatic vacuum to fester. In September 2023, Tinubu recalled all Nigerian ambassadors worldwide and still has yet to appoint permanent replacements. What’s more, he was conspicuously absent from Trump’s meeting in July with West African leaders. Tinubu’s distance from the White House may also reflect political caution on his part, following renewed reporting on his past in the United States, including his connection to a federal criminal case and questions about his academic records.

Although Tinubu appointed a handful of consuls-general and chargés d’affaires (including in Washington) earlier this year, Nigerian foreign policy experts note that these temporary measures fall far short of the representation expected of a country of Nigeria’s stature, and reports have detailed the poor state of Nigerian diplomatic missions. Officials in Abuja cite financial constraints for the delay in appointing ambassadors. Amid the dispute with the United States, Tinubu is now reportedly finalizing a list of ambassador nominees.

Tentative diplomacy

Tinubu’s contacts with the Trump administration appear to be limited. In April in Paris, he met for the first time with Massad Boulos, Trump’s senior advisor for Africa and a citizen of Nigeria among other countries. While that encounter signaled a tentative opening, there is no indication of any ongoing back-channel relationship.

Boulos himself recently stirred debate in Nigeria when he remarked publicly that it is not only Christians who are victims of violence in Nigeria. The comment diverged from claims made by Christian advocacy groups that a genocide against Christians is taking place in Nigeria, a claim that resonates with segments of Trump’s political base. Boulos’s attempt to bring some nuance to the conversation appears to have done little to shift Washington’s broader perception that Abuja has not done enough to contain extremist violence or to demonstrate accountability for religiously targeted attacks.

But even before the religious freedom debate, there was friction on other fronts. Earlier in July, Nigeria’s government vowed to resist pressure from the Trump administration to accept deportees from Venezuela and other third countries.

What the CPC designation means for Nigeria

Being named a “Country of Particular Concern” is not merely symbolic. Under the International Religious Freedom Act of 1998 (IRFA), it places a country in the category of states that have “engaged in or tolerated particularly severe violations of religious freedom.” It can trigger diplomatic censure and, in some cases, targeted sanctions or aid restrictions, unless the president grants a waiver for national-security reasons.

Nigeria was first placed on the CPC list in 2020, during the first Trump administration, but was removed in 2021 by the Biden administration ahead of then Secretary of State Antony Blinken’s visit to Nigeria. The decision drew sharp criticism from the US Commission on International Religious Freedom (USCIRF), an independent body created by the IRFA. And last month, US Senator Ted Cruz (R-TX) introduced a bill calling for the CPC designation and the imposition of sanctions on Nigeria, including measures against Nigerian officials who “implement or support blasphemy and Sharia laws.” The redesignation, therefore, represents a policy reversal and a warning that Washington expects progress on religious-freedom protections or further consequences may follow.

At a crossroads

Tinubu, himself a Muslim, faces a delicate balancing act in a country roughly evenly divided between Muslims and Christians. Ahead of the 2023 presidential election, his selection of a Muslim vice presidential running mate from Nigeria’s northeast Borno state drew opposition from voters who considered the move at odds with Nigeria’s religious diversity. While his administration has vigorously rejected the notion of a “Christian genocide” in Nigeria—arguing that that framing does not reflect the true situation in the country—terrorist organizations have targeted churches, kidnapped clergy, and committed massacres in Christian farming communities. Washington’s renewed CPC designation challenges Nigeria’s leadership to confront Christian-targeted extremist violence more decisively.

For Tinubu, who has already clinched his party’s endorsement for re-election in 2027, his approach to this issue will define his foreign-policy credibility and political legacy. Domestically, as a politician from Nigeria’s predominantly Christian south, he must avoid alienating Nigeria’s predominantly Muslim north or feeding perceptions of Western bias in framing the country’s security crisis. Internationally, he must reassure partners that his government is committed to defending pluralism and prosecuting those responsible for faith-based atrocities.

The cost of inaction could be severe. Nigeria’s CPC status could complicate security cooperation—including military training and intelligence sharing—and add to concerns over the foreign investment environment unless Abuja demonstrates measurable improvements.

More profoundly, the designation exposes the fragility of Nigeria’s social contract. When Nigeria gained independence in 1960, its founders envisioned a country where ethnic and religious pluralism would coexist. Decades later, deepening religious and ethnic polarization poses a threat to that vision. Unless the Tinubu administration tackles corruption, poverty, and insecurity, any diplomatic fallout will be secondary to the domestic unraveling already underway.

A path forward

Restoring confidence will require concrete steps. Tinubu should:

1. Reassert Nigeria’s diplomatic presence in Washington. Nigeria, as the world’s largest Black democracy, should project the diplomatic stature befitting its status on the world stage. The absence of robust diplomatic representation has left Nigeria increasingly vulnerable in Washington. The country has been hit hard by the new US tariff policy and could face further repercussions if the Trump administration expands its travel ban. This diplomatic gap is particularly striking given that Nigeria is the most common country of origin for African immigrants to the United States and those of African descent. Restoring a full ambassadorial presence in Washington can help send a message that Abuja has the will and resources to revitalize US–Nigeria relations. A credible diplomat with bipartisan connections in Washington could help reset the tone of engagement and re-establish trust.
2. Open Nigeria’s doors to transparency and external scrutiny. It is not enough for the government to dismiss claims of a “Christian genocide.” Nigeria must cultivate an atmosphere of transparency that allows external observers to assess the facts firsthand. That should include inviting assessments by USCIRF or multilateral partners such as the United Nations or the African Union, along with greater access for journalists, civil society organizations, and independent researchers.
3. Restore accountability in Nigeria’s fight against sectarian violence. Many Nigerians have grown accustomed to government complacency and the impunity that has characterized the violence across parts of Nigeria. Abuja’s credibility at home and abroad depends on visible consequences for perpetrators of sectarian violence—regardless of faith or region—and protection of witnesses who can testify to atrocities. That starts with better funding for security forces. Nigeria’s fight against insecurity may remain a myth if its police force remains underfunded and ranked among the lowest globally in capacity and morale. The government must also address growing concerns that former Boko Haram fighters and other defectors are evading rehabilitation and reintegrating directly into local communities. Compensating victims, whether Christians or Muslims, while empowering them to rebuild and resettle, could further signal that the state values every Nigerian life equally.
4. Prioritize the welfare of Nigerians and address the root causes of violence. Nigeria’s minimum wage stands at 70,000 naira (about $48) per month—one of the lowest in Africa—while legislators, among the highest paid globally, earn between $150,000 and $190,000 annually, and there has been a recent push for increased pay. This disparity reflects a failure to align the cost of governance with the realities of most citizens. Long-term security will depend on tackling the roots of instability: poverty, youth unemployment, and social exclusion. With eighty million Nigerian youths out of work, the government must expand education, job creation, and rural development, especially in conflict-prone areas. Prioritizing these domestic investments would signal commitment to reform and help shift Nigeria’s global image from a country that manages crises to one that builds resilience.

For its part, the United States should moderate its pressure with an open door for engagement. Blanket condemnation risks provoking defensiveness in Abuja. Constructive partnership could yield better results. US policy should aim not merely to punish but to strengthen Nigeria’s capacity to protect its own citizens. Without a doubt, Nigeria’s renewed CPC designation is a diplomatic alarm bell, but it need not herald a breakdown in US–Nigeria relations or escalate into a wider geopolitical standoff, with Beijing already warning against US “interference” or “use of force.” As an African adage cautions, “when two elephants fight, it is the grass that suffers”—and in this case, ordinary Nigerians stand to bear the cost of great-power rivalry in the region. The current imbroglio could instead become an inflection point, prompting both governments to re-evaluate their priorities and restore the principled cooperation that once defined their ties.

But the ball is now in Tinubu’s court. With Nigeria on the brink of a major diplomatic crisis with one of its most important strategic partners, he must confront extremist violence without inflaming sectarian divides, rebuild diplomatic trust with Washington, and prove that Nigeria’s diversity is its strength, not its death knell. If he can navigate that delicate balance, Nigeria might yet emerge from this moment of scrutiny stronger, more credible, more prosperous, and more united.

Ohimai Amaize is a Nigerian journalist and the senior editor for social media strategy and audience engagement at the Atlantic Council.

The post With Trump’s threats of military intervention in Nigeria, Tinubu faces a delicate balancing act appeared first on Atlantic Council.

When it comes to the EU’s mostly aligned position on Ukraine and Russia, Hungary stands as the biggest outlier. Orbán has repeatedly echoed Russian talking points about Ukraine. And while other EU member states have worked to wean themselves off Russian energy, Budapest has deepened its dependency on Moscow, providing more than five billion euros to Russia’s tax revenues since the Kremlin launched its full-scale invasion in February 2022.

Hungary has also both delayed and derailed EU-wide efforts. The EU’s decision-making procedures, which require unanimity on key issues, provide Hungary ample opportunity to delay or veto EU action. Budapest, for example, is almost always among the last holdouts to agree to place new sanctions on Russia. For months, Orbán delayed the fifty-billion-euro package that the EU prepared for Kyiv, before finally relenting in February 2024 after receiving some concessions on its access to EU funds that had been frozen over Budapest’s rule-of-law violations.

In addition, Hungary has been blocking Ukraine’s bid for EU membership since the bloc opened accession negotiations with Kyiv in December 2023. Orbán has continued to block progress despite the European Commission affirming Ukraine’s readiness earlier this year and stating that there are “no objective reasons” for the blockage. The Commission on November 4 reiterated that Kyiv had met the conditions required to open negotiating chapters, despite Hungary’s veto.

As a result, the EU must move increasingly without Hungary in a nonofficial capacity. For example, the European Council opened accession negotiations with Ukraine in the December 2023 Council meeting only after Orbán dropped his veto by physically leaving the room when the decision came to a head. The Council has continued to resort to holding discussions on Ukraine without Orbán to avoid the political theater of a Hungarian veto on Council decisions. At the last European Council meeting in October, Orbán skipped the conversation on Ukraine entirely.

That the EU has been able to navigate Hungary’s intransigence to secure nineteen rounds of sanctions packages, provide financial support for Ukraine, and grant Kyiv EU candidate status is a feat of diplomatic prowess for the bloc’s leaders, who have used significant financial carrots and sticks to secure Orbán’s reluctant acquiescence.

But the lack of unanimity does a disservice to Ukraine, to Europe, and to the United States. Hungary is not always alone in its obstruction. Still, Budapest has weakened the EU’s hand at a moment when the demands that Europe step up in support of Ukraine are growing, particularly from Washington.

The White House should be clear-eyed about the fact that, despite Trump’s chumminess with Orbán, he has been the roadblock to the action the United States is demanding from Europe. Especially on the provision of financial assistance to Ukraine and advancing Ukraine’s EU membership, Orbán is the problem.

At Friday’s meeting in Washington, Orbán will seek to strengthen his relationship with Trump. Orbán seemed ascendent earlier this fall with the announcement of a meeting between Trump and Russian President Vladimir Putin in Budapest—a meeting Orbán heralded as a sign of his influence over the proceedings. Now, his position is tenuous. The meeting’s cancellation denies Orbán any such diplomatic weight, and he faces the added problem of potentially disastrous effects from the new US energy sanctions on Russia. He will head to Washington looking to secure desperately needed sanctions exemptions, and he has claimed that Hungary would otherwise face an economic collapse.

This means Trump has leverage. The Trump team should press Orbán to stop playing spoiler and allow Europe to take the meaningful action it needs to as Ukraine’s biggest backer. So in exchange for any sanctions relief or economic deals, Orbán’s White House visit would be a perfect opportunity to end Budapest’s obstruction of Ukraine’s EU accession progress.

Even if it is a long way off, Ukraine’s EU membership is in the US interest—and in Trump’s interest, as it would advance his goal of a lasting peace in Ukraine and help facilitate commercial deals for the United States. Ukraine’s integration into the EU’s single market would greatly expand Kyiv’s economic potential. US investments in Ukraine, through the US-Ukraine Investment Fund, would very likely stand to gain if Kyiv received the associated benefits of EU membership in the future. Further, Ukraine’s progress on the path to membership would provide the necessary reforms to keep the country stable and give a clear signal that Europe is bearing the burden of support for Kyiv, a frequent demand from Washington.

Trump has heard this line of reasoning before and picked up on the issue. At the White House meeting with seven European leaders in August, Trump confronted Orbán about his opposition to Ukraine’s EU membership in an impromptu phone call. With Orbán in town, it is the right moment to raise the issue again. Getting Orbán to drop his opposition to Ukraine’s accession would be a diplomatic feat for the White House, highlight the influence Trump has over other world leaders, and represent a strategic coup for Ukraine, Europe, and Washington.

Of course, Orbán has skirted promises before, and Trump may want to cut his friend some slack. But putting the issue front and center at Friday’s meeting will be an important move to show that Washington is watching Europe’s stepped-up efforts on defense and support for Ukraine, and that Trump expects even the most troublesome EU member states to get out of the way of this progress.

James Batchik is an associate director at the Atlantic Council’s Europe Center.

The post Trump has an opportunity to unblock Ukraine’s EU accession in his meeting with Orbán appeared first on Atlantic Council.

As Maduro faces increased pressure, including the risk of impending US military strikes, he has turned to Venezuela’s autocratic allies for help. According to reporting by the Washington Post, Maduro has implored China, Iran, and Russia for missiles, radars, drones, and other military capabilities and assistance.

Of these three countries, Russia has long been the most important for Venezuela, and Maduro reportedly sent his request directly to Russian President Vladimir Putin in October. But with Russia’s full-scale invasion of Ukraine now in its third year and the country’s already weakened economy facing increased pressure from a new wave of US and European Union sanctions, there are significant limits to the aid that Moscow can provide Maduro—and an open question whether it will continue its assistance if the Venezuelan leader is threatened.

A long-standing partnership

Russia and Venezuela have long had close ties, with the partnership deepening significantly after then Venezuelan President Hugo Chavez reached out to Putin in 2000 for much-needed support. In the twenty-five years since then, Russia has been a vital source of military and economic aid for Venezuela. While Russian state-linked oil companies receive some oil in return for their investments, the real benefit of Moscow’s investment in Venezuela is geopolitical. In return for arms and money, Russia gains a significant foothold in South America, helping to fulfill Putin’s ambitions of making Russia a great power and challenging the United States in its own hemisphere. Russia’s support for Venezuela furthers the Kremlin’s ability to act as a spoiler for US interests, and it has the potential to pull US attention and resources away from opposing Russian aggression in Ukraine and elsewhere in Europe.

Russian oil companies have invested in Venezuela for decades, and this investment helped ensure that Venezuelan state-owned oil company PDVSA was able to sustain its output in recent years. Last month, Russia and Venezuela signed a Strategic Partnership Treaty, which calls for expanded collaboration in sectors such as energy, mining, transport, communications, and counterterrorism. Yet, the financial returns on these investments have not always been substantial. In 2019, Reuters reported that Russian companies had yet to break even on the billions of dollars’ worth of investments in the country’s oil sector over the preceding decade. Even so, Russian companies also have the exploration rights for oil and gas reserves, which are potentially worth billions of dollars. These untapped reserves continue to incentivize Moscow’s sustained presence in the country despite its early investments failing to provide a financial windfall.

Since Russia’s full-scale invasion of Ukraine became the Kremlin’s main priority and a drain on Russia’s resources, Moscow has dialed back interest in, and likely its aid to, Venezuela. However, Russia continues to value projecting the image of a formidable ally, investing instead in cultivating ties through military diplomacy. Russia and Venezuela have carried out at least nine military exchanges since 2022, and this included Venezuela hosting part of Russia’s 2022 International Army Games. Though reduced from earlier years, Russia does still provide Venezuela military aid. In July, Venezuela opened a factory to produce Russian Kalashnikov munitions, and last week, a Russian transport aircraft linked to the Russian military landed in Caracas.

In the past, Russia has been willing to deploy military assets to Venezuela when the regime has faced threats. In December 2018, Putin sent two Tu-160 strategic bombers alongside other aircraft to Caracas as Maduro faced international pressure following the election in May of that year, the outcome of which was rejected by Venezuelan opposition candidates. Then in early 2019, as Maduro continued to face opposition, Russia deployed the S-300 surface-to-air missile system to Venezuela, a clear sign of support.

What will Russian support look like this time?

Russia has had success in propping up its autocratic allies in the past. Most notably, Russia’s direct military intervention in Syria in 2015 helped change the course of the civil war and propped up the regime of Bashar al-Assad for years. But the Kremlin’s support for Assad waned after it launched the war in Ukraine, which contributed to the Syrian regime’s collapse in December 2024. This delivered a blow to Russia’s credibility as a reliable ally for Putin’s autocratic friends and should serve as a warning to Maduro.

Maduro’s appeals to Moscow for help may result in some aid, but he should not expect Putin to be his savior. Russia continues to face real economic constraints that limit its ability to provide an economic lifeline to Venezuela. When Maduro traveled to Moscow in August to mark eighty years of the bilateral relationship, he came home without any new loans or funding. Trade between the two topped out at $1.2 billion in 2024, less than a third of Russia’s trade with other Latin American nations such as Brazil and Mexico. With Russia’s wartime economy facing stagnation and potential decline, Moscow is likely hesitant to spend already limited funds on propping up Maduro.

Significant Russian military support is also unlikely to be forthcoming, even if the United States launches some sort of targeted strike within Venezuela. Today, Russia’s war against Ukraine has made it more reliant on China, Iran, and North Korea. As Russia scholar Angela Stent wrote in an Atlantic Council report released last month, these countries are “essential for Russia’s continued prosecution of the war.” Notably missing from this list of key allies is Venezuela. And even being part of this group, sometimes referred to as an “axis,” does not ensure Russian aid. Though Iran is a critical supplier of Shahed drones, the strategic partnership treaty between Moscow and Tehran signed in January stipulates that Russia will not come to Iran’s defense if it is attacked by Israel or the United States.

Indeed, following the US strikes on Iran earlier this year, Russia responded with words of condemnation, but no tangible actions of support. Instead, Moscow welcomed the distraction from its war in Ukraine that the attacks provided. Should the United States strike Venezuela, Moscow would likely repeat this playbook and avoid coming to Venezuela’s aid in any meaningful way.

Expect Russian bluster over real benefits  

Despite the limits he faces in providing economic or significant military aid to Maduro, Putin certainly still wants to be seen as a reliable and valuable partner to autocracies around the world. One option that Putin may employ is nuclear saber-rattling. Earlier this year, Russian lawmakers proposed deploying nuclear missiles to Venezuela and Cuba. While nothing has come of this threat, such statements allow Moscow to convey support for its ally in Caracas without undertaking action.

Don’t be surprised if, to up the ante now, Putin openly muses about such deployments in the coming weeks. But Russia’s economic constraints and its focus on Ukraine mean that there is simply not much that Moscow can really provide to Venezuela. Bold rhetoric from the Kremlin will continue, but not much else is likely to follow.

Imran Bayoumi is an associate director with the GeoStrategy Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security. 

Shelby Magid is the deputy director of the Atlantic Council’s Eurasia Center.

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

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

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

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The post Europe finally moves to ban Russian gas but potential loopholes remain appeared first on Atlantic Council.

The border shutdown follows a recent wave of Belarusian balloons entering Lithuanian airspace. The incursions have prompted airport closures and cause significant travel disruption, with more than 170 flights affected during October. On Sunday night alone, Lithuanian authorities detected 66 airborne objects heading from Belarus into the Baltic country.

Minsk has sought to downplay the incursions as a mere cigarette smuggling operation, but Vilnius insists the balloons are part of a broader hybrid war being waged by Russia and Belarus against Europe. “Smuggling in this case is just a subtext or a means for a hybrid attack against Lithuania. We have a lot of evidence, both direct and indirect, that this is a deliberate action aimed at destabilizing the situation in Lithuania,” commented Lithuanian President Gitanas Nausėda. He warned of additional countermeasures, including restrictions on Belarusian rail transit and unified EU-wide sanctions mirroring those imposed on Russia.

European Commission President Ursula von der Leyen echoed Nausėda’s comments and expressed solidarity with Lithuania, calling the Belarusian balloons a “hybrid threat” that Europe will not tolerate. She linked the issue to the European Union’s broader push for enhanced military readiness, particularly in terms of airspace defense capabilities against the growing threat posed by Russian drones and aircraft.

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.

Belarusian dictator Alyaksandr Lukashenka has dismissed European concerns and attacked the Lithuanian decision to close the border as a “crazy scam,” while also accusing the West of waging a hybrid war against Belarus and Russia. His denials lack credibility, however, given the recent spate of airspace violations across Europe and along the EU’s eastern frontier with Russia and Belarus.

Around twenty Russian drones penetrated Polish airspace in early September, leading to an unprecedented armed response from NATO jets. Some of the Russian drones entered Poland via Belarus, highlighting Minsk’s role in Moscow’s campaign of hybrid aggression. Days later, a small group of Russian fighters violated NATO airspace off the coast of Estonia.

There have also been numerous incidents over the past two months involving suspected Russian drones close to strategic sites throughout Europe including military bases and international airports. Speaking in September, Danish Prime Minister Mette Frederiksen claimed the drone incursions were part of a Russian hybrid war and said Europe was facing its “most difficult and dangerous situation” since the end of World War II.

European airspace violations serve a number of purposes for Putin and his Belarusian proxy. In practical terms, they allow the Kremlin to probe NATO defenses and test the alliance’s readiness to combat incursions. Russian drones and Belarusian balloons also inconvenience the European public and intimidate European leaders at a time when the continent is already increasingly alarmed by US President Donald Trump’s mixed messaging over America’s commitment to European security.

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In response to Lithuania’s border closure, Lukashenka has warned that he may now stop cooperating with Brussels on migration issues. Given his regime’s well-documented prior weaponization of migrants on the Belarusian border with the European Union, this is a very thinly-veiled threat.

At the same time, the Belarusian ruler is also attempting to engage in renewed outreach to the West, with a particular emphasis on the US. Lukashenka has held a number of meetings with United States officials in recent months, leading to the release of political prisoners held by Belarus and an easing of American sanctions against Belarusian national airline Belavia.

This apparent thaw has been hailed in Washington as a sign of progress, but not everyone is convinced. Human rights groups have identified 77 new political prisoners in Belarus during September 2025, more than the total number of detainees freed in US-brokered releases since the start of the year. In other words, it would appear that Lukashenka is seeking sanctions relief without committing to end repressive policies at home and while continuing to serve Moscow’s strategic interests.

The Trump administration has signaled its dissatisfaction over recent Belarusian balloon violations of Lithuanian airspace. “I made clear we stand in solidarity with Lithuania amidst recent balloon incursions. Belarus should prevent further such incidents,” commented US Special Envoy John Coale, who has been directly involved in this year’s talks with the Lukashenka regime.

Growing tensions on the Lithuanian border with Belarus should serve as further confirmation that Lukashenka remains fully committed to participating in Russia’s confrontation with the West. Belarusian balloon violations of EU airspace are part of a Kremlin-led campaign to test Western resolve, strain NATO solidarity, and intimidate Europe. As long as Lukashenka continues to play a supporting role in Putin’s hybrid war against the West, he should be regarded as an adversary.

Hanna Liubakova is a journalist from Belarus and nonresident senior fellow at the Atlantic Council.

Further reading

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

Read more from UkraineAlert

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

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

Learn more

The post Belarusian balloons pose new threat in Putin’s hybrid war against Europe appeared first on Atlantic Council.

Consequently, Iran’s partnership with Russia, which views the reimposition of these UN sanctions as illegitimate, is likely to deepen. This development is expected to accelerate Tehran’s strategic pivot eastward, a shift that gained momentum after US President Donald Trump’s first administration withdrew from the JCPOA in May 2018.

Despite persistent mistrust, Iran and Russia are highly pragmatic actors. As long as the West continues to pursue policies of isolation, deeper economic cooperation between Tehran and Moscow is a logical consequence. United by a desire to counter US influence, Iran and Russia are poised to deepen their bilateral and multilateral cooperation.

Russia’s evolving stance on the “snapback”

Ironically, Russia originally proposed the “snapback” mechanism enshrined in UN Security Council Resolution 2231 during the negotiations that led to the JCPOA’s 2015 passage. At the time, Moscow viewed the clause as a practical solution to potential diplomatic deadlock, offering a veto-proof, automatic process to reimpose sanctions should Iran violate the agreement. This design, in Russia’s view, ensured the JCPOA’s enforceability while maintaining consensus among the major powers.

Today, however, Russia opposes the mechanism’s activation. After the E3 initiated the “snapback” process on August 28, Moscow denounced the legally “flawed” move, arguing that the European states themselves had breached the JCPOA and therefore lacked the standing to trigger such a measure. Russia also contended that the reimposition of pre-2015 UN sanctions on Iran would carry no binding international legal force, despite the E3’s assertion of an “unambiguous” right to do so.

Back in 2020, when the first Trump administration sought to unilaterally trigger the “snapback” mechanism, Russia and China joined together in formally opposing this move on the grounds that Washington’s withdrawal from the JCPOA deprived the United States of any legal justification for invoking “snapback.” To back up their case using international law, Moscow and Beijing cited a June 1971 advisory opinion of the International Court of Justice (ICJ) concerning the South African presence in Namibia and applied it to the arms embargo on Iran as well as the “snapback” procedure. According to this advisory opinion, a party that disowns its obligations under an agreement cannot simultaneously claim the rights arising from that agreement.

Having been clear it would not recognize, nor comply with, restored pre-2015 sanctions on Tehran, Moscow attempted to delay, undermine, and obstruct the E3’s efforts to bring back these UN sanctions. But a UN Security Council resolution—drafted by Russia and China to preserve sanctions relief for Iran—failed to pass on September 26, with nine members, including the United States, United Kingdom, and France, voting against it. Only four countries—Russia, China, Algeria, and Pakistan—supported it, and two abstained.

“We had hoped that European colleagues and the US would think twice, and they would opt for the path of diplomacy and dialogue instead of their clumsy blackmail, which merely results in escalation of the situation in the region,” said Dmitry Polyanskiy, the deputy Russian ambassador to the UN, at the Security Council meeting.

With no alternative resolution adopted by the deadline in late September, the “snapback” process formally entered into effect. This episode underscores a broader diplomatic paradox: legal mechanisms, once championed by a particular state, can endure well beyond the political consensus that gave rise to them—sometimes to that state’s own strategic disadvantage.

Although Moscow was unable to block the UN Security Council’s reimposition of pre-2015 sanctions on Iran, it retains significant capacity to obstruct their enforcement. One key example is its ability to prevent the reactivation of the 1737 Sanctions Committee (originally established in December 2006 to oversee and enforce the implementation of UN sanctions on Tehran) or stall the appointment of experts to the committee’s panel. As the committee’s mandate requires consensus within the UN Security Council, Russia can leverage its position to hold up its revival. Moscow’s rejection of “snapback” is more than symbolic—it reflects a strategy to blunt the impact of renewed UN sanctions on Iran. Nonetheless, even with Russia and China undermining enforcement, it seems difficult to avoid concluding that “snapback” by the E3 will have a destabilizing impact on Iran’s economy while exacerbating tensions between elite figures in the state and ordinary citizens.

Iran and Russia deepen ties amid sanctions

Russia’s current refusal to comply with the recently reimposed UN sanctions on Tehran will help Iran weather this increased economic pressure, at least to some degree. Bilateral trade and cooperation across various sectors, including nuclear energy, will likely deepen as the two countries move ahead with implementing their Comprehensive Strategic Partnership Treaty, which Russian President Vladimir Putin and Iranian President Masoud Pezeshkian signed in Moscow nine months ago. Meanwhile, Russia can be counted on to advocate on behalf of Iran’s interests at the UN Security Council, while becoming increasingly critical of the West’s policies toward Tehran.

Russia, China, Pakistan, and Iran’s alignment against the reactivation of the “snapback” mechanism and resultant UN sanctions will reinforce a conviction among Iranian officials that the country’s entry into non-Western institutions such as BRICS+ and the Shanghai Cooperation Organization has been most prudent. In line with the “Look East” pillar of Iran’s foreign policy, the leadership in Tehran believes the country’s geopolitical destiny is with Russia, China, and other non-Western powers such as Pakistan, Central Asian republics, and North Korea.  

From Tehran’s perspective, the E3’s move further confirms its long-held view that Western powers are untrustworthy, making nuclear concessions seem futile. Moreover, European, particularly German, support for Israel during the recent Twelve Day War—to say nothing about US military strikes on Iranian nuclear facilities—only deepened this perception, severely undermining the voices in Tehran who sought to find a “new understanding” with Western capitals.

Having said this, Iran will keep the door open to talks with the West, albeit while prioritizing deterrence over diplomatic compromises. And despite growing alignment, major stumbling blocks remain in transforming the Tehran-Moscow partnership into a full-fledged alliance. Chief among them is Russia’s resilient and pragmatic relationship with Israel, which has strengthened under the leadership of Putin and Israeli Prime Minister Benjamin Netanyahu. The Kremlin’s desire to maintain strong ties with Gulf monarchies is also a source of tension. Many Gulf countries remain suspicious of Iranian intentions—particularly in relation to the Islamic Republic’s sponsorship of certain non-state actors in the Arab world, as well as its missile and drone activities—despite an overall state of détente in Riyadh and Abu Dhabi’s relationships with Tehran.

Additionally, Russia’s response to the Twelve Day War highlighted Moscow’s desire to maintain a balance between Israel, Arab states, and Iran. To Tehran’s disappointment, Moscow condemned Israeli attacks on Iran and called for de-escalation, but did not make any concrete moves that tangibly supported Iran. Iranian perceptions of Russia assisting Israel amid that conflict have contributed to further erosion of trust in the bilateral relationship. Mohammad Sadr, a member of Iran’s Expediency Discernment Council, for example, claimed that “Russia provided Israel with information about Iran’s air defense sites” during the June war.

But Tehran will still seek to move closer to Russia in pursuit of its economic and military needs, as it faces growing international pressure and the fear of a potential collapse of the June 2025 cease-fire with Israel. With Moscow refusing to implement the pre-2015 UN sanctions, Iran will turn to Putin’s government for greater cooperation in intelligence sharing, technical support, and advanced military technology, while counting on Russia to further facilitate defense cooperation between Iran and various former Soviet republics from Tajikistan to Belarus.

Looking ahead, growing Iranian-Russian alignment will further undermine Western efforts to isolate Tehran. As both states deepen their coordination, economically, militarily, and diplomatically, they are working not only to blunt the effectiveness of Western sanctions, but also to challenge the broader architecture of a US-led global order. Although the prospects for reviving the JCPOA or reaching a new nuclear deal altogether remain extremely dim, the West’s failure to meaningfully engage Iran on its its nuclear and missile program, as well as more controversial aspects of its regional foreign policy, will likely accelerate Tehran’s drift further into Moscow’s orbit.

Giorgio Cafiero is the CEO of Gulf State Analytics, a Washington, DC-based geopolitical risk consultancy. He is also an adjunct assistant professor at Georgetown University.

The post ‘Snapback’ sanctions are deepening the Iran-Russia alignment appeared first on Atlantic Council.

“It was time,” President Donald Trump said on Wednesday as he announced that the United States was ratcheting up sanctions on Russia. The new measures—the first such action against Russia in Trump’s second term—target Russian energy giants Rosneft and Lukoil, as well as more than thirty subsidiaries. The sanctions come as US-led efforts to end Russia’s war in Ukraine have stalled, with a proposed meeting between Russian President Vladimir Putin and Trump in Budapest now cancelled. How much of a punch do the new sanctions pack? How might Moscow respond? Atlantic Council experts answer below. 

• Daniel Fried (@AmbDanFried): Weiser Family distinguished fellow and former US assistant secretary of state for Europe 
• John E. Herbst (@JohnEdHerbst): Senior director of the Eurasia Center and former US ambassador to Ukraine
• Kimberly Donovan: (@KDonovan_AC): Director of the Economic Statecraft Initiative within the GeoEconomics Center and former White House and Treasury official 

Why now?

• “This is the first time the Trump administration has imposed any new financial restrictions on Russia,” in this term, Dan tells us. This action came “after Putin stonewalled on a cease-fire and patronized Trump” during a call between the two leaders last week. 
• “Today’s move is a welcome warning shot to Putin to knock off the games and maximalism and get serious about ending the war,” says Dan. 
• And yet, John warns, “Putin still thinks that he can outlast any Western leader in pursuing his war of conquest.”

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What’s the impact?

• Kim predicts a “direct and immediate impact on Russia’s oil profits,” both from legal sales and those via the Kremlin’s price cap-busting shadow fleet.  
• The primary sanctions against Rosneft and Lukoil, Kim notes, were pursuant to Executive Order 14024, which she says is significant because it “carries the threat of secondary sanctions on foreign financial institutions that continue to do business with the sanctioned companies.” 
• But these sanctions are “not a maximal blow,” says Dan. Tougher US actions, he adds, could include “joining Europe in lowering the price cap on Russian oil, enforcing the oil price cap by putting sanctions on the Russian shadow fleet of tankers,” and sanctioning ports that service them. 
• Nevertheless, Dan says the sanctions are “a strong move.” He explains that they could “put even more downward pressure on Russian oil revenues” by forcing Moscow to further discount its oil and “forcing purchasers to consider alternative sources of oil.”  

What’s next?

• Kim notes that the US Treasury Department also issued a general license on Wednesday that will “allow for a wind down of transactions with Rosneft and Lukoil, which expires on November 21.” This window, she says should give countries that purchase large amounts of Russian oil, such as China and India, “time to decide if they will stop importing Russian oil or face the threat of secondary sanctions by the United States.” 
• Going forward, says Kim, the United States should continue aligning sanctions policy with the United Kingdom and the European Union. (Though the latter has not yet sanctioned Lukoil.) Such alignment and “consistent enforcement,” she writes, “will ensure these actions achieve the desired result and get Putin to negotiate an end to this bloody war.” 
• To achieve his goal of ending the war, Trump should “prepare for a monthslong ratcheting up of pressure on Moscow,” says John. “At the moment, all Putin sees for sure is another round of sanctions. It must not be the last round.”  
• The United States, “also needs to do more on the military side,” John argues. Even if the Trump administration does not want to give Tomahawk missiles to Ukraine now, John asks: “Why repeat the Biden tactic of ruling out measures that make the Kremlin nervous?” 
• “Trump can only achieve a durable peace,” says John, “if he persuades Putin that the United States and its allies will arm Ukraine to the point that further Russian military gains are not possible.” 

The post How will Trump’s new Russian oil sanctions shift the war? appeared first on Atlantic Council.

Serbia’s energy lifeline is now under US sanctions after 8 months of postponements. Washington has targeted NIS, Serbia’s main oil company, majority-owned by Russia’s Gazprom Neft, striking at the core of Belgrade’s energy system and its fragile balance between Moscow and Brussels.

With 80% of Serbia’s fuel supply flowing through NIS, the sanctions raise urgent questions:

• Will Russia sell its stake in Serbia’s oil giant?
• Could Western or regional buyers step in?
• And how will this reshape Belgrade’s geopolitical balancing act between East and West?

In this episode of #BalkansDebrief, Ilva Tare, Europe Center Senior Fellow, speaks with Dr. Igor Novaković, Senior Associate at the International and Security Affairs Centre, ISAC Fund, to unpack what these sanctions mean for Serbia’s energy security, its economy, and its future in Europe’s political orbit.

From the refinery to the corridors of Brussels and Moscow, this is a story about power, dependency, and the price of neutrality in a region caught between competing global interests.

#BalkansDebrief is an online interview series presented by the Atlantic Council’s Europe Center and hosted by journalist Ilva Tare. The program offers a fresh look at the Western Balkans and examines the region’s people, culture, challenges, and opportunities.

Watch #BalkansDebrief on YouTube and listen to it as a Podcast.

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The post Can Serbia survive US sanctions on Russian oil? | A Debrief with Igor Novaković appeared first on Atlantic Council.

This sudden change in tone came after US Secretary of State Marco Rubio and Russian Foreign Minister Sergei Lavrov reportedly failed to make any meaningful progress during a preliminary call ahead of planned talks in Budapest. Lavrov later confirmed that Putin had dismissed Trump’s ceasefire proposal and remained fully committed to achieving the maximalist goals of his invasion. “A ceasefire now would mean only one thing: A large part of Ukraine would remain under Nazi rule,” Russia’s top diplomat stated.

Lavrov’s latest comments serve as a timely reminder that Moscow’s objectives in Ukraine go far beyond limited territorial concessions and extend to regime change in Kyiv. His insistence on branding the Ukrainian government as “Nazis” is nothing new, of course, but it does underline Russia’s rejection of peaceful coexistence with an independent Ukraine, while also highlighting the scale of the current disconnect between Moscow and Washington. While Trump attempts to broker a geopolitical real estate deal, Putin is seeking to secure his place in history by extinguishing Ukrainian statehood and reviving the Russian Empire.

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.

It is not surprising that some within the Trump administration still struggle to grasp the true motives behind Russia’s attack on Ukraine. After all, the current invasion has been accompanied by an unprecedented deluge of disinformation designed to distract international attention from Putin’s imperial ambitions. Since 2022, the Kremlin has sought to pin the blame for the invasion on everything from NATO enlargement to phantom fascists. Moscow’s many excuses have undeniably succeeded in clouding perceptions of the war, but none of the justifications presented by the Kremlin can stand up to serious scrutiny.

Putin has repeatedly framed the war as a response to decades of NATO expansion that has brought the alliance ever closer to Russia’s borders. His own actions, however, have largely debunked this argument. When neighboring Finland responded to the invasion of Ukraine in spring 2022 by announcing plans to join NATO, Putin did nothing and said he had “no problem” with Helsinki’s decision. He has since gone even further and withdrawn most Russian troops from the frontier with Finland. Given the fact that Finnish accession virtually doubled Russia’s shared border with NATO, this nonchalance is revealing. Clearly, Putin knows very well that NATO poses no threat to Russia itself. His real problem is with Ukrainian independence not NATO expansion.

The Kremlin’s claims to be waging a crusade against Ukrainian Nazis are even more far-fetched. Russian attempts to equate Ukrainian national identity with Nazism date all the way back to World War II and have been enthusiastically revived by the Putin regime. This approach shamelessly exploits the Russian public’s reverence for the Soviet role in the defeat of Hitler, while conveniently ignoring the political realities in today’s Ukraine.

Ever since Ukraine regained independence in 1991, Far Right political parties have been relegated to the margins of the country’s fledgling democracy. During Ukraine’s last prewar parliamentary election in 2019, most nationalist parties formed a single coalition in a bid to overcome years of ballot box disappointment. They failed miserably, receiving just 2.16 percent of the vote.

Nothing has exposed the absurdity of Kremlin attempts to portray Ukrainians as Nazis more than the election of Jewish candidate Volodymyr Zelenskyy as the country’s president. Ever since Zelenskyy won the presidency by a landslide in 2019, Putin and other Kremlin officials have engaged in deeply unsavory mental gymnastics as they have struggled to explain how a supposedly Nazi nation could overwhelmingly vote for a Jewish leader. The most notorious example of this disgraceful trend came in spring 2022, when Russian Foreign Minister Lavrov declared during an Italian television interview that “Hitler also had Jewish blood.”

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Putin has typically been far franker about his war aims when speaking to domestic Russian audiences. For years, he has argued that Ukrainians are in fact Russians (“one people”) who are occupying historically Russian lands and have no right to a separate nation of their own. On the eve of the full-scale invasion, he began referring to Ukraine as an artificial “anti-Russia,” and took the highly unusual step of publishing a rambling 5000-word history essay that read like a declaration of war against Ukrainian statehood. Following the outbreak of hostilities, he began proclaiming the “return” of Russian lands and comparing his invasion to the imperial conquests of eighteenth century Russian Czar Peter the Great.

The criminal actions of the Russian army in Ukraine have been profoundly shaped by Putin’s bitter opposition to Ukrainian national identity. In areas under Kremlin control, anyone viewed as a Ukrainian patriot or deemed a potential threat to the occupation authorities is likely to disappear into a vast network of camps and prisons. A United Nations probe has ruled that these mass detentions represent a crime against humanity.

Huge numbers have also been deported. This includes tens of thousands of children, who are subjected to ideological indoctrination to rob them of their Ukrainian heritage and impose a Russian identity. Those who remain in occupied Ukraine are being forced to accept Russian citizenship amid a brutal campaign to systematically erase all traces of Ukrainian history, culture, language, and identity. This genocidal conduct makes a complete mockery of attempts to portray the invasion of Ukraine as a mere border dispute that can be settled via limited land swaps.

Putin’s Ukraine obsession is rooted in his experience as an eye witness to the collapse of the Soviet Empire while serving as a KGB officer in East Germany, and reflects his fears that the further consolidation of a democratic and European Ukraine could act as a catalyst for the next stage in Russia’s imperial retreat. Beginning with the 2004 Orange Revolution, his determination to force Ukraine back into the Kremlin orbit has come to dominate Russian foreign policy and has slowly but steadily compromised Moscow’s relationship with the wider Western world. Putin has now bet everything on the reconquest of Ukraine and knows that his entire reign will be judged by the outcome of the current war.

If Trump wishes to end the bloodshed in Ukraine and secure his precious Nobel Peace Prize, he must first recognize that Putin is playing for the highest possible stakes on the stage of history and will never compromise unless forced to do so. Indeed, he dare not back down. At this point, anything less than the destruction of Ukraine as a state and as a nation would be regarded in Moscow as a major defeat that would plunge the Kremlin into crisis.

Putin will doubtless continue to profess his desire for peace while engaging in stalling tactics and playing for time. He will string Trump along with yet more seductive phone calls and headline-grabbing summits that flatter the US leader’s ego, but he will almost certainly not enter into genuine peace negotiations until the alternative is defeat in Ukraine and disaster for Russia itself. The sooner Trump accepts this reality, the sooner we can move beyond the current phony peace process and begin the hard work of securing a sustainable settlement through the long overdue application of Western strength.

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

Further reading

UkraineAlert Sep 30, 2025

Putin’s dream of demilitarizing Ukraine has turned into his worst nightmare

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Conflict Defense Technologies

UkraineAlert Oct 16, 2025

Ukraine’s drone sanctions are working but don’t expect a Russian revolt

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Ukraine’s long-range drone strike campaign has brought Putin’s invasion home to Russia but mounting domestic problems are unlikely to spark a rebellion against the Kremlin dictatorship, writes Christopher Isajiw.

Conflict Drones

UkraineAlert Oct 2, 2025

Drone superpower Ukraine is teaching NATO how to defend against Russia

By David Kirichenko

Ukraine’s unrivaled experience of drone warfare makes it a key partner for NATO and an indispensable ally in the defense of Europe as the continent faces up to the mounting threat posed by an expansionist Russia, writes David Kirichenko.

Conflict Defense Technologies

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

Read more from UkraineAlert

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

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

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The post Budapest summit postponed as Putin rejects Trump’s ceasefire proposal appeared first on Atlantic Council.

This is not the first time since the start of the full-scale invasion that Russia has faced major budgetary strains. In 2022, the Kremlin’s urgent need to cover rising military expenditures forced it to resort to improvised measures such as windfall taxes on the energy and banking sectors. A surge in commodity prices then helped cover Russia’s ballooning defense budget, while mobilization and additional recruitment in 2023 and 2024 were financed mainly through municipal and regional budgets, along with minor tax hikes.

For much of the past three and a half years, international attention has focused on Russia’s apparent success in overcoming the impact of sanctions, along with the Kremlin’s ability to maintain modest GDP growth while transitioning to wartime conditions. However, the economic strain of the ongoing invasion is now becoming increasingly hard to disguise.

Russia’s deepening economic difficulties have been exacerbated by a highly effective Ukrainian campaign of long-range air strikes targeting the oil and gas industry that fuels Putin’s war machine. Since August 2025, Ukraine has launched a large-scale air offensive against oil refineries, gas processing plants, fuel depots, pipelines, logistics hubs, and export terminals across the Russian Federation. This has contributed to a sharp drop in Russian energy export revenues and led to spikes in fuel prices for domestic consumers. In recent months, fuel shortages have been reported in regions throughout Russia, with car owners forced to queue for hours in search of limited supplies.

The current fuel crisis in Russia is unlikely to be resolved soon. In a recent assessment, the Paris-based International Energy Agency stated that the impact from Ukrainian drone strikes is expected to suppress refinery processing rates for Russia’s economically crucial oil industry until at least mid-2026. Ukrainian strikes are also continuing to gain pace, with Kyiv in the process of developing a new generation of domestically produced missiles that should enable a further escalation in the bombing campaign.

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.

To cover the growing gaps in the Russian budget and continue funding the war, the Kremlin plans to hike the country’s VAT rate from 20 to 22 percent. Tax increases are also expected to impact entrepreneurs, as the threshold for Russia’s simplified system with lower rates is set to be reduced fourfold. Critics have characterized this strategy as redirecting money away from ordinary Russian citizens and private businesses in order to finance the invasion of Ukraine.

Russia’s deteriorating economic situation places the Kremlin in a difficult position. On the one hand, a combination of sustained Western support for Ukraine and funding issues in Moscow mean that the Russian military could soon face increasing difficulties on the battlefield. On the other hand, the longer the fighting drags on, the more Russia’s economy is likely to suffer. Meanwhile, further sanctions measures and Ukrainian strikes on Russia’s energy industry are creating new pressure points that risk fueling domestic discontent inside Russia.

With relatively little movement along the military front lines in Ukraine over the past two years, the economic front of the war may ultimately prove decisive. “Putin will only stop this war when he thinks he can’t win, and for him to come to that conclusion, there needs to be more pressure on the Russian economy and more help for the Ukrainians,” commented Polish Foreign Minister Radosław Sikorski in September. “The war will likely end the way World War I ended. One side or another will run out of resources to carry on.”

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How Russia’s winter warfare strategy targets Ukrainian civilians

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The objective in Western capitals must now be to make sure Russia runs out of resources before Ukraine. This should not be beyond the realms of possibility, given the vastly superior resources of Ukraine’s allies.

Russia’s current goal is to reduce its dependence on oil and gas. The planned Russian budget for 2026 is based on a lower oil price and aims to rely more on domestic taxes instead. Over time, this approach could make Russian state finances more resilient by cutting the share of oil and gas revenues from the current level of around 40 percent to about half that figure. But if Western countries tighten sanctions at the right moment, this plan could backfire, triggering runaway inflation and a further slowdown in Russian economic activity.

There are currently encouraging signs of Western readiness to increasingly target Putin’s war economy. Trump’s efforts to impose tariffs on countries that buy Russian oil have already made some nervous about trading with Moscow. The EU and UK have also stepped up sanctions, including blacklisting more ships from Russia’s shadow fleet. These measures are having an impact. For example, China’s Qingdao Port recently introduced technical restrictions on tankers that will effectively ban shadow fleet vessels, a move that underscores growing caution toward doing business with the Kremlin.

Ukraine’s deep strikes have exposed Putin’s Achilles heel and have helped demonstrate that the Russian economy is far more fragile than many in Moscow would like us to believe. Kyiv’s Western partners should now exploit their economic leverage over Russia in order to increase the pressure on Putin and convince the Kremlin that continuing the war could lead to economic ruin.

Vladyslav Davydov is an advisor to Ukraine’s First Deputy Minister for Development of Communities and Territories.

Further reading

UkraineAlert Sep 30, 2025

Putin’s dream of demilitarizing Ukraine has turned into his worst nightmare

By Peter Dickinson

Putin had hoped to demilitarize and decapitate the Ukrainian state, but his self-defeating invasion has inadvertently created the militarily powerful and fiercely independent Ukraine he feared most of all, writes Peter Dickinson.

Conflict Defense Technologies

UkraineAlert Oct 14, 2025

Russian strikes on Ukraine’s energy infrastructure are a European problem

By Aura Sabadus

Russia’s strikes on Ukrainian energy infrastructure are no longer just a Ukrainian problem. Moscow’s bombing campaign will become a wider European issue unless more support is offered to Kyiv, writes Aura Sabadus.

Conflict Drones

UkraineAlert Oct 16, 2025

Putin seeks more foreign fighters amid mounting Russian losses in Ukraine

By David Kirichenko

With fewer and fewer Russians ready to volunteer for the war in Ukraine, Putin is seeking to recruit more foreign fighters from across Africa, Asia, and beyond, writes David Kirichenko.

Africa Americas

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

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

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

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The post Vladimir Putin’s war machine may finally be running out of fuel appeared first on Atlantic Council.

While the Kremlin is understandably eager to conceal the scale of the damage caused by Ukraine’s energy sector attacks, there can be little question that the strikes conducted in recent months are bringing Putin’s invasion home to ordinary Russians. In early October, the Paris-based International Energy Agency downgraded its outlook for Russia and assessed that the impact from Ukrainian drone strikes will suppress Russia’s refinery processing rates until at least mid-2026. Meanwhile, car owners across Russia are being forced to queue for gasoline amid supply issues not witnessed since the dark days of the early 1990s.

The current wave of fuel shortages is undermining Kremlin efforts to shield the Russian population from the negative consequences of the war in Ukraine. Putin has been careful to limit the impact of the invasion on ordinary Russians, with military recruitment concentrated on disadvantaged regions of the country, prison populations, and financially motivated volunteers. This approach is very much in line with the unwritten ‘social contract’ that has evolved during the 25 years of Putin’s reign, whereby he offers the Russian public higher living standards in exchange for curtailed personal freedoms and political passivity.

The so-called social contract between Putin and the Russian population had already begun to unravel long before the present wave of Ukrainian attacks on Russia’s energy industry. Over the past three and a half years, the full-scale invasion of Ukraine has resulted in military losses unseen in Europe since World War II. At least one million Russians have been killed or wounded in the conflict, according to Britain’s Ministry of Defense and other international sources.

In parallel, economic growth in all but the defense sector has stagnated, with massive payments to military personnel deepening public dependency on the war. Throughout Russian society, policies of repression have reached unprecedented new levels as Putin has exploited wartime conditions to complete the country’s transition from flawed democracy to authoritarian dictatorship. Despite this deteriorating domestic situation, there is still no sign of any significant anti-war movement in today’s Russia.

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.

It is probably unrealistic to expect any Russian revolt over Putin’s breach of the social contract. This should not come as a surprise. While opinion polls have often indicated strong public support for the Putin regime, the Kremlin has always relied primarily on coercion rather than consensus. Throughout Putin’s reign, opposition figures have been exiled, imprisoned, or silenced, while the independent media has been muzzled and civil society suppressed. Following the onset of the full-scale invasion, these trends have all intensified. As a result, there is currently little prospect of any grassroots protests.

Opposition from within Russia’s elite looks equally unlikely. With the Russian economy increasingly on a war footing, the full-scale invasion is now a crucial factor determining the wealth and status of the country’s political and business establishment. With most members of the elite personally dependent on Putin and largely locked out of the Western world, the conditions for a Kremlin coup appear to be almost entirely absent. Instead, the invasion of Ukraine has allowed Putin to consolidate his grip on power and has forced those around him to draw closer to the throne.

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Online Event Fri, January 30, 2026 • 9:00 am ET

How Russia’s winter warfare strategy targets Ukrainian civilians

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This does not mean that Ukraine’s current strategy of long-range strikes against the Russian energy sector is futile. Far from it, in fact. But with Putin firmly entrenched on the home front, only external pressures can realistically force him to abandon his invasion. Ukrainian attacks on Putin’s oil and gas industry are already having a significant impact on the Russian economy. If the current momentum can be maintained into 2026, the economic damage could become far more severe. This will curtail Moscow’s ability to finance and prosecute the war in Ukraine, while also negatively impacting many other aspects of Russian daily life.

Ukrainian efforts to push Putin to the negotiating table can only succeed with stronger Western support. Despite Russia’s claims of resilience, its economy remains heavily dependent on energy exports, with China and India the main clients. Effective Western action should include tightening sanctions on these buyers. Efforts must also continue to end all European purchases of Russian energy exports, either directly or via third parties. Additionally, Western leaders could help end the war by working to bring down global oil prices, thereby starving the Kremlin of much-needed export revenues.

Economic measures alone will not be enough. Military aid to Ukraine should also increase, with an emphasis on the provision of weapons systems capable of strengthening Ukraine’s domestic defenses while allowing Kyiv to expand attacks inside Russia. The objective should be to stabilize the front lines in Ukraine and protect Ukrainian cities from bombardment, while escalating the destruction of Russia’s war economy through a combination of air strikes and sanctions. If these goals can be achieved, Putin may finally be compelled to seek a settlement.

Christopher Isajiw is an international relations commentator and business development consultant to private, governmental, and non-governmental organizations.

Further reading

UkraineAlert Oct 8, 2025

Ukraine’s defense tech sector must guard against innovation drain

By Andriy Dovbenko

Without robust intellectual property (IP) protections, Ukraine may lose control of the defense tech innovations that are currently helping to defend the country on the battlefield, writes Andriy Dovbenko.

Conflict Defense Industry

UkraineAlert Sep 25, 2025

Trump called Russia a ‘paper tiger’ because he believes Putin is losing

By Peter Dickinson

US President Donald Trump now says Ukraine can defeat Russia. His dramatic change in tone reflects growing recognition that Putin’s invasion is not going according to the Kremlin plan, writes Peter Dickinson.

Conflict Disinformation

UkraineAlert Oct 14, 2025

Russian strikes on Ukraine’s energy infrastructure are a European problem

By Aura Sabadus

Russia’s strikes on Ukrainian energy infrastructure are no longer just a Ukrainian problem. Moscow’s bombing campaign will become a wider European issue unless more support is offered to Kyiv, writes Aura Sabadus.

Conflict Drones

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

Read more from UkraineAlert

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

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

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The post Ukraine’s drone sanctions are working but don’t expect a Russian revolt appeared first on Atlantic Council.

In early September, Belarus and the United States announced an agreement that saw 52 political prisoners released in exchange for an easing of sanctions against Belarusian state airline Belavia. This was the second such deal brokered by the US in the past few months, with 14 detainees freed in June 2025 during a visit to Minsk by United States Special Envoy Keith Kellogg.

The release of political prisoners by the Lukashenka regime has been hailed by the White House as a step in the right direction as the Trump administration seeks to reengage with Belarus following years of frosty relations. In a further indication of a thaw in Washington-Minsk ties, US officers were invited to observe recent joint military exercises between Belarus and Russia.

This might look like progress at first glance, but the reality is less encouraging. For every Belarusian prisoner released, others are being jailed. Just days after the US delegation left Minsk in September, journalist Ihar Ilyash was sentenced to four years in prison. Since June, when former Belarusian opposition leader Siarhei Tsikhanouski and others were freed thanks to American efforts, 131 new political prisoners have been locked up, representing almost exactly double the total number released during the same period. Today, around 1,300 Belarusian political prisoners remain behind bars. 

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.

It should come as no surprise to see Lukashenka imprisoning more people. After all, recent sanctions relief has given him an obvious incentive to manufacture more hostages, which he can then trade for further concessions during future negotiations.

The United States and Europe have been down this road before. Between 2015 and 2020, some Western sanctions against Belarus were lifted and high-level visits to Minsk resumed, while Lukashenka was courted as a potential mediator in efforts to resolve Russia’s undeclared war against Ukraine. This led to a series of symbolic gestures but no structural reforms. Ultimately, hopes of building bridges with Belarus collapsed in 2020 when Lukashenka responded to nationwide pro-democracy protests by launching a brutal crackdown.

Any serious effort to improve relations between Minsk and the democratic world must be grounded in a realistic appraisal of the Lukashenka regime. In the final analysis, Lukashenka will always choose Moscow over the West because his political survival depends on it. This has become abundantly clear since 2020, when the Kremlin intervened to help the Belarusian dictator crush protests. Two years later, Belarus served as a launchpad for Russia’s full-scale invasion of Ukraine.

Today, Belarus reportedly hosts Russian tactical nuclear weapons and plays a supporting role in Moscow’s hybrid war against the West. Even when he appears to be acting independently, Lukashenka is careful not to directly cross the Kremlin. When Russian drones recently violated Polish airspace, including some that entered Poland via Belarusian territory, Minsk warned Warsaw of the threat but carefully avoided blaming Moscow.

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Online Event Fri, January 30, 2026 • 9:00 am ET

How Russia’s winter warfare strategy targets Ukrainian civilians

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Advocates of renewed engagement with Minsk argue that efforts to punish Lukashenka have failed to prevent Belarus’s slide deeper into authoritarianism. But a premature thaw would now carry enormous costs. Relaxing sanctions and reopening trade would boost state-controlled Belarusian companies and revitalize the regime while demoralizing the democratic resistance at home and abroad. Crucially, it would also provide Russia with a potential sanctions loophole in the heart of Europe.

Addressing the challenges posed by an authoritarian Belarus is vital for European security. As long the Lukashenka dictatorship endures, NATO’s eastern flank will remain unstable and Ukraine will continue to face a major threat along the country’s northern border. Other authoritarian regimes are also watching the Western approach toward Belarus closely. If Lukashenka is able to secure benefits without compromising his own position, his fellow autocrats will draw the obvious conclusions and act accordingly.

Rejecting high-level engagement with Lukashenka does not mean abandoning Belarus. Instead, the current focus should be on seeking ways to support Belarusians directly while maintaining pressure on the regime. This could involve greater support for Belarusian civil society and independent journalism in exile, along with cultural and educational outreach that strengthens links between Belarusians and the wider European community. More scholarships should be made available, while access to visas and professional opportunities could also be significantly enhanced.

Rewarding Lukashenka without requiring any meaningful change in Belarus is not pragmatism. It is appeasement. This kind of short-term thinking will only serve to further entrench the current dictatorship. Instead, the message to Minsk must be one of Western unity and resolve, with a commitment to maintaining sanctions pressure on the regime while investing in a better future for ordinary Belarusians. Ultimately, Western policy toward Lukashenka must be shaped by recognition that only a democratic Belarus can bring lasting stability to the wider region.

Hanna Liubakova is a journalist from Belarus and nonresident senior fellow at the Atlantic Council.

Further reading

UkraineAlert Sep 25, 2025

Trump called Russia a ‘paper tiger’ because he believes Putin is losing

By Peter Dickinson

US President Donald Trump now says Ukraine can defeat Russia. His dramatic change in tone reflects growing recognition that Putin’s invasion is not going according to the Kremlin plan, writes Peter Dickinson.

Conflict Disinformation

UkraineAlert Sep 23, 2025

Putin is escalating Russia’s hybrid war against Europe. Is Europe ready?

By Maksym Beznosiuk

Putin has clearly been encouraged by Trump’s efforts to downgrade America’s involvement in transatlantic security and feels emboldened to escalate his own hybrid war against Europe, writes Maksym Beznosiuk.

Belarus Conflict

UkraineAlert Sep 16, 2025

Only Ukraine can teach NATO how to combat Putin’s growing drone fleet

By David Kirichenko

NATO must urgently learn from Ukraine’s unique experience of Russian drone warfare as the alliance seeks to address the growing threats posed by Putin’s drone swarms, writes David Kirichenko.

Conflict Defense Industry

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

Read more from UkraineAlert

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

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

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The post Belarus dictator must not be rewarded for releasing his own prisoners appeared first on Atlantic Council.

Flagship Event Mon, September 29, 2025 • 6:30 am ET

2025 Transatlantic Forum on GeoEconomics

The Transatlantic Forum on GeoEconomics is an annual conference convening economic and financial leaders from both sides of the Atlantic.

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Event transcript

Uncorrected transcript: Check against delivery

MATTHEW WHITAKER: Good morning, Fred.

FREDERICK KEMPE: Good morning, Ambassador. How are you?

MATTHEW WHITAKER: Well, they said a fireside chat. There’s no fire, so I’m a little disappointed.

FREDERICK KEMPE: I always take that out of my notes because a fireside chat is a—you know, it’s until we get to December, January, February I think we don’t need that.

But what a pleasure to start the day with you—Matthew Whitaker, the United States permanent representative to NATO. And you got off to what I would say is just a tremendous start with the summit in The Hague: A 5 percent defense commitment from all the allies. Nobody could have imagined that: 3.5 percent core, 1.5 percent beyond that. It’s great to have you here kicking us off.

As Julia said, we always put together the notion that you cannot separate security and you can’t separate prosperity. And so one of the questions behind this that we’ll talk about during the course of the day is Europe can’t afford not to pay for its own defense, but cannot afford to pay for its own defense. That’s one question.

But let’s start a little bit with a very brief introduction. We don’t have much time, so I don’t want to go through your entire CV. But Ambassador Whitaker has been President Trump’s envoy to NATO since April. As I said, he’s already made his mark in the summit in June. Most notably from that summit, the ambassador himself labeled it one of the most consequential moments in this alliance’s history. And it could be that if this could now be delivered on.

So maybe that’s where I’ll start. You’ve got threats to Europe’s security becoming frequent and dangerous. Just this month, Russia violated airspace—Poland, Romania, Estonia. This week’s Russian attacks on Ukraine are some of the fiercest we’ve had since the war began in February 2022. What are you looking at? In this context, with the decisions made in the NATO summit, how are you going to measure success? How are you going to see if everything that people have agreed to is actually producing real results?

MATTHEW WHITAKER: Yeah, great question. And thanks, Fred. I appreciate the invitation and, obviously, we could speak probably for all morning on the topics that right now we’re dealing with at NATO. And I want to appreciate, you know, your Atlantic Council, your Europe Center, and Atlantik-Brücke for hosting this important forum. The topics are very timely, and appropriate to be here in Brussels.

You know, the United States, as I say everywhere I go, remains committed to NATO and to defending every inch of NATO territory. But there are still issues to address, including the big one, defense spending, and obviously the resolution of the war in Ukraine. The United States expects European NATO allies to meet their defense commitments and the spending target of 5 percent, which you mentioned is 3.5 percent on NATO capability targets and another 1.5 percent on defense-related spending like enablement, dual-purpose infrastructure, and the like.

And these investments I think really get to the heart of the capabilities, security, stability, and quite frankly the credibility of NATO. When allies contribute their fair share towards the conventional defense of Europe, we strengthen deterrence and allow the United States to prioritize its own strategic resources while reinforcing regional and global security. And the Hague defense commitment was a good start, but unfortunately I think some of our allies are dragging their feet, and they need to pick up the pace. And you know, we need real year-over-year growth in every country’s defense spending, not just some defense spending in countries.

If every ally lives up to their Article 3 obligation, which says they will invest in their individual and therefore the collective defense, we’ll drive innovation and modernization across the alliance—two big things that I’m working on on a daily basis—and ensure that our forces are prepared for the evolving threats that we see changing every day, whether it’s in cyber, space, and really across all domains. And shared investment and collective defense investment in modern, interoperable forces—another keyword here in Europe, because there is still not 100 percent interoperability among all of our armed forces—will ensure that Europe and the United States can work seamlessly together. It strengthens our collective security, balances burden-sharing, and builds a credible deterrent that protects both European and American citizens, and Canadian citizens.

In an uncertain world, we can only have peace through strength. And this—I talk about this so much, Fred, how the strength of NATO, and if all thirty-two allies—if the whole team is strong and there’s no weak link, then that strength is what’s going to ensure peace and no one will challenge that strength.

And we all know that Russia is the greatest threat to peace in the transatlantic area. And if allies are serious about bringing peace to Ukraine, they need to starve the Russian war machine and stop purchasing Russian energy. Once they do that, obviously, there’s a clear path to additional US and European sanctions to impose even more costs and change the calculation for the Russians to come to the negotiating table and resolve this completely unnecessary and just meat-grinder of a war. And quite frankly, the ball is in the court of the European and Canadian allies. They need to start—every single ally needs to start spending money on their defense and stop buying Russian energy.

And you know, this conversation is something I’ve been looking forward to, Fred, for—since it got on my calendar, and I really appreciate the time. But I just want to emphasize that we are—everyone made the commitment in The Hague. Everyone knows 5 percent is our North Star. Everyone knows that every year we have to get year-over-year growth. And the challenge now is to make sure that everyone is moving at pace to the—at the speed of relevance to make sure that we can meet these commitments and, therefore, have that strength that’s going to guarantee the peace.

FREDERICK KEMPE: Thank you, Ambassador.

So let me come back to the defense spending and sort of the challenge for Europe. But let me first hit on something in your—in your opening comment, which is a clear path to sanctions; stop purchasing Russian energy. There’s a NATO bill—sorry, sanctions bill in the Senate, I think eighty-four Senate sponsors, waiting to go through. Are you saying and is the president saying that until Europe does more in terms of stopping its gas purchases, oil purchases from Russia, that these sanctions—the US sanctions won’t move forward?

MATTHEW WHITAKER: Yeah, I think President Trump has looked at the entire horizon of this and has said, you know, what are we doing? If we’re—if we’re still giving European money to Russia to buy energy, you know, sanctions aren’t going to ultimately have as much bite. And so, you know, if you look at countries like Poland, Czech Republic, completely weaned themselves off of Russian oil and gas. We have other NATO alliance members that are buying almost a hundred percent of their oil and gas—specifically, Hungary, Slovakia—and not a hundred percent, but Turkey still is buying too much Russian energy. And these are conversations that we’re having as the United States with our allies and together through NATO as to how we also wean those folks off.

Now, obviously, this is not going to be easy. You know, two of those countries have direct pipelines from Russia—bringing them, you know, cheaper oil than they can buy on the—on the market, and so it’s not going to be easy. But it also—you know, as I go to these conferences, one of the things I hear are people on the stage say, oh, this is going to be hard; you know, this is a hard issue, or—but that’s—we have to do these hard things. This is—this is what’s actually going to bring this environment of peace and prosperity for all of our citizens, all one billion—approximately—citizens that, you know, are in NATO territories, in the thirty-two countries.

And so I keep working really hard. You know, I’ve had some very good conversations both with the United States government and people like Doug Burgum and Chris Wright, our energy secretary and our interior secretary, and then also with our allies to—like, we got—this is going to be hard, I know, but we have to do it. And that’s how NATO not only is relevant in things other than just the security of Europe and the transatlantic region, but also how it’s relevant to solving the war in Ukraine and—you know, and moving forward to a new moment in world history.

FREDERICK KEMPE: I’m so glad you said it that way, a new moment in world history. Ursula von der Leyen, the president of the Commission, gave a State of the European Union which was really powerful, and her quote was Europe is in a fight: “A fight for a continent that is whole and at peace. For a free and independent Europe.” Interesting, used that word. “A fight for our values and our democracies. A fight for our liberty and our ability to determine our destiny for ourselves. Make no mistake—this is a fight for our future.”

You know, I’ve been watching Europe for a long time, and it feels as though that’s true. And the two sides of this that we’re talking about at this conference are security and competitiveness. Can you talk about the interlinkages between that? Because one of my questions over time is whether Europe’s going to be able to afford—it can’t afford not to pay for its defense, but will it be able to afford to pay for its defense? Will it not have to take from the welfare state? Will it not have to innovate more and grow more to be able to do this? How do you look at those interlinkages between Europe’s economic health and ability to defend itself?

MATTHEW WHITAKER: Well, they’re directly related. I mean, it is—this is something you’re not going to be able to borrow your way to, you know, security, because at the end of the day you can buy tanks and you can buy artillery and you can buy planes—prefer you buy F-35s—but all of those need to be sustained and repaired and fixed. And you know, that oftentimes is as expensive in the long term as the initial purchase. And so we have to figure out how to get the European economy on better, more solid footing.

And a lot of it is the United States has a culture of innovation and entrepreneurship. I mean, we just—it’s built into our DNA. A lot of it was inherited from the immigrants that came from Europe originally, whether from—you know, whether Dutch or German or, you know, every other, you know, country and creed. But ultimately, for some reason Europe has taken a no approach and the United States has taken a yes approach when it comes to innovation and entrepreneurship. You know, we have—we have created a culture in the United States where somebody can take risk, and if they take risk and they—and they succeed then they’ll be rewarded for that. And I think oftentimes in Europe it’s backwards, where there is a—there’s a—the government is skeptical on new ideas and innovation and innovators. And that’s something that’s going to have to change.

And, obviously, the social safety net is—you know, instead of a hand up, it’s a hammock, where I think there is a very comfortable life for, you know, a lot of countries and their citizens. And I look at, you know—you know, I know the American work ethic is inconsistent. There are some of us that work very hard; there’s some that—you know, that don’t. But certainly, a work week for us is at least forty hours and oftentimes, you know, for a lot of people it’s fifty or sixty hours a week. And in places like, you know, Belgium, it’s thirty-six hours and with downward pressure on the number of hours. And I think that’s—you know, that whole culture is going to have to grow and develop because fundamentally you can’t pay 5 percent of your GDP on defense and defense-related items without economic growth—

FREDERICK KEMPE: Right.

MATTHEW WHITAKER: —because, you know, you can’t grow your government budget. And there’s only two ways. You can get it through economic growth, and therefore more revenue under your current tax system; or you can get it, you know, by raising taxes. And that certainly is not popular here in Europe or in North America either.

FREDERICK KEMPE: And as you’ve talked to your allies, how do they feel about—you were talking again in your opening comment about some dragging their feet. Do you feel the energy after the summit declarations is there toward meeting these goals, toward making the changes that are needed? Does Europe understand what a big moment it is for Europe?

MATTHEW WHITAKER: Yeah. The good news is that the biggest economy, Germany, has committed to get to the spending targets in the next four years. And that is very important. You know, what Germany does is going to be a lot more important—nothing against my friends from North Macedonia, but if North Macedonia gets there in four years it’s not going to make a huge difference because their economy’s not big and their population’s not big. But Germany will. And that’s going to—that’s probably going to, what I would say, paper over a little bit of some of the inconsistencies. But we’re going to need countries like Spain and Italy and several others to get serious.

But there—but there are countries that are sober/serious, especially those on the frontlines of Russia on the eastern flank. I mean, Poland is clear-eyed on what the threat is and, you know, they’re going to be at 5 percent here in the next year. All the Baltic countries—Estonia, Latvia, Lithuania—they’re going to be at 5 percent spending on core defense. I mean, they are—they are investing. But again, you’re talking about countries that are smaller than my home state of Iowa; you know, that are less than two million citizens. And so, you know, it’s going to be the big countries like Germany, France, Great Britain, Italy that are going to really determine whether Europe steps up.

And so Germany is the good-news story, and we need to keep encouraging them to make those big spending jumps. I’m a little—you know, I’m going to continue to watch our friends in France and Great Britain. I think the desire is there, but the economics are just not there. I mean, the borrowing capacity is not really going to cover what they need to do, and their economic growth is equally slow. And they’re going to—they’re going to have to structurally rethink how they’re doing growth in their country and invest in ways to encourage businesses to grow, entrepreneurs to start new businesses, and create a culture where that is sustained.

FREDERICK KEMPE: Thank you for that.

So in the past President Trump’s expressed frustration with the concept of collective defense for allies who are not paying where they ought to be paying. We’ve seen the Russian incursions now in the airspace over countries like Poland and Estonia, however, who are hitting their numbers and have been doing so for some time. Where do you—how serious do you see these new incursions over airspace? How serious is the United States looking at this? How can the alliance deter future such incidents?

MATTHEW WHITAKER: Yeah. Well, we—I mean, we’re going to defend every inch. And I think I’ll point to the good-news story. So the—so the drones that flew into Polish airspace were tracked, were shot down. Many of them were shot down by F-35s and F-16s. And you know, that shows a domain awareness and an air defense strategy that I think is—shows that NATO is serious and ready to move.

I think one of the things that I’m looking at is how we can do that better—how we’re not firing two-million-dollar missiles to shoot down six-hundred-dollar Shaheds. And that’s something that we’re working very closely with the military leadership within NATO and the US military leaders to make sure that we have multilayered at all altitudes air defense.

And then Estonia is another great example. I mean, from the moment those planes took off, they were tracked by our—by our radars. Ultimately, Sweden, Finland, and the Italian air force all were part of making—escorting those planes, let’s call it, and making sure that they were not a threat to the capital in Estonia.

And so each one of these examples, I think, demonstrates NATO capabilities.

The thing that I want to remind everybody is, you know, we’re in this—if you think about how Iran treated the United States and our allies, it was kind of this no war, no peace—N-O war and N-O peace. And I think we’re—I think that’s probably what Russia is trying to do to NATO right now, is to not cross a line that drags the United States and our allies into a war, but they also are trying to be disruptive and present kind of asymmetrical threats. And that’s, you know, another area where I’m working every single today together with our allies and our—and our military leaders, is to make sure that we have better options on the asymmetrical war and the hybrid war; and to make sure that we’re not just always reacting, that we are—that we are strategic, and that we have an ability to respond in kind, and at the same time to play the same game; you know, if we’re really in this sort of hybrid war, to make sure that the—that we have enough rungs on the escalation ladder that we can also play in that domain.

And I’m just ensuring that, again, we’re strong and go unchallenged, because I think a lot of people think that somehow these challenges that Russia presents to us are—somehow demonstrate our weakness. It’s quite the opposite. I mean, we’re all over every single one of these threats.

FREDERICK KEMPE: So very interesting last week in New York, after meeting with the Ukrainian president, President Trump said Ukraine can and should retake territory it has lost. That seemed to some in the media and some observers as a—as at least a change of rhetoric. He’s now considering providing Ukraine Tomahawk missiles, though as I understand it still through NATO purchases not direct support. Then, on Sunday, Vice President Vance attributed President Trump’s recent change in attitude to the continued loss of life, impact on Russia’s economy, and said, quote, “The Russian economy is in shambles. The Russians are not gaining much on the battlefield.”

Is there a shift going on in the—in the administration in the United States toward Russia right now? And, if so, what does it consist of?

MATTHEW WHITAKER: You know, I think, first of all, President Trump has been very clear that he’s frustrated with Vladimir Putin, that Putin could end this war if he wanted to and continues to fight—and in fact, not only continues to fight, but every time that President Trump makes an entreaty to Vladimir Putin, Putin then responds by sending massive amounts of drones and missiles at cities in Kyiv—cities in Ukraine. And so, ultimately, I think President Trump has determined that—of the two sides, that the Russians are less willing to negotiate and resolve this than the Ukrainians, who appear to be willing to give a lot for peace.

And at the same time, there’s just a battlefield reality that Russia continues to lose about, depending on the day, about a thousand soldiers every single day, which is just—it’s incomprehensible. In over four years, they’ve lost about a million soldiers on the battlefield for less than 20 percent of Ukrainian territory. And it’s just—ultimately, a snail could have left the border with Russia and Ukraine and been to Poland already, you know, in all seriousness.

FREDERICK KEMPE: Yeah.

MATTHEW WHITAKER: So they can’t even move as fast as a snail. It’s like this pace with which, you know, this—and then for a day they tried to—you know, Russia tried to convince us that they’re—that they’re—really, they’re a bear, not a paper tiger, you know?

FREDERICK KEMPE: Yeah.

MATTHEW WHITAKER: President Trump called them a paper tiger, and they spent a day trying to explain how, really, they were a bear. And you know, I mean, a bear could have probably made it from the border to Poland in a couple days, I’m guessing.

But you know, this is the situation we find ourselves in. There is a—there is a detachment from reality that the Russians currently have as to their military success on the battlefield, and most likely that is the generals and the military leaders that are not providing real information to Vladimir Putin at the Kremlin as to what’s happening on the battlefield.

FREDERICK KEMPE: Yeah.

MATTHEW WHITAKER: But this war needs to end. President Trump’s been so clear and clear-eyed about how this war needs to end. It is a completely senseless war, it makes no sense whatsoever to continue this on the battlefield, and it needs to end.

And you know, I think one of the things that I would point to, Fred, that I think is crucial is President Trump has made available the best weapons in the world—American armaments, munitions—to sell to our European NATO allies plus Canada and then provide to Ukraine. And that’s another area where, if we talk about Europe taking over the conventional defense of the continent, then that—those sales should continue to move at pace. And we’ve—you know, we’ve sold billions already and we have billions more available. Ukraine needs it, wants it, and we need to make sure that that continues to flow and that—and that our European allies are stepping up and buying that.

FREDERICK KEMPE: Yeah.

So let me end with a question, one of my—as you know, I always like to point to a part of your biography that appeals to me. You’ve got this amazing career in public service and private practice, but you were also a player on a Big Ten team in Iowa that went to the Rose Bowl. That’s not quite—

MATTHEW WHITAKER: At THE University of Iowa.

FREDERICK KEMPE: The University of Iowa. And that’s not quite the World Cup, which is going to be played in the United States next year, in 2026, but it comes pretty close. In football, if you see a strategy’s not working you change on the field. So on the field with Russia right now, since it’s not coming to the negotiating table, since it seems stuck but Russia also seems economically weak, isn’t it time to double down on sanctions? Isn’t it time to double down on the military efforts against Russia to bring—isn’t that going to be necessary to bring Putin to the table?

MATTHEW WHITAKER: Ultimately, that’s up to President Trump and the Congress. But I think he knows that there are multiple steps.

And so he put sanctions on India. Certainly, they have reacted. There’s a—there’s a lot of other things we can do on a sanctions front, on a shadow fleet front. There are a menu of items that we could do. But we can’t do it alone.

And this—I think this is one of President Trump’s frustrations with the EU especially, is they want the United States to bear the weight and the burden of sanctions, whether it’s against China, whether against Brazil, or India, or any other countries that are buying Russian oil and gas. And all he’s saying is that we need to move together. Like, we are more powerful as an alliance and as allies if we all work together instead of, you know. But the EU, obviously, has challenges in their membership and who’s willing to—you know, because Hungary, who’s buying a hundred percent of their oil and gas, you know, they would be voting to sanction themselves, ultimately. And you know, that’s—that would be foolhardy. Hungary has an election in the spring that I think they’re very keen on how that plays out over the coming months. And that’s something that we’re watching very carefully.

But that’s why, as an alliance, the EU and the United States need to bring alternatives. I mean, I point again, Poland/Czech Republic eliminated their dependency on Russian oil and gas, and they have more trade space now and more ability to—you know, to navigate this current situation where Russia has invaded Ukraine and continuing to fight the war. And I think we need to—for these landlocked countries, and together with Turkey, I think we need to provide them alternatives, whether that’s, you know, American LNG, whether that is oil, you know, and building pipelines and the things—again, the hard work that it’s going to take to actually change the calculation on these matters.

FREDERICK KEMPE: Mr. Ambassador, I wasn’t quite sure how I could bring American football together with Ukraine, but thank you for this—

MATTHEW WHITAKER: Just know it’s very hard to watch in Europe. Six hours ahead is—those night games are impossible.

FREDERICK KEMPE: So, look, very much look forward to the rest of this conference. Thanks for kicking us off in such fine fashion.

Watch the discussion

The post US Ambassador to NATO Matthew Whitaker’s message to allies ‘dragging their feet’ on defense spending appeared first on Atlantic Council.

Estimates of Syria’s post-civil war cost of rebuilding range from $250 billion to $400 billion. This sum is beyond what Syria’s internal resources can generate and will require mobilization of significant outside public and private investment. Syria must articulate a realistic but ambitious national strategy for economic reconstruction and development, and it must align donor and investor projects with that strategy. To help finance reconstruction and development, Syria’s transitional government should expand its partnerships with international financial institutions (IFIs) and multilateral development banks (MDBs), as these institutions can play a key role in mobilizing global capital. The presence of MDBs alone will not be determinative of the success of Syria’s development strategy; other factors such as internal political stability and external economic relations are more important. However, MDB operations in Syria can be a development force multiplier, increasing investment and expanding the technical capacity of both the public and private sectors. MDBs have a greater capacity for investment in high-risk countries, such as Syria as it emerges from civil war. Their presence as public institutions can help mitigate unobservable and unquantifiable risks (such as political risks) for other private-sector participants. Equally important, MDBs provide technical assistance to both the public and private sectors through funding of education, training, technology transfer, and broadening of external partnerships.

Syria currently has memberships with five IFIs and MDBs, including two global and three regional institutions: the World Bank Group, the International Monetary Fund (IMF), the Arab Monetary Fund (AMF), the Arab Fund for Economic and Social Development (AFESD), and the Islamic Development Bank (IDB). The European Investment Bank (EIB), the investment arm of the European Union (EU), was previously active in Syria and has recently indicated its intention to resume operations there in line with EU policy.

Syria is eligible to join three more MDB institutions: the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), and the New Development Bank (NDB). The transitional government of Syria (TGS) should immediately seek membership in the EBRD and the AIIB. Membership in the NDB is aligned to the expansion of the BRICS (Brazil, Russia, India, China, and South Africa) bloc of nations. Syria is not a member of the BRICS bloc and is unlikely to join in the foreseeable future.

Economic strategy

The TGS is trying to organize the physical reconstruction of the country while rebuilding state institutions that provide essential public services. Syria is emerging from six decades of dictatorship by the Assad family and a horrific fourteen-year civil war (2011–2024) that killed more than six hundred thousand Syrians and displaced about 13 million, more than half of the total population. Syria’s economy shrank by an estimated 85 percent from its pre-civil war levels, and the estimated cost of rebuilding ranges from $250 billion to $400 billion. Syria must build a dynamic, competitive economy to lift Syrians out of poverty. This will require significant investment, beyond what can be generated from internal resources.

The development of Syria’s economic strategy is the responsibility of the TGS and is beyond the scope of this analysis. However, some strategic issues need to be reviewed as we outline the role of MDBs in Syria’s reconstruction and development. Syria’s regional integration, particularly with the Gulf Cooperation Council (GCC) countries and Turkey, is just as important as Syria’s global integration. Syria has considerable economic potential, which differs from other countries in the region. It has an educated population, and its wage levels and exchange rates have not been artificially inflated by oil income (the so-called “Dutch disease”) because Syria is not an oil-exporting nation. Syria has significant potential to develop its agriculture and industrial base. Its ports on the Mediterranean are underdeveloped but well positioned to serve Syria’s development and, potentially, to integrate Syria economically with Iraq and the GCC countries.

Geography

Syria is located at the western terminus of Asia and is a central part of the land bridge between Europe, Asia, and Africa. Syria’s location has made it a target of external actors, notably Israel and Iran, seeking to dominate the country for their own destructive interests.

Most of Syria’s population and previous development are concentrated in the western corridor, north to south from the Turkish border to the Jordanian border through the cities of Aleppo, Hama, Homs, and Damascus. However, the development of Syria’s east-west corridors, from the Mediterranean coast through the cities of Aleppo, Raqqa, Hasaka, and Deir Ez-Zour, and onward to the Iraqi border, is of equal importance and represents an important economic opportunity. Syria’s Mediterranean ports—Latakia, Tartus, and Baniyas—can be further developed to service Syria’s needs, and Iraq’s as well. Syria’s best agricultural lands, and the majority of its water and oil resources, lay along this east-west corridor. Aleppo is the home of Syria’s textile industry and the northern plains stretching east of the city are the heart of its cotton production. The region accounts for a significant share of Syria’s production of agricultural output (wheat, pulses, olives, and livestock). The development of the east-west corridor regions is critical to Syria’s internal political reintegration and would complement regional economic projects such as Turkey’s links to Central Asia via the Caucasus and Iraq’s Development Road project linking Turkey to the Grand Faw Port project on the Arabian Gulf. Syria could be positioned as a western terminus for trade from and with other Asian countries, and Syrian exporters can certainly benefit from those transport links. MDBs can help Syria expand and modernize the transportation, energy, and technology infrastructure needed to take full advantage of its location.

Human capital

Syria has modest oil and gas resources and is currently a net importer of both. The TGS cannot rely upon oil export revenues to finance the country’s reconstruction and economic development. However, that means Syria does not suffer from the “natural resource curse” common in other regional economies that are reliant upon oil and gas exports. Oil and gas export revenues can lead to exchange rate appreciation—which, in turn, impairs the development of export-oriented manufacturing sectors.

Syria’s wealth is in its educated workforce. This is best reflected in its diaspora, which is globally successful in multiple industries across multiple continents and regions (the GCC, Europe, North America, South America, and West Africa). Syrians have long prized educational attainment, and the country has a large pool of skilled and semi-skilled labor that needs meaningful employment. Syria has been a net exporter of human capital for several generations, and this accelerated rapidly during the civil war as the country lost much of its middle class and intelligentsia. MDBs can play a useful role in addressing this by providing financing and technical assistance for the reconstruction and expansion of all levels of Syria’s educational infrastructure.

Building Syria as an economic hub

Foreign Minister Asaad al-Shaybani cited Singapore as an economic example for the new Syria at the Davos Summit in January 2025. This was an interesting choice because Singapore is an open economy that has developed into a regionally and globally significant trade, investment, and manufacturing hub. Syria has a favorable geographic location, spanning from the Mediterranean to Iraq and Jordan, and there are clear synergies Syria can achieve if it develops its transport and infrastructure links with its immediate neighbors. It has an educated population, with wages that are relatively low compared to those in the GCC or its immediate neighbors. The Syrian diaspora is globally successful and eager to invest, as are investors from the GCC. The country has agricultural and industrial potential that can be developed.

Other countries in the region, such as Jordan and Egypt, have similar—though not identical—resource endowments and similar levels of human capital development. However, for a variety of reasons beyond the scope of this analysis, they have not developed into globally competitive manufacturing or technology hubs. Because Syria must be rebuilt almost from the ground up after fourteen years of civil war and the overthrow of the Assad regime, there are fewer entrenched political and economic interests to block the country’s development. The Syrian people have a real opportunity to develop and implement the best available technologies, education, public administration practices, and infrastructure.

To exploit these advantages, Syria needs

• infrastructure investment in its ports, transportation, and energy production;
• reconstruction and expansion of its education system;
• building of public-sector capacity to deliver essential services and ensure transparency and rule of law;
• creation of a regulatory system that ensures competitive markets; and
• building of Syrian firms that can compete in regional and international markets.

MDBs can play an important part in developing Syria by mobilizing investment capital and providing the technical assistance needed by both the public and private sectors.

The potential role of MDBs

MDBs can assist Syria’s reconstruction and economic development through direct investment and provision of technical assistance to enhance local administrative capacity.

Direct investment: Private financial institutions will be reluctant to invest in high-risk countries, such as Syria as it emerges from civil war. MDBs have greater capacity than private financial institutions to mitigate these types of unobservable and unmeasurable risks. MDBs have an in-country presence and an ongoing relationship with host country authorities, providing them with an information advantage when it comes to assessing and mitigating country political and financial risks. MDBs provide public budget support and policy reform advice, as well as supporting government and corporate capacity building. Their presence in a project can provide a political umbrella to deter adverse events because MDBs are in a better position to influence a host government’s potentially adverse decisions. The presence of an MDB helps to reassure private investors and encourage their participation in project financing.

Technical assistance: MDBs engage with local and national governmental authorities and provide key technical assistance that helps to enhance local administrative capacity. For example, the TGS faces an important political and national security challenge in the disarmament, demobilization, and reintegration (DDR) of fighters from the various armed groups that participated in the struggle against the Assad regime. MDBs, such as the World Bank, can play a useful role in advising and funding DDR programs. Another example would be the World Bank’s well-regarded technical assistance program (the Stolen Asset Recovery Initiative (StAR)), which works with partner countries that seek to recover stolen assets. This program could help the TGS recoup the billions stolen by the Assad family and Assad regime officials.

Diversification benefits

Syria will benefit from becoming a member country in more MDB institutions. Membership can insulate Syria from changes in resource availability or changes in political relationships with donor nations. The specific benefits include the following.

• More sources of financing: Syria’s overall borrowing capacity is constrained by its debt-carrying capacity, which is presently quite limited. Nonetheless, it is still useful for the TGS to have access to a greater number of sources for funding and technical assistance.
• Differing institutional expertise: Each MDB has its own areas of expertise that are unique to that institution. The EBRD has successful programs to help finance growth of small and medium enterprises (SMEs), private infrastructure, and municipal finance. The AIIB has executed successful projects in renewable energy, digital and information technology infrastructure, and transportation.

By becoming a member of more MDB institutions, the TGS can draw upon each of these institutional areas of expertise, as appropriate to Syria’s development needs.

Additional potential MDB partner institutions

EBRD

The EBRD was established in 1989 to address the transition needs of the nations of Central and Eastern Europe as they emerged from communist rule. Its headquarters are in London and, following the Arab Spring in 2010, it expanded its area of operations to encompass the countries of Western Asia and North Africa, supporting democratization and economic development in those regions. The EBRD is currently active in Turkey, Jordan, and Lebanon.

Accession to the EBRD as a member nation requires an affirmative vote by two-thirds of governors, representing at least three-quarters of members’ total voting power. The United States is the largest single shareholder, with 9.2 percent of shares, followed by the United Kingdom, France, Germany, and Japan, with 8.9 percent each.

The EBRD’s purpose, as reflected in its founding documents, is to support “multiparty democracy, pluralism and market economics.” EBRD operations focus on former Soviet bloc countries’ transition from a communist state-owned economic model toward market-based economics. That mission remains, even as the EBRD’s area of operations has expanded to include countries in Western Asia and North Africa that, like Syria, have a legacy of state ownership of key sectors of the economy. The EBRD’s mission differs from that of other development banks, such as the World Bank, in that it focuses less exclusively on poverty alleviation and more directly on economic transition and political governance.

Since its inception, the EBRD has invested more than €210 billion in more than 7,500 projects. It undertook 584 projects in 2024, investing €16.6 billion. EBRD investment in green economy projects accounted for 58 percent of the total financing provided in 2024.

The EBRD has a reputation for expertise in several areas directly relevant to Syria. It has programs for financing and advising SMEs, local financial institutions, agribusiness, sustainable energy, and municipal infrastructure. The TGS will need to reach out to ascertain the level of shareholder support for its membership. But Syria’s membership in the EBRD would dovetail with stated US, UK, and EU objectives of stabilizing Syria’s economy and promoting stable governance.

AIIB

The AIIB is the newest MDB, beginning operations from its headquarters in Beijing in 2016. Its mission is the financing of infrastructure on the Asian continent, with an emphasis on projects that are sustainable and technology enabled, and that promote regional connectivity. Sponsored by China (which holds the most shares), the AIIB has grown to 110 members. The United States and Japan have declined to seek membership, but many European nations have joined the institution. Several of Syria’s immediate neighbors (Iraq, Jordan, and Turkey) are already members of the AIIB, and Lebanon is a prospective member. Accession by new members must be approved by a special majority vote of the AIIB Board of Governors, which represents a majority of the institution’s voting power.

The AIIB emphasizes four thematic priorities, including

• green infrastructure;
• connectivity and regional cooperation;
• technology-enabled infrastructure; and
• private capital mobilization.

The AIIB financed 303 projects between 2016–2024, with a cumulative investment of $58.9 billion. The sector breakdown of the projects is summarized in the chart shown here.

The AIIB’s track record on infrastructure finance and its emphasis on regional connectivity are directly applicable to Syria. The AIIB’s priorities emphasize the importance of connectivity as a pathway to economic development. For example, the AIIB is co-financing $250-million expansion of rail links between eastern Turkey and the Caucasus. Regional economic powers in Western Asia (e.g., Turkey, Saudi Arabia, and Qatar) have proposed plans for the development of cross-border infrastructure and integration. Syria’s participation in these plans, through the development of its infrastructure, will in turn advance regional integration efforts. The AIIB can be a useful financing partner in these efforts.

Aligning assistance with development priorities

Since December 2024, there is considerable political and economic excitement about the potential of a stable, rapidly developing Syria. A large measure of this excitement was generated by the United States, which has pressed ahead with easing of sanctions to give Syria a chance to emerge from the catastrophic Assad era. European countries have similarly eased sanctions, and most regional powers—with the notable exceptions of Israel and Iran—have moved quickly to shore up Syria politically and economically. A rush of donors and investors have announced new projects and publicized the signing of investment memoranda. However, there is a risk that these initial projects will conflict with, or potentially undermine, progress on less glamorous but more pressing tasks such as unifying military control, establishing basic national security from internal and external threats (which are often interrelated), rebuilding public administration and essential services, and aiding returning Syrian refugees to start reconstruction.

The TGS must assert clear priorities in reconstruction and development and ensure that assistance and investment align with the country’s development priorities. The TGS can benefit from the various MDB institutions’ differing areas of expertise, aligning each one with specific development goals. For example, despite the easing of sanctions, Syrian banks face immediate challenges in reestablishing correspondent relationships with outside banks because of concerns about anti-money laundering and countering the financing of terrorism (AML/CFT) risks. Until Syrian banks can reestablish those correspondent relationships, it will be difficult for the country to secure the promised investment inflows.

In the immediate term, the IMF, World Bank, and Financial Action Task Force (FATF) via its regional body, the Middle East and North Africa Financial Action Task Force (MENAFATF), are the most logical partners to help address AML/CFT risks in the banking sector. FATF is the standard-setting body, and the IMF and World Bank both provide significant policy support to many countries to assess their compliance with relevant AML/CFT standards. The urgency of addressing AML/CFT risks is compounded by the fact that the TGS is attempting to suppress drug trafficking, much of which is linked to former regime officials. Blocking drug traffickers’ access to both Syrian and global financial institutions is an important step that the TGS can take on national security grounds, and is also crucial for rebuilding local and global confidence in the Syrian financial system.

In the medium term, the TGS can leverage the expertise of MDB institutions like the EBRD, which has significant experience in executing local currency credit facilities, using local banks as partner institutions. The EBRD has used such facilities to build the capacity of local financial institutions and to extend credit to underserved economic sectors, especially SMEs. That experience could be usefully replicated in Syria.

There are numerous other examples of how MDBs can be useful partners in executing Syria’s development priorities. Expanding relationships with these institutions would give the TGS more options for accomplishing those priorities.

Next steps

The TGS should seek membership in both the AIIB and the EBRD but might prioritize moving forward with membership in either of these MDBs, based on its assessment of reconstruction and development needs. The AIIB has an institutional focus on regional connectivity, which complements the heightened investor interest in various projects to reintegrate and reconnect the Syrian economy within the region. The EBRD has a demonstrated track record in local financial sector development, agribusiness, and municipal infrastructure finance, which are clear priorities in Syria’s reconstruction. Accession to the EBRD can be a lengthier process because of the requirement for shareholders representing three-quarters of the institution’s capital to approve, versus the majority approval required by the AIIB shareholders. The TGS should begin diplomatic outreach to the primary shareholders of these MDBs and inform them of its interest in accession to membership. The TGS should concurrently reach out directly to the EBRD and AIIB to notify these institutions of Syria’s desire to begin the process of accession to membership.

Basil Kiwan is a contributor with the Atlantic Council, and a former financial regulation specialist at the Federal Deposit Insurance Corporation. He previously served at the US Treasury Department on a variety of international economic policy issues.

Econographics Jul 17, 2025

Charting a strategic path for Syria’s postwar reconstruction

By Kimberly Donovan, Jonathan Panikoff, Lize de Kruijf, Manal Fatima

As Syria emerges from over a decade of conflict, easing sanctions by the United States, the European Union (EU), and other European partners is an important step toward reintegrating Syria into the global economy. Yet, for a country that has been economically isolated for over fourteen years, lifting sanctions is only the beginning.

Economy & Business Financial Sanctions and Economic Coercion

Econographics May 29, 2025

After partial relief, what’s next for Syria sanctions?

By Alex Zerden

Syria remains a high-risk jurisdiction due to years of conflict, endemic corruption, state institution collapse, narcotrafficking of captagon, insufficient anti-money laundering efforts, and inadequate financing of terrorism controls.

Economy & Business Financial Sanctions and Economic Coercion

New Atlanticist Jun 30, 2025

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By Lize de Kruijf and Nazima Tursun

The US withdrawal of foreign aid to Indo-Pacific countries creates space for China to expand its influence in the region.

Defense Policy Economy & Business

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

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The post Expanding Syria’s multilateral development bank engagement appeared first on Atlantic Council.

Why? 

Last week, Trump reportedly dialed in unannounced to a meeting between a delegation of EU sanctions experts and US officials, during which he called for the EU to enact steep tariffs on India and China. Then over the weekend, the US president posted on social media that NATO countries should place “50% to 100% TARIFFS ON CHINA, to be fully withdrawn after the WAR with Russia and Ukraine is ended.”

The most common take on Trump’s post is that he is asking for NATO (most of which are also part of the European Union) to do impossible things as a delaying tactic in order not to have to impose sanctions himself.   

It is true that this administration takes a dim view of sanctions, which it sees as one of the reasons why countries are looking for alternatives to the dollar. It is also undeniable that Trump is reluctant to impose additional sanctions on Russia. His administration has explained that imposing additional sanctions would risk breaking the already thin ice on which negotiations rest.  

And yet, according to the new etiquette of transatlantic relations, the Europeans accept that they must at least engage with Trump’s demands, even when the opening bid is outlandish. The EU and the United Kingdom are being asked to say to the world that they too are giving up on sanctions and adopting the United States’ weaponization of tariff policy. While their strategic dependence on the United States is well known, it is fundamentally against their interests to be perceived as so dependent that they have no say on their commercial relations with India and China.

The Commission’s proposals for the nineteenth package include a ban on liquefied natural gas purchases but do not yet commit the EU to removing the exemption granted to Hungary and Slovakia for Russian crude oil imports. On Friday, von der Leyen also spoke about the EU taking tougher stances on China and even India by targeting cryptocurrencies, banking, and energy firms that are helping Russia circumvent sanctions.

Given that Trump has set the bar so high, the risk is that he accepts nothing short of tariffs and even returns to musing about dismantling the current sanctions regime against Russia. But the Europeans should try to engage on what they know Trump really wants: reducing Russia’s energy exports to Europe while keeping global oil prices low. In this struggle, the volumes covered by the oil sanctions exemption for Hungary and Slovakia are small—about 500,000 barrels per day. To convincingly demonstrate its seriousness, the EU ought to find a way to phase these purchases out sooner, even if this means compensating the member states involved to avoid their vetoing the renewal of sanctions, which EU member states must do every six months.

Trump is right to focus on oil exports, as these have provided a lifeline to the Russian economy since the beginning of the full-scale war. However, as has been clear just as long, creating the expectation that Russian supply will be taken off the market increases prices, which benefits Russia. The Biden administration’s response was a price cap in late 2022 that has allowed India to buy more Russian crude using Western shipping and insurance, provided it was below the cap. High oil prices increase the temptation to cheat, so the cap hasn’t always worked, but there is still strong evidence the policy reduced Russia’s income from crude oil exports by $48 billion to $122 billion in 2023. Falling oil prices this year have allowed the EU to drop below the original sixty dollars per barrel to a floating cap of 15 percent below global market prices.

The EU’s offer to Trump therefore should involve more crackdowns on price-cap evasion, including tougher policing by EU member states such as Denmark of shipments through their waters. Instead of tariffs, the Europeans could also suggest threatening a joint secondary-sanctions regime with the United States, which might be daunting enough for Beijing and New Delhi to consider reducing their purchases of Russian oil and natural gas. Such an outcome could have a significant effect on the global oil market (much larger than ending the 500,000-barrel-per-day exemption for Hungary and Slovakia). The United States and the EU would need to anticipate carefully how oil prices might react to measures that could credibly reduce supply over a few months, and Washington may need to draw down from the Strategic Petroleum Reserve to cover any gap. It will take six-to-nine months for the United States to ramp up supply, and there are only a million spare Saudi barrels per day at present.

The timing for a body blow to the Russian economy couldn’t be better. It’s moved from overheating to recession in just six months due to low oil prices. This year’s deficit is likely to be double the moderate 2 percent deficits the Kremlin has managed since 2022. Government expenditures tend to pile up later in the year for Russia, so the fact that it is already faring much worse than previous years must have Moscow concerned. Reducing export income would push that deficit to a level that Russia cannot fully mitigate by depreciating the ruble, issuing domestic bonds, or raiding its already much-depleted liquid savings. The lower Russia’s export income, the earlier the Kremlin will have to cut spending, including on equipment and generous recruitment packages for soldiers.

Europe is performing a delicate balancing act—demonstrating commitment to Kyiv, relevance to Washington, resolve to Moscow, and rational self-interest to Beijing and New Delhi. The latter rules out following Trump’s instructions on tariffs, but alternatives that may still cause China and India to reduce their purchases of Russian oil and gas are available, provided the United States and Europe can coordinate their plans. And this will take some effort from Europe to reduce its own purchases.  

Von der Leyen’s latest proposal on mobilizing the value of immobilized Russian assets gives renewed credibility to Europe’s commitment and resolve. Quite sensibly, the plan doesn’t cross the Rubicon of confiscating immobilized Russian assets in the EU—something most of the bloc has opposed despite US pressure. At the same time, this proposal could face difficulties, as it will bring new fiscal liabilities to member states that will be on the hook to protect the Central Securities Depositories where the money is blocked but Russia still has a claim. Nonetheless, von der Leyen’s proposal remains a very useful point for Europe to make at this juncture, signaling that Ukraine can count on an important stream of funding for the years to come if necessary. 

Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The post The EU won’t tariff China and India to please Trump. But it is working on a counteroffer. appeared first on Atlantic Council.

That is because allowing the provision to expire would remove Iran’s nuclear program from the Security Council’s agenda, effectively declaring that there are no international concerns about its potential military uses. That would be perverse. Despite the damage inflicted by the Israeli and US bombing of Iran and Iran’s nuclear facilities in June, the whereabouts of Tehran’s stockpile of Highly Enriched Uranium is not known, and there is no meaningful access for the International Atomic Energy Agency (IAEA) inspectors into the key sites. 

So assuming the snapback happens, UN member states will once more be under the obligation to enforce sanctions, including an arms embargo, on Iran. In practice, that may cause little additional harm to Iran’s economy, already squeezed by US maximum pressure sanctions. But the political impact will probably be to make any negotiated agreement an even more remote prospect. Iran has threatened to retaliate, including possibly by leaving the Nuclear Non-Proliferation Treaty.

The irony of this is that for the international community, now would be the best time to negotiate a new, lasting deal with Iran. Instead, snapback sanctions threaten to take us into further sterile confrontation. The Iranian regime is deeply divided about future strategy, but this will make life harder for those who want to argue for talks and concessions in return for relief from sanctions. On the other side, the US administration does not seem keen to engage in the sort of patient, detailed deal-making that would be necessary, instead staking out maximalist positions amounting to the sort of capitulation that Tehran is unlikely to consider. The prospect for renewed negotiations looks bleak.

Does that matter? Iran is severely weakened by the decimation of its air defenses as well as its nuclear sites as part of the Twelve-Day War this summer. The “front of resistance” representing Iran’s forward-defense is similarly degraded in Syria, Lebanon, and Gaza. So, why should we worry if Iran can’t be brought back to the nuclear negotiating table?

Such thinking represents a dangerous triumphalism. The truth is that there have only ever been two ways to deal with the threat of the Islamic Republic’s nuclear enrichment: by binding agreements putting it beyond the capacity to cause harm, or by ongoing military action. A single attack, however effective, does not prevent Iran from rebuilding: the military route commits the United States to backing Israel in the sort of “forever war” that US President Donald Trump came to office committing to avoid. 

Iran, of course, is incensed by the activation of the snapback clause. From their point of view, they were in full compliance with the JCPOA when the United States walked out in 2018: they don’t accept that the E3 have the right to take this step. It’s true that when the first Trump administration came to power in 2017, Iran’s program was contained, and by the end of his first term, it was out of control—further ramping up in response to every new measure taken against it.

Snapping back sanctions not only amounts to a final admission of the failure of the JCPOA, but it will also increase friction in the Security Council. Russia and China will take Iran’s side. But there is little point in rehearsing how the JCPOA parties ended up here: the legality of snapback is fairly open-and-shut. The key is what happens next.  

Hawks will claim that the West may be saved from this dilemma of negotiations versus repeated bombing: the regime may be overthrown, and a new dispensation in Tehran might give up its nuclear enrichment and ballistic missile programmes, and support for regional proxies. But that amounts to policy-making by wishful thinking. The regime knows it has run out of legitimacy and popular support, as evidenced by an unprecedented level of challenge to the Supreme Leader’s hardline ideology from voices inside the regime. But a convulsive change would likely result either in the Islamic Revolutionary Guard Corps (IRGC) stepping in to take control, or sliding towards internal conflict and state collapse. The scale of regional crisis if Iran were to slip into the same sort of civil war as Syria or Libya stretches the imagination. 

So, when the dust settles, the West will probably be left facing the recognition that the least bad option is the painstaking process of negotiating a new deal of some sort, one that permanently puts to rest the threat of a military nuclear program, in return for sanctions relief. Unlike in 2015, these talks would have to address, in some form, Iran’s regional behaviour and involve regional players. 

This is incredibly hard, but one of the hardest things about it may be the ideology that has taken root among hawkish commentators, that any concession on sanctions is automatically a bad thing. This is a mistake. Economic pressure is important, and should only be relieved in return for hard security gains. But one reason Iranian securocrats hated the JCPOA so much was that they could see that sanctions relief weakened their grip. By contrast, the sanctions of recent years have allowed the IRGC to extend control over much of the Iranian economy. It’s in the interests of the West and the Iranian people to keep alive the possibility of a negotiated solution that eventually helps Iran become a more normal country.

Rob Macaire is a member of the Atlantic Council’s Iran Strategy Project advisory committee and a former British ambassador to Iran. 

The post Snapback sanctions threaten to further derail Iran nuclear deal hopes appeared first on Atlantic Council.

Over the past week, numerous Western leaders have condemned Russia’s “reckless” incursion. Meanwhile, NATO has announced the launch of the Eastern Sentry deterrence initiative, with plans for more integrated air defense, intelligence sharing, and new assets. Despite these steps, some believe the response has so far been insufficient. Ukrainian President Volodymyr Zelenskyy has criticized NATO’s “lack of action,” suggesting that European countries need to go further and work on a joint air defense system to create “an effective air shield over Europe.”

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.

If the West fails to credibly deter further Kremlin escalations, this would have potentially disastrous consequences for international security. At stake is not only Ukraine’s survival as a sovereign state, but NATO’s continued existence as the main guarantor of peace and stability in Europe. A conventional Russian invasion of Poland or the Baltic states remains within the realm of possibilities if Moscow is successful in Ukraine. However, a far more likely scenario would be some kind of gray zone aggression on NATO’s eastern flank with the aim of discrediting the alliance’s core commitment to collective security.

This could take many forms. For example, Russia could launch a significantly larger drone attack against Poland. Alternatively, the Kremlin could stage a hybrid cross-border incursion into Estonia, utilizing the same kind of plausible deniability employed during the 2014 seizure of Ukraine’s Crimean peninsula. Moscow’s goal would be to demonstrate that the NATO alliance lacks the resolve to act on its collective security commitments, while remaining below the threshold that could trigger a full-scale war.

Even prior to the recent appearance of Russian drones over Poland, there were already ample indications that the scale of the threat posed by the Putin regime was not fully understood in Western capitals. Recent diplomatic efforts to end the invasion of Ukraine via some form of compromise peace deal suggest a fundamental misunderstanding of Russia’s maximalist war aims. Putin’s ambitions extend far beyond limited territorial gains in Ukraine; any attempt to appease him with “land swaps” will merely whet his imperial appetite and encourage further aggression.

Members of the so-called Coalition of the Willing led by France and the UK have spoken recently of providing Ukraine with “robust” security guarantees, but only after a ceasefire is in place. This gives the Kremlin dictator no incentive to back down. While Putin’s recent summer offensive in Ukraine has failed strategically, Russia continues to make marginal gains on the battlefield while mercilessly striking Ukrainian cities and civilians with drones and missiles. It is therefore imperative to compel the Kremlin to agree to a ceasefire first, separating this from discussions over security guarantees while retaining a commitment to both.

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How Russia’s winter warfare strategy targets Ukrainian civilians

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A far more united, assertive, and multi-pronged approach is required in order to deter Russia. Western governments must make full use of the extensive economic leverage at their disposal. Washington and Brussels should seize Russia’s frozen assets and implement tougher sanctions that drastically cut Russia’s income from oil exports, including measures targeting Moscow’s shadow fleet of tankers. Applying additional secondary sanctions on foreign financial institutions that facilitate the purchase of Russian oil will force buyers like India and China to comply with US sanctions or risk losing access to the global financial system.

At the same time, the US and Europe must ensure Ukraine becomes a “steel porcupine” capable of defending itself and deterring future Russian aggression on its own. This should involve guaranteed weapons deliveries, an end to all restrictions on Ukrainian long-range strikes inside Russia, increased intelligence sharing, and enhanced industrial cooperation between Western and Ukrainian defense companies, especially in terms of drone technologies and electronic warfare.

This combination of intensifying economic pressure on Russia and increased military support for Ukraine could set the stage for a ceasefire agreement. If this is achieved, the West must then unilaterally implement security guarantees and deploy troops from as many countries as possible to Ukraine to ensure maximum deterrence. Any deployments should take a layered approach. The initial step would be a monitoring mission on the line of contact, followed by the deployment of soldiers across Ukraine, along with air and naval patrols.

While American troops will almost certainly not be involved on the ground in Ukraine, it is vital that US President Donald Trump sticks to his commitment to back any reassurance force with continued intelligence, surveillance, and reconnaissance support, along with a potential aviation component. The Trump administration has successfully encouraged NATO members to spend more on defense and support Kyiv, but Trump’s skepticism toward alliances and his often ambiguous position on Ukraine increase the likelihood of a Russian challenge to NATO’s Article 5 in the near future.

Putin’s latest escalation in the skies over Poland is an unmistakable signal that NATO’s credibility is under threat. In order to reduce the potential for a larger European war, a new approach to engagement with the Kremlin that projects strength and resolve is clearly required. Failure to act accordingly will place the entire international security architecture in question, including the foundational principle that borders cannot be changed by force.

Zahar Hryniv is a Young Global Professional at the Atlantic Council’s Eurasia Center.

Further reading

UkraineAlert Sep 16, 2025

Ukraine’s skies are Europe’s first line of defense against Russian drones

By Alina Zubkovych

As NATO leaders respond to Russia’s recent drone incursion into Poland, they should recognize that Ukraine’s skies are now European first line of defense against Putin’s growing drone fleet, writes Alina Zubkovych.

Conflict Defense Technologies

UkraineAlert Sep 16, 2025

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Conflict Defense Industry

UkraineAlert Aug 28, 2025

Putin wants to capture Ukraine’s crucial fortress belt without a fight

By Mykola Bielieskov

As US-led efforts to end the Russian invasion of Ukraine struggle to gain momentum, Vladimir Putin’s latest territorial demands include the surrender of strategically vital and heavily fortified Ukrainian land in the east of the country, writes Mykola Bielieskov.

Conflict Disinformation

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

Read more from UkraineAlert

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

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

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The post Putin’s Polish probe demands decisive response to restore NATO deterrence appeared first on Atlantic Council.

Hungary’s first act of retaliation was to ban Ukraine’s drone force commander Robert Brovdi from entering the country. Brovdi, who is of Hungarian descent, responded defiantly. In a strongly-worded social media post, he branded Hungary’s pro-Kremlin authorities “dancers on bones” and accused them of being complicit in Russian war crimes by funding Moscow’s invasion. “Your hands are soaked in blood up to the elbows, and we will not forget it,” he commented.

Brovdi’s reply may not have been very diplomatic, but it reflected the painful truth. Moscow’s invasion of Ukraine is being financed primarily by the export of Russian oil and gas. As one of the Kremlin’s last remaining European customers along with neighboring Slovakia, Hungary is feeding Putin’s war machine.

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.

Since the start of Russia’s full-scale invasion of Ukraine in February 2022, Hungary and Slovakia are believed to have paid Moscow close to $6 billion in tax revenues for crude oil deliveries alone. This contribution is enough to finance thousands of the cruise missiles that are used to bomb Ukrainian towns and cities on a daily basis.

Following Russia’s invasion, the EU announced plans to completely phase out Russian fossil fuel imports. However, rather than diversify away from Moscow, Budapest and Bratislava have actually increased their dependency on Russian energy deliveries. Hungary has expanded its reliance on Russian oil from 61 percent on the eve of the invasion to the current figure of 86 percent, while Slovakia is now thought to be almost entirely dependent on Moscow for oil. Similar trends are evident in terms of Russian gas exports to both countries.

This continued reliance on Russia is a choice rather than a necessity. A report published earlier this year by the Center for the Study of Democracy (CSD) and the Center for Research on Energy and Clean Air (CREA) found that Hungary and Slovakia could both potentially diversify their energy supply strategies by importing non-Russian oil via alternative sources such as Croatia’s Adria pipeline.

Opportunities for diversification also exist in relation to natural gas. For example, the two countries could secure non-Russian gas deliveries in the form of liquefied natural gas from global suppliers via existing LNG terminals located in Germany, Poland, Italy, or Greece.

Eurasia Center events

Online Event Fri, January 30, 2026 • 9:00 am ET

How Russia’s winter warfare strategy targets Ukrainian civilians

Conflict Europe & Eurasia Geopolitics & Energy Security Human Rights

Hungary and Slovakia argue that their reliance on the Kremlin is motivated by cost, with imports from Russia cheaper than purchasing energy resources elsewhere. While wholesale prices paid by Hungarian and Slovakian buyers are not officially released, data published by the European Commission indicates that natural gas prices for end consumers in Hungary and Slovakia are among the highest in the EU. In other words, Hungarian and Slovakian consumers do not appear to be any better off than their EU peers as a result of ongoing Russian oil and gas deliveries.

A key long-term oil export contract between Hungarian and Russian companies was due to expire at the end of June 2025, thus potentially freeing the Hungarian side of contractual obligations and empowering it to seek alternatives elsewhere. It is unclear whether the agreement has been renewed or if Hungary is now simply buying Russian oil on the spot market, but continued imports point to the fact that the Hungarian government has no plans to turn away from Russian fossil fuels.

Hungary has known for more than three years that the EU is aiming to end energy imports from Russia. Budapest also has alternative options available that would allow the country to reduce its reliance on Russian oil and gas supplies. Instead of diversifying, however, the Hungarian government has chosen to deepen its dependence on the Kremlin. They have done so despite knowing that they are helping to finance the largest European war since World War II.

Ukraine’s recent strikes on the Druzhba pipeline are not only an attack on Russia’s war economy. They are also a wake-up call for Hungarians highlighting the role being played by their country in the funding of Russia’s invasion.

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.

Further reading

UkraineAlert Aug 28, 2025

Putin wants to capture Ukraine’s crucial fortress belt without a fight

By Mykola Bielieskov

As US-led efforts to end the Russian invasion of Ukraine struggle to gain momentum, Vladimir Putin’s latest territorial demands include the surrender of strategically vital and heavily fortified Ukrainian land in the east of the country, writes Mykola Bielieskov.

Conflict Disinformation

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Moscow’s efforts to portray Zelenskyy as illegitimate fall apart when weighed against Ukraine’s Constitution and the country’s political practice, along with international precedents and legal tradition, writes Serhii Savelii.

Conflict Democratic Transitions

UkraineAlert Aug 21, 2025

Sorry, Trump, but Putin will not pursue peace until he is facing military defeat

By Elena Davlikanova, Yevhen Malik

Following the recent Alaska and White House summits, it should now be abundantly clear that Russia will continue to reject Trump’s peace overtures until Putin faces significantly more pressure to end the war, write Elena Davlikanova and Yevhen Malik.

Conflict European Union

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

Read more from UkraineAlert

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

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

Learn more

The post Hungary has alternative energy options but chooses to rely on Russia appeared first on Atlantic Council.

Russia’s economy is struggling. Nearly four years of war expenses combined with Western sanctions have put Moscow’s economy on a wartime footing. Inflation and interest rates remain high at 8.8 percent and 18 percent, respectively. The Russian government continues to draw down its National Welfare Fund to cover its fiscal deficit. Energy exports, especially oil, remain a lifeline for Russia even though they are declining. Putin, quite literally, cannot afford to lose his remaining oil revenue. 

Russia’s National Welfare Fund

Russia continues to drain its financial safety net to cover the costs of war and fund its economy. Russian economists recently assessed that the country is in jeopardy of depleting its National Welfare Fund by 2026, warning that as of June the fund only maintained $36 billion in liquid assets. This is the lowest it has been in more than five years. 

Gold makes up about 40 percent of assets held in the National Welfare Fund. Market uncertainty and increased volatility in response to evolving US tariffs and bilateral trade deals, as well as other monetary policy risks, are driving investors toward gold as a safe-haven asset instead of the US dollar. As a result, gold prices surged to record highs in the spring and have been holding steady at over $3,300 per ounce, which benefits Russian coffers. High gold prices, coupled with lax sanctions enforcement, have helped Russia recover value in the National Welfare Fund, which can prolong the Kremlin’s ability to fund its war. However, Russia’s gold is finite and, according to press reporting, the government only has 139.5 metric tons of gold left—a significant decline from the more than 400 metric tons it held before its full-scale invasion of Ukraine in February 2022. If Moscow cannot generate revenue from energy sales, then it will need to tap into its remaining gold reserves to cover its spending, which will push Russia into further fiscal and economic decline. 

This predicament creates the perfect target for sanctions—Russian oil. 

Russia’s oil exports

The Group of Seven (G7) sixty-dollar-a-barrel price cap on Russian oil, coupled with sanctions on financial institutions such as Gazprombank, have restricted Moscow’s energy revenues. Despite these restrictions, Russia continues to generate income from the sale of its oil. In July, for example, it brought in $9.8 billion from oil and gas exports. Notably, this is a 27 percent decrease from a year earlier, further restricting Russia’s budget.

Russia continues to export most of its oil to China and India. Some of these transactions are compliant with the G7 price cap, while other transactions are the result of sanctions-evasion techniques, such as the shadow fleet and what Russia’s deputy trade commissioner has called a “very, very special mechanism” with Indian buyers. 

Earlier this month, the Trump administration announced 25 percent tariffs on Indian goods as a punishment for India buying Russian oil. The tariff rate is scheduled to go up to 50 percent on August 27 if India continues to buy Russian crude. However, the tariffs have not deterred Russia from supplying oil to India or deterred India and China from buying it. In fact, China appears to be increasing its purchases of Russian oil, despite Trump’s warning that he may consider retaliatory tariffs on Beijing in the coming weeks. Secondary tariffs are bringing Russia, China, and India closer together and strengthening their economic ties. This runs the risk of weakening US and European economic leverage in peace negotiations between Russia and Ukraine.

The United States needs to strengthen the West’s negotiating position and create more leverage to end Russia’s war on Ukraine. Sanctioning Russia’s oil, similar to the approach the United States took against Iran, will immediately disrupt Moscow’s oil revenue. With the safety net of the National Welfare Fund dwindling, Putin would have no choice but to negotiate with Western leaders to end Russia’s war. 

In addition, imposing secondary sanctions on Russian oil will force India, China, and other buyers to comply with US sanctions or risk losing access to the US-led global financial system. Licenses and exemptions can be used to mitigate unintended consequences, while increased production by the group of oil-producing countries known as OPEC+ can help offset the loss of Russian oil on the market. In exchange for a peace deal and security guarantees for Ukraine, the United States and Western partners can offer to lift sanctions and other restrictive measures that would allow the return of Russian oil to the market and save Russia’s economy from ruin. Such a peace deal should include, but not be limited to, Russia dropping its claims on Ukrainian territory, returning all Ukrainian children and prisoners of war, dropping court cases against Western companies complying with sanctions, making financial commitments for Ukraine’s reconstruction, agreeing to the deployment of a European-led deterrent force in Ukraine.

To start increasing financial pressure on the Kremlin, the US Treasury can close gaps between US and European Union (EU) sanctions on the shadow fleet by targeting the additional 105 vessels and companies involved in the shadow-fleet value chain that the EU targeted in July. Further, the US Treasury can target Russian oil companies including Gazprom, Lukoil, and Rosneft, which are currently subject to restrictions, but not subject to primary sanctions by the United States. The US Treasury can target Russian vessels operating outside of the shadow fleet, ports, and port operators, as well as service providers for seaborne and pipeline oil flows. The US Treasury can enforce existing sanctions on oil companies and producers, such as Gazprom subsidiary Gazprom Neft and Surgutneftegas. Enforcement includes following through on threats of secondary sanctions targeting the foreign financial institutions involved in transactions for Russian oil and oil-derived products. Existing executive orders provide the authority to target this activity, and new executive orders and legislation are not required. As the very least, simply enforcing the actions that have already been taken will have a significant impact on Russian oil revenues.

“Leverage: don’t make deals without it”

To Trump’s credit, his personal relationship with Putin creates the opportunity for dialogue and opens lines of communication that were previously closed. The US president is well positioned to bring about peace and achieve security guarantees for Ukraine, but his administration needs to arm him with the best tools and options to do so. 

In Trump: The Art of the Deal, Trump wrote, “Leverage: don’t make deals without it.” Sanctioning Russia’s oil and cutting off their revenue is the leverage Trump needs to negotiate an end to this bloody war and a lasting peace deal for Ukraine.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director.

Econographics

Apr 17, 2025

Russia Sanctions Database

By Kimberly Donovan, Maia Nikoladze, Lize de Kruijf

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

Eastern Europe Economy & Business

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The post Tannebaum interviewed by BBC on Trump-Putin summit stakes and sanctions options if progress is not made appeared first on Atlantic Council.

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And it could reshape Central Asia’s geopolitics even further. If the war concludes with Russia annexing significant portions of Ukraine, for example, this outcome will certainly influence the competitive dynamics between Russia and China in the region going forward.

How Russia’s war impacts Central Asia

Central Asia’s geopolitical importance stems from its position as a trade crossroads, its vast energy reserves, and its role in China’s Belt and Road Initiative (BRI). For decades, Russia maintained dominance in the region through historical ties, the Collective Security Treaty Organization (CSTO), and the Eurasian Economic Union. However, the war in Ukraine has strained Russia’s regional engagement, creating opportunities for China to deepen its influence in Central Asia—and for local states to leverage their agency to balance these powers.

That does not mean Russia is in a weak position. Despite early setbacks in the war, Russia has adapted, expanding its defense industry to produce up to three million artillery shells annually by early 2025, surpassing NATO’s output. Russian troops have also gained significant combat experience—in contrast to China, whose forces have done little but occasionally repress their own people. Russia’s economy, initially suffering tremendous setbacks due to combined and effective Western sanctions, has shown resilience. The International Monetary Fund estimates the economy grew 3.2 percent in 2024, surpassing the growth rate of many Western economies. This economic resilience is driven by redirected trade to Asia, import substitution, and the growth of Russia’s domestic industries. Russia’s economic and military recovery has bolstered its image as a formidable power in some Central Asian circles, particularly among authoritarian leaders wary of Western pressures to democratize. Russia’s narrative of single-handedly resisting NATO and the European Union (EU) may resonate with some Central Asian elites and the region’s Russian minority populations, enhancing Moscow’s soft power.

However, Russia’s focus on subjugating Ukraine has strained its Central Asian ties. Even if a cease-fire is achieved, Russia’s likely prioritization of consolidating gains in Ukraine and rebuilding its western defenses may limit resources for Central Asia, weakening its ability to counter China’s economic advances in the region. Moreover, some Central Asian leaders, particularly in Kazakhstan, view Russia’s territorial ambitions with concern, fearing similar revisionist moves in regions with ethnic Russian populations, such as Kazakhstan’s north. For instance, Russian President Vladimir Putin’s 2014 remark that Kazakhstan is an “artificial country” heightened anxieties about Russian intentions, pushing some states to diversify their alignments, most notably toward China. This approach has paid dividends for Kazakhstan: Chinese President Xi Jinping pledged Beijing’s support for Kazakhstan’s “independence, sovereignty, and territorial integrity” on a 2022 trip to Astana.

China’s aims in the region

China has capitalized on Russia’s focus on the war to strengthen its foothold in Central Asia. Through the BRI, China has invested billions of dollars in infrastructure, such as pipelines, energy projects, and the China-Kyrgyzstan-Uzbekistan railway, which bypasses Russia. By 2020, China surpassed Russia as the top trade partner for most Central Asian states.

Russia’s prioritization of its war on Ukraine has also created an opportunity for Chinese arms sales to the region, with reports suggesting that Uzbekistan is set to acquire Chinese fighter jets to replace aging Russian equipment. China’s more than five-billion-dollar investment in Tajikistan’s infrastructure since 2007 dwarfs Russia’s contribution. China’s officially neutral stance on the war in Ukraine and its peace-brokering rhetoric enhance its diplomatic appeal, positioning it as a less confrontational partner than Russia. And Beijing’s financial leverage, through loans and control over infrastructure, further solidifies its influence. For example, China’s role as Uzbekistan’s main gas importer and its investments in renewable energy signal a long-term strategy to dominate the region’s energy sector.

Yet, despite these advances, China faces significant challenges in the region. Central Asian publics’ skepticism toward China, fueled by fears of “debt trap” diplomacy and resentment toward Chinese workers, limits Beijing’s soft power. A seemingly small but telling example of this phenomenon is the fierce backlash in Kyrgyzstan to China flooding the country with cheap, shoddy plastic yurts. The genuine felt yurt, made painstakingly by hand and decorated with women’s hand-embroidered yurt belts, is a source of intense cultural pride among the Kyrgyz. The fact that many are now reduced to buying the Chinese variant due to economic circumstances forces Kyrgyz artisans out of work, fueling anti-Chinese sentiment. On a much larger scale, China’s treatment of the Muslim Uyghur minority in Xinjiang raises concerns in Muslim-majority Central Asian states, potentially undermining trust. These tensions allow Russia to maintain influence, particularly when it comes to security, where its historical ties and CSTO presence remain significant.

How Central Asian leaders approach Russia and China

Central Asian states are not passive in this geopolitical contest. They are active players, leveraging the Russian war to pursue “multi-vector” foreign policies, balancing Russian security ties with Chinese economic opportunities. The war has reinforced this pragmatic approach, as Central Asian leaders navigate Russia’s assertive posture and China’s economic dominance. Central Asian resilience hinges on maintaining internal stability and diversifying its political and economic ties without provoking either Moscow or Beijing. Kazakhstan, for instance, has maintained neutrality on the war while deepening economic ties with China. Uzbekistan and Turkmenistan have both diversified their energy exports to China, reflecting efforts to hedge against overreliance on any single partner. The United States’ C5+1 summit in 2023 and growing EU engagement with the region offer alternative partnerships for Central Asian states, but Western influence remains limited compared to that of Russia and China.

What will an end to Russia’s war on Ukraine mean for Central Asia?

The situation might well change further if Russia’s war in Ukraine ends or a sustained cease-fire is reached. For instance, if Russia does get away with annexing—or retaining de facto control of—a significant amount of Ukrainian territory, this could enhance its regional power. Selling the Russian war on Ukraine as a victory could encourage greater deference to Russian military initiatives, especially among smaller CSTO member states like Kyrgyzstan and Tajikistan, as well as Kazakhstan, which is wary of its vast northern border with Russia.

Moreover, Russia’s strengthened military and economic growth may embolden it to resist China’s encroachment in Central Asia, where Moscow views itself as the historical hegemon. China, prioritizing economic dominance, may tolerate Russia’s security role but push for greater control over trade and resources, potentially straining their alignment and reviving opportunities for Central Asian leverage.

A victorious Russia, perceived as having stood up against the combined might of NATO and the EU, could inspire some Central Asian states to resist Western overtures, indirectly benefiting China’s nonaligned stance. In addition, if sanctions relief comes as part of an agreement to end the war, Russia’s economic dependence on China could decrease. However, if Russia overextends itself after the war, prioritizing the integration of conquered Ukrainian territories over engagement with Central Asia, China could take the opportunity to fill the vacuum, particularly on energy and trade.

Regardless of what a deal to end the war in Ukraine ultimately looks like, the interplay of Russia’s geopolitical ambitions, China’s strategic patience, and Central Asian leaders’ pragmatism will come to define the contested and dynamic postwar regional order.

Tatiana Gfoeller is a nonresident senior fellow with the Atlantic Council’s Eurasia Center and member of the board of directors at American Women for International Understanding. From 2008 to 2011, she served as US ambassador to the Kyrgyz Republic.

The post What Russia’s war on Ukraine means for Central Asia  appeared first on Atlantic Council.

As the Trump administration recalibrates its policy toward Caracas, Colombia continues to grapple with instability caused in part by neighboring Venezuela. The number of Venezuelan migrants and refugees journeying to Colombia has plateaued, but the country’s resources are strained and its security situation is worsening as armed groups and criminal organizations continue to use Venezuela as a haven beyond the reach of the Colombian military. Meanwhile, the United States has cut foreign aid and centered its Venezuela policy around prisoner releases, deportations, and curbing migration. Despite differences in priorities and political approaches, opportunities exist for the United States and Colombia to engage in mutually beneficial actions that promote domestic and regional stability.

This issue brief, based on multiple consultations with US-Colombia Advisory Group members following a private expert briefing in December 2024, outlines the shifting dynamics in US and Colombian policy towards Venezuela. It makes recommendations for stronger US-Colombia coordination to promote stability in Venezuela and the broader region through diplomatic channels, security and intelligence cooperation, regional migration policy, and integration and regularization of migrants in Colombia.

Lucie Kneip is a program assistant at the Atlantic Council’s Adrienne Arsht Latin America Center, where she provides strategic direction to the center’s work on Venezuela and Colombia. She has supported the work of the Venezuela Solutions Group and the US-Colombia Advisory Group and has coordinated events with high-level policymakers, business leaders, and civil society members from across the Americas. Together with Geoff Ramsey, she leads the center’s work on individual sanctions in Venezuela and created the Venezuela Individual Sanctions Tracker.

Geoff Ramsey is a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center. Ramsey is a leading expert on US policy toward Venezuela and has traveled regularly to the country for the last decade. Before joining the Atlantic Council, Ramsey directed the Venezuela program at the Washington Office on Latin America where he led the organization’s research on Venezuela and worked to promote lasting political agreements aimed at restoring human rights, democratic institutions, and the rule of law.

The Atlantic Council’s US-Colombia Advisory Group is a nonpartisan, binational, and multi-sectoral group committed to advancing a whole-of-society approach to addressing the most vital policy issues facing the US-Colombia relationship—with a recognition of the broader implications for bilateral interests across the region more broadly.

At its founding in 2017, the Advisory Group was co-chaired by Senators Roy Blunt (R-MO) and Ben Cardin (D-MD). Upon Blunt’s retirement, Senator Bill Hagerty (R-TN) assumed the honorary chairmanship alongside Cardin from 2023 until 2024.

Sep 29, 2021

US-Colombia Advisory Group

The Atlantic Council’s US-Colombia Advisory Group, is a nonpartisan, binational, and multi-sectoral group committed to advancing a whole-of-society approach to addressing the most vital policy issues facing the US-Colombia relationship—with a recognition of the broader implications for bilateral interests across the region more broadly.

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The post How the US and Colombia can tackle crime, migration, and fallout from Venezuela’s crisis appeared first on Atlantic Council.

During his comments Monday alongside British Prime Minister Keir Starmer in Scotland, Trump also mentioned two actions that he might take after that deadline: additional sanctions on Russia and major tariffs on countries purchasing Russian oil or gas. Those are two useful steps, but the question that the White House should be asking is what steps might eventually force Putin to accept the compromise peace that Trump has advocated since before taking office. 

Since the Russian president launched his revisionist campaign with the 2008 attack on Georgia, and then his seizure of Crimea in 2014, he has managed to outlast the opposition that he has faced from the West. Trump has the ability to change this. To do so, he must abandon the dawdling, incremental policy of the Biden administration, and he must take strong military and economic measures that will prevent additional Russian gains on the battlefield and further reduce the output of an already doddering Russian economy. What might this look like?

Send offensive weapons to Ukraine

The Trump administration can make good on its willingness to send advanced weapons to Ukraine (paid for by Europe), not just Patriot missiles for air defense, but offensive weapons. If he is ready to move beyond the inherent caution of Team Biden, Trump could announce his intention to send Tomahawk missiles (with a range of over one thousand miles) if Russian bombardment of Ukrainian cities and civilians does not end in the next ten days. This could also encourage Germany to do the same with its Taurus missiles. The United States could also move quickly to reach an agreement with Ukraine for the joint production of advanced drones. This would enhance the defense capability of Ukraine and the United States. With these and other weapons in Ukraine, the United States could help Ukraine achieve the capability to threaten Russian supply lines into Crimea and core logistics points serving the front in eastern Ukraine—an important step in checking Russia’s advance and incentivizing a cease-fire. 

Bolster NATO

The Trump administration could build on its success at the recent NATO Summit in The Hague to enhance the Alliance’s deterrence capabilities. It took a good step in that direction with the deployment of nuclear weapons to the United Kingdom earlier this month. It should likewise announce that any Russian missiles or drones overflying NATO airspace (on their way to Ukraine) will be treated as a hostile object and dealt with accordingly.

Ramp up sanctions and tariffs

First on July 14 and then again on July 28, Trump mentioned his intention to place secondary tariffs on Russia’s trading partners, which would likely include the two largest purchasers of Russian hydrocarbons—China and India—if Putin does not agree to a cease-fire. There has been strong momentum in Congress toward a tough sanctions-plus-secondary-tariffs bill led by Sen. Lindsey Graham (R-SC), but the reality is that—as he has shown in other areas—Trump can easily ratchet up tariffs himself. Since Moscow’s otherwise enfeebled economy is greatly boosted by Beijing and New Delhi purchasing its hydrocarbons, the threat of major tariffs could make it far more difficult for the Russian economy to support the ongoing war effort. With the recent capture of a Russian drone made largely with Chinese components on the battlefield in Ukraine, the United States could sanction China for breaking the arms embargo. Along with these tariffs and sanctions, the United States could push for greater international cooperation to shut down the “shadow fleet” carrying contraband Russian oil. 

Press Europeans on the immobilized Russian state assets

Putin believes that he can outlast Western support for Ukraine and Ukrainian resources, both military and economic. An efficient way to demonstrate that this is wrong would be to arrange the transfer of the nearly $300 billion of immobilized Russian state assets to Ukraine. Over the past several weeks, Trump has shown himself to be a tough but able negotiator with his European counterparts; he could once again lean on the Europeans to do more for Ukraine. By itself, the transfer of these immobilized state assets—the vast majority of which are in European accounts—would sustain Kyiv’s military and economic needs for over three years.

***

Introducing all or most of these measures in rapid succession would deal a major blow to Putin’s confidence that time is on his side. That is the best chance to get the Russian president to negotiate a durable peace. As Trump himself said, there’s no reason for waiting.

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

The post The Russia pressure menu: Options to convince Putin to negotiate on Ukraine  appeared first on Atlantic Council.

Ambassador Whitaker’s comments came amid growing international scrutiny of China’s role in the Russian invasion of Ukraine. In recent months, Ukrainian President Volodymyr Zelenskyy has accused China of directly providing Russia with weapons. Beijing has denied the claims. More recently, Reuters has reported that Chinese-made engines are being covertly shipped via front companies to a state-owned drone manufacturer in Russia and labelled as “industrial refrigeration units” to avoid detection.

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.

Recent reports of growing Chinese support for the Russian war effort are fuelling renewed speculation over what Beijing is hoping to achieve in Ukraine. While Chinese officials reject accusations that their country is arming Russia as “groundless” and insist that their focus remains on promoting peace talks, comments attributed to Chinese Foreign Minister Wang Yi in early July offer a window into Beijing’s priorities. According to EU officials, China’s top diplomat told his European counterpart, Kaja Kallas, that Beijing is not willing to accept a Russian defeat in Ukraine as this could allow the United States to turn its full attention to China.

Wang Yi’s widely reported statement certainly fits with Beijing’s official stance toward the Russian invasion of Ukraine. Although China claims to want peace, it has consistently demonstrated its diplomatic and economic support for Moscow amid deepening ties with the Kremlin. On the eve of the invasion, China and Russia declared a “no limits” partnership. China’s President Xi Jinping has since met with his Russian counterpart on multiple occasions to reaffirm this partnership. Chinese officials have also frequently echoed Russian justifications for the invasion.

Economic ties between the two countries have strengthened significantly since 2022 amid a rupture in Russian business links with the West. Bilateral trade has soared to record highs, with China serving as a key alternative destination for Russian energy exports while also allegedly proving instrumental in helping Moscow bypass Western sanctions. According to a May 2025 report by the German Foreign Ministry, China is believed to be responsible for around 80 percent of Russian sanctions avoidance.

This growing partnership makes perfect sense. China and Russia share a clear geopolitical alignment in opposition to the current US-led world order, with both Xi and Putin openly speaking about the need for a new multipolar era in international relations. Russia also appears to have had considerable success in convincing China that the invasion of Ukraine is a key step toward achieving this goal. Likewise, Beijing has good reason to fear a Russian defeat in Ukraine, which would significantly strengthen the West while freeing up the United States to turn its attention to Asia.

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It is clear that China is now Russia’s most important international partner, but there are some indications of distrust between the two authoritarian allies. Many in Moscow are wary of Russia’s growing dependence on Beijing amid suspicions regarding China’s long-term ambitions toward their country. According to a New York Times report published in June 2025, some elements within Russia’s extensive intelligence community openly refer to the Chinese as “the enemy” and believe efforts are already underway to lay the groundwork for future claims to Russian territory.

In China, meanwhile, there is likely to be a degree of uneasiness about the rapidly deepening military cooperation between Russia and North Korea. Since 2022, Pyongyang has emerged as a key supplier of artillery shells, ballistic missiles, and other munitions to the Russian army. More recently, North Korea has begun providing thousands of combat troops for Russia’s war against Ukraine, along with large numbers of workers for military-related construction and factory roles.

Growing cooperation between Moscow and Pyongyang could undermine Beijing’s position by diluting China’s ability to influence the Kremlin. At the same time, the large amounts of money and increased access to advanced Russian military technologies that North Korea is receiving in return for its support could also transform the delicate geopolitical balance in East Asia.

There is little reason to doubt recent EU claims that China is committed to preventing a Russian defeat in Ukraine. However, the much-hyped partnership between Moscow and Beijing may be more marriage of convenience than ideological alliance. Both sides share a common interest in weakening the West, but they might not be as trusting of each other as their public statements would suggest.

Some in Russia are now openly alarmed by their country’s growing reliance on China and have little faith in Beijing’s good intentions. China almost certainly does not want Russia to lose the war in Ukraine, but Beijing is unlikely to welcome the idea of an historic Russian victory that would strengthen Moscow and weaken the current dominant Chinese position during future negotiations with the Kremlin. Instead, China’s preference may be for the indefinite continuation of a war that increases its leverage over Russia while keeping the West fully occupied and unable to turn its attention to Asia.

Mykola Bielieskov is a research fellow at the National Institute for Strategic Studies and a senior analyst at Ukrainian NGO “Come Back Alive.” The views expressed in this article are the author’s personal position and do not reflect the opinions or views of NISS or Come Back Alive.

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

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

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

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The post US ambassador: China believes it is waging a proxy war through Russia appeared first on Atlantic Council.

Since China began its policy of mass internment in 2017, an estimated two million Uyghurs have been arbitrarily detained in state-run internment camps, where they are subject to political indoctrination, torture, organ harvesting, and forced repudiation of their religious and ethnic identities. According to the United Nations, these abuses may constitute crimes against humanity. Several governments, including the United States, have determined that China is actively committing genocide against the Uyghurs.

Despite international calls for China to cease its human rights abuses, the government is instead furthering its repression of the Uyghurs. For those who narrowly avoid detainment in internment camps, another stark fate awaits them: subjection to China’s state-sponsored forced labor programs.

Through sanctions and the adoption of anti-forced labor legislation, the United States has led the global effort to combat China’s forced labor practices. While these measures have moved the needle in the fight against forced labor, widespread tariffs and the absence of new punitive measures targeting forced labor may cause progress to stagnate. As tensions grow and global economic uncertainties unfold, the Trump administration must ensure that it does not lose sight of Uyghur human rights. The United States can help curtail China’s forced labor practices and uphold its precedent of promoting Uyghur human rights by doubling down on its enforcement of the Uyghur Forced Labor Prevention Act and imposing additional anti-forced labor measures.

Which industries are exposed to Uyghur forced labor?

Forced labor plays a central role in China’s campaign of repression. Two systems of forced labor exist in China, which primarily target the Uyghurs. The first system exploits detainees in China’s internment camps for labor. The second system—conducted under the pretense of “poverty alleviation”—involves transferring large numbers of Uyghurs from rural regions to factories and fields across China. In both instances, authorities use intimidation and abuse to coerce individuals to labor. Following their subjection to China’s labor programs, workers face abusive working conditions, inadequate pay (if any), rigid surveillance, political indoctrination, and mandatory Mandarin lessons—a systematic effort to erase Uyghur language and culture.

Crucially, industries and supply chains across the world risk exposure to Uyghur forced labor. The Uyghur Region is deeply integrated in the global economy, accounting for roughly 20 percent of the world’s cotton, 25 percent of the world’s tomatoes, 45 percent of the world’s solar-grade polysilicon, and 9 percent of the world’s aluminum. Given that a sizable portion of the world’s production takes place in the Uyghur Region, goods that are produced through Uyghur forced labor inevitably enter international supply chains and end up in stores and households across the world.

Though forced labor touches industries ranging from automotive to pharmaceuticals, it is especially pervasive in the apparel and agriculture industries. Under conditions that raise concerns of coercion, nearly half a million Uyghurs and other ethnic minorities are transferred each year to work in cotton fields. In China’s tomato fields, workers are subject to torture, with testimonies of beatings and electric shocks administered to those who fail to meet high daily quotas. Evidence of forced labor has also emerged in the seafood industry, where Uyghurs work in Chinese processing plants that supply seafood to the United States—seafood that ends up in federally-funded soup kitchens, school lunches provided by the National School Lunch Program, and even US canned fish donations to Ukraine.

Against this backdrop, the Forced Labor Enforcement Task Force identified several industries where forced labor is deeply entrenched as high-priority sectors for enforcement. This is an important designation. However, without sustained effort and vigorous screening, products made with forced labor will continue making their way into our homes and taint everything from the clothing we wear to the food we eat.

How has the United States responded to Uyghur forced labor?

Escalating human rights abuses against the Uyghurs and other ethnic minorities have prompted governments across the world to act. The United States, as one of the leading forces opposing China’s human rights abuses, has leveraged its robust economic statecraft toolkit to institute punitive measures on individuals and entities complicit in the persecution of Uyghurs. The United States has notably imposed 117 sanctions on entities and individuals, issued investment bans on eleven companies, and implemented numerous export and import controls.

To directly combat China’s forced labor practices, Congress passed the Uyghur Forced Labor Prevention Act (UFLPA), a landmark legislation that stands as the most powerful tool globally to address Uyghur forced labor. The UFLPA was signed into law in 2021 and prevents goods made with Uyghur forced labor from entering the United States by utilizing a rebuttable presumption that any goods produced in the Uyghur Region are done so under forced labor conditions. The enforcement of UFLPA calls for sanctions on individuals and entities complicit in forced labor, and it also expands the Department of Homeland Security’s UFLPA Entity List—an import blacklist of companies with ties to Uyghur forced labor. Last updated in January 2025, the UFLPA Entity List now includes 144 entities, a marked increase from the initial twenty entities in 2022.

The UFLPA is the first law globally that counters Uyghur forced labor tangibly, comprehensively, and with meaningful economic impact. Since UFLPA’s implementation in June 2022, the US Customs and Border Protection has seized a staggering $3.69 billion worth of goods for investigation and denied shipments totaling nearly $1 billion in value entry into US markets.

Ultimately, sanctions and forced labor laws like the UFLPA have prompted companies to comply with human rights standards. Mounting pressure and increased scrutiny from the United States and the international community have led major multinational companies to withdraw from the Uyghur Region over forced labor concerns, despite firm retaliation from Beijing. By implementing the UFLPA, the United States has also set a positive precedent with numerous countries, including Canada and European Union members, adopting their own policies targeting forced labor.

Where do we stand now?

The global response to US measures countering Uyghur forced labor is evidence that pressure works. Although substantive progress has been made in the effort to combat forced labor, the Trump administration’s tariff policies may hamper further progress. On the one hand, the administration’s elimination of the de minimis exemption could help minimize a key loophole in UFLPA enforcement. Under the exemption, Chinese imports valued under $800 were allowed to enter the United States while avoiding import duties and strict customs scrutiny, limiting CBP’s ability to enforce the UFLPA. This loophole has been exploited by Chinese companies complicit in forced labor, such as Shein and Temu, which have built their entire business models around the exemption.

While the closure of the de minimis loophole could prove fruitful, the administration’s global reciprocal tariffs pose other concerns. Steep tariffs imposed on major US trading partners could inadvertently incentivize companies to look for areas in their supply chains where they can cut back on costs. This is especially concerning if these companies overlook ethical labor considerations in search for alternatives in countries like China that are laden with abusive labor practices. Additionally, imposing widespread tariffs may lead to instances of tariff evasion and could cause issues for forced labor screenings due to the obfuscation of product origins. Compounding these concerns, additions to the UFLPA Entity List have stalled since the Biden administration’s last update in January.

With the focus of world affairs shifting to spotlight trade turbulence and growing diplomatic tensions, efforts to counter forced labor and advance human rights cannot afford to lose momentum. As companies and countries navigate global uncertainties, it is imperative that the Trump administration takes a hard stance against Uyghur forced labor and ensures unabated continuity in US enforcement of anti-forced labor measures. It can do so by introducing and ramping up additions to the UFLPA Entity List. The United States could also impede China’s forced labor practices by passing the reintroduced No Dollars to Uyghur Forced Labor Act in Congress, which seeks to prohibit US contracts with companies tied to forced labor in the Uyghur Region. To ensure these measures are implemented effectively, US agencies charged with leading Uyghur-focused initiatives must be staffed with specialists who possess a deep understanding of the state-sponsored forced labor and persecution that take place in China, and who have the expertise to help identify and address sanctions evasion.

Amid geopolitical uncertainties, Uyghur human rights must be safeguarded as an enduring priority. The United States needs to act swiftly, decisively, and meaningfully to ensure that they are.

Nazima Tursun is a former young global professional at the Atlantic Council’s Economic Statecraft Initiative.

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The World Bank estimates Syria’s economy at around $21 billion, representing an 83 percent decline since 2010, while the United Nations (UN) estimates that the cost of reconstruction will be more than $250 billion. The road ahead is long.

Recent developments are encouraging. Syria has reengaged with the World Bank and International Monetary Fund (IMF) and reconnected with the European banking system. However, fostering stability and reconstruction requires international actors—particularly the United States—to pursue a coherent, positive economic statecraft strategy to anchor recovery in the long term. Without coordinated engagement, targeted investment, and clear policy direction, Syria remains vulnerable to corruption, deepening poverty, and adversarial influence seeking to fill the vacuum left by the collapse of the Assad regime.

Lifting US sanctions on Syria

US President Donald Trump’s recent executive order, “Providing for the Revocation of Syria Sanctions,” marks the first official step in lifting US sanctions on Syria. The order terminated previous executive orders imposing sanctions on the country. In response, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) lifted 518 designations, including for major Syrian banks and companies critical to infrastructure and rebuilding.

However, the executive branch is limited in what it can do. The Caesar Act, which codifies sanctions into law, requires congressional approval to lift any designations under its framework. Although the Caesar Act sanctions are temporarily waived for 180 days, this exception is set to expire in November 2025. The executive order directed the secretary of state to assess the potential for fully suspending sanctions under the Caesar Act, but the congressional process for lifting these sanctions may be slow and politically complex.

Additionally, the secretary of state recently announced the removal of all Hay’at Tahrir al-Sham (HTS) terrorism designations, after the group was disbanded earlier this year. Nevertheless, HTS remains listed under the United Nations (UN) sanctions. While the United States has drafted a UN resolution to begin the process of lifting UN sanctions, this may prove to be a slow process. Any delisting would require unanimous consensus from the UN Security Council, which is unlikely. While UN sanctions remain in place, financial institutions will continue to struggle with compliance issues when engaging with Syria.

Finally, while the executive order permits relaxing export controls of certain goods, the US Department of Commerce is yet to review or lift export controls, further complicating efforts by the private sector to reenter the Syrian economy.

While these policy changes by the US government are crucial, they are also complex and, on their own, insufficient to enable Syria’s reconstruction and stabilization.

Steps in the right direction

Announcements by the United States, the EU, and other European countries regarding the sanctions relief for Syria have generated significant momentum to reintroduce Syria into the global economy.

For the first time since 2009, the IMF has conducted a mission to Damascus. Their recommendations highlight the urgent need for sound fiscal and monetary policy, institutional strengthening, banking reform, and enhanced anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks. These are foundational steps toward rebuilding confidence in Syria’s economic governance, which the Syrian authorities have expressed commitment to. The World Bank also recently approved a $146 million loan to restore Syria’s electricity infrastructure—a critical step for both economic productivity and civilian welfare.

Meanwhile, the EU’s easing of financial restrictions has enabled Syria to rejoin the SWIFT system, leading to its first electronic transfer in over a decade—signaling cautious reengagement from European financial actors.

With Trump’s executive order, US banks and the private sector are now positioned to reenter Syria too. However, reputational and political risks may temper initial enthusiasm, requiring the US government to lead the way.

Remaining challenges require positive economic statecraft

Even with fewer legal barriers, Syria is considered a complex and risky environment for many private sector actors. The country has been sanctioned in some form since 1979. After years of conflict and institutional erosion, a legacy of opaque regulatory frameworks, weak governance, and perceived instability remains.

Syria’s persistent presence on the Financial Action Task Force grey list underscores concerns about illicit financial activities and the country’s limited regulatory capacity. For the private sector, this listing signals elevated financial and operational risks, including increased regulatory burdens, reputational damage, limited financial access, and economic instability.

Further compounding this risk perception, the recent conflict escalation between Israel and Iran has heightened instability in the region and cast a shadow over Syrian investment opportunities. The United States’ military intervention in the conflict raises concerns about the coherence of US strategy in the Middle East. Meanwhile, escalating tension between Syria and Israel in recent days adds another layer of uncertainty threatening Syria’s prospects for peaceful and stable reconstruction.

While the easing of sanctions was intended to catalyze economic reintegration, the geopolitical landscape in the region may limit the speed and scale of private capital influx, unless it is underpinned by strategic support and risk mitigation. Given Syria’s historical strategic value, adversarial actors are also likely to try to maintain influence and investment there, making sustained constructive engagement by the United States and its allies essential.

A roadmap for US policy

To support Syria’s reconstruction and encourage responsible private sector engagement, the United States should pursue a more structured approach, beginning with the steps listed below.

1. Ensure legal clarity for the private sector. Providing the private sector with structured guidance to navigate the evolving legal landscape of the Caesar Act, designations related to terrorism, and export controls will help US banks and businesses navigate regulatory complexities, ensuring compliance and reducing risks perceptions.
2. Ensure legal and political clarity for the Syrian government. Ongoing communication with the Syrian government regarding the conditions and expectations tied to sanctions relief, as well as benchmarks for continued engagement, will facilitate smoother cooperation and reduce risk of backsliding.
3. Continue diplomatic efforts within the UN. Ongoing diplomacy with the UN Security Council members regarding the lifting of HTS designations is essential to prevent jurisdictional arbitrage, uneven sanctions compliance and enforcement, and increased risk for the financial and private sector.
4. Strengthen financial integrity. Providing technical assistance to enhance Syria’s AML/CFT compliance and to establish formal, regulated channels for investment and financial transfers would prevent the proliferation of informal systems prone to corruption, illicit finance, and state capture, and would reduce risks for financial institutions considering reentry.
5. Leverage US International Development Finance Corporation (DFC) reauthorization to manage risk related to investment in Syria. The United States should use DFC reauthorization to create a strategic framework for investment in Syria, coordinating with institutions like the World Bank’s Multilateral Investment Guarantee Agency to provide insurance mechanisms that protect private investors from political and economic instability, while promoting transparency and policy consistency.
6. Develop a task force with allies to support Syria’s reconstruction. Progress requires strategic alignment between the United States, EU, IMF, World Bank, and key regional actors, including the Gulf states. Considering the upcoming Annual Meetings of the IMF and the World Bank Group, the United States should seize the opportunity to develop a coordinating body to identify opportunities and solutions for Syria’s postwar reconstruction, ensuring reforms are sequenced, accountable, and achievable.
7. Support diaspora and Gulf investment with oversight. Syria’s diaspora and investors based in the Gulf offer strong potential for recovery capital—but only if engagement is channeled through secure, regulated platforms that promote transparency and prevent capture by entrenched interests.

Syria’s recovery and reintegration into the global economy is strategically necessary for regional stability. Past experiences in Sudan and Libya offer cautionary tales about the how removing economic leverage can backfire when there are no clear reform benchmarks or defined positive economic statecraft strategies. If left unstructured and unsupported, Syria’s fragile recovery risks becoming opaque, corrupt, and ultimately reversible.

For the United States, this moment presents a rare opportunity to lead through coordination, clarity, and targeted assistance. Syria’s economic future—and by extension, a measure of stability in the broader Middle East—may well depend on Washington’s willingness to expand its toolkit beyond punitive economic measures and embrace more positive economic statecraft tools.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director.

Jonathan Panikoff is the director of the Atlantic Council’s Scowcroft Middle East Security Initiative and a former deputy national intelligence officer for the Near East at the US National Intelligence Council.

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

Manal Fatima is an assistant director at the Atlantic Council’s Scowcroft Middle East Security Initiative. 

Note: The insights and recommendations presented in this piece emerged from a private roundtable held in June, co-hosted by the Atlantic Council’s Economic Statecraft Initiative and the Scowcroft Middle East Security Initiative. We extend our sincere thanks to all participants for their valuable contributions and for helping shape the ideas reflected here.

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US policy toward Venezuela is at a crossroads, with a degree of uncertainty still hanging over the new administration’s approach. The White House faces a choice: Should the United States try to use sanctions leverage to obtain limited concessions from Maduro on energy security, migration, and democratic reforms? Or should it bet on a return to “maximum pressure” in the hope of deepening existing fissures among Venezuela’s ruling elites and hastening a more immediate transition?

This issue brief, informed by the Adrienne Arsht Latin America Center’s Venezuela Solutions Group, explores two options through which the Trump administration could adopt an “America First” policy towards Venezuela.

Option I: Shaping incentives for an economic and democratic opening

The Trump administration could leverage sanctions on individuals and the energy sector to attempt to push Maduro toward political and economic reforms that advance the administration’s stated interest in Venezuela accepting deportees from the United States. This would involve shaping incentives for Maduro and his inner circle to extract concessions that could move Venezuela toward a gradual opening.

Policy recommendations:

• Adapt the first Trump administration’s Democratic Transition Framework to lay the foundations for creative power-sharing arrangements.
• Advance migration policy cooperation and refrain from exacerbating outbound migration.
• Issue conditional sanctions licenses in exchange for economic and political benchmarks.
• Expand the footprint for US and Western-aligned energy firms in Venezuela while displacing Russia, China, and Iran.

Option II: Broad pressure to advance regime collapse

Alternatively, the Trump administration could revise its previous policy of maximum pressure, especially if Maduro does not cooperate with policies to reduce outbound migration and the influence of US geopolitical rivals. This involves using pressure mechanisms including sanctions, indictments, and law enforcement to attempt to provoke a fissure in Maduro’s inner circle. Divisions in Caracas could break the government’s hold on power and incentivize a democratic transition in which a new coalition in power is more willing to work with the United States on migration and security interests.

Policy recommendations:

• Remove all licenses allowing oil companies to operate in Venezuela.
• Pursue investigations and prosecutions against government officials tied to money laundering, drug trafficking, and other criminal activities.
• Tighten enforcement of secondary sanctions on Beijing, Moscow, and Tehran- based organizations.
• Ramp up individual sanctions.
• Bolster the Venezuelan democratic opposition and civil society.

The Adrienne Arsht Latin America Center’s (AALAC) Venezuela Solutions Group focuses on advancing a peaceful, democratic solution to Venezuela’s crisis as well as furthering policy coordination between the United States and allies in Europe and across the Americas.

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The Adrienne Arsht Latin America Center’s Venezuela Solutions Group is a diverse group of experts and practitioners from Venezuela, the United States, Latin America, and Europe, brought together to advance the conversation on how to reach a peaceful, democratic, and negotiated solution to the crisis in the South American country. The group comprises former government officials, civil society leaders, private sector leaders, humanitarian voices, economists, and leading experts on Venezuela who work to promote debate and propose actionable and concrete policy recommendations in order to advance policy innovation in addressing the situation in Venezuela. 

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The White House’s clarification provided some degree of relief, given that oil revenue from China is propping up Iran’s economy, and by extension Tehran’s ability to develop its nuclear program and to continue funding Hamas, Hezbollah, and other terrorist groups. However, the White House clarifying that it is not green-lighting sanctioned oil trade between Iran and China is not enough. Strengthening the enforcement of sanctions against Iran and the “Axis of Evasion” is necessary to ensure that Iran cannot rebuild its nuclear program using oil revenues it receives from China.

Iran is the most highly sanctioned country in the world

US sanctions on Iran are the most extensive and comprehensive set of economic measures that the United States maintains on any foreign government, including Russia. The objectives of these sanctions are to change the Iranian regime’s behavior, including its support for terrorism, and prevent the proliferation of nuclear weapons. The sanction authorities are captured in United Nations (UN) Security Council resolutions, executive orders, and several statutes, most of which require concurrence from (or at least notification to) Congress before sanctions can be changed or lifted.

The United States has sanctioned nearly every sector of the Iranian economy and designated thousands of individuals and entities that are a part of or associated with the regime. Sanctions target Iran’s energy and petrochemical sectors. Potential targets of US sanctions include entities that buy, sell, or transport products in these sectors, as well as foreign corporations that invest in them. This would include, for example, Chinese entities that buy Iranian oil and any banks that process those transactions.

Other sanctioned Iranian industries include shipping, construction, mining, metals, textiles, automotive, and manufacturing. Iran’s supreme leader, Ayatollah Ali Khamenei, is subject to sanctions, as are other government entities, such as the Islamic Revolutionary Guard Corps. Sanctions on Iran’s financial sector, including the Central Bank of Iran, effectively prohibit financial transactions with the country. In addition to sanctions administered by the Office of Foreign Assets Control (OFAC), the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) found the entire jurisdiction of Iran to be a primary money laundering concern in 2019, pursuant to Section 311 of the USA PATRIOT Act, which further restricts Iran’s access to the US financial system. The United States has also listed Iran as a state sponsor of terrorism since 1984.

Multilateral sanctions against Iran

Apart from the United States, the European Union (EU) and the UN also levied significant sanctions against Iran in 2005 for violating the 1967 Nonproliferation Treaty and subsequent agreements by clandestinely pursuing a nuclear weapons program. 

In the past, multilateral sanctions have succeeded in bringing Iran to the negotiating table. In 2015, the United States, the United Kingdom, France, China, Russia, and Germany (P5+1), together with the EU, agreed to the Joint Comprehensive Plan Of Action (JCPOA) with Iran. Known as the “Iran nuclear deal,” the JCPOA restricted Iran’s nuclear development in exchange for the relief of some US, EU, and UN Security Council sanctions. US sanctions relief predominantly focused on oil exports, while sanctions targeting Iranian support for terrorism and other disruptive activity remained in place. However, the JCPOA did not last long.

During his first term, Trump withdrew the United States from the JCPOA and snapped back US sanctions against Iran, including secondary sanctions. Trump claimed that the JCPOA was a bad deal that “gave the Iranian regime too much in exchange for too little.” While the JCPOA is defunct, the agreement is technically still in place, since the remaining signatories did not rescind it. As a result, in October 2023, UN sanctions on Iran’s ballistic missile capabilities were sunset, consistent with the sanctions relief timeline outlined in the JCPOA. 

In response, the United States, the EU, and other Western partners issued their own sanctions targeting Iran’s military-industrial complex—and its ballistic missile program, in particular—as a stopgap for the removal of UN sanctions. Notably, China and Russia, although part of the UN Security Council and signatories to the JCPOA, did not sanction Iran’s ballistic missile program. Instead, Beijing and Moscow deepened their economic relationships with Tehran following the Group of Seven (G7) coalition’s sanctions against Russia in response to its full-scale invasion of Ukraine in 2022. 

During the Biden administration, the United States maintained pressure on Iran and used sanctions to target Iran’s support for Russia’s war in Ukraine, sophisticated money laundering networks, and schemes that moved money for Iran’s military and laundered oil proceeds, among other actions, often in coordination with foreign partners. 

A return to maximum pressure

Soon after Trump was sworn in for his second term, he issued National Security Presidential Memorandum 2 (NSPM-2). NSPM-2 reiterates US policy toward Iran, stating that Iran must be denied nuclear weapons and intercontinental ballistic missiles. The memorandum also says that Iran’s regional aggression must be neutralized, its support for surrogates must be disrupted, and its missile development must be countered.

To achieve these goals, NSPM-2 tasks the executive branch with enacting “maximum pressure” on Iran using sanctions, diplomacy, and legal tools. Specifically, the memorandum calls on the US secretary of state to “implement a robust and continual campaign, in coordination with the Secretary of the Treasury and other relevant executive departments or agencies . . . to drive Iran’s export of oil to zero, including exports of Iranian crude to the People’s Republic of China.”

China, Iran, and the Axis of Evasion

Although multilateral sanctions have turned Iran into an economic pariah, Tehran still manages to evade sanctions and export oil to China through elaborate mechanisms and networks. While China is acting out of its own national interest, the revenue Iran generates from oil and petrochemical sales to China enables Iran to finance its nuclear program, maintain sophisticated ballistic missile capabilities, and fund its terrorist partners in the region. While imports of Iranian oil make up roughly 13.6 percent of China’s overall oil imports, these sales represent nearly 90 percent of Iran’s oil exports. In April, Iran exported approximately 1.6 million barrels per day to China. 

OFAC has been targeting the networks and actors enabling this activity, pursuant to NSPM-2. In March, OFAC designated “teapot” oil refineries in China that are buying Iranian oil. In April, OFAC issued a sanctions advisory on detecting and mitigating Iranian oil sanctions evasion. In June, OFAC sanctioned additional entities in Hong Kong that are part of Iran’s “shadow banking network” that facilitates sanctions evasion and moves money from Iran’s oil sales. That same month, FinCEN issued an advisory describing Iran’s illicit and complex oil smuggling practices, noting that the majority of Iran’s sanctioned oil is sold to small independent oil refineries in China. 

Enforce oil sanctions to prevent a nuclear Iran

The Trump administration’s recent social media posts about Iran sanctions have been inconsistent and confusing. However, US foreign policy toward Iran so far has not changed. Trump has not rescinded NSPM-2, Congress has not passed amendments to Iran-related statutes, and US sanctions on Iran and Iranian oil remain in place. 

Instead of raising questions about the direction of US foreign policy, the White House should seize the moment it has created and ramp up execution of NSPM-2, including the enforcement of existing sanctions. Sanctions enforcement should entail diplomacy to compel third countries, such as China, to abandon smuggling or purchasing sanctioned oil. It should include information sharing with foreign partners to encourage them to sanction illicit Iranian activity and deny targeted actors access to their financial systems. Enforcement must also involve civil and criminal legal action to hold sanctions evaders accountable within US and partner-nation jurisdictions. Finally, Iran sanctions enforcement requires the use of secondary sanctions to designate foreign financial institutions involved in laundering the proceeds from Iranian oil sales.

US military strikes severely damaged Iran’s nuclear facilities, and the United States must ensure that Iran cannot build them back. Tehran maintains the ambition, technological knowledge, and industrial capacity to reconstitute its nuclear program, but its decision could come down to money. The United States should enforce its oil sanctions to deny Tehran the revenue it needs to rebuild its nuclear capabilities. This will require cracking down on the Axis of Evasion. To ensure that Tehran cannot get its hands on the financial resources it would need to rebuild its nuclear program, Iran sanctions enforcement should start with China. 

Kimberly Donovan is the director of the Economic Statecraft Initiative of the Atlantic Council’s GeoEconomics Center and a former senior US Treasury official and National Security Council director of counterterrorism.

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Tsikhanouski was one of the most high-profile figures to be jailed in summer 2020 during the run-up to Belarus’s presidential election. Following his imprisonment, Tsikhanouski’s wife Sviatlana Tsikhanouskaya ran as a candidate in his place and emerged as a serious threat to the rule of Belarusian dictator Alyaksandr Lukashenka. Forced into exile in the days following the fraud-marred vote, she has spent the past five years leading the Belarusian opposition movement while raising international awareness about the struggle for a democratic Belarus. Seeing an emaciated but free Tsikhanouski finally embrace his wife was a powerful image.

The couple’s reunion on Saturday in Lithuanian capital Vilnius was facilitated by United States diplomatic efforts. Tsikhanouski was one of fourteen Belarusian political prisoners to be released as a result of US Special Envoy Keith Kellogg’s visit to Minsk and meeting with Lukashenka. Among those freed were RFE/RL journalist Ihar Karnei and university lecturer Natallia Dulina.

Tsikhanouskaya expressed her thanks to US President Donald Trump, Kellogg, and other American officials for their role in securing freedom for some of Belarus’s most well known political prisoners. However, she also made a point of underlining that many more Belarusians remain incarcerated on politically motivated charges. “We’re not done. 1,150 political prisoners remain behind bars. All must be released,” she commented.

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The decision to free some of Belarus’s most prominent political prisoners last weekend was not an act of mercy. It was a calculated move by Lukashenka in pursuit of international legitimacy. The Belarusian ruler has found himself diplomatically isolated since launching a brutal crackdown on protests over his country’s contested 2020 presidential vote, and has become heavily dependent on the Kremlin for his political survival.

It appears that he now wants the United States to soften their stance and recognize him as a potentially useful partner in a difficult region. The goal is normalization on Lukashenka’s terms, with a reduction in international pressure on the regime without any fundamental changes to his repressive system.

Officials in Minsk have made no secret of their desire to discuss sanctions relief and broader engagement with the United States. Lukashenka has also expressed an interest in joining US-led peace talks between Russia and Ukraine. This is a clear signal that he seeks to reposition himself not as a Kremlin satellite, but as a legitimate regional player worthy of diplomatic recognition.

There is no real evidence that Lukashenka is genuinely distancing himself from Moscow. Since 2020, he has allowed Russia to dramatically expand its influence throughout Belarus in a process that some have likened to a creeping annexation. In 2022, Lukashenka let Russia use the country as a gateway for the full-scale invasion of Ukraine. He remains one of the few international leaders to regularly meet with Russian President Vladimir Putin.

Just before Kellogg’s visit, Lukashenka met with Alexander Bastrykin, head of Russia’s Investigative Committee, and pledged that “Belarus is, has always been, and will be with Russia.” Joint military exercises with the Russian army are scheduled to take place in Belarus in September, while recent satellite imagery indicates that Russia is upgrading its nuclear infrastructure at a site in Belarus.

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While Lukashenka’s attempts to portray himself as an independent geopolitical actor remain deeply unconvincing, diplomatic efforts by the United States and other democratic allies are yielding results. The fourteen people freed on Saturday were the latest among more than 300 political prisoners to be released by the Belarusian authorities since summer 2024. These political detainees have been used by the Lukashenka regime as bargaining chips to gain favor during negotiations with the international community.

Many of those previously released were already nearing the end of their sentences. Those who remain in Belarus following release reportedly face constant surveillance, pressure to collaborate with the security services, and the threat of re-arrest for any public dissent. Others, like those released last weekend, have been effectively forced into exile and stripped of their citizenship in practice, if not yet officially.

Meanwhile, the situation for those still imprisoned is more critical than ever. Since 2020, eight Belarusian political prisoners have died in custody. Others have died soon after release, often as a result of untreated illnesses or human rights abuses suffered during their incarceration. At least 206 of those currently imprisoned are known to have serious medical conditions. For others, there is no end in sight. Prisoners like Viktoria Kulsha, a 43-year-old mother sentenced in 2021 for moderating a Telegram chat in support of anti-regime protests, continue to face new charges despite being scheduled for release.

The release of fourteen Belarusian political prisoners is welcome news. But the 1172 who remain behind bars deserve more than symbolic gestures. They need a strategy that targets the system responsible for their incarceration. Without this additional pressure, each carefully staged prisoner release risks consolidating Lukashenka’s grip on power and enabling him to manipulate the West while keeping his authoritarian regime intact. The United States clearly has significant leverage over Lukashenka and should not be afraid to use it.

Hanna Liubakova is a journalist from Belarus and nonresident fellow at the Atlantic Council.

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North Korea is playing an increasingly vital support role in Russia’s war against Ukraine. This includes providing the Kremlin with vast quantities of ammunition, ballistic missiles, and thousands of men, writes Olivia Yanchik.

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According to Shoigu, North Korea will send two brigades of “military construction workers” totaling five thousand men, along with a further one thousand combat engineers. They will reportedly conduct demining operations and help repair war damage in Russia’s Kursk region, which borders Ukraine and witnessed months of heavy fighting following a Ukrainian incursion in August 2024.

This is the latest step in an ambitious defense sector partnership between the two countries that has taken shape over the past three years. Since the early months of Russia’s full-scale invasion in 2022, North Korea has provided the Kremlin with extensive military supplies. More recently, this cooperation has expanded further with Pyongyang sending thousands of soldiers to participate directly in the war against Ukraine. Russia and North Korea signed a strategic partnership treaty in summer 2024.

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The deployment of North Korean troops to Russia was first reported in late 2024, with at least 10,000 North Korean soldiers believed to have taken part in combat operations in Russia’s Kursk region. According to a recent UK Ministry of Defense intelligence update, North Korean forces sustained more than 6,000 casualties during fighting against the Ukrainian military, representing around half of the original deployment. This is an indication of the prominent role played by the North Koreans in front line combat operations.

Russia initially denied the presence of North Korean soldiers. However, following significant battlefield progress in spring 2025, both Moscow and Pyongyang moved to publicly acknowledge the role played by North Korean troops in pushing the Ukrainians out of the Kursk region. Reports indicate that they served as assault units operating on the front lines of the Russian offensive, which would certainly tally with the high North Korean casualty rates claimed by the British.

This North Korean presence is having a significant impact on the battlefield. Ukrainian military officials who have encountered North Korean troops on the front lines of the war acknowledge their ability to learn quickly and incorporate new tactics based on their expanding combat experience in Russia. “They have adapted to modern combat conditions,” commented Ukrainian commander Oleh Shyriaiev. This has included significant progress in terms of drone warfare.

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The appearance of North Korean troops fighting alongside Russian forces came following more than two years of increasing military cooperation marked by expanding deliveries of North Korean ammunition and equipment to bolster the Russian war effort. This support has played a critical role in aiding Moscow’s invasion of Ukraine. A Reuters investigation published in spring 2025 indicated that North Korea was providing more than half of all artillery shells being used by the Russian military in Ukraine.

North Korea is also supplying Russia with significant quantities of ballistic missiles, according to a May 2025 report produced by the Multilateral Sanctions Monitoring Team comprising eleven countries including the United States, Britain, Japan, and a number of EU member states. The report concluded that Russia is using North Korean weapons to escalate airstrikes on critical Ukrainian civilian infrastructure and to “terrorize” entire Ukrainian cities.

In exchange for providing the Kremlin with manpower and a steady flow of munitions, North Korea is receiving Russian assistance that is enabling the country to modernize its military. Reported upgrades in North Korean military capabilities through cooperation with the Kremlin include Russian funding for North Korean military programs along with the provision of air defense equipment and anti-aircraft missiles, advanced electronic warfare systems, and the further development of North Korea’s ballistic missiles.

By providing Russia with ballistic missiles for attacks on Ukraine, North Korea has gained unprecedented experience in modern warfare. This is making it possible to increase the accuracy of North Korea’s existing missile guidance systems. With Moscow’s help, North Korea is also developing attack drones similar to those used by Russia to strike Ukrainian cities, according to Ukrainian military intelligence chief Kyrylo Budanov.

The modernization of the North Korean army poses a range of potential security challenges for South Korea and the wider region. North Korea’s participation in Russia’s war against Ukraine is also seen by many as a dangerous escalation toward a more international confrontation.

So far, North Korean soldiers appear to have only participated in combat operations inside Russia. However, Kyiv officials have voiced concerns that the North Koreans could soon be redeployed to Ukraine itself to join Russia’s ongoing summer offensive. Given the lack of a forceful Western response to Pyongyang’s increasingly open involvement in the Russian war effort, such concerns seem more than justified.

Olivia Yanchik is an assistant director at the Atlantic Council’s Eurasia Center.

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The post North Korea is playing a key role in Russia’s war against Ukraine appeared first on Atlantic Council.

Published on June 17 just hours after Russia carried out one of its deadliest missile and drone attacks on Kyiv, the EU’s new draft regulation on phasing out fossil fuel imports is arguably long overdue. If adopted, it would deprive the Kremlin of vital budget revenues and potentially prevent Russia from fracturing Europe’s unity through energy blackmail.

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The EU’s draft regulation lays out several key steps such as a ban on signing new contracts. It calls for phasing out spot and long-term supplies between 2026 and the beginning of 2028, while prohibiting the provision of services at EU terminals for liquefied natural gas (LNG) to customers from Russia or controlled by Russian undertakings.

Importantly, the current draft also includes tough enforcement and transparency measures that would oblige importers of Russian gas to submit all information needed in order to evaluate risks for gas trading and supply security to the European Commission. In line with the proposals, customs authorities would be given greater powers to monitor imports.

The draft regulation aligns with a proposal recently endorsed by the European Parliament to impose tariffs on fertilizers and agricultural products originating in Russia and Belarus. While these measures are underpinned by trade law, which may insulate them from a potential veto from Kremlin-friendly gas buyers such as Hungary and Slovakia, it may take at least another six months to implement them. Even after adoption and implementation, there would likely still be lingering questions regarding the penalties that may be imposed in case of non-compliance.

Earlier in June, the EU presented its eighteenth package of sanctions targeting Russia. This latest package included a ban on any EU operators engaging directly or indirectly in transactions regarding Russia’s controversial Nord Stream gas pipelines. It also proposed to lower the oil price cap from $60 to $45. The slashing of the price cap would inflict significant damage on the Kremlin’s war economy, which is heavily reliant on oil exports. However, the escalating conflict between Israel and Iran, which lifted oil prices more than 10 percent in recent days, may help Russia rake in further income.

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While the EU’s latest sanctions package and proposed Russian fossil fuel import phaseout are welcome steps, these measures would still leave sufficient flexibility for the Kremlin to export oil, LNG, and oil products to the rest of the world. Since Russia’s full-scale invasion of Ukraine began in February 2022, Moscow has generated fossil fuel revenues of close to $1 trillion, with only a quarter of this revenue coming from the EU.

The remaining $700 billion has come from sales to large importers such as China, which has been buying oil or oil products often transported by Russia’s shadow fleet of tankers. To clamp down on these grey zone exports, there is a need for a far more determined approach to limit Russia’s international oil and gas trade.

Legislation proposed by US Senators Richard Blumenthal and Lindsey Graham may be the only decisive measure that could tear down Russia’s war machine and safeguard Ukraine’s security. The bill, which benefits from bipartisan support and a supermajority of 84 Senate cosponsors, aims to impose a 500 percent tariff on imported goods from countries such as China or India that buy Russian oil, gas, uranium, and other products.

This bill would send a hard-hitting message not only to Russia but also to any other country which may now feel empowered to attack other sovereign nations without fear of retribution. However, approval ultimately rests with US President Donald Trump. So far, he does not appear ready to give the green light.

For more than a decade, Russia has been using oil and gas exports to pay for its war of aggression against Ukraine, fracture European unity, and consolidate ties with fellow authoritarian regimes around the world. The European Union and United States have prepared measures that could dramatically weaken Russia’s energy weapon and undermine Putin’s war machine. The question now is whether they have the political leadership to proceed.

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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Russia and Ukraine are locked in an economic war of attrition

By Anders Åslund

As the Russian army continues to wage a brutal war of attrition in Ukraine, the two nations are also locked in an economic contest that could play a key role in determining the outcome of Europe’s largest invasion since World War II, writes Anders Åslund.

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

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A little noticed fact is that the Ukrainian economy is actually doing relatively well in the context of the current war. The Russian onslaught in 2022 reduced Ukraine’s GDP by 29 percent, but in 2023 it recovered by an impressive 5.5 percent. Last year, Ukrainian GDP rose by a further 3 percent, though growth is likely to slow to 1.5 percent this year.

Any visitor to Ukraine can take out cash from an ATM or pay in shops using an international credit card. Countries embroiled in major wars typically experience price controls, shortages of goods, and rationing, but Ukraine has none of these. Instead, stores are fully stocked and restaurants are crowded. Everything works as usual.

How has this been possible? The main answer is that Ukraine’s state institutions are far stronger than anybody anticipated. This is particularly true of the ministry of finance, the National Bank of Ukraine, and the state fiscal service. After 2022, Ukraine’s state revenues have risen sharply.

In parallel, wartime Ukraine has continued to make progress in combating corruption. When Russia’s invasion of Ukraine first began in 2014, Ukraine was ranked 142 of 180 countries in Transparency International’s annual Corruption Perceptions Index. In the most recent edition, Ukraine had climbed to the 105 position.

Rising Ukrainian patriotism has helped fuel this progress in the fight against corruption. EU accession demands and IMF conditions have been equally important. Ukraine has gone through eight quarterly reviews of its four-year IMF program. It has done so on time and with flying colors. The same has been true of each EU assessment.

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Looking ahead, three critical factors are necessary for wartime Ukraine’s future economic progress. First of all, Ukraine needs about $42 billion a year in external budget financing, or just over 20 percent of annual GDP, to finance its budget deficit. The country did not receive sufficient financing in 2022 because EU partners failed to deliver promised sums. This drove up Ukraine’s inflation rate to 27 percent at the end of 2022. The Ukrainian budget was fully financed in 2023 and 2024, driving down inflation to 5 percent. The budget will be fully financed this year.

The second factor is maritime trade via Ukraine’s Black Sea ports. Shipping from Odesa and neighboring Ukrainian ports to global markets has been almost unimpeded since September 2023 after Ukraine took out much of the Russian Black Sea Fleet. The vast majority of Ukraine’s exports are commodities such as agricultural goods, steel, and iron ore, which are only profitable with cheap naval transportation, so keeping sea lanes open is vital.

The third crucial factor for wartime Ukraine’s economic prospects is a steady supply of electricity. Russian bombing of Ukraine’s civilian energy infrastructure disrupted the power supply significantly in 2024, which was one of the main reasons for the country’s deteriorating economic performance.

Ukraine’s economic position looks set to worsen this year. In the first four months of 2025, economic growth was only 1.1 percent, while inflation had risen to 15.9 percent by May. The main cause of rising inflation is a shortage of labor. The national bank will presumably need to hike its current interest rate of 15.5 percent, which will further depress growth. After three years of war, Ukraine’s economy is showing increasing signs of exhaustion. The country has entered stagflation, which is to be expected.

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Russia’s current economic situation is surprisingly similar to Ukraine’s, although almost all trade between Russia and Ukraine has ceased. After two years of around 4 percent economic growth in 2023 and 2024, Russia is expecting growth of merely 1.5 percent this year, while official inflation is 10 percent. Since October 2024, the Central Bank of Russia has maintained an interest rate of 21 percent while complaining about stagflation.

The Russian and Ukrainian economies are both suffering from their extreme focus on the military sector. Including Western support, Ukraine’s military expenditure amounts to about $100 billion a year, which is no less than 50 percent of Ukraine’s GDP, with 30 percent coming from the Ukrainian budget in 2024. Meanwhile, Russia’s 2025 military expenditure is supposed to be $170 billion or 8 percent of GDP. Unlike the Ukrainians, the Russians complain about the scale of military spending. This makes sense. The Ukrainians are fighting an existential war, while Russia’s war is only existential for Putin.

Contrary to common perceptions, Russia does not have an overwhelming advantage over Ukraine in terms of military expenditure or supplies. Russia does spend significantly more than Ukraine, but much of this is in reality stolen by politicians, generals, and Putin’s friends. Furthermore, Western sanctions impede the Russian military’s ability to innovate. In contrast, Ukraine benefits from innovation because its economy is so much freer, with hundreds of startups thriving in areas such as drone production.

Russia is now entering a fiscal crunch. Its federal expenditures in 2024 amounted to 20 percent of GDP and are likely to stay at that level in 2025, of which 41 percent goes to military and security. However, the Kremlin has financed its budget deficit of about 2 percent of GDP with its national welfare fund, which is expected to run out by the end of the current year. As a result, Russia will likely be forced to reduce its public expenditures by one-tenth.

Low oil prices could add considerably to Russia’s mounting economic woes and force a further reduction in the country’s public expenditures. However, Israel’s attack on Iran may now help Putin to stay financially afloat by driving the price of oil higher.

Economically, this is a balanced war of attrition at present. Ukraine’s Western partners have the potential to turn the tables on Russia if they choose to do so. Ukraine has successfully built up a major innovative arms industry. What is missing is not arms but funds. The West needs to double Ukraine’s military budget from today’s annual total of $100 billion to $200 billion. They can do this without using their own funds if they agree to seize approximately $200 billion in frozen Russian assets currently held in Euroclear Bank in Belgium. This could enable Ukraine to outspend Russia and achieve victory through a combination of more firepower, greater technology, and superior morale.

Anders Åslund is the author of “Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy.”

Further reading

UkraineAlert Jun 10, 2025

Ukrainian innovations are redefining the role of drones in modern war

By Vitaliy Nabukhotny

Ukraine’s audacious drone strikes on Putin’s bomber fleet at airbases across Russia have been hailed as a watershed moment in military history, leading to claims that Ukraine is “redefining modern warfare,” writes Vitaliy Nabukhotny.

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UkraineAlert Jun 12, 2025

Putin’s peace plan is a blueprint for the end of Ukrainian statehood

By Tetiana Kotelnykova

Russia’s peace plan sends a clear signal that Moscow wants to erase Ukraine as a state and as a nation. If Western leaders wish to avoid this catastrophic outcome, they must convince Putin that the alternative to a negotiated peace is a Russian defeat, writes Tetiana Kotelnykova.

Conflict Freedom and Prosperity

UkraineAlert Jun 10, 2025

Modern Ukraine’s national journey can be traced on Kyiv’s central square

By Peter Dickinson

Since 1991, Kyiv’s Maidan square has emerged from Ukraine’s post-Soviet identity crisis via two popular uprisings to become the sacred ground zero of a nation forged in the crucible of revolution and war, writes Peter Dickinson.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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1. What impact would this proposal have on the Nord Stream gas pipelines? 

This package could put the final nail in Nord Stream 2’s coffin, providing a much overdue, decisive vision for the future of Russian pipeline flows to Europe. Ending this zombie project debate once and for all also sends a clear message to global liquefied natural gas producers, which may be hesitant to expand partnerships with the European buyers as long as a relapse to Russian gas dependence is a possibility. This checkmate move from the European Commission still needs approval from EU member states, as well as watertight language on sanctions implementation to prevent caveats or exemptions. Moreover, the Commissions’s bold action on Nord Stream 2 brings the Commission’s Roadmap to fully end EU dependency on Russian energy closer to reality, just as the roadmap’s legislative proposals are expected later this month.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

***

The proposal is a welcome one to put an end to the questions about the restarting of the pipelines. The proposed rules would ban any EU operator from doing direct or indirect transactions for Nord Stream 1 or 2, making the operation of the pipelines impossible. More importantly, the proposal would end any rumors or quiet discussions around the future of the pipeline and shows the seriousness, at least in the Commission, around achieving energy independence from Russia. “There is no return to the past,” von der Leyen declared during Tuesday’s announcement. 

—Jörn Fleck is the senior director of the Atlantic Council’s Europe Center.

***

After nearly two static decades of Germany’s Gazpromphilic foreign policy, and statements emerging in recent weeks from German politicians from the Social Democratic Party (SPD) and the Alternative for Germany (AfD) indicating openness to a revival of Nord Stream, today’s EU announcement of Nord Stream sanctions is nothing short of astonishing. That’s because it amounts to a de facto approval by new German Chancellor Friedrich Merz. Since assuming the Chancellery, Merz has taken steps toward a true Zeitenwende that were lacking in Germany since that political approach to Russia had been first announced by his predecessor Olaf Scholz, with Merz stating clearly and resolutely in late May that under his leadership, the German government will “do everything to ensure that Nord Stream 2 cannot be put back into operation.” 
 
Merz doubled down on this rhetoric while sitting next to US President Donald Trump in the Oval Office last week, declaring Nord Stream to have been “a mistake.” Saying this next to Trump is especially important given recent reports that a US-based investor has sought to lobby the Trump administration to drop sanctions on Nord Stream to allow for American ownership of the pipelines. According to the investor, this move is an attempt to supposedly achieve the “de-Russification” of the projects—despite the logical incoherence of how such infrastructure could ever be truly “de-Russified” if it were still delivering Russian gas. 
 
If the EU is able to successfully get this sanctions package through the gauntlet of member state ratification—no small task with the likes of Hungary and Slovakia waiting in the wings to go to bat for Russian President Vladimir Putin’s energy interests in Brussels—it will be a major step toward finally ending Russia’s energy grip over European political and security interests. 
 
—Benjamin L. Schmitt is a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy and Perry World House. 

2. How much would lowering the oil price cap from $60 to $45 hurt Russia’s economy? 

That depends on how effectively the new price cap would be enforced and where the general price of crude would fluctuate. The impact would probably be significant but not as big as it would be if the United States could find a way to limit third-country purchases of Russian oil, either through US Senator Lindsey Graham’s bill or in another (and more practical) form. 

—Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council and a former US ambassador to Poland. 

***

Russia still relies on revenue from oil exports, so lowering the price cap could negatively affect how much money they can bring in. However, the price cap has been very difficult to enforce. In response to the price cap, Russia developed an expansive shadow fleet to export its oil, which created an additional challenge for Western sanctions enforcement authorities.  

That said, lowering the price cap would be welcome considering the price of Brent Crude as of today, $67.24 per barrel, which is very close to the $60 price cap. When the price cap first went into effect in 2022, the price of oil was over $100 per barrel. Reducing the price cap is an acknowledgement that oil prices have dropped considerably since it was first introduced and reflects a commitment to restrict Russia’s ability to generate revenue. 

—Kimberly Donovan is the director of the Economic Statecraft Initiative at the Atlantic Council’s GeoEconomics Center. She previously served in the federal government for fifteen years, most recently as the acting associate director of the Treasury Department Financial Crimes Enforcement Network’s Intelligence Division.

3. What else is in this sanctions package? 

The most interesting aspect of this package is the “transaction ban” on “financial operators in third countries that finance trade to Russia, in circumvention of sanctions.” That sounds a lot like secondary sanctions, which historically have been controversial in the EU. If this passes, it could significantly strengthen EU sanctions by extending their reach. 

—Kimberly Donovan

4. What are the chances of this proposal moving forward? 

It’s worth keeping in mind that this is still just a proposal, and there is a long way to go before it is finalized. These sanctions proposals require the unanimous support of the EU’s twenty-seven member states, which, in and of itself, is no simple process of negotiations. The proposal will likely face two immediate hurdles from the likes of Hungary and Slovakia, whose respective leaders have delayed or played spoiler on the previous efforts for political leverage until their demands were met. However, the fact that there have been seventeen successful rounds of sanctions in the past suggests that solutions, however messy, incomplete, or last-minute, are possible. There is an important transatlantic angle as well. The EU wants to move together with the United States on Russia. So European holdouts will certainly not want to be seen as roadblocks should the Trump administration decide, for example, to push for further sanctions on Russia. 

—Jörn Fleck 

***

I don’t know how much has been vetted with Hungary nor what kind of pressure the Commission is prepared to put on Budapest if it attempts to block the proposal. But the Commission seems serious about ramping up pressure and announcing steps before the G7 Summit, where they will have a chance to obtain Japanese and Canadian support, and thus to present the United States with some decisions. 

—Daniel Fried  

***

Brussels seems optimistic that the eighteenth sanctions package will pass. However, aspects of the sanctions package will need G7 support. This includes the proposal to reduce the price cap, which is why the Commission understandably announced the proposal in advance of G7 meetings this coming weekend in Canada. Further, support from Washington or lack thereof could sway how countries such as Hungary and Slovakia vote on the sanctions package. 

—Kimberly Donovan

5. How might Washington react to this proposal? 

That is a big question, and I can’t give a reliable answer. The European leaders at the G7 will have a chance to convince Trump that it is his own plan to end the war that the EU is backing, and that the United States ought to go all in to that end and agree to pressure Russia. But Trump, despite edging up toward imposing additional costs on Russia, has not yet done so, despite multiple opportunities and provocations from Putin. 

—Daniel Fried  

***

It’s unclear how Trump himself will react to the proposal. But what the US president should see in this proposal is a Europe that is a willing and serious partner. The administration has made clear that it expects Europe to step up for its own security and for Ukraine’s. This is part of Europe’s response to do just that. European leaders have been united on pushing for action on Russia given Moscow’s continued intransigence on cease-fire talks and devastating attacks on Ukraine. This proposal is another indication that Europe is putting real ideas on the table to boost US and Ukrainian leverage with Putin. 

—Jörn Fleck 

***

Members of Congress may welcome this package, as the spirit is consistent with the bill Graham introduced to get Putin to the negotiating table. However, we’ll have to wait and see how Trump reacts considering the stalled cease-fire talks and escalating violence on the battlefield. 

—Kimberly Donovan

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A vague “Japanese model” comes up in many conversations about industrial strategy in the United States. It is common knowledge that, in the second half of the twentieth century, Japan found new export destinations for its industrial output while working its way up the manufacturing value chain. Japan’s powerful (though now defunct) Ministry of International Trade and Industry (MITI) almost always receives credit for managing this success. In short, the casual evaluator of economic security policies might answer that Japan has known what it is doing for longer than the United States.

Self-critical Japanese specialists would find such a portrait saccharine and outdated.

From the 1970s onward, Japan gradually opened its current account and its economy to investment. By the 1980s, when US public opinion was turning against Japanese imports, MITI’s power had already greatly diminished. Alongside the rest of the Japanese government and the Bank of Japan, it struggled to recreate favorable conditions during the lost decade that started in the early 1990s. There has since been increasing alarm regarding China’s rise and its many consequences for the Japanese economy, including Japan’s dependence on Chinese imports and investment.

While these concerns had been building for some time, the spark that started a legislative bureaucratic overhaul to extend the government’s authority and centralize the chain of command came during the second term of late Prime Minister Shinzo Abe, from 2012–2020.

The outbreak of the COVID-19 pandemic and the subsequent weaponization of supply chains made Abe’s decisions seem remarkably prescient. Yet the world has changed even faster than he might have expected. Japan has built new policies and teams to deal with economic threats wrought by China and Russia, but these were designed to work in conjunction with partners, primarily the United States. Though suspended, President Donald Trump’s “liberation day” 31-percent reciprocal tariff on Japan casts doubt on whether Washington still considers Japan the United States’ closest partner in Asia.

Japan finds itself in a predicament remarkably similar to that of other US partners. But unlike the European Union, it is wary of threatening to deploy its economic statecraft policies against the United States. Instead, following in Abe’s footsteps, it hopes to rely on deals. This has proven successful in obtaining a green light for Nippon Steel’s purchase of US steel, as Trump lifted Joe Biden’s blocking of the transaction. But the welcoming of Japanese investment by no means guarantees a looser stance on Japanese imports to the United States.

Over three months, we conducted interviews with Japan’s economic security policymakers in Washington and Tokyo, who agreed to meet despite their busy schedules. The goal of this piece is to represent how these teams are organized and how they think about relevant issues. The fallout from Trump’s tariffs was front of mind in every conversation, yet it was still possible to present a comprehensive picture of where Japanese economic statecraft stands now, and how it will continue to prepare for more uncertainty. 

From vision to legislation

Abe left a significant legacy in economic and defense policy. It should be no surprise that he also made a difference in the areas in which they overlap. Economic themes were present in Abe’s 2007 speech on the “free and open Indo-Pacific” during his shorter first term. In front of India’s Lok Sabha (or parliament), he committed Japan to promoting regional connectivity and economic partnerships. Nonetheless, the bureaucratic and legislative overhaul of economic security and economic statecraft came in the later years of Abe’s second term. Before that, security and economics were treated separately and their needs perceived as different.

On the security front, growing threats from China and North Korea helped Abe justify a reinterpretation of Japan’s pacifist constitution to expand the role of its Self-Defense Forces. In 2013, Japan created a National Security Council to centralize decision-making with the support of a National Security Secretariat (NSS). Two years later, the government passed security legislation allowing Japan to exercise collective self-defense, enabling it to aid allies under attack even if Japan itself is not directly threatened.

Concerns about economic security were already present, especially those relating to Chinese intellectual property (IP) theft and overreliance on Chinese manufacturing. However, these were clearly superseded by the need for a revitalization of Japan’s economy, which by then had suffered two decades of subpar growth. Abenomics, the prime minister’s signature economic policy, succeeded in reversing deflation and boosting consumer spending through increased government spending and quantitative easing. Attempts to improve competitiveness through structural reforms, including reform of the labor market, were somewhat less successful.

Abenomics was a net positive for Japan’s economic security, boosting consumption and making Japan (slightly) less reliant on exports. While economic revitalization was the priority, this didn’t prevent the prime minister and the political class from becoming more attuned to the economic security risks Japan faced. China’s decision to withhold exports of critical minerals for several months in 2010 was probably the first significant shock. But when Russia annexed Crimea and destabilized the Donbas region of Ukraine in 2014, Japan surprised observers by joining the United States and the European Union in imposing country-specific sanctions outside a United Nations (UN) mandate. These events were enough to kickstart an overhaul of Japan’s economic security landscape.

In 2015, Abe said in a speech to the US Congress that the United States and Japan “must take the lead to build a market that is fair, dynamic, sustainable, and is also free from the arbitrary intentions of any nation.” The subsequent years were characterized by more focus on economic security. The NSS created a specific economic security team in 2019, and Japan made several updates to legislation.

Before the changes of the late 2010s, Japan’s economic security policies were governed by the still extant Foreign Exchange and Foreign Trade Act (FEFTA) of 1949. This act originally imposed a tight regime of inbound investment screening, which was progressively hollowed out as Japan sought to bring itself in line with Organisation for Economic Co-operation and Development (OECD) and other international standards. Still, the division of labor set out by FEFTA hadn’t changed. The Ministry of Finance remained responsible for investment screening while the Ministry of Economy, Trade and Industry (METI)—the successor to MITI—became the natural decision-maker for export controls and subsidies.

To this day, FEFTA remains the legal basis for the Japanese government’s investment screening and export controls. However, vulnerabilities exposed by the COVID-19 pandemic made it clear that an additional layer of legislation would be needed—one that could build economic resilience by allowing the government and firms to cooperate in a more intensive way. This was the basic rationale of the Economic Security Promotion Act of 2022. This law created the position of minister for economic security, based in the prime minister’s office, although much of the engagement with firms and data collection is still run out of METI.

How the ministries and agencies are responding to new challenges

As the government of Japan has placed greater emphasis on economic security and updated its legislation, its departments haven’t significantly altered their division of labor in terms of economic statecraft. METI continues to lead on export controls, the Ministry of Finance on investment screening, and the Ministry of Foreign Affairs on sanctions. What has changed is how policies are coordinated, with the creation of teams explicitly devoted to economic security.

When it was created in 2014 to support National Security Council meetings, the NSS did not feature an economic security team. Instead, the Ministry of Foreign Affairs played this role by default given that it was already responsible for coordinating policy with other governments. While this ensured that Japan applied the measures to which it agreed in international forums, it was clearly insufficient to implement a holistic strategy of economic self-defense, resilience, and indispensability. 

Since the 2019 creation of an economic security team within the NSS, the balance between internal and external coordination has become clear. The ten-person team is small but powerful. It can convene meetings between large, well-established ministries and bring their preferences in line with a more general sense of Japanese strategy, including Tokyo’s alignment with Washington. This role has become more prominent since the arrival of the first minister of state for economic security—who sits in the cabinet office, not inside METI or another large ministry—and a legislative mandate in the Economic Security Promotion Act for the NSS to coordinate economic security policy. The team’s access to the prime minister’s office also allows it to seek political guidance faster than experts in ministries can.

And yet, while the role of the NSS in economic security has clearly grown, the team’s small size and the long-standing roles of other ministries and agencies make the NSS a partial counterpart to the US National Security Council. The economic security team has a blue-sky thinking role and runs a regular program of cross-departmental tabletop exercises focusing on economic coercion, some of which have included US government specialists.

It’s important to remember that the NSS economic security team is not automatically at the top of the chain of command in the way the National Security Council (NSC) might be. Sensitive decisions on export controls and investment screening can also be settled by METI and the Ministry of Finance, respectively. Therefore, studying the role of each organization remains essential.

Ministry of Foreign Affairs

The Ministry of Foreign Affairs no longer carries out internal coordination on economic security, as this mandate has been moved to the NSS. Despite this shift, the ministry still plays a vital role in Japanese sanctions and helps coordinate international positions on other tools such as export controls. As we’ve found in other countries, such as France, the diplomats have two key qualities: they are present at every international summit and often must stand in for more expert colleagues when a deal is done, and they are good at finding compromises.

While Japan has participated fully in the recent Western sanctions coalition against Russia, this has been made possible by exemptions that Tokyo sought and obtained. The best example is the sanctions exemption for the Japanese-owned Sakhalin-2 oil and gas refinery from the Russian oil price cap and other measures that could stem the flow of liquefied natural gas. The Ministry of Foreign Affairs has also contributed to talks on how to make the sanctions effort work better, such as the Common High Priority Item list for export controls. In December 2023, it also pushed Japan to take the unprecedented step of using the legal basis of its Russia sanctions to sanction third-country entities enabling Russia to circumvent sanctions.

These decisions show that the ministry’s culture still prioritizes coordination with the United States. This worked well under the Biden administration, during which both governments managed to organize two 2+2 Summits of the Economic Security Consultative Committee, with the Ministry of Foreign Affairs and METI on the Japanese side and the Departments of State and Commerce on the US side. There is no clarity regarding whether this will continue under the second Trump administration.

Difficulties coordinating with the United States will be a culture shock for the ministry, but it will try to salvage what it can and keep pushing for unity in the Group of Seven (G7). The ministry is also leading on building understanding with the Global South, especially on economic security. Japan realizes better than some of its close partners that sanctions and economic statecraft can be easily misconstrued in third countries and can have adverse impacts on their economic development. Therefore, the ministry has taken on the task of explaining how its economic security policies do not contradict overarching principles such as the Free and Open Indo-Pacific, while also pushing for overseas development aid to be better coordinated with economic security priorities.

METI

Proponents of industrial policy have a starry-eyed view of the Ministry of Economics Trade and Industry’s predecessor—the Ministry of International Trade and Industry—and its role in steering Japan’s rise as an export powerhouse. The eulogizing is not entirely misplaced, but it perhaps overlooks how the powerful super ministry has needed to adapt, first to the shortcomings of Japan’s export-driven model and now to the era of economic coercion. METI can leverage deep sectoral knowledge on the Japanese economy and its interdependencies with the rest of the world, which other ministries do not have. Yet its officials still tend to downplay their readiness for the new challenges and say Japan has a lot to learn about the tools of economic statecraft.

One sign of this is that METI’s Trade and Economic Security Bureau, though run by long-standing official Nishikawa Kazumi, is a recent creation and another result of the 2022 Economic Security Promotion Act. The bureau’s role is to implement the new legislation by taking a forensic approach to Japan’s problems and the cards it can still play. In close cooperation with firms, the finance sector, and universities, the bureau’s work is organized into three pillars. These are

• “red” areas of disruptive technological innovation in which Japan needs to cultivate its indispensability but must beware of losing autonomy;
• “blue” areas in which Japan has technological advantages and should maintain its indispensability; and
• “green” areas of external dependence in which de-risking is needed.

So far, the approach has also made it easier to unlock larger subsidies for advanced semiconductors, which fit squarely within the “red” area in which Japan risks being left behind. The best example of this is the 1-trillion yen ($6.9 billion) subsidy for TSMC to build a factory on the island of Kyushu.

The three-pillar framework has been useful in raising awareness with firms. Some small and medium enterprises had been unaware that their intellectual property and production were part of what makes Japan indispensable to the global economy. This is usually good news. The exercises have made clear that Japan is ahead of the curve in synthetic biology. The Japan pavilion at the Osaka World Expo proudly features a human heart made of induced pluripotent stem (iPS) cells. But technological advantages are also bringing constraints, such as the US demand for a trilateral deal with Japan and the Netherlands to control the export of semiconductor manufacturing equipment or Tokyo’s own decision to restrict exports of drone technologies that can have military applications.

Ministry of Finance

Of all the ministries working on Japan’s economic security, the Ministry of Finance has had the most stable area of responsibility. Under the Foreign Exchange and Foreign Trade Act of 1949, the Ministry of Finance carries out investment screening. Policies were initially very strict; however, investment liberalization progressed after Japan joined the OECD in 1964. Since the second Abe administration, attention has shifted to the new challenge of economic security.

Unlike other export controls, which often face skepticism from Japanese members of parliament keen to help firms in their constituencies, inbound investment screening enjoys broad-based political support. In 2020, an amendment supported by politicians and driven by the changing international environment considerably tightened screening by requiring prior notification of any foreign direct investment (FDI) covering 1 percent or more of ownership in a firm in a sensitive sector—down from 10 percent. The measure is country agnostic, but the shift was apparently driven primarily by China.

Prior to a 1978 liberalization, the ministry also practiced outbound investment screening. Since 1998, a simpler post-investment reporting system has become standard practice for Japanese firms, but this does not include screening. Arguably, Japan’s modest venture capital ecosystem relative to that of the United States means it faces fewer dilemmas on outbound investment.

Japan will need to diversify its partnerships to weather the storm

Japan’s recent legislative and bureaucratic reforms were carried out with awareness of US political volatility, though perhaps not an expectation that the second Trump administration would engage in a trade war with its allies. While Tokyo welcomed early signals of US engagement, such as Secretary of State Marco Rubio’s participation in the Quad dialogues, it cannot ignore the reality that Washington is increasingly prone to economic coercion, even against allies.

This is not without precedent. US pressure in the 1980s contributed to Japan’s long economic stagnation. But today’s situation represents a larger shift and comes under more challenging geopolitical circumstances for a country like Japan, which now considers three of its neighbors to be bad actors. Japan must prepare for a strategic divergence from US economic policy, while identifying ways to prevent definitive ruptures wherever possible.

During the Trump presidency, Japan will be on a different course than the United States on green energy technology, as Japan is an export powerhouse in this field. It will also be at odds with the United States on overseas development assistance in regions where US retrenchment is enabling China’s advance. Institutions like the Japan Bank for International Cooperation (JBIC) already quietly prioritize projects with economic security value; this approach should be made more explicit to encourage greater uptake in Asia and Africa.

Deeper coordination with G7 partners and other likeminded countries is essential, including on the most worrying scenarios in the Strait of Taiwan. Japan shares many of the European Union’s concerns about the US tendency to frame every economic issue as a national security threat. Japan also prefers country-agnostic policies, instead of the tier-based or country-specific approaches US administrations have developed.

Tokyo prefers more predictable policies yet—unlike the European Union—it is unencumbered by internal divisions among twenty-seven member states. It has a unique opportunity to serve as an example of what open economies that do not wish to engage in economic coercion, but must be ready to stand up to it, should do. METI’s systematic approach to cultivating indispensability is certainly more advanced than what the rest of the G7 is doing. On the other hand, Japan remains vulnerable to coercion through its supply chains and much more work must be done to build resilient alternatives to China.

Japan is in a geopolitically challenging neighborhood and is witnessing the basic tenets of its foreign policy—from alignment with the United States to fostering a rules-based environment—come under unprecedented stress. Yet its advanced manufacturing base and recently updated legislation on economic security also provide it with more cards to resist economic coercion than most countries hold. Its public and private sectors are now largely aligned on these issues. Business leaders have even expressed support for former Economic Security Minister Sanae Takaichi becoming the next prime minister.

It’s hard to think of a more ringing endorsement from the private sector for prioritizing economic security.

Charles Lichfield is the deputy director and C. Boyden Gray senior fellow of the Atlantic Council’s GeoEconomics Center.

The report is part of a yearlong series on economic statecraft across the G7 and China supported in part by a grant from MITRE.

The contents of this issue brief have not been approved or disapproved by the Japanese government.

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The United States has opened meaningful space for reconstruction and private sector engagement. Efforts to do so include the Treasury’s Office of Foreign Assets Control (OFAC) issuing General License (GL) 25 (including frequently asked questions on May 28), a State Department Caesar Act waiver, and Financial Crimes Enforcement Network (FinCEN) USA PATRIOT Act Section 311 exceptive relief for the systemically important Commercial Bank of Syria. Along with other relief, the measures remove obstacles to reconnecting the sanctioned Central Bank of Syria and certain Syrian commercial financial institutions to the global financial system.

While a significant signal, these announcements do not mean a return to business as usual with Syria after forty-six years of punishing economic measures directed primarily against the former Assad regime. Syria remains a high-risk jurisdiction due to years of conflict, endemic corruption, state institution collapse, narcotrafficking of captagon, insufficient anti-money laundering efforts, and inadequate financing of terrorism controls. In February, the intergovernmental Financial Action Task Force affirmed Syria’s status on its “grey list” of jurisdictions under increased monitoring. These relief measures announced by the State Department and the Treasury are also either temporary in nature (the 180-day Caesar Act waiver) or subject to revocation at any time (GL25 and the FinCEN Section 311 exceptive relief). Additionally, other US legal and economic restrictions remain in place, including the following:

• Syria’s state sponsor of terrorism (SST) designation that, in part, removes some of Syria’s sovereign immunity in US courts;
• foreign terrorist organization (FTO) designations with attendant material support criminal liability enforced by the Department of Justice and civilly by US terrorism victims;
• United Nations sanctions, including on key members of the Syrian interim government; and
• export controls administered by the Department of Commerce.

As an immediate next step to build on this momentum, the Trump administration can take the following measures:

• Provide policy clarity on the outstanding restrictive economic measures and legal prohibitions related to the SST and FTO designations. The administration can publish a memorandum by the Department of Justice to articulate the administration’s prosecutorial policy involving alleged material support to FTOs operating in Syria. While novel, such guidance would provide greater legal clarity, especially for humanitarian organizations operating in Syria.
• Work with Congress to review the statutory sanctions in place against Syria to ensure that they reflect the fall of the Assad regime and current political developments.
• Work with allies and partners to calibrate the United Nations sanctions to current risks.
• Provide guidance, including frequently asked questions, for the Caesar Act waiver and the FinCEN Section 311 exceptive relief, as well as interagency policy guidance on the roadmap for further relief.
• Develop a policy for using and supporting partners with positive economic statecraft tools such as technical assistance to rehabilitate the financial sector, in addition to licensing, waiving, and removing restrictive economic measures.

The US government should be commended for acting swiftly to update sanctions and other authorities to better reflect the current realities on the ground. Significant work remains ahead to responsibly calibrate restrictive economic measures to achieve US foreign policy goals and support positive economic tools to allow the Syrian people to benefit from this dramatic change in US policy.

Alex Zerden is the founder of Capitol Peak Strategies, a risk advisory firm, an adjunct senior fellow at the Center for a New American Security, and a former Treasury Department financial attaché. You can follow him on X at @AlexZerden.

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The post Donovan and Nikoladze cited in the South China Morning Post on the rising role of gold in sanctions evasion appeared first on Atlantic Council.

The post Donovan and Nikoladze cited by Kitco News on the reasons behind the surge in gold demand appeared first on Atlantic Council.

Governments and private actors alike are giving gold’s role in the global financial system a boost, but with a twenty-first-century twist. Individual countries and groups of countries are experimenting with creating gold-backed digital assets and trading systems that bypass the dollar-denominated financial system. In many cases, these initiatives are for purely economic benefits. However, gold is also being used by US adversaries to evade sanctions or finance activities that counter US national security interests.

The rise of gold-backed currencies that circumvent the US banking system, coupled with sanctioned regimes’ growing interest in the adoption of alternative currencies and payment systems, could create a massive blind spot for US financial intelligence and sanctions enforcement efforts. To reduce the proliferation of these alternatives to the dollar-based financial system, the United States should temper its use of coercive economic measures that can cause gold prices to rise and promote dollarization through trade and investment ties, especially with third countries impacted by sanctions on US adversaries.

Why Russia is interested in gold

Russia’s central bank is among the top holders of gold in the world, having built gold reserves from 2014 to 2020 to hedge against Western sanctions. While the central bank’s gold reserves have not increased substantially since 2020, Russia’s Ministry of Finance is thought to be buying gold from domestic producers without reporting it. In 2021, the Ministry of Finance doubled the share of gold in Russia’s National Wealth Fund to 40 percent. 

After the West froze $300 billion of the Russian central bank’s assets in response to Moscow’s full-scale invasion of Ukraine in 2022, this gold-hoarding strategy paid off. As gold prices skyrocketed this year, the value of Russia’s gold reserves increased by $96 billion, offsetting one-third of the frozen assets.

Gold has also played a major role in Russia’s illicit trade. For example, the United Arab Emirates (UAE), a BRICS+ member and a global hub for gold trade, as well as Turkey, have engaged in cash-for-gold trade with Russian banks. The Russia-based Lanta Bank and Vitabank received twenty-one shipments of currencies such as US dollars, euros, UAE dirhams, and Chinese renminbi worth $82 million from the UAE and Turkey in exchange for Russian gold. Late last year, the United States and United Kingdom sanctioned the network of entities and individuals involved in Russia’s illicit gold trade due to their role in generating revenue for Russia’s war chest. Additionally, Britain’s National Crime Agency published a red alert in late 2023 on gold-based illicit trade and sanctions circumvention. 

Apart from using gold for reserves and sanctions evasion, Russia is also trying to leverage the BRICS+ grouping as a platform to advocate for the creation of a gold-backed BRICS+ currency. It remains to be seen if the group makes any tangible progress ahead of the next BRICS+ Summit in Brazil in early July. In the meantime, tracking the rise of gold-backed currencies and alternative payment systems across the world offers valuable insights into how they could be used for sanctions evasion. 

The rise of gold-backed stablecoins

Gold-backed stablecoins—cryptocurrencies whose prices are pegged to gold—offer the most valuable property of gold, which is stability during financial uncertainty. They are also logistically more convenient to store and sell than physical gold. Companies such as Paxos* and Tether capitalized on these qualities, creating gold-backed stablecoins in 2019 and 2020, respectively. 

Usually, each token of gold-backed stablecoin corresponds to a specific amount of gold. For example, by purchasing one unit of Tether Gold (XAUT), investors receive the ownership rights of one troy ounce of physical gold on a specific gold bar with a serial number. Each gold bar weighs four hundred ounces on average, so if investors would like to redeem a gold bar, they have to own units worth one full gold bar. Issuers of these stablecoins hold gold reserves in safe vaults, typically in the United Kingdom or Switzerland. Third parties regularly audit gold reserves to confirm that the supply of tokens does not exceed the amount of gold held by issuers.

Although commodity-backed stablecoins represent less than one percent of the market capitalization of fiat-backed stablecoins, governments are now following the lead of crypto companies in experimenting with them. Earlier this month, for example, the Kyrgyz Ministry of Finance announced that it will launch a gold-backed stablecoin called USDKG in the third quarter of 2025. The Kyrgyz Ministry of Finance holds gold reserves worth $500 million and plans to expand that number up to $2 billion. (This is separate from the gold reserves held by the National Bank of the Kyrgyz Republic, which was among the top buyers of gold in the last quarter of 2024.) USDKG will not track the price of gold, unlike well-established stablecoins such as Paxos Gold or Tether Gold. Instead, it will be pegged to the dollar but solely backed by gold reserves. USDKG holders will be able to redeem gold, other crypto assets, or fiat currency. 

The reported objective of the gold-backed stablecoin is to facilitate cross-border inflows of remittances, which make up one-third of Kyrgyzstan’s gross domestic product. Russia accounts for more than 90 percent of remittances that flow into Kyrgyzstan, sent by migrant workers back to their families. Kyrgyzstan has not yet launched the stablecoin, but if it’s going to be used to facilitate cross-border flows with Russia, then there is a chance that certain actors could use USDKG to export sanctioned goods to Russia outside of US authorities’ oversight. Financial institutions in Kyrgyzstan have already been sanctioned for their involvement in Russia sanctions evasion schemes by the United States. 

For example, earlier this year, the Treasury Department sanctioned Kyrgyzstan-based Keremet Bank for facilitating transactions on behalf of US-sanctioned Russian bank Promsvyazbank. The Kyrgyz Ministry of Finance sold the controlling shares of Keremet Bank to a firm connected to a Kremlin-linked Russian oligarch in 2024. According to the Treasury press release, the transaction was intended to turn Keremet Bank into a sanctions evasion hub that would enable Russia to receive payments for exports and pay for imports. Given sanctioned Russians’ strong interest in taking advantage of Kyrgyzstan’s financial system to import restricted technologies, they will likely be drawn to USDKG because of its ability to process transactions with Kyrgyz entities while completely bypassing the US banking system. 

How the US can stem the digital gold rush

It is no coincidence that stablecoins account for 63 percent of all illicit crypto transactions and have become a preferred tool for sanctions evasion. They attract sanctioned entities because of their ability to transfer value pseudonymously with high speed and at low cost. While the US Senate recently advanced the GENIUS Act to regulate stablecoins, one of the major deficiencies of the bill is that it does not adequately regulate offshore stablecoin issuers. Even if put into law, the GENIUS Act would fail, for example, to regulate Tether, the largest offshore issuer of dollar-pegged stablecoins, which has been the subject of federal investigations because of its alleged widespread use by terrorist groups and Russian arms dealers. 

Unlike US-issued or dollar-backed stablecoins, foreign-issued gold-backed stablecoins such as USDKG will likely escape US regulation because they don’t have a touchpoint with the US banking system. Their proliferation, along with gold-backed trading schemes, is driven to a large extent by the United States’ weaponization of the dollar, as well as uncertainty over US trade policy. 

The United States has the power to indirectly reduce gold prices and encourage the adoption of dollar-backed assets by returning to being the provider of stability in the global economy. That can be achieved by dialing down the use of tariffs and other economic measures that could cause governments and private actors to turn to gold.

At the same time, the US government should promote the dollarization of economies such as Kyrgyzstan’s by continuing to provide financial assistance and deepening trade and investment ties with other third countries impacted by sanctions against Russia. Doing so will help close gaps in US financial intelligence, strengthen US sanctions enforcement, and lower the demand for currencies outside the dollar-based financial system.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. She is a former senior Treasury official and National Security Council director. Follow her at @KDonovan_AC.

Maia Nikoladze is an associate director at the Atlantic Council’s Economic Statecraft Initiative within the GeoEconomics Center. 

Note: Paxos is a partner of the Atlantic Council’s GeoEconomics Center.

The post Gold’s geopolitical comeback: How physical and digital gold can be used to evade US sanctions appeared first on Atlantic Council.

Click to jump to an expert analysis:

Kimberly Donovan: Sanctions are a powerful, yet slow-burning tool 

Rachel Rizzo: Europe is no longer waiting for the United States to act

Elisabeth Braw: Spotlight who is replenishing Russia’s shadow fleet, too

Aleksander Cwalina: There is still more the EU can do to tighten the screws to Russia

Olga Khakova: If Trump also goes after the shadow fleet, it could bring Putin to the table

Sanctions are a powerful, yet slow-burning tool 

The EU’s seventeenth package is a welcome addition to the extensive sanctions the Group of Seven-plus (G7+) coalition maintain on Russia in response to Russia’s ongoing war in Ukraine. The latest package further brings EU sanctions in line with US and UK designations on Russian oil producers including Surgutneftegas, as well as the ongoing strategy to target Russia’s illicit oil trade using shadow fleet vessels.  

The extent and timing of this latest sanctions package demonstrate Europe’s resolve to maintain economic pressure on Russia, and they are a clear signal that Europe maintains strong economic leverage in potential negotiations with Russia to end the war.  

It’s hard not to notice that the sanctions were announced the day after US President Donald Trump spoke with Russian President Vladimir Putin and posted on social media that “Russia wants to do largescale TRADE with the United States when this catastrophic ‘bloodbath’ is over, and I agree.” There is growing concern about a potential divergence in US and EU foreign policy, and the latest EU package is a strong reminder that EU sanctions could remain in place even if Washington decides to ease its sanctions or open avenues for trade and finance with Moscow. 

That said, EU sanctions require renewal every six months and need consensus by all twenty-seven members. If the United States does not maintain economic pressure on Russia, then there is concern that Hungary may break with the bloc and veto EU sanctions on Russia’s economy when they are up for renewal in July. 

Sanctions are a powerful, yet slow-burning tool. The multilateral sanctions that G7+ coalition partners levied against Russia are finally having the intended effect. Russia’s economy is struggling, interest rates and inflation remain high, Russia is drawing down on its National Welfare Fund, and the country is in a wartime economy. This is why Moscow’s primary demand from the Black Sea cease-fire talks was lifting sanctions.  

To get a better and bigger deal with Russia over the war in Ukraine, it would be in Washington’s best interest to not only engage its European allies in negotiations, but also to join them in issuing additional sanctions to deny Moscow the opportunity to gain leverage at the negotiation table. 

—Kimberly Donovan is the director of the Economic Statecraft Initiative at the Atlantic Council’s GeoEconomics Center. She previously served in the federal government for fifteen years, most recently as the acting associate director of the Treasury Department Financial Crimes Enforcement Network’s Intelligence Division.

Europe is no longer waiting for the United States to act

The latest round of EU sanctions against Russia highlights the EU’s willingness to do something it hasn’t yet done since February 2022: take ownership over the outcome of Russia’s war in Ukraine. The United States has always been in the driver’s seat, with the Biden administration both shaping and leading the West’s response to the war. The re-election of Trump brought an almost 180-degree shift in the US approach, with a much more conciliatory tone toward Russia emanating from the White House, along with a hope that Trump’s dealmaking skills could get both sides to the table for a cease-fire. That approach has yet to bear fruit.  

This is where the EU’s pressure becomes important. It highlights the bloc’s willingness to act independently of the United States and use its own tools to get Russia to the table without waiting for the United States to provide political cover. With European Commission President Ursula von der Leyen leading the charge, the hope is that the EU stays united on the sanctions front for the foreseeable future, squeezing Russia’s war machine (and its broader economy) to the point where Putin has no other choice than to stop the war. 

—Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center. Her research focuses on European security, NATO, and the transatlantic relationship.

Spotlight who is replenishing Russia’s shadow fleet, too

Every sanction helps reduce the shadow fleet’s activities, and the EU’s diligent efforts to identify shadow vessels are to be saluted. The EU should be especially proud of its latest package, which includes sanctions against an extraordinary 189 shadow vessels and some of the ships’ owners. The latter is especially important, since the owners do their best to operate in the shadows and are extremely hard to trace. 

However, the shadow fleet’s main characteristic remains in place: the fact that it can be constantly replenished. It can be replenished because there are ship owners willing to sell their retirement-age ships into the shadow fleet. In fact, doing so is commercially advantageous for them: Retiring old vessels involves paying for them to be scrapped, while selling them into the shadow fleet brings in money—a lot of it.  

Unfortunately, a few shipowners, including in Western countries, undermine sanctions against Russia by selling their ships into the shadow fleet. Perhaps even worse, by doing so, they willingly create risks on the high seas, because shadow vessels pose hazards to other vessels, to the maritime environment, and to coastal states. Publishing their names would send a strong message. 

—Elisabeth Braw is a senior fellow with the Atlantic Council’s Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security.

There is still more the EU can do to tighten the screws to Russia

On the sidelines of the G7 finance ministers’ meetings in Banff, Canada, this week, the United States opposed language in a joint statement that included “further support” for Ukraine. The United States also expressed reluctance to describe the Russian full-scale invasion of the country as “illegal,” further distancing Washington from its G7 counterparts. This follows a concerning trend as Trump has talked about Washington stepping back in peace talks and eventually restarting US trade with Russia. 

In contrast, the European Commission pushed forward and adopted its seventeenth sanctions package against Russia, underlining European Union unity and clarity. The package closed some remaining loopholes that allow Russia to fund its war machine and access key Western technology for military use. In doing so, it reiterated EU solidarity with Ukraine. 

The package was received well in Kyiv, with Ukrainian President Volodymyr Zelenskyy calling the newest round of sanctions “strong” and saying that they will limit Moscow’s ability to continue its invasion.  

However, more can be done to tighten the screws on Russia.  

Kyiv and its European allies are already discussing how to raise the stakes in a harsher eighteenth EU sanctions package if Moscow does not make serious efforts toward a cease-fire. This would most likely target the Russian banking and energy sectors and aim to further limit the Russian shadow fleet that Moscow uses to evade maritime trade restrictions. The EU and its partners should continue to target these industries. The bloc should also seriously consider seizing assets from sanctioned individuals in the EU for Ukraine and implementing secondary sanctions that limit third-party purchasing of Russian oil—both steps recommended by Kyiv. 

As European leaders are becoming increasingly frustrated with Washington’s stalling and Putin’s faux negotiations and maximalist demands, the EU should lead by example and take bold steps to continue aiding Ukraine and putting pressure on Russia. 

—Aleksander Cwalina is an assistant director at the Atlantic Council’s Eurasia Center.

If Trump also goes after the shadow fleet, it could bring Putin to the table

Putin’s strategy of buying time with deceitful “peace” promises is shown to be failing in the face of the new EU and UK sanctions, as funding for Moscow’s war starts to run out. 

The shadow fleet carries more than 60 percent of Russian oil exports, according to a recent estimate, and the new sanctions will help strengthen enforcement of the price-caps mechanism on Russian oil. Currently, there are some discussions at the G7 level on lowering the price cap for the next sanctions package. But lowering the price cap will only impact Russia if it is enforced. Otherwise, Russia will continue to send large quantities of its oil through the shadow fleet, ensuring it continues to rake in profits.  

In addition to curtailing Russia’s oil profits, the shadow fleet sanctions protect European coastlines from the potential environmental damage and sabotage that the Russian shadow fleet could cause. Europe is achieving this by refusing the provision of services, insurance, and port access to these metal-scrap grade ships. 

The United States has already sanctioned 183 vessels. Now, Trump has an opportunity to forge his legacy as a peacemaker by joining the EU and UK sanctions on 342 vessels to bring Putin to the negotiating table. Moscow will only take US pressure seriously if it is implemented with decisiveness and strength—something the Trump administration has demonstrated effectively in tough negotiations with other nations.   

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

The post Europe is striking back at Russia’s shadow fleet. Here’s what to know about the latest EU and UK sanctions. appeared first on Atlantic Council.

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The new Syrian leadership and its supporters have pushed for sanctions relief to help rebuild from the rubble of more than a decade of civil war—accompanied by promises of establishing a more free and tolerant Syria. But skepticism remains regarding al-Sharaa’s past links to al-Qaeda and communal massacres against minority groups that have taken place since he came to power.  

How will the removal of US sanctions affect Syria’s economy and future US-Syria relations? And what are the wider implications for the region? Our experts offer their insights below.  

Click to jump to an expert analysis:

Qutaiba Idlbi: This is an opportunity to secure a long-term US strategic victory in the region 

Kirsten Fontenrose: Watch for a Saudi-Syria deal, Russia’s renewed presence, and Iran’s next moves

Daniel B. Shapiro: Trump is making a smart gamble, Congress should back him up

Sarah Zaaimi: A US carte blanche to al-Sharaa may lead to sectarian backsliding

Thomas S. Warrick: Trump has made clear that he is listening to Arab leaders

Amany Qaddour: Now is the time to move beyond politicizing aid

Alan Pino: A clear signal to Iran

Kimberly Donovan: Lifting the complex Syrian sanctions regime will require careful strategy

Celeste Kmiotek: Bashar al-Assad must be held accountable

Maia Nikoladze: This move aligns US Syria sanctions policy with the EU and UK 

Ömer Özkizilcik: This represents a diplomatic success for Saudi Arabia and Turkey

Sinan Hatahet: Engagement must go beyond sanctions relief

Diana Rayes: A critical reprieve for Syrians everywhere   

Elise Baker: Now is the time to establish the Syria Victims Fund

Lize de Kruijf: Without meaningful financial support, the US risks ceding influence in Syria 

This is an opportunity to secure a long-term US strategic victory in the region

Trump’s decision to lift US sanctions on Syria is a pivotal shift that could define his legacy in the Middle East. The move signals an opportunity to secure a long-term US victory in Syria by stabilizing the region, countering rivals such as Russia and China, and opening economic opportunities for US businesses. 

Trump has long portrayed himself as a dealmaker, and his record on Syria supports that image. Unlike the Obama and Biden administrations, Trump responded decisively to al-Assad’s chemical weapon attacks in 2017 and 2018, launched airstrikes to deter further atrocities, and cooperated with Turkey in 2020 to halt the Assad regime’s and Russia’s assault on Idlib. He also signed the Caesar Syria Civilian Protection Act, which crippled the Assad regime financially, leading to its fall last December. Now, however, those same sanctions are undermining the prospects of Syria’s new post-Assad regime government, which is attempting to rebuild and distance itself from Iranian and Russian influence. 

The current sanctions are weakening a new government that seeks US and Gulf support. If these sanctions were to stay in place, Syria’s economy would remain in free fall, making it increasingly reliant on Russia, China, and Iran. This would open the door to renewed extremism, regional instability, and the resurgence of the Islamic State of Iraq and al-Sham (ISIS). Lifting sanctions will allow US companies to compete with Chinese firms for contracts in Syria’s expected $400 billion reconstruction effort. It will also enable Trump to leverage Gulf funding, create jobs in both Syria and the United States, and demonstrate Washington’s role as a stabilizing force. A prosperous Syria would reduce refugee flows, weaken Hezbollah and the Islamic Revolutionary Guard Corps, and eliminate Syria as a threat to Israel—a country with which the new Syrian leadership seeks peaceful relations. 

The new Syrian government is not without flaws, but it has made pragmatic moves. It started reintegrating territories with the Syrian Democratic Forces, cracked down on drug trafficking, made efforts aimed at protecting minorities, and distanced itself from Hezbollah and Iranian forces. These steps show a willingness to cooperate with the West and align with its goal of regional stability. If Trump follows through, he could secure a rare bipartisan win, outmaneuver Russia, and reshape the future of Syria in a way that serves US interests and regional peace. 

—Qutaiba Idlbi is a senior fellow with the Atlantic Council’s Rafik Hariri Center and Middle East Programs where he leads the Council’s work on Syria. 

Watch for a Saudi-Syria deal, Russia’s renewed presence, and Iran’s next moves

I am hearing that the lifting of US sanctions on Syria took some members of Trump’s own administration by surprise. Since January, Syria has been a counterterrorism file, not a political one. Al-Sharaa received a list of milestones from the US administration this spring, and meeting these would have meant a gradual rollback of sanctions. So this sudden lifting must feel like a new lease on life for the Syrian ruler.

But this sudden decision to lift sanctions should not be interpreted as a sign that the United States is making Syria a priority. In fact, it indicates the opposite. Both Saudi leader Mohammad bin Salman and Turkish President Recep Tayyip Erdogan will have had to promise Trump that they will hold al-Sharaa accountable and will shoulder the burden of reconstruction. The United States has never colonized or invaded Syria, and the United States committed a lot of manpower and funding into supporting opposition to al-Assad under the first Trump administration. It is hard to make an argument that the United States has any obligation to fund Syria’s reconstruction. That responsibility will fall to those who pressed Trump to lift sanctions. 

Going forward, there are three things to watch:   

One, watch for Saudi Arabia’s deal with al-Sharaa. He will owe them big time for making this happen. (Erdogan will argue that he is owed as well, having greased the skids on a phone call with Trump just before his meetings in Riyadh.) Expect Saudi Arabia to require that foreign fighters be ejected from senior government roles and demand that Iran is kept out of Syria. Look for Saudi companies to be granted the contracts to undertake reconstruction projects in Syria, an easy give for al-Sharaa and a no-brainer in this situation. 

Two, for Europe especially, watch Russia. Moscow may find it easier to establish its interests in Syria now. Saudi Arabia and Israel will see a Russian presence as a way of counterbalancing Turkey’s influence in Syria.

Three, watch for shifts in Iran’s foreign policy. Syria is now proof that Trump will in fact lift sanctions under certain conditions—if your leadership promises to change its stripes and favored foreign partners vouch for you. Expect to see a charm offensive by Tehran.

— Kirsten Fontenrose is a nonresident senior fellow at the Scowcroft Middle East Security Initiative in the Atlantic Council’s Middle East Programs. Previously, she was the senior director for the Gulf at the National Security Council during the first Trump administration, leading the development of US policy toward nations of the Gulf Cooperation Council, Yemen, Egypt, and Jordan.

Trump is making a smart gamble

Trump’s announcement that he will provide sanctions relief to Syria is a gamble, but it is the right one. The collapse of the Assad regime, whose brutality, misrule, and collaboration with malevolent regional actors destroyed Syria, has given long-suffering Syrians a chance to build a different future. 

The road to recovery will not be an easy one. Many are rightly suspicious of Syria’s new acting president, Ahmed al-Sharaa, and others in his Hayat Tahrir al-Sham movement, due to their violent jihadist past. As one cannot look inside another’s soul, it is unknown if they have truly shed their extremist ideology amid a rebranding since coming to power in December. 

What can be judged are actions. So far, al-Sharaa has said and done many of things Western and Arab nations have called for. He is making efforts to be inclusive, including appointing women and minorities into his cabinet. He says strict Sharia law will not be imposed. He has begun negotiations with the Kurdish Syrian Democratic Forces on their peaceful integration into Syrian national institutions. He claims to want Syria to pose no threat to any of its neighbors, including Israel, and he wants to keep Iran from re-establishing influence in Syria. He is aligning himself with moderate Arab states and US partners like Saudi Arabia and the United Arab Emirates. 

These words and actions must be tested and verified over time. But to have any chance to succeed in stabilizing Syria, the new government needs resources to make the economy function. Reconstruction and resettlement of refugees, not to mention restoring services disrupted by years of civil war, will be expensive. Without a significant measure of US sanctions relief, none of this is possible. It would nearly guarantee Syria’s descent back into chaos and provide fertile ground for extremists. 

Congress should work with Trump on crafting sanctions relief such that, if necessary, sanctions can be restored. But Trump is right to seize this opportunity. 

—Daniel B. Shapiro is a distinguished fellow with the Atlantic Council’s Scowcroft Middle East Security Initiative. From 2022 to 2023, he was the Director of the N7 Initiative. He has previously served as US deputy assistant secretary of defense for the Middle East and as US ambassador to Israel.

A US carte blanche to al-Sharaa may lead to sectarian backsliding 

Lifting sanctions presents a tremendous opportunity to revitalize the Syrian economy and provide a genuine chance for the al-Sharaa government to implement the vision for social unity it has advocated since December. However, the United States should make sure not to give carte blanche to the new Syrian regime and lose all of its leverage over a ruler who has only recently self-reformed from a dangerous radical ideology, especially when it comes to managing ethnic and religious diversity. 

Al-Sharaa has publicly and repeatedly pledged to build a nation for all Syrians, regardless of their identities. He also appointed a Christian woman to his newly announced government and welcomed a delegation of Jewish religious officials to return for the first time since their synagogue was closed back in the 1990s. Still, his first five months in power have also been marked by violent confrontations with certain religious minorities and the ascension to power of foreign fighters with questionable pasts. Back in March, over one thousand Alawites were killed in a violent crackdown on the minority’s stronghold on the Syrian coast. Meanwhile, the Druze remain divided, and many refuse to turn in their arms, fearing the escalation of sectarian tensions. 

Similarly, many other sects remain anxious about their future, including Christians and Twelver Shia, who saw the lowering of the Sayeda Zainab flag—a revered pilgrimage site on the outskirts of Damascus—as a sign of the prevalence of a monochrome orthodox version of Islam. Another worrying signal was the sweeping authority provided to the presidency in the new Syrian constitution, which also excluded mention of minority rights and societal diversity, making Islam the only supreme law of the land. 

Al-Sharaa and his entourage have a historic chance to start anew and build a plural and inclusive Syria for all its citizens. Until then, Washington and its allies should continue monitoring the state of minorities in this complex sociocultural context and signal to the new lords of the land that lifting sanctions is a provisional chance and not an unconditional license to lead Damascus into another sectarian spiral.   

—Sarah Zaaimi is a resident senior fellow for North Africa at the Atlantic Council’s Rafik Hariri Center and Middle East programs, focusing on minorities and cultural hybridity. She is also the center’s deputy director for media and communications. 

Trump has made clear that he is listening to Arab leaders 

No one can say that Trump does not listen to Arab leaders—clearly, he does. Arab leaders were united in telling Trump and his administration that the United States should lift sanctions against Syria to help move the country toward peace with all its neighbors. 

Officials in the Trump administration had different views on how to respond to al-Sharaa’s statements calling for peace with Syria’s neighbors and openness to the West. But no one expected Trump to announce the lifting of sanctions on this trip. As recently as April 25, a senior administration official said that the new Syrian government needed to combat terrorism, prevent Iran from regaining influence in Syria, expel foreign fighters from Syria’s government and security apparatus, destroy all chemical weapons, adopt nonaggression policies toward all neighboring countries, and clear up the fate of missing American Austin Tice. “We will consider sanctions relief, provided the interim authorities take demonstrable steps in the directions that I have articulated,” he said. “We want Syria to have a second chance.” 

On March 20, I and other US experts on the Middle East called for Syria to express interest in joining the Abraham Accords. I think that al-Sharaa’s April 19 offer to discuss joining the Abraham Accords did exactly what it needed to do: It broke through to get Trump’s attention. 

Trump is now willing to give Syria a second chance. Sanctions against terrorist groups like Hayat Tahrir al-Sham, which brought al-Sharaa to power (with support from Turkey), are likely to remain in place. Syria needs to make substantive progress on sidelining extremists within al-Sharaa’s ranks and engaging in serious talks (either direct or indirect) with Israel that could eventually lead to joining the Abraham Accords. Trump could change his mind tomorrow, but for now, it is clear Trump is listening. 

—Thomas S. Warrick is a nonresident senior fellow in the Scowcroft Middle East Security Initiative and a former deputy assistant secretary for counterterrorism policy in the US Department of Homeland Security. 

Now is the time to move beyond politicizing aid

What a monumental shift for Syria—one of the most significant since the December fall of the Assad regime.  

Having just returned recently from the country, I could clearly see that the humanitarian situation has stagnated. The Trump administration’s massive US Agency for International Development (USAID) cuts—amid already dwindling funds for Syria—have had a catastrophic impact. The soul-crushing sight of destroyed buildings across the country as a result of the regime’s brutality was still visible in so many of the previously besieged areas like Douma and Harista of Eastern Ghouta. The Assad regime’s deprivation, oppression, and collective punishment of millions has left the country in a state of decay.  

In my view as a humanitarian and public health practitioner, sanctions have been one of the most critical hindrances to early recovery. Syria’s health sector is decimated after over a decade of destruction to critical civilian infrastructure like hospitals and clinics—not to mention schools and marketplaces— from aerial attacks by the regime and its allies.  

As long as sanctions are in place against the new government in Syria, the recovery of the country is impossible, and civilians will continue to the pay the price, just as they did under the Assad regime. Beyond the need for Syria’s early recovery and reconstruction from a physical infrastructure standpoint, the country needs to heal. This is an opportune moment to capitalize on this shift. The politicization of aid throughout the entirety of conflict has translated to the suffering of millions. Now is the time to move beyond that politicization of aid and recovery efforts and give Syrians the chance to start the healing process. Lifting sanctions will allow for that and bring Syria back from being a pariah state. 

—Amany Qaddour is a nonresident senior fellow for the Atlantic Council’s Middle East Programs. She is also the director of the 501(c)(3) humanitarian nongovernmental organization Syria Relief & Development. 

A clear signal to Iran

Trump’s decision to lift economic sanctions on Syria provides a needed lifeline to Syria’s struggling economy, aligns Washington’s Syria policy with that of regional Arab powers, and pointedly signals a determination to prevent Iran from rebuilding its presence and influence in this key country. 

Popular unrest—including increasing criticism of al-Sharaa and his new government—has been growing in Syria over the poor economy and living conditions as the country attempts to recover from over a decade of civil war. The lifting of US sanctions opens the way for an infusion of regional and international aid, investment, and expertise to help the al-Sharaa government begin rebuilding the country and heading off the political instability that could otherwise arise. 

Removing sanctions also shows US support for efforts by Washington’s Arab partners in the Gulf, Egypt, and Jordan to reintegrate Syria into the moderate Arab fold after decades of alignment with Iran.  The controversy over the invitation of al-Sharaa to the Arab Summit in Baghdad because of his and his follower’s past ties to al-Qaeda makes clear that Syrian reintegration will need to proceed slowly, based on a demonstrated commitment to eschew all ties to terrorism and apply equal justice to all minorities in Syria. 

Finally, Trump’s decision to lift sanctions on Syria puts down a marker that Washington is not only determined to prevent Iran from getting a nuclear weapon, but to check Iranian efforts to try to restore its badly weakened resistance axis aimed at threatening Israel and wider reigonal domination. 
 
—Alan Pino is a nonresident senior fellow with the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East programs. 

Lifting the complex Syrian sanctions regime will require careful strategy

Trump’s announcement in Riyadh that the United States will end sanctions on Syria is a major foreign policy shift. Lifting sanctions on Syria is complicated and will require strategy to determine which sanctions to pull down and when, as well as what measures implement to enable the snap-back of sanctions should the situation in Syria deteriorate. 

Syria has been on the US state sponsor of terrorism list since 1979 and is subject to sanctions and export controls pursuant to numerous executive orders and legislation for a range of issues including human rights abuses, smuggling Iranian oil, and supporting terrorist groups. A further complicating factor is that Hayat Tahrir al-Sham (HTS), which overthrew the Assad regime, is leading the interim Syrian government. HTS, formerly known as al-Nusrah Front and once al-Qaeda’s arm in Syria, is designated as a terrorist organization by the United States, Canada, and other governments. HTS is also designated as a terrorist group by the United Nations (UN), a designation that all UN member states must comply with, including the United States. The UN designation of HTS and al-Sharaa include an asset freeze, travel ban, and arms embargo. 

Trump’s announcement is a welcome shift in US foreign policy. The Syrian government and the Syrian people will need sanctions lifted to have a chance of rebuilding the country. This is a delicate and complicated situation on top of a complex sanctions regime. To move forward with this shift in foreign policy, as a next step, the United States will need to consider which sanctions it is willing to lift on Syria to meet specific goals and it will need to start engaging with the United Nations to consider if and how sanctions should be lifted on HTS. 

—Kimberly Donovan is the director of the Economic Statecraft Initiative at the Atlantic Council’s GeoEconomics Center. She previously served in the federal government for fifteen years, most recently as the acting associate director of the Treasury Department Financial Crimes Enforcement Network’s Intelligence Division.