The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

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By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Kiki Dong, Isabella Rao, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

US Renews Economic Pressure on Iran with New Sanctions

^{"IRGC Ground New Equipment 2021 (09)" by Hadi Hirbodvash is licensed under CC BY 4.0.}

Over the last week, the US has implemented or re-imposed several sanctions measures on Iran as it attempts to ramp up military and economic pressure on Tehran once again. Following the breakdown of the June memorandum of understanding (MOU) that paused the active Iran conflict and established high-level talks on the nuclear issue, the resumption of economic pressure pairs with military strikes as part of a broader effort to secure more concessions from Iran amid a deadlocked negotiation process. But the renewal of sanctions (and airstrikes) is unlikely to secure a new deal in the short term, given the previous failure of economic or kinetic pressure to compel concessions from Tehran.

On July 15, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned seven individuals and entities involved in the Islamic Revolutionary Guard Corps’ (IRGC) international weapons procurement network. The sanctions package targets individuals and entities in Iran, Nigeria, Italy and Russia pursuant to EO 13382, which targets weapons of mass destruction (WMD) proliferators and their supporters. On July 14, OFAC sanctioned more than 50 individuals linked to the illicit shipping and sanctions evasion network of Mohammad Hossein Shamkhani, an Iranian oil magnate who has been the target of numerous rounds of US sanctions. Entities and individuals in Iran, Dubai, the British Virgin Islands, Denmark and elsewhere were sanctioned pursuant to EO 13902, which provides authority to the Secretary of the Treasury to identify and impose sanctions on key sectors of Iran’s economy. And on July 10, OFAC sanctioned Iranian financier Ali Ansari (and entities associated with him) and currency exchange houses in an effort to disrupt financial support to the IRGC and Supreme Leader Mojtaba Khamenei. Ansari and exchange houses were sanctioned pursuant to EOs 13876 and 13224 for providing material support to Khamenei or acting on behalf of the IRGC. The new sanctions also followed the revocation of the temporary sanctions waiver allowing the sale of Iranian oil, originally intended to expire August 21.

The designations are happening against the backdrop of the breakdown of the June memorandum of understanding (MOU) between the US and Iran and the reignition of active hostilities in the Gulf. Since active conflict restarted in early July following Iranian targeting of several commercial vessels in the Strait of Hormuz, both sides have escalated rapidly (although the kinetic conflict remains below the level reached prior to the signing of the MOU). Iran has struck military and civilian targets throughout the Gulf, including a desalination plant in Kuwait, military bases in Jordan (a rare target throughout the conflict), and continued harassment of shipping in the Strait. The US has retaliated with strikes on military and oil infrastructure, broadening at the end of last week to include civilian infrastructure like Iran’s power grid, ports and bridges.

The US is seeking to renew pressure on Iran in a bid to secure further concessions outside of a deadlocked negotiating process. New sanctions against Iran’s weapons procurement and oil shipping network constitute a parallel effort to increase economic pressure alongside military strikes. Last week, the US also restarted its blockade on Iranian ports, a renewed effort to deny Iran any revenues from its heavily-sanctioned oil trade (which almost exclusively transits the Strait to reach customers, mostly in China). President Trump restarted strikes after reportedly being convinced by aides that Iran was not negotiating in good faith in ongoing nuclear talks, and that Tehran was using the time to reconsolidate and rearm rather than seek a comprehensive agreement. Misalignments over the text of the MOU were also beginning to grate; the 14-point agreement permitted Iran to “make arrangements” for safe passage of commercial vessels in the Strait following a 60-day period of guaranteed free passage. The US expected Iran to provide free passage indefinitely (in line with international maritime law), while Iran was seeking to establish tolls and policing. The breakdown of talks and return to military action was in part precipitated by Iranian objections to a US-facilitated Omani corridor that would have bypassed Iranian jurisdiction. The ships that Iran struck in early June, kicking off this round of escalation, were using the southerly Omani route.

Chances are slim that this renewed pressure campaign will compel Iran to offer concessions on the nuclear or maritime front that were not secured by more severe and sustained efforts this spring. Months of conflict have demonstrated that Iran has a higher threshold for military strikes and economic pain than the US, at least for now. Tehran does not trust Washington to make good on its promises of sanctions relief or even the release of cash, and is seeking to entrench permanent global leverage in the form of control of the Strait rather than relying on a new bargain. That reality makes it difficult to imagine any timely or comprehensive resolution to the conflict. However, there are signs that both sides are seeking deescalation, and intermittent pauses or fragile ceasefires are not unlikely in the coming months (especially as midterm elections approach). Still, the instability around the Iran sanctions regime, kinetic strikes throughout the Gulf, and the closure of the Strait of Hormuz signal continued uncertainty for global energy markets and businesses.

US Developments

US Sanctions Shamkhani Oil-Shipping Network and Iran Weapons Procurement Network

On July 13, 2026, President Donald Trump formally notified Congress that the US has resumed military strikes on Iran. The same day, Trump reinstated a blockade of the Strait of Hormuz. Likewise, it appears that the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has resumed its sanctions campaign against Iran.

On July 14, 2026, OFAC expanded sanctions targeting the alleged illicit shipping network of Iranian businessman Mohammad Hossein Shamkhani (“Shamkhani”), citing its role in facilitating Iran’s oil exports following renewed attacks in the Strait of Hormuz. The action sanctioned more than 50 individuals, companies, and vessels allegedly linked to Shamkhani’s network operating across the UAE, Singapore, Hong Kong, India, and other jurisdictions.

The action builds on OFAC’s April 15, 2026, and July 30, 2025, designation actions targeting the Shamkhani network. Treasury has now sanctioned more than 200 individuals, entities, and vessels allegedly operating within Shamkhani’s network.

On July 15, 2026, OFAC sanctioned seven individuals and entities allegedly involved in an international network supporting weapons procurement efforts on behalf of the Islamic Revolutionary Guard Corps (“IRGC”).

The action builds on OFAC’s May 8, 2026, and June 10, 2026, designations, which targeted alleged procurement networks that sourced weapons for the IRGC and Iran’s Center for Innovation and Technology Cooperation. The sanctions are pursuant to Executive Order (E.O.) 13382, which targets weapons of mass destruction proliferators and their supporters.

Senators Push Forward on Russian Sanctions Bill

On July 10, 2026, Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, alongside Senators Roger Wicker (R-MS), the Chair of the Senate Armed Services Committee, the late Lindsey Graham (R-SC), and Richard Blumenthal (D-CT), released a statement announcing that they had “reached an agreement with the Trump Administration to move [their] updated Russia sanctions legislation [the Sanctioning Russia Act] forward.”

The Sanctioning Russia Act is a sweeping sanctions and tariff-related bill first introduced in April 2025 that has received strong bipartisan support in the Senate. On July 7, 2026, lawmakers reportedly sought Secretary of the Treasury Scott Bessent’s support for the bill during the NATO summit in Türkiye. Previously, we reported that the Act saw a renewed push in Congress in late November 2025 following President Trump’s indication that he would support the legislation, provided that he retained ultimate decision-making flexibility with respect to the sanctions and tariffs contained therein. We also reported that the late Senator Graham had said President Trump “greenlit” the Act in January 2026, though it was not voted on at that time.

On July 14, 2026, a revised version of the bill, now titled the “Sanctioning Russia Act of 2026”, was introduced in the Senate. The bill has been the subject of lengthy negotiation between its supporters and the Trump administration and it has been significantly revised. The revisions include:

· The removal of the “covered determination” framework which required the President to determine that Russia undertook certain activities adverse to Ukraine before most sanctions would be activated. The current bill generally imposes sanctions after a certain number of days after passage of the legislation without a “covered determination” being made.

· A reduction of mandatory tariffs on Russian goods from at least 500 percent on imports to no more than 500 percent.

· A reworked secondary tariff authority, which authorizes the imposition of tariffs of up to 100% on countries that, after enactment, continue making new purchases of Russian-origin crude oil or natural gas and are among the five largest importers of those products or the top five countries facilitating Russian oil sanctions evasion. Countries whose imports of Russian natural gas account for less than 15% of Russia’s total natural gas exports and that are reducing those imports would qualify for an exception.

· The expansion of the sanctions authority to include activities supporting the Russian defense industrial base, including the selling, leasing, or providing of CNC tools, lubricant additives, chemical coatings, fiber optic cables with military applications, and items on the Common High Priority List.

· The expansion of maritime and shadow fleet sanctions by specifically authorizing sanctions against persons and vessels transporting Russian oil, liquid natural gas, uranium, coal, petroleum products, or arms.

· A broader investment restriction that prohibits any new US investment in Russia, the provision of certain services to Russia, and the financing or facilitation of transactions by foreign persons that would otherwise be prohibited if performed by a US person.

In addition, the bill would impose mandatory sanctions on Russian President Vladimir Putin, top Russian officials, the Russian military, major Russian banks, foreign persons supporting Russia’s military, and Russia’s shadow fleet of oil tankers. Many of these sanctions are already in place, but the revised bill ensures the sanctions are statutorily mandatory.

The amended bill would authorize the President to waive the application of any sanctions or restrictions under the Act. The President would be required to certify to Congress that the issuance of the waiver is in the national interests of the United States and provide a report outlining its reasoning.

Senators supporting the Act have expressed optimism that Congress will pass it this summer, especially following the death of Senator Graham, who was one of the bill’s chief architects and proponents. It is unclear, however, whether the bill will pass the House, as some House Democrats have expressed opposition to the provisions that would give the President broader authority to impose tariffs without congressional approval.

OFAC Issues Venezuela-related FAQ

On July 7, 2026, OFAC issued Frequently Asked Question (“FAQ”) 1263, which clarifies that General License (GL) 60 does not require payments to the Government of Venezuela related to authorized earthquake relief efforts to be made into the Foreign Government Deposit Funds Account (“FGDF”).

However, FGDF requirements under other Venezuela-related general licenses (such as GLs 46C, 48B, 49A, 50B, 51B, 52A, and 54A) still apply. Activities authorized under those licenses must continue to use the FGDF where required and cannot be relabeled as earthquake relief to avoid that requirement.

US Designates Cuban Entities and Issues Cuba-related FAQ

On July 13, 2026, the Department of State designated ten entities to “further the Trump Administration’s comprehensive push to end the Cuban regime’s malign activities both in Cuba and across [the western] hemisphere.” Specifically, the State Department designated four entities for their “direct roles in carrying out, enabling, and financing the Cuban regime’s campaign of violent repression” and six state-owned entities, including Grupo Empresarial del Comercio Exterior (“GECOMEX”) and Grupo Empresarial de Transporte Marítimo Portuario (“GEMAR”), for funding the Cuban regime.

Relatedly, OFAC issued a FAQ 1262, which states that non-US persons, including foreign financial institutions, generally will not be targeted for engaging in transactions ordinarily incident and necessary to the wind-down of dealings with these GECOMEX or GEMAR, or any entity in which GECOMEX or GEMAR owns, directly or indirectly, a 50 percent or greater interest, through August 12, 2026. However, OFAC cautions that transactions involving the return of assets to these entities or the transfer of these assets to another jurisdiction “could expose non-US persons to significant sanctions risk.” US persons remain prohibited from dealing with GECOMEX or GEMAR absent OFAC authorization.

These designations follow recent actions taken by the Trump administration to exert pressure on the Cuban regime on June 23, June 11, June 4, May 18, and May 7, 2026.

OFAC Updates and Removes Hong Kong-related Designations

On July 17, 2026, the national emergency declared in Executive Order (E.O.) 13936 of July 14, 2020, “The President’s Executive Order on Hong Kong Normalization,” expired. As a result, OFAC removed nine persons designated under E.O. 13936 from the List of Specially Designated Nationals and Blocked Persons (“SDN List”). In addition, OFAC removed 39 individuals from the SDN List and added them to OFAC’s Non-SDN Menu-Based Sanctions List (“NS-MBS List”) pursuant to the Hong Kong Autonomy Act of 2020. Among these individuals are notable Hong Kong and PRC officials, including former Chief Executive Carrie Lam, Chief Executive John Lee, and Commissioner of Police Chris Tang.

OFAC Sanctions Alleged Cybercriminals

On July 13, 2026, OFAC sanctioned two individuals and one entity for allegedly enabling the malign activities of ransomware actors and other cybercriminals, most notably ransomware attacks against Americans. More specifically, OFAC stated that one individual and the entity provided virtual private network (“VPN”) services to ransomware groups and the other individual sold tools to disguise ransomware and malware.

The sanctions were coordinated with the United Kingdom’s Foreign, Commonwealth & Development Office, which also sanctioned alleged cybercriminals. OFAC noted that the sanctions were issued in furtherance of E.O. 14390, which orders, among other things, US government agencies to take action to protect Americans from the threat posed by foreign actors engaged in cybercrime.

Trump Administration Expands Efforts to Combat “Far-Left Terrorism”

On July 16, 2026, the Trump Administration convened an international ministerial to combat “the rise of far-left political terrorism as a transnational threat.” At the meeting, Treasury Secretary Bessent announced expanded efforts to “identify organizations that abuse charitable and nonprofit structures as vehicles for illicit finance.” After referencing OFAC, the Financial Crimes Enforcement Network, and IRS Criminal Investigation, Bessent said the US would “mobiliz[e] some of the same tools... deployed against terrorists abroad to confront this emerging threat here at home.” Separately, Secretary of State Marco Rubio signaled that additional Foreign Terrorist Organization (FTO) designations are forthcoming and indicated an intention to use “financial targeting and disruption” against terrorist networks. On the same day, the State Department announced a new visa restriction policy for “far-left terrorist groups.”

The latest developments build on previous Trump Administration actions to “combat far-left terrorism.” In September 2025, Trump designated Antifa as a “domestic terrorist organization” and signed the National Security Presidential Memorandum on “countering domestic terrorism and organized political violence.” In November 2025, the State Department designated four Europe-based “Antifa groups” as FTOs and Specially Designated Global Terrorists, with additional designations under review. In December 2025, the State Department announced that its Rewards for Justice program is offering up to $10 million for “information leading to the disruption of the financial mechanisms” of the designated groups.

UK Developments

UK Makes New Designations Under Cyber and Russia Sanctions Regimes

The UK has designated 13 individuals and one entity for their suspected involvement in cyber activity undermining the integrity, prosperity or security of the United Kingdom under the UK’s cyber thematic sanctions regime, including a number of individuals associated with the GRU, Russian military intelligence service. A further ten individuals have been designated under the UK’s Russia sanctions regime for their suspected involvement in the destabilization of Ukraine through their roles at Rybar LLC.

According to a policy paper updated to coincide with the designations, these actions are part of efforts to scale up cooperation with European partners on hybrid and information threats, including through the UK-EU Security and Defence Partnership, as well as cooperation between teams in the UK, France, Germany, Poland and Brussels, to deliver a pan-European response to this threat.

UK Makes New Designation Under Iran Sanctions Regime

The UK has designated the Islamic Movement of Companions of the Right (IMCR) due to its involvement in hostile activity by the Government of Iran that undermines the security of the UK, as well as for its involvement in attacks against persons and assets, including the sabotage of assets. According to a UK government press release announcing the designation, IMCR was targeted in particular for its involvement in recent attacks on Jewish locations.

OFSI Extends Brokerage General Licence

OFSI has published a one year extension to General Licence INT/2025/6641960, addressing non-designated third party brokerage accounts held at designated brokerage firms (Brokerage GL) under the UK’s Russia and Belarus sanctions regimes. The Brokerage GL authorizes non-designated persons who have made investments through designated brokers to transfer their funds to a non-designated broker. The expiry date of the Brokerage GL has been extended until 16 July 2027. Any persons intending to use Brokerage GL should consult a copy for full details of the permissions and usage requirements.

UK Makes New Designation Under Global Anti-Corruption Sanctions Regime

The UK has designated Anna Kosakova for her suspected involvement in serious corruption under its Global Anti-Corruption sanctions regime. Specifically, Ms. Kosakova was designated due to her suspected involvement in the improper diversion, granting, or allocation of funds originating from the Central Bank of Lebanon while Riad Salameh was its Governor.

UK Designates Eleven Under the Sudan Sanctions Regime

The UK has designated four individuals and seven entities for their suspected involvement in providing financial or logistical support to the two primary warring factions under the UK’s Sudan sanctions regime. According to a press release accompanying the designations, they specifically target the conflict gold trade in Sudan, as well as related procurement networks and financial facilitators providing revenue for Sudan’s war.

UK Implements UN Democratic Republic of Congo Designations

The UK has designated six individuals and two entities under the UK’s Democratic Republic of Congo sanctions regime, implementing a decision of the UN Security Council Sanctions Committee. The newly designated persons include senior commanders of the Allied Democratic Forces, March 23 Movement, and the Democratic Forces for the Liberation of Rwanda, with the designations seeking to disrupt the leadership and financing of these organizations.

EU Developments

EU Council Strengthens Sudan Sanctions Regime

On July 13, the EU Council strengthened the restrictive measures against Sudan by introducing new sectoral measures targeting the war economy. The measures expand the scope of the existing sanctions framework under Council Regulation (EU) 2023/2147 by introducing restrictions targeting the gold sector, which the EU Council identified as a key source of revenue sustaining the conflict. The new restrictions prohibit the purchase, import, or transfer of gold originating in Sudan when exported after July 15, 2026. In addition, the EU banned the sale, supply, transfer, or export of mercury and sodium cyanide and sodium cyanide oxides to Sudan, identifying these chemicals as key inputs for gold mining and gold exploitation. Both measures are accompanied by prohibitions on the provision of related services, including technical assistance, brokering services, and financial assistance.

Limited exceptions apply to the restrictions on mercury and cyanide, including for humanitarian purposes, public health emergencies, and natural disaster response activities. Lastly, a transitional period until January 16, 2027, is introduced for the execution of certain contracts involving sodium cyanide concluded before July 15, 2026.

EU Council Adopts New Listings Under the Russia Cyber-Attacks and Destabilizing Activities Sanctions Regimes

The EU Council recently adopted a set of restrictive measures in response to Russian cyber-attacks and other destabilizing activities directed against the EU, its Member States, and international partners. Under the horizontal sanctions regime addressing cyber-attacks, the EU Council designated eight individuals and four entities for their involvement in cyber-attacks that constitute an external threat to the EU or its Member States. The new listings target actors linked to major cybercriminal operations, including the Bullet Proof Hosting service provider Media Land LLC, its owner Alexander Volosovik, and its affiliated infrastructure provider ML.Cloud. The EU Council also designated the pro-Russia hacktivist group Z-Pentest, its founder Yuliya Pankratova, and hacker Denis Degtyarenko for their involvement in cyber operations targeting critical infrastructure, including the energy and water sectors. The listings also include LLC Impuls and its owner Evgeniy Bashev for supporting cyber operations conducted by GRU Unit 29155, a unit of Russia’s military intelligence agency. In addition, the EU Council designated individuals involved in the development and distribution of the LummaC2, TrickBot, and Conti malware.

In parallel, under the sanctions regime in view of Russia’s destabilizing activities, the EU Council designated Ivan Kasyanenko, deputy commander of the Special Operations Service of the GRU. The EU Council cited Kasyanenko’s alleged involvement in activities connected to Unit 29155, including operations in Afghanistan, the 2018 Novichok poisonings, covert Russian activities in Europe, the management of Wagner Group networks in Africa, and military technical cooperation initiatives involving Iran. The restrictive measures include an asset freeze and a prohibition on making funds or economic resources available to listed persons and entities. Designated individuals are also subject to a travel ban.

EU Council Amends EU Global Human Rights and Russia Human Rights Sanctions Regimes

The EU Council adopted new listings under both the EU Global Human Rights Sanctions Regime and the sanctions regime in view of the situation in Russia. First, the EU Council designated eight individuals and one entity under Council Regulation (EU) 2020/1998 in connection with their responsibility for torture and other cruel, inhuman and degrading treatment of Ukrainian prisoners of war (POWs) and civilian detainees in the occupied Ukrainian territories. Second, the EU Council designated 11 individuals and five entities under Council Regulation (EU) 2024/1485 for serious human rights violations and abuses in Russia. The listings include the Russian technology company VK and its subsidiary Communication Platform LLC, both associated with the development and operation of the state-supported Max application, as well as Russian companies Citadel, VAS Experts, and Norsi-Trans, involved in the development, supply, and maintenance of SORM, Russia’s state surveillance system for internet and mobile communications.

EU Council Updates Sanctions Listings Targeting Actions Undermining the Territorial Integrity, Sovereignty and Independence of Ukraine

On July 17, the EU Council adopted new listings under Council Regulation (EU) 269/2014 in response to Russia’s continued aggression against Ukraine and recent large-scale drone and missile attacks targeting civilian infrastructure. In particular, the EU Council designated one individual and five entities associated with the ABS Electro group of companies, a Russian conglomerate involved in the development and manufacture of electronic and radio-electronic components used in drone warfare. According to the Council, companies within the ABS Electro group contribute to the development of systems that enhance the resistance of Russian unmanned aerial vehicles, including Shahed and Geran type drones, to electronic warfare.

Additionally, the EU Council noted that several of the recently listed entities are active in the Russian energy sector through the production of automated control systems for oil and gas infrastructure, a sector that provides a substantial source of revenue to the Russian government. All listed persons and entities are subject to an asset freeze and a prohibition on making funds or economic resources available, while designated individuals are also subject to a travel ban.

Asia-Pacific Developments

China Criticizes Expanded US Sanctions on Cuba and Proposed Measures Targeting Russian Energy Buyers

During a regular press briefing on July 15, 2026, China strongly criticized recent US sanctions measures affecting Cuba and proposed US legislation targeting major purchasers of Russian energy. Responding to reports that Washington had imposed new sanctions on Cuban entities and tightened restrictions affecting fuel supplies, Foreign Ministry spokesperson Lin Jian said the more than six-decade US blockade and sanctions regime had caused significant hardship for the Cuban people and urged the United States to end what he described as coercive and unjust measures. Addressing a question on proposed US legislation that could impose tariffs of up to 100% on leading buyers of Russian oil and gas, including China, Lin reiterated Beijing’s opposition to unilateral sanctions that lack a basis in international law or authorization from the UN Security Council. He stated that China would “take necessary measures to firmly defend the legitimate rights and interests of Chinese businesses and citizens,” arguing that double standards, economic coercion, and pressure tactics are ultimately counterproductive.

China Signals Possible Return of US Trade Privileges for Hong Kong Amid Sanctions Shift and Improving Bilateral Ties

On July 17, 2026, China welcomed the United States’ decision not to renew Executive Order 13936, the Hong Kong-related national emergency measure first issued in 2020, describing the move as “an important step” in implementing commitments discussed during bilateral trade talks in Madrid. Beijing and the Hong Kong government characterized the policy shift as a positive development that could help restore normal economic and trade exchanges, while media reports suggested it may contribute to improving US-China relations ahead of an expected visit by President Xi Jinping to the United States later this year.

India’s Strategic Chabahar Port Project Left in Limbo Amid US Strikes on Iran

On July 17, 2026, concerns grew in India after reported US airstrikes caused significant damage to Iran’s Chabahar port, including infrastructure linked to commercial operations at the strategically important facility. The development has renewed uncertainty surrounding India’s approximately Rs 800 crore investment in the port, which New Delhi has viewed as a key gateway to Afghanistan, Central Asia, and beyond while bypassing Pakistan. Although India signed a 10-year agreement in 2024 to operate the Shahid Beheshti terminal, US sanctions reinstated under the Trump administration have effectively frozen active operations, prompting India to reduce its operational exposure to avoid potential penalties. While India has fulfilled its financial commitments under the project, the future of its role at Chabahar remains unclear amid ongoing sanctions and regional conflict. Iranian officials have continued to encourage India’s participation, describing the port as a major symbol of bilateral cooperation and a critical transit hub for regional connectivity and trade.

Global

Resurging conflict in the Middle East extends volatility in the global energy market. Oil surged above $90 a barrel briefly on Monday, with the Strait of Hormuz once again in the military crosshairs and the Yemeni Houthis threatening to impose a naval blockade on Saudi Arabia. The latter threatens Saudi exports through the Bab el-Mandeb into the Red Sea. A full closure of the Bab el-Mandeb would reduce global oil supply a further 7%, adding to the massive cuts from the closure of the Strait of Hormuz. The current oversupply in the market risks flipping back to increased risks of crude shortages and surging prices.

The disrupted supply of crude oil is increasing risks of shortages in the downstream supply chain of refined products. With Arab Gulf refineries undergoing continued production shut-ins and Russian refineries under Ukrainian drone attacks, global refining capacity and inventories are dropping. Estimates range from somewhere between 25% and 45% of Russian refining capacity now being offline. Diesel inventories in the US, the Amsterdam–Rotterdam–Antwerp (ARA) hub, Fujairah and Singapore are below the five-year seasonal range. Europe is facing an acute diesel supply crunch, with inventories falling to multi-year lows.

Read More: Reuters [paywall], Reuters [paywall], OilPrice.com

Europe

Andy Burnham becomes the UK’s new Prime Minister. King Charles III granted Burnham, the former Manchester Mayor, permission to form a government. Burnham inherits Starmer’s supermajority but will face uphill challenges. First, Burnham’s domestic priority is to decentralize power from London towards the regions to improve local governance in places like North England, a historical Labour stronghold now contested by the far-right Reform UK, the leading party in the polls. This likely means strengthening the Prime Minister’s executive discretion, such as fielding a “No. 10 North” in Manchester to focus attention on regional priorities, at the expense of the civil service in Whitehall. Second, Burnham must overcome Labour’s factionalism, which caused Starmer to hesitate on an incrementalist agenda. Internal disputes over the party’s direction could grow as Labour dips in the polls and faces calls for a snap election due to the leadership change.

Burnham means foreign policy continuity for the UK. While relatively inexperienced in international affairs, Burnham will inherit Starmer’s foreign policy team and has signaled he will continue to prioritize the repair of the UK-EU relationship. Burnham’s hope for reindustrialization could align with the US’ emphasis on economic security, but bilateral relations between the US and the UK remain icy amid non-coordination in the Iran war.

Read More: AP, Politico, Foreign Policy [paywall]

Middle East

Kuwait and Pakistan are reportedly negotiating an expanded defense pact in exchange for energy cooperation and investment. The talks, leaked to news outlets over the weekend, are reportedly in early stages, but would build upon the more limited defense deal, which includes training and joint exercises, signed in 2023.

The pact - similar to the Saudi-Pakistani deal signed earlier this year - signals growing Gulf security diversification, but could be complicated by a widening Iran war. The Saudi pact is already complicating Pakistan’s growing engagement in the Middle East, where it acts as the key mediator between the US and Iran. Last week, Pakistan reportedly told Iran that it would consider attacks on the Kingdom as attacks on itself following new Houthi strikes, sparking concerns in Islamabad that it could be drawn into the war. Both pacts exemplify the Gulf’s growing search for defense alternatives amid declining trust in the US, but it is unclear how transformative even a mutual defense pact will be, given Pakistan’s hesitance and Saudi’s continued reliance on Washington.

Read More: Reuters [paywall], Middle East Eye, Reuters [paywall], Stepwise Risk Outlook

Asia-Pacific

Thousands of supporters of India’s youth-led Cockroach Janta Party (CJP) clashed with police this morning as they tried to march on parliament despite authorities denying permission for the protest. Police and paramilitary personnel, who had deployed to the protest site ahead of time, fired tear gas and charged at the protesters. Protesters are demanding the resignation of India’s education minister over alleged failures in the country’s education system, 10 million Indian rupees in compensation for each exam aspirant who died by suicide and the release of Sonam Wangchuk. The demonstration builds on a wider surge of Gen-Z-led, anti-government movements that spread across Asia over the past year demanding political reform and greater accountability.

The movement has emerged as one of the most significant youth-led challenges to Prime Minister Narendra Modi’s third term as frustration over education, unemployment and limited economic opportunities for young Indians grows. The party emerged in May after a Supreme Court justice compared unemployed young Indians to “cockroaches,” days after more than 2.2 million students were ordered to retake the country’s medical entrance exam following a major paper-leak scandal. Since then, the movement has broadened beyond the exam controversy into a wider expression of youth disillusionment with governance and economic opportunity.

Tensions escalated on Saturday after police forcibly removed educator-activist Wangchuk from the CJP’s sit-in. Wangchuk has been on a hunger strike for three weeks, reviving a form of protest with deep roots in India’s political history. CJP founder Abhijit Dipke, who began an indefinite hunger strike following Wangchuk’s detention, has also called for Modi’s resignation. Indian courts have refused to release Wangchuk from what is being described as an “illegal detention” in a New Delhi hospital.

Read More: Reuters [paywall], The Cockroach Janta Party, The Guardian, Al Jazeera, BBC [paywall]

Americas

A 5.5-magnitude earthquake struck Peru’s central Junín region on Saturday night, killing six people, injuring at least 21, and displacing hundreds of residents. The earthquake hit near the rural district of Chongos Bajo and damaged dozens of homes, while approximately 300 people sought shelter in a local sports stadium amid continued aftershocks. The tremor also damaged historic religious buildings and caused power outages across several communities near the epicenter. According to Peru’s National Institute of Civil Defense, emergency crews remain focused on assessing structural damage and restoring basic services to affected areas.

The aftermath of the disaster will be an early test for the transition of President-elect Keiko Fujimori, who is due to take office on July 28. On Sunday, Fujimori expressed her condolences to the families of those killed and voiced support for affected communities, while urging the outgoing government to continue deploying all necessary resources to protect residents and assist displaced families. She also praised the initial emergency response coordinated by the Presidency of the Council of Ministers. The earthquake is likely to place disaster preparedness and emergency response capacity higher on the agenda as Fujimori prepares to begin her administration amid growing scrutiny of the state’s ability to respond to natural disasters in Peru’s vulnerable Andean regions.

Read More: New York Times [paywall], Reuters [paywall], AP

Geoeconomics

France and Germany have agreed to develop a joint roadmap by September to strengthen the EU’s response to what both governments describe as China’s unfair trade practices. Following Friday’s annual joint cabinet meeting, French President Emmanuel Macron and German Chancellor Friedrich Merz tasked their finance and economic ministers with drafting proposals for safeguard measures, including emergency trade measures and early-warning procedures for the European Commission. Both leaders argued surging Chinese imports, the EU’s roughly $1 billion-a-day trade deficit with China and the alleged undervaluation of the yuan are placing mounting pressure on European industry.

The initiative signals growing Franco-German convergence on China and could pave the way for a more coordinated EU trade policy. While Paris has long advocated stronger trade defenses against China, Berlin has traditionally taken a more cautious approach because of its deep commercial ties with China, though both leaders have stressed they are seeking to rebalance trade rather than decouple from China. Merz’s shift reflects the mounting pressure on German manufacturers, which have lost market share to Chinese competitors across an expanding range of industries. A more unified Franco-German position would strengthen the European Commission’s political backing as it debates a new China strategy.

Read More: Financial Times [paywall], Euronews, Stepwise Risk Outlook, Wall Street Journal [paywall], EU Today

Disruptive Technology

Last week, China’s Moonshot released its latest AI model, Kimi K3, undermining the US’ tech edge. Kimi K3 has 2.8 trillion parameters, a size that dwarfs Anthropic’s Claude Opus 4.8, thought to be somewhere between 1.5 trillion and 2 trillion. According to Moonshot, Kimi K3 performs better in front-end coding tasks than Anthropic’s most powerful model, Fable, but is not as powerful in most benchmarks. Kimi K3 is an open-weight model, meaning that AI developers can tinker with the parameters to improve their own models or create AI use cases. Kimi K3 is also 40% cheaper than leading American models, offering a compelling alternative to companies seeking to cut down on token costs.

Kimi K3 signals a disrupted AI balance of power. China has developed creative ways to circumvent American chokepoints on the AI stack by developing homegrown compute, bundling less powerful chips, and training models on the outputs of American frontier models (known as “distillation”). An emphasis on open-weight models also helps other Chinese start-ups rapidly develop models more efficiently, as well as shape the general AI ecosystem (for example, US-based Thinking Machines built its latest model, Inkling, on DeepSeek V3). However, until China’s homegrown chips match the compute of the US, they will likely not define the frontier. The difference now is that Chinese models are weeks rather than months away from parity.

Read More: Axios, CNBC, Financial Times [paywall]

Energy

The Caspian Pipeline Consortium (CPC) is pausing oil loading at its black sea export terminal due to a drone strike. While two tankers were loading at the terminal, they were attacked by a drone, although the ownership of the drone is not known. The drone attack caused a fire on one of them, although there was no reported spill and no actual damage to the terminal infrastructure. The CPC is an almost 1000-mile oil pipeline that connects Kazakhstan’s oil production in the Caspian Sea to Russia’s Novorossiysk port, from which Kazakh oil can reach world markets. The CPC makes up about 80% of all Kazakh oil exports, and Kazakhstan’s foreign ministry condemned the attacks on CPC infrastructure.

Fighting in the Black Sea between Russia and Ukraine has escalated sharply in recent weeks. Ukraine has stepped up its strike campaign against Russia’s energy infrastructure and energy income through strikes on vessels connected to Russia’s shadow fleet in the Sea of Azov and in the entire Black Sea. Kyiv has successfully struck a large number of shipping vessels in the Sea of Azov, such as a series of strikes that hit 17 Russia-linked oil tankers and 2 gas carriers on July 15.

The complications with energy shipping in the Black Sea come at a delicate moment for global energy markets. Brent crude futures reached over $90 per barrel on the back of escalating fighting between the US and Iran and increased risks in the Strait of Hormuz, and it’s unclear how the conflict between Tehran and Washington will develop. Further constraints on oil coming from Russia and Kazakhstan could exacerbate shortages, although spiking prices could be beneficial for Russia as they had been earlier this year.

Read More: Wall Street Journal [paywall], Reuters [paywall], Bloomberg [paywall], Oilprice.com, Eurasianet

Transnational Crime & Corruption

Indonesia’s anti-corruption drive is opening rifts between the country’s law enforcement agencies. Last week, Indonesian police initiated criminal charges against Former Attorney General for Special Crimes Febrie Adriansyah for alleged procurement corruption. Febrie allegedly organized corrupt supply deals for state-owned power plants that contributed to nationwide blackouts in June. Police forces seized almost $30 million in gold and cash from his private residence.

Civil society groups accused Indonesian elites of targeting Febrie for his own anti-corruption investigations. Febrie’s agency investigated alleged corruption involving Indonesia’s multi-billion-dollar free school meals program, prosecuted a major tech entrepreneur for procurement corruption and cracked down on alleged illegal forestry activities. Major international credit rating agencies and index providers are taking rule of law concerns into account as they review Indonesia’s ratings.

Read More: Organized Crime and Corruption Reporting Project, Financial Times [paywall], South China Morning Post [paywall]

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured interview is with Anni Coonan, Senior Analyst and Editor-in-Chief of the Stepwise Risk Outlook.

Interview with Anni Coonan, Senior Analyst and Stepwise Editor

^{"Persian Gulf Near Hormuz Island" by ninara is licensed under CC BY-SA 2.0.}

Anni Coonan is a senior analyst with Steptoe’s Global Strategic Engagement Team and Editor-in-Chief of the Stepwise Risk Outlook. A risk analyst and researcher with a focus on US foreign policy, geostrategic competition, and the Middle East and North Africa, Anni provides forward-looking analysis on domestic and geopolitical developments for international clients, providing assessments and key takeaways to guide strategic decisions and stakeholder engagement plans. Anni has written and edited newsletters on the intersection of geopolitics and business risk for over six years, earning JD Supra readership awards at two previous law firms. She also supports due diligence investigations and research in support of litigation. Anni is based in New York.

Read the Full Report Here

Global

Wildfires fueled by extreme heat and dry conditions pose serious health risks from smoke and noxious gases. Wildfires in Canada and Minnesota are producing heavy smoke, which has engulfed the US Midwest and Northeast, exposing millions of people to hazardous levels of air pollution. Studies have linked wildfire smoke with higher rates of heart attacks and strokes, and increases in emergency room visits for asthma and vulnerable groups with weakened immune defenses.

Health officials are urging people in affected areas to reduce exposure. Experts advise wearing N95 masks and limiting outdoor activities in order to minimize inhaling dangerous particles. Experts also recommend indoor air purifiers that can trap particles smaller than 2.5 microns. Researchers are studying the long-term effects of smoke particles in water supplies, on crops or ingested by livestock and whether wildfire smoke amplifies the adverse effects of extremely hot weather.

2026 is shaping up to have a highly destructive wildfire season. In the US, by mid-summer, over 3.6 million acres have burned, approximately 157% to 195% higher than the previous 10-year average for the same time period. European Forest Fire Information System reports that the number of blazes in both Spain and France is at an all-time high for this time of year. Spain has suffered 330 fires so far in 2026, triple the average. Burnt area in France is about four times greater than the average.

Read More: Reuters [paywall], CBS News, US National Interagency Fire Center, Financial Times [paywall]

Europe

Ukrainian President Volodymir Zelenskyy’s government reshuffle has sparked large-scale resistance both in Ukraine and internationally. As part of the reshuffle, Zelenskyy fired defense minister Mykhailo Fedorov and moved to replace him with Yevhenii Khmara, who is currently the acting head of the Security Service of Ukraine (SBU). Fedorov’s removal triggered protests in the streets of Kyiv and resulted in significant political pushback, especially since the decision to oust Fedorov came unexpectedly.

The specific cause for firing Fedorov was his relationship with General Oleksander Syrskyi, the head of Ukraine’s armed forces. Fedorov and Syrskyi reportedly had a highly acrimonious relationship and struggled to cooperate. However, Fedorov’s reputation is significantly better than Syrskyi’s. Fedorov’s six months in office are credited with significant progress in Ukraine’s campaign against Russia and progress in anti-corruption efforts, whereas Syrskyi is seen by many (including Fedorov) as unwilling to adapt to a changing battlefield and too focused on centralized command.

The conflict from the reshuffle comes at a bad time for Zelenskyy. The decision is almost exactly a year after Zelenskyy attempted to subordinate Ukraine’s anti-corruption authorities to his office. Ukraine’s government has also suffered from corruption scandals over the last year, and Ukraine currently has strong momentum in its strike campaign against Russia. Moreover, other parts of the reshuffle have also not gone well. Yuliia Svyrydenko, who was prime minister up until the reshuffle, reportedly “flatly refused” an offer from Zelenskyy to become Ukraine’s ambassador to the US.

Read More: Financial Times [paywall], Politico EU, Ukrainska Pravda, Kyiv Post

Middle East

President Trump doubled down on a controversial suggestion to have Syria take on Hizballah in Lebanon rather than Israel. The president first floated the idea in early July, likely in response to the Lebanese Armed Forces’ capacity issues and a shared desire by Syria to weaken Iran-backed groups. On Tuesday, Trump told media he was thinking about giving President al-Sharaa a “green light” to enter Lebanon. But the plan is deeply controversial in both countries; Syria under the Assads held territory and exerted significant influence in Lebanon from 1976 to 2005, Hizballah materially supported the Assads during Syria’s civil war, and Syrians are exhausted from over a decade of war.

Instead, al-Sharaa is seeking to normalize Lebanese relations on an economic level and avoid external entanglements. On Friday, Lebanon and Syria announced a plan to revive prewar trade agreements and ultimately aim for a broader bilateral trade deal. The strategy dovetails with Damascus’ plan to expand economic development and regional interconnectedness, while focusing single-mindedly on solving Syria’s thorny domestic security issues rather than engaging in regional proxy wars.

Read More: The New Arab, Arab News, Reuters [paywall], Middle East Institute

Asia-Pacific

The executive order (EO) that authorized US sanctions on individuals and entities deemed responsible for undermining Hong Kong’s autonomy quietly lapsed on Tuesday. Issued on July 14, 2020, shortly after President Trump signed the Hong Kong Autonomy Act (HKAA), EO 13936 declared a national emergency over developments in Hong Kong, directed federal agencies to revoke Hong Kong’s differential treatment status, and provided the legal basis for a range of sanctions and trade restrictions. The EO and HKAA came shortly after the People’s Republic of China passed a sweeping national security law on Hong Kong that criminalizes secession, subversion, terrorist activities, and collusion with external forces that endanger national security. The EO became effectively defunct on Tuesday when its anniversary passed without the formal renewal notice required under the National Emergencies Act.

The sanctions program appears caught between a surviving statutory mandate and the disappearance of the emergency authority used to implement it, raising questions about the legal basis for maintaining designations. Sec. 4 of EO authorized the Treasury Department to use the blocking powers of the International Emergency Economic Powers Act (IEEPA) to designate individuals and entities pursuant to the HKAA and the Hong Kong Human Rights and Democracy Act of 2019. Yet while the EO has expired, HKAA remains in force and continues to require sanctions on persons found to have undermined Hong Kong’s autonomy. The 48 individuals designated under the program remain on OFAC’s Specially Designated Nationals (SDN) List. Export controls restricting defense equipment sales to Hong Kong remain in place as the Export Administration Regulations (EAR) were officially amended.

The timing is notable ahead of President Xi Jinping’s expected September visit to the US. Washington and Beijing have spent recent months attempting to stabilize the increasingly volatile relationship, including the October trade truce and the cordial tone during their May summit, fueling cautious optimism that the two seek to establish guardrails around strategic competition, though disputes over trade and tech restrictions persist. Washington’s quiet decision to soften its position on Hong Kong’s autonomy removes a longstanding diplomatic irritant and suggests an effort to prevent another contentious issue from undermining broader bilateral stabilization, though the administration has not publicly commented.

Read More: Federal Register, Embassy of China, Congress, Council on Foreign Relations

Americas

The US State Department on Wednesday designated Mexico’s Juárez Cartel and Los Viagras as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs). A press statement from the State Department said the organizations had carried out attacks against Americans, Mexican security forces, and civilians, citing the 2019 killing of nine US citizens in Sonora by La Línea, a faction of the Juárez Cartel. The designation subjects both groups to financial sanctions, blocks any assets under US jurisdiction, and generally prohibits US persons from conducting transactions with them. The move brings the number of Mexican cartels designated as terrorist organizations by the Trump administration to eight, including the Sinaloa Cartel and Jalisco New Generation Cartel.

The latest designations reflect Washington’s broader strategy of applying counterterrorism tools to combat transnational criminal organizations and increase pressure on Mexico over security cooperation. The announcement follows recent US indictments against current and former officials in Sinaloa for alleged cartel ties and comes amid ongoing controversy over US security operations in Mexico. The addition of the Juárez Cartel strengthens the legal framework for US actions against criminal groups operating along the Texas border, while the designation of Los Viagras expands pressure on cartel networks in Michoacán, a key hub for synthetic drug production and extortion targeting export industries.

Read More: AP, State Department, PBS

Africa

The US has barred American citizens in the Democratic Republic of the Congo (DRC) from returning directly to the US until they complete quarantine protocols, as the country’s Ebola outbreak becomes increasingly difficult to contain. Two Americans have been confirmed infected, and the outbreak has resulted in at least 700 deaths. The international response continues to face delays in assistance, with the World Health Organization reporting it has received only about 40% of the $115 million it requested for emergency operations.

Beyond the humanitarian impact, the outbreak is beginning to affect broader US strategic interests in the DRC. The outbreak has reportedly slowed implementation of elements of the US-DRC Strategic Partnership Agreement by delaying discussions surrounding US-backed critical minerals projects. While mining operations continue, visits by US suppliers and investors intended to expand cooperation on critical mineral development have been postponed, raising the prospect of delays to investment timelines.

Read More: Reuters [paywall], Reuters [paywall], Business Insider Africa

Geoeconomics

India is experiencing a record outbound-investment surge. Indian companies announced more than $14 billion of overseas equity investments during the first four months of the fiscal year beginning April 1, roughly three-quarters of the $18.7 billion announced during the entire previous year. The headline figure is heavily influenced by Sun Pharma’s proposed $11.75 billion acquisition of US drugmaker Organon, which would give it products sold across approximately 140 countries, while Persistent Systems’ €1.3 billion bid for Germany’s Nagarro would reduce its dependence on the US outsourcing market. More broadly, Indian firms are buying foreign distribution networks, intellectual property and manufacturing capacity to protect themselves from US tariffs, regional conflicts and supply disruptions. Moreover, overseas direct-investment commitments, which include equity, loans and guarantees, increased 11 percent to $48.39 billion in fiscal 2025–26.

The expansion strengthens Indian companies abroad but compounds India’s immediate external-financing problem. Outbound FDI reached $35.8 billion on a trailing 12-month basis in January, up 47 percent from a year earlier, while repatriation by foreign investors remained above $52 billion and India’s net FDI inflow fell close to zero. Overseas acquisitions therefore add to demand for dollars when foreign investors have withdrawn more than $23 billion from Indian markets, the rupee has fallen more than 6 percent this year and the country’s foreign-exchange reserves have declined sharply. Corporate investment is not the principal cause of that pressure: India imports about 90 percent of its oil and gas, and its energy bill exceeded $60 billion in the June quarter alone. Nevertheless, weaker net FDI leaves the current account increasingly dependent on volatile portfolio flows and diaspora deposits.

Read More: Financial Times [paywall], Reuters [paywall], Financial Times [paywall], Observer Research Foundation

Disruptive Technology

TSMC announced that it will spend an additional $100 billion on expanding its manufacturing capacity in the US. This brings its total inbound investment to $265 billion and ten planned fabrication plants in Arizona. The increased investment is a signal of two trends. First, given that these fabs will focus on the most advanced semiconductors under two nanometers, the pledged investment is a sign of confidence in AI deployment. Current trends affirm this confidence, with TSMC’s Q2 net income increasing 77% year-over-year. Moreover, TSMC is expanding operations in Taiwan and Japan, too. Second, TSMC aims to diversify its supply lines from Taiwan to insulate operations from increased strategic competition in the South China Sea. China’s defense modernization drive explicitly aims for the option to establish military dominance over the Taiwan Strait by 2027. With increased capability, China’s risk tolerance to climb the geoeconomic escalation ladder—or even commit to kinetic operations—will increase.

TSMC’s investment decision comes despite a volatile US chips policy framework. The Biden administration incentivized the first investment cycles in Arizona through subsidies in the Chips Act. Meanwhile, the Trump administration has adopted a two-pronged approach, threatening tariffs against companies that do not on-shore manufacturing, plus converting chip subsidies to taking equity stakes. The US’ shifting policy on chip manufacturing incentives may blunt their effectiveness. This suggests that market trends—the AI boom and the benefit of supply chain redundancy—may be the driving force behind new investments that could outlast several administrations.

Read More: Yahoo!news, The Hill, The New York Times [paywall]

Energy

The European Union is facing pressure from some members to dilute the bloc’s Emissions Trading System (ETS). Ten countries, led by Italy and Poland, are pushing the EU to review the bloc’s carbon price on fuel as part of an overall revision of the EU’s carbon market due to be proposed on July 17. The countries also argued for other changes, such as giving more free CO2 permits without broad conditions. Currently, Brussels only plans to give free permits to companies that intend to invest in European decarbonization. Brussels already delayed the new carbon tax by a year over concerns about the impact on consumers.

The group is potentially pitting itself against other countries that support the new carbon price on fuel, such as Germany and Sweden. Supporters argue that the ETS system is a vital element of Europe’s drive for decarbonization and adoption of green technologies. The Commission’s initial proposal for the review significantly loosens restrictions and lengthens the timeline for decarbonization; there will be opportunities for national governments and EU lawmakers to work out and potentially approve carbon market changes as well.

The ETS will be a major factor in EU politics for months to come. The ETS affects much of Europe’s heavy industry and has long-term implications for the bloc’s economy and investment environment as the bloc looks to update the ETS for the next decade. National governments, European policymakers, and industry groups are set to thrash out issues like whether to add in new sectors and whether to slow down the speed at which the EU expects industries to decarbonize.

Read More: Reuters [paywall], Politico EU, Politico EU, Deutsche Welle, Bruegel

Transnational Crime and Corruption

European authorities are debating a military response to Atlantic cocaine smuggling operations. The initiative, primarily backed by France and the Portugal-based multinational Maritime Analysis and Operations Center (MAOC), proposes intercepting drug smugglers using naval frigates and military helicopters. The proposal is currently facing resistance from Germany and the Netherlands, which are reluctant to militarize what they view as a law enforcement issue.

Atlantic cocaine smuggling is a growing issue for southwestern Europe. Cocaine trafficked from Colombia, where more land than ever is under coca cultivation, is brought up the coast of West Africa in container ships and dropped off to “flotillas” of custom speed boats waiting offshore near Spanish and Portuguese island territories, including Madeira and the Canary Islands. Italian authorities told media that the smuggling operations are overseen by Albanian organized crime, while the individual smugglers are North African, many of whom allegedly receive support from the Libyan regime of Khalifa Haftar.

Police authorities also propose responses beyond military confrontations. Funding and training programs for Senegalese and Cabo Verdean coast guards could help interdict drugs before they can reach Europe. Europe could also ban the ownership and manufacture of the speed boats used in trafficking operations, mimicking laws passed by Spain and Portugal in 2018 and 2026, respectively.

Read More: Washington Post [paywall], Le Monde [paywall], IRPI Media (Italian), MOAC-N

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Elton Smole examines the potential political impacts of the Venezuela earthquakes.

Venezuela’s Future in Limbo After Catastrophic Quakes

By Elton Smole

^{By U.S. Marines 24MEU by Cpl. Daniel Garcia - Public Domain}

Venezuela’s devastating June 24 earthquakes have transformed a delicate post-Maduro transition into a high-stakes test of the Trump administration’s strategy to maximize US influence. The Trump administration’s approach aims to advance US regional dominance and secure access to Venezuela’s energy resources, but this strategy risks further political instability and could undermine prospects for long-term democratic and economic recovery.

Venezuela’s political and economic future was already uncertain before the 7.2 and 7.5 magnitude quakes. The January 3 capture of former President Nicolas Maduro by US forces raised the hopes of the political opposition led by the exiled Maria Corina Machado. However, the Trump administration has instead backed the interim government of Maduro’s former vice president, Delcy Rodriguez. Rodriguez has largely accommodated US interests by reforming energy sector regulations, inviting new foreign investment and ceding stewardship of state revenues to the US Treasury Department. However, following last month’s earthquakes, President Trump’s pledge to “run Venezuela” has transformed into a liability, and his goal of stabilizing the Rodriguez regime has become a potential powder keg.

In today’s full analysis:

• From Natural Disaster to Political Catalyst

• Trump’s Response Seeks to Maximize US Leverage

• Risks of the US Strategy in Venezuela

  Read the Full Report Here

Global

Arab Gulf states are accelerating planning of new export routes as permanent alternatives to transit through the Strait of Hormuz. The reignition of fighting between the US and Iran has once again effectively closed the Strait and access to and from the Persian Gulf for commercial shipping. Ports in the Persian Gulf are critical infrastructure supporting the export of oil, gas and petroleum byproducts, as well as being important logistics hubs for East-West trade. Iran’s intention to control this vital shipping route for its own benefit presents the neighboring Gulf States with a quandary: permit Iran to turn the waterway into an economic tool of coercion or develop alternatives that reduce dependence on export infrastructure in the Persian Gulf.

The Gulf states are piling into the latter option, moving rapidly to build new pipelines, rail networks and port facilities. There are at least seven new pipelines either currently under construction or on the drawing board. Iraq, Syria and the US are in talks to revive a historic 500-mile pipeline from Iraq to Syria’s Mediterranean coast. The UAE plans to build a new port and container terminal in the Gulf of Oman, bypassing the Strait of Hormuz. This would reduce Dubai’s dependence on the Jebel Ali hub. Saudi Arabia has launched a new rail corridor connecting ports in the Persian Gulf—including Dammam, King Fahd Industrial Port, and Jubail Commercial Port—with the Al Haditha border crossing on the border with Jordan. Kuwait is looking at regional pipeline tie-ups with Saudi Arabia and the UAE.

Qatar has no viable option to bypass the Strait for its LNG exports. LNG must be cooled to liquid form and carried by specialized tankers, i.e., there is no pipeline solution. Either Qatar will need to reach a political agreement with Iran, or its gas will remain trapped and the global energy market will need to adjust to the protracted loss of 20% of global supply.

Read More: Axios, Middle East Eye, Railway Pro, Jerusalem Post, New York Times [paywall]

Europe

EU member states have been unable to reach consensus on a new sanctions package against Russia. The EU has failed for a third consecutive day to come to an agreement on the bloc’s new package of sanctions against Russia, and ambassadors have pushed further rounds of negotiation to next week. The issue at hand is freezing the price cap on Russian oil, which would, due to the war in Iran, likely rise significantly because of global oil price increases. The one-week deferment gives the EU some leeway to reach an agreement before August 1, which is when the new cap will automatically become effective without agreement.

EU members are putting a price on their agreement for new sanctions, which could undercut European unity on sanctions policy. Vienna wants compensation for Austria’s Raiffeisen Bank, which Vienna claims suffered billions of euros of expropriation of its Russian operations. Greece has objected to EU restrictions on trading Russian LNG. Some proposed sanctions had already been either watered down or removed, such as modifications made to a proposed ban on visas for Russian soldiers or the decision to drop potential sanctions against Patriarch Kirill, the head of Moscow’s Orthodox Church. However, it is ultimately likely that member states will reach an agreement on sanctions, especially since the 21st sanctions package is seen as strong.

Read More: Politico EU, Euractiv, Reuters [paywall]

Middle East

The US and Iraq are set to announce $60 billion in new bilateral deals tomorrow, including the revival of an Iraq-Syria oil pipeline. New Iraqi Prime Minister al-Zaidi will announce the deals at the US Chamber of Commerce on Friday with Energy Secretary Chris Wright, following a White House visit that projected “tremendous chemistry” between Trump and al-Zaidi. The deal package is to be anchored by US support for the revival of the Kirkuk-Baniyas pipeline, damaged since 2003 but now seen as an important strategy to circumvent the Strait of Hormuz.

The US is shifting bilateral focus to economic ties as Iraq aligns more closely with Washington than Tehran. President Trump pushed openly for al-Zaidi’s confirmation, judging other candidates as too pro-Iran, and al-Zaidi has announced policies that will reduce Iranian influence in Baghdad (like disarming nonstate, Iran-backed militias). Al-Zaidi put a point on the shift at the meeting, saying that “on September 30th, American forces will leave, and American companies will enter” – a big change in the bilateral relationship with significant upside for US companies.

Read More: Semafor, Reuters [paywall], DW

Asia-Pacific

India’s cabinet on Wednesday approved funding for the second phase of the country’s semiconductor program, as New Delhi seeks to establish itself as a major player in the global semiconductor ecosystem. Semicon 2.0 expands policy and financial support across every major segment of the semiconductor value chain. The 1.28 trillion Indian rupees ($13.3 billion) in funding will be distributed across six pillars, including semiconductor design and IP development, machinery and materials, fabrication plants, advanced packaging and outsourced assembly and testing (OSAT), as well as R&D and talent development.

The program’s broad scope reflects New Delhi’s view that semiconductors are a strategic industry underpinning its long-term economic and technological ambitions. Its emphasis on developing capabilities across the semiconductor value chain aligns with the country’s Viksit Bharat (Developed India) initiative, under which technological self-reliance and resilient supply chains are central to the broader “Made in India” strategy. Building globally competitive capabilities in these high-value industries is expected to contribute significantly to India’s long-term economic target. By 2047, the centenary of its independence, India aims to achieve developed-country status with an ambitious $30 trillion economy and a per capita income of $18,000, requiring more than a sevenfold expansion in nominal economic output over the next two decades.

Read More: Press Information Bureau India, NITI Aayog, CRN Asia, Bain & Company

Americas

The United States announced that it will impose a 25% tariff on a range of Brazilian imports beginning July 22, following a yearlong Section 301 investigation that concluded Brazil had engaged in unfair trade practices. According to the Office of the US Trade Representative, the measures target issues including digital trade restrictions, ethanol market access, and illegal deforestation. While the tariffs will apply to a broad range of goods, several of Brazil’s largest exports to the United States are exempt, including coffee, beef, avocados, Brazil nuts, petroleum products, and aircraft parts. Brazilian President Luiz Inácio Lula da Silva condemned the move and said Brazil would pursue both retaliatory measures under its Reciprocity Law and a challenge through the World Trade Organization. An ongoing US investigation into forced labor in global supply chains could result in an additional 12.5% tariff next week, potentially raising the effective tariff rate on some Brazilian imports to 37.5%.

The tariffs come amid increasingly strained political relations between Washington and Brasília. The original investigation was launched shortly after Senator Flávio Bolsonaro, son of former President Jair Bolsonaro, visited the White House last year, fueling accusations from Lula and his allies that the Bolsonaro family encouraged US pressure on Brazil. Flávio Bolsonaro has denied supporting the tariffs and, earlier this month, asked US officials to delay their implementation until after Brazil’s October elections, arguing that they could strengthen Lula politically. Recent polling suggests the dispute may be having that effect, with Lula benefiting from a rally-around-the-flag dynamic as he positions himself as defending Brazilian sovereignty against foreign pressure. The issue has become a prominent feature of Brazil’s increasingly polarized political environment ahead of the pivotal elections.

Read More: CNN, New York Times [paywall], Reuters [paywall]

Africa

Ethiopia launched its first National Dialogue in an effort to address years of ethnic tensions and chart a path toward national reconciliation. The dialogue brings together more than 4,000 representatives from across the country to discuss the nation’s most pressing issues. Participants will discuss issues identified through nationwide public consultations conducted by the Ethiopian National Dialogue Commission.

However, the dialogue faces serious questions about its legitimacy and ability to deliver lasting peace. Some opposition leaders argue that the government failed to adequately consult them during the planning process, effectively limiting their participation. Meanwhile, armed groups like the Oromo Liberation Army, the Tigray People’s Liberation Front (TPLF) and the Amhara Fano do not have representatives attending. These exclusions, combined with widespread public distrust in political institutions, undermine confidence that the dialogue can produce broadly accepted outcomes.

The success or failure of the National Dialogue will have major implications for Ethiopia’s future and stability in the Horn of Africa. Ethiopia is one of the fastest-growing economies in Sub-Saharan Africa, driven by investment in mining, energy and agriculture. Political instability and unresolved ethnic conflict threaten to stall economic growth. Failure to achieve meaningful progress could further destabilize a region already strained by war in Sudan and growing instability in South Sudan and Somalia. The absence of negotiations with the TPLF also increases the risk of renewed conflict in the Tigray region.

Read More: allAfrica, The Conversation, Deloitte

Geoeconomics

China’s latest GDP report shows a marked slowdown and a widening gap between industrial production and domestic demand. Official real GDP expanded 4.3% year over year in the second quarter, down from 5% in the first quarter, below the 4.5% consensus forecast and beneath the lower end of Beijing’s 4.5%–5% annual target. The economy grew 0.9% from the previous quarter and 4.7% across the first half, leaving the full-year target achievable but increasingly dependent on stronger performance later in 2026. Production remained the principal source of strength: industrial output increased 5.4% in the first half, while high-tech and equipment manufacturing grew 13.3% and 9.3%, respectively. Domestic demand was considerably weaker. Retail sales increased only 1.3%, fixed-asset investment fell 5.7%, private investment declined 8.5% and property investment contracted 18%.

The composition of growth makes China continuously more dependent on foreign demand. Exports rose 13.4% in yuan terms during the first half and 20.8% in June, while mechanical and electrical products accounted for almost two-thirds of total trade. This export strength is compensating for the property downturn, weak consumption and declining investment, but it also pushes Chinese production into foreign markets and intensifies demands for trade protection in the US and Europe.

Read More: Reuters [paywall], Financial Times [paywall], Rhodium Group

Energy

France is being forced to curtail power generation from its nuclear plants as a result of Europe’s ongoing heat waves. EDF, the company that manages France’s fleet of nuclear plants, announced it had to shut down three plants and run seven more at reduced power in order to comply with environmental restrictions to avoid discharging excessively hot water into rivers. So while there are no issues with the power plants themselves, the reactors, which cool themselves with water that is then released back into rivers, the plants are limited by the heat wave’s impact on the rivers themselves.

Concerns about French power could have an impact on the country’s attractiveness for other, energy-intensive industries. Paris has used its abundant nuclear power to try and attract industries like AI and cloud computing, which can have high energy demand. The impact of climate change on France’s nuclear industry will potentially have an effect on Paris’ ability to keep courting those industries. Doubts about nuclear power can also feed into the political debate, with groups like the left-wing France Unbowed having already begun linking concerns about climate change to an anti-nuclear stance.

Read More: Euronews, The Guardian, Politico EU

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Carter Spahn examines how to identify and define national security investments.

Principles of National Security Investing

By Carter Spahn

^{“Artist’s conception of GPS Block II-F satellite in Earth orbit” by NASA is marked with Public Domain Mark 1.0.}

National security investing is attracting capital, yet it remains poorly defined as an investment category. Global venture investment in defense technology rose 75 percent from 2024 to 2025, while private funds increasingly extend the national security label to artificial intelligence, critical minerals, energy, advanced manufacturing and supply-chain resilience. Some investments in these fields definitively strengthen national security. Others primarily pursue attractive markets, domestic jobs, technological leadership or economic growth and produce, at most, an incidental security benefit. As more funds and companies characterize broad portions of their activity as national security investing, the term risks becoming a marketing device rather than a meaningful investment category.

If the distinction is not clarified, fund managers risk allocating capital under the pretense of helping protect a nation and generating a return, while the investment only does the latter. This misallocation could deceive investors and reduce the fund’s credibility. Further, governments need to know whether the private sector is financing a security capability or if they need to provide liquidity to entities and projects that are unable to secure it in the private markets. Misleading headline “national security investment” numbers due to security-washed transactions will create financing-blind spots. A rigorous qualification process is therefore necessary to identify national security investments: one broad enough to recognize essential infrastructure and enabling capabilities outside traditional defense technology, but narrow enough to exclude investments whose security connection is remote, speculative, immaterial or manufactured.

For private investors, the analysis begins with four questions:

• Was national security part of the investment thesis from the outset?

• What threat and security issue does the investment address?

• Will this particular transaction materially create, preserve, expand, harden or assure access to the capability?

• Are trusted substitutes inadequate under the relevant contingency?

If utilized, the following set of principles operates as a sequence of assessments to answer said questions, allowing investors to determine if an investment fits a national security mandate.

In today’s full analysis:

• The Seven Principles

• National Security Returns and Investment Returns are Separate Judgments

Read the Full Report Here

Global

Fighting hits shipping in second major waterway, disrupting energy and agriculture supply chains. Ukrainian forces have launched a campaign aimed at disrupting Russian logistics in the Sea of Azov. Ukraine is using naval and air drones to disable vessels transporting oil and petroleum products, limiting Moscow’s ability to supply its forces in occupied Crimea. Ukrainian forces struck a total of 76 merchant vessels between July 6 and 11, and the campaign is ongoing. Maritime traffic along the Don River, in the Sea of Azov and parts of the Black Sea has sharply declined, according to tracking data of AIS transponders.

Grain exports from both Russia and Ukraine risk disruption, reminiscent of the early days of the war. Russia’s leading grain-producing regions, Rostov and Krasnodar, lie along the Sea of Azov. The country’s second-largest port in the Black Sea region is located on the Kerch Strait, a key target of Ukrainian attacks. Russian forces are retaliating against Ukrainian ports. Strikes on port infrastructure in the Odesa and Chornomorsk regions severely disrupt Ukraine’s agricultural export corridors. The grain harvest has just begun, with trucks transporting just-harvested grain to ports backing up, creating bottlenecks, which risk rippling through the global supply chain.

Read More: Financial Times [paywall], Institute for the Study of War, Reuters [paywall]

Europe

On Monday, ten European countries agreed to establish the Integrated Anti-Ballistic Missile (IABM) Coalition. France, Denmark, the UK, Germany, Italy, the Netherlands, Norway, Spain, Sweden, and Ukraine have jointly agreed to coordinate the rapid development of a defensive anti-ballistic missile capability that is not dependent on American systems, like Patriot PAC-3 interceptors. The flagship project will be dedicated to scaling Ukraine’s Freyja system, which is a redesign of Fire Point’s offensive FP-7 ballistic missile. Ukrainian President Volodymyr Zelenskyy has described Russia’s ballistic missile threat as its “last advantage” in the war; in recent attacks, Ukraine has been unable to intercept any ballistic missiles.

The IABM partnership seeks to leverage defense industrial comparative advantages. Ukraine has unlocked the scale to potentially rapidly produce missiles at $700,000 per round, much cheaper than the Patriots’ cost of $3.8 million. However, Ukraine’s Freyja lacks the support of the radar, sensing, and command and control systems to ensure accurate warning and targeting. European defense primes from France, Norway, Germany, and others could assist with this.

There are obstacles to mass-producing interceptors in Ukraine. First, any factory producing missiles, a high-value target, will be difficult to hide or decentralize. Second, the nine NATO allies in the IABM coalition will need to negotiate workshare. Different national champions could argue that their systems should be the next flagship project; moreover, those companies may compete for production rights if the Freyja becomes licensed. Other attempts at European defense collaboration, such as in the design and production of a sixth-generation fighter jet, have recently faltered.

Read More: Elysee, Breaking Defense, Army Recognition

Middle East

US-brokered negotiations between Israel and Lebanon are working towards limited Israeli withdrawals. Israel announced Tuesday that it was willing to implement “pilot zones” in southern Lebanon where Hizballah would be disarmed, Israeli military forces would withdraw, and the Lebanese military would take over security operations. Israel currently occupies a 10km “buffer zone” in southern Lebanon. The fate of the buffer zone is controversial in Israel, where parts of Prime Minister Benjamin Netanyahu’s coalition have demanded a permanent military presence to deter future attacks by Hizballah.

The sticking point in the negotiations is the sequencing of Israeli withdrawal, Hizballah disarmament and Lebanese redeployment. Lebanese President Joseph Aoun demanded an immediate Israeli withdrawal from the pilot zones to allow for disarmament operations by the Lebanese military. Israeli officials instead want to verify the destruction of Hizballah military infrastructure before withdrawing from the zones. President Trump reportedly personally intervened to encourage Israel to redeploy troops from the pilot zones.

Read More: Axios, New York Times [paywall], Reuters [paywall]

Asia-Pacific

As Singapore prepares to assume the ASEAN chairmanship in 2027 from the Philippines, the leaders of both countries met to discuss the future of the regional bloc and their bilateral ties. Philippine President Ferdinand Marcos Jr. arrived in Singapore yesterday for a three-day working visit and met his counterpart today. The two leaders reaffirmed their commitment to maintaining a peaceful, stable and prosperous Association of Southeast Asian Nations (ASEAN). They also discussed expanding trade, advancing AI cooperation, attracting investment and strengthening health and social development. Singapore is one of the Philippines’ largest foreign investors. Foreign direct investment remains a key challenge for the Philippines, which attracted just US$9 billion last year of ASEAN’s total US$244 billion. Political instability in the Philippines has continued to weigh on investor confidence.

Singapore’s priorities for its 2027 ASEAN chairmanship include digital and AI integration, energy resilience, climate action and stronger external partnerships. The city-state aims to support small and medium-sized enterprises and develop a shared regional AI ecosystem by leveraging Southeast Asia’s rapidly growing digital population. However, ASEAN continues to face internal challenges, including tensions along the Cambodia-Thailand border, the ongoing crisis in Myanmar and external energy shocks. The bloc made a breakthrough on Sunday by holding its first face-to-face meeting with Myanmar representatives since the 2021 coup, although no concrete outcomes emerged as members failed to reach a common position. Balancing ambitious goals with ASEAN’s longstanding challenges will test Singapore’s ability to deliver meaningful and tangible outcomes during its chairmanship.

Read More: Inquirer, ASEAN, The Straits Times, South China Morning Post [paywall], S&P Global

Americas

Four members of the US House of Representatives concluded a four-day congressional delegation to Cuba on Monday. Maxine Dexter (OR-03), Mark Pocan (WI-02), Teresa Leger Fernández (NM-03), and Delia C. Ramirez (IL-03) met with President Miguel Díaz-Canel, government officials, entrepreneurs, medical professionals, religious leaders, farmers, and civil society groups. Following the visit, the lawmakers criticized the Trump administration’s energy embargo and broader sanctions regime, highlighting Cuba’s economic and humanitarian challenges. In a joint statement, the delegation said they traveled to assess the impact of US policies on ordinary Cubans, citing widespread electricity shortages, food scarcity, and difficulties facing the island’s private sector.

On Monday, the US Treasury Department imposed new sanctions on Cuba’s tourism ministry. The new sanctions also cover two state-owned companies: Grupo Empresarial de Transporte Maritimo Portuario (GEMAR) and Grupo Empresarial del Comercio Exterior (GECOMEX). This comes amid continued uncertainty over US-Cuba relations and the future of the Trump administration’s pressure campaign against Havana. While both governments have acknowledged recent contacts between officials, neither side has indicated progress toward easing restrictions or reopening formal negotiations. The congressional delegation called for greater engagement and dialogue between the two countries, arguing that current policies are worsening economic conditions without producing meaningful political change.

Read More: AP, House of Representatives, Al Jazeera

Africa

US and Nigerian forces stated that leadership decapitation strikes have significantly disrupted ISWAP operations in Nigeria. US AFRICOM reported that the killing of Abu-Bilal al-Minuki and other leaders of Islamic State West Africa Province (ISWAP) “destroyed critical logistical infrastructure.” Following this operation, Nigerian troops dismantled command and logistics hubs, further eroding the group’s capabilities. As a result, ISWAP fighters have reportedly surrendered as others struggle to find new leadership, damaging morale and slowing the tempo of its operations.

The US-Nigeria intelligence and counterterrorism partnership has produced early successes, but threats in the country’s northeast persist. Boko Haram remains an enduring challenge in Nigeria, and although ISWAP’s capabilities have been degraded, jihadist groups have historically demonstrated the ability to reconstitute following leadership losses. This underscores the resilience and adaptability of extremist movements despite strategic setbacks.

Read More: Africa Defense Forum, Africa Defense Forum, ISS Africa

Geoeconomics

US inflation cooled sharply in June, although falling energy prices accounted for most of the improvement. The Consumer Price Index declined 0.4% from May, the largest monthly decrease since April 2020, and annual inflation fell from 4.2% to 3.5%, below the 3.8% consensus forecast. Energy prices dropped 5.7% as gasoline fell 9.7%, reversing part of the surge caused by the US-Iran conflict; however, energy and gasoline remained 15.7% and 26.7% more expensive, respectively, than one year earlier. Food prices continued rising by 0.2% for the month and 3% annually. The report shows households received meaningful short-term relief at the gas pump, but less improvement in recurring household expenses: real average hourly earnings remained 0.1% below their June 2025 level.

Underlying inflation also slightly weakened. Core CPI was unchanged in June and slowed from 2.9% to 2.6% annually; shelter rose just 0.1%, its smallest monthly increase since January 2021, while core goods prices dropped 0.1% for a second consecutive month. Those figures suggest that housing inflation is finally easing and that much of the earlier tariff pass-through into consumer goods may have run its course. More importantly, the ceasefire-driven drop in oil prices has already been overtaken by renewed fighting with Iran, creating a pathway for higher fuel and transportation costs to feed back into core inflation. Markets now expect the Federal Reserve to hold rates at 3.5%–3.75% in July but assign roughly a 60% probability to a September increase.

Read More: Bureau of Labor Statistics, Financial Times [paywall]

Energy

The White House is showing interest in scaling up its energy partnership with Baghdad. Shortly before a meeting with Iraqi Prime Minister Ali al-Zaidi, US President Donald Trump declared that the US would be deepening its energy cooperation with Iraq on oil. Specifically, Trump appears to want American companies to have more access to Iraq’s oil reserves, and he told reporters that the US was “going to be taking out a lot of oil” in the country. Baghdad recently allowed a preliminary agreement to investigate strategic oil export pipeline projects, with US companies involved in the agreement.

In recent months, Iraq has chafed at the limits put on its oil production by OPEC. Baghdad has reportedly floated the possibility of leaving OPEC if it is unable to receive higher quotas for oil production. During his meeting with Trump, al-Zaidi stated that Iraq needs a fair share within OPEC after being asked about the potential for Iran to exit the group.

Trump has given al-Zaidi significant political support over the last year. Following Iraq’s parliamentary elections in 2025, Trump pushed for al-Zaidi to be appointed as Iraq’s prime minister. In turn, his visit to Washington was al-Zaidi’s first international trip since taking office, and al-Zaidi has referred to Iraq’s partnership with the US as “the most strategic partnership in the world.”

Read More: Reuters [paywall], Reuters [paywall], The Hill, Atlantic Council

Transnational Crime and Corruption

New US sanctions on Monday targeted Eastern European cyberattack software providers. The US Office of Foreign Assets Control (OFAC) designated a Ukraine-based VPN provider, its administrator, and a Belarusian ransomware developer. The three designees were accused of actively supporting cyberattacks on critical US infrastructure and providing tools used by hackers to remain anonymous.

The US sanctions were coordinated with EU and UK designations against Russian state-linked cybercriminals. The sanctions targeted Russian military intelligence officers, affiliated hackers and private companies that support cyberattacks. EU and UK officials accused Russia of orchestrating decades-long cyber campaigns to undermine critical infrastructure, governmental organizations and military installations across Europe. The UK specifically alleged that official from the GRU, Russia’s military intelligence agency, worked with cybercriminals to recruit hackers and university-trained cyber specialists.

EU and UK sanctions also targeted the developers of malware and ransomware used in cyberattacks by Russian intelligence and nonstate criminals. State and nonstate cyberattacks often rely on “malware-as-a-service” entrepreneurs, who develop sophisticated malware and cyberweapons sold and shared to a global customer base of less skilled criminals. These semi-private entrepreneurs also provide a degree of plausible deniability for state-backed cyberattacks.

Read More: Wall Street Journal [paywall], US Treasury, UK Foreign, Commonwealth & Development Office, European Council, Atlantic Council

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Zayna Dembinski examines Australia and India's defense policy amid the development of a more networked Asia-Pacific security architecture.

How India and Australia Are Navigating a Securitized Asia-Pacific

By Zayna Dembinski

^{"BRAHMOS Launcher" by Hemantphoto79 is licensed under CC BY-SA 3.0.}

The Asia-Pacific region is entering a new phase of security as middle powers like India and Australia respond to heightened regional threat perceptions set off by renewed worries of China’s expanding military capabilities and reach. The long-range ballistic missile launched into the South Pacific last week by China acted as more than an isolated demonstration; it illustrated a broader regional trend. As China’s military capabilities expand, Asia-Pacific states are strengthening defense cooperation, investing in indigenous defense industries and diversifying security partnerships. India and Australia provide two examples of how middle powers are contributing to this trend through expanded arms exports and regional security partnerships. These developments point toward a more networked Asia-Pacific security architecture with important implications for defense markets and businesses.

In today’s full analysis:

• Escalating Regional Threat Perceptions

• India’s Defense Exports and Australia’s Defense Diplomacy

• Future Outlook and Business Implications

  Read the Full Report Here

Global

The US launches diplomatic effort to isolate the International Criminal Court. According to the State Department press release, the US is adopting a whole-of-government response to “systematically disable the ICC’s ability to operate, target American servicemen or officials, or otherwise threaten American sovereignty.” The US announced plans to revoke visas and impose travel bans and sanctions on ICC personnel. Nations that cooperate with the ICC may put at risk US assistance. Partners who enjoy the benefits of the US security umbrella are called on to reject the ICC’s claimed authority to prosecute American officials and servicemen.

The US has never been a member of the ICC. The US regards the prosecution of its citizens before an international body without US consent as a violation of its sovereignty. Over the years, the US has adopted different approaches to protect Americans, from seeking exemptions from the UN for peacekeeping forces, to engaging the court to influence operations, ignoring court communications and, more recently, imposing sanctions.

The ICC was set up in 1998, with a mandate to prosecute those responsible for the most serious international crimes: war crimes, crimes against humanity, and genocide. The ICC has jurisdiction to prosecute crimes committed by nationals of member states, but also crimes committed on the territory of member states, even if those responsible are citizens of a country that is not a member of the court.

Read More: US Department of State, Reuters [paywall], Congressional Research Services

Europe

Ukrainian President Volodymyr Zelenskyy recently announced a reshuffle of the Ukrainian government. The reshuffle is reportedly a result of corruption allegations against Ukraine’s current ambassador to the United States, Olga Stefanishyna. Current Ukrainian Prime Minister Yulia Svyrydenko is seemingly set to succeed Stefanishyna as Ukraine’s representative in Washington, although that is not yet confirmed. It is unclear who will replace Svyrydenko, but there are several potential candidates such as the head of Ukraine’s state energy companies, Ukraine’s current Minister of Defense, or the current Energy Minister. Any shakeup that moves Mykhailo Fedorov out of the Ministry of Defense would be controversial given his popularity and the perception that he’s been highly competent in the role. There had been expectations of a reshuffle for months, with the expectation it would happen in the Fall, but the sudden announcement came as a surprise.

Corruption has been an ongoing problem for Zelenskyy’s government that creates larger foreign policy issues for Kyiv. In late 2025, Zelenskyy’s powerful chief of staff resigned as part of a larger corruption scandal involving the businessman Timur Mindich, which centered around the state nuclear power company Energoatom. The scandal also implicated high-level politicians such as ex-ministers Herman Halushchenko and Rustem Umerov. In 2025 Zelenskyy tried to establish control over Ukraine’s anticorruption agencies, a move that triggered street protests and strong backlash from Brussels. Ukraine’s progress on anti-corruption policies and major corruption scandals have direct implications both for Ukraine’s political climate and future elections as well as for its relationship with the EU.

Read More: Politico EU, Kyiv Independent, New York Times [paywall], Kyiv Independent, Kyiv Independent, Atlantic Council

Middle East

Houthi officials declared an end to de-escalation with Saudi Arabia on Monday after Yemen’s international airport in Sanaa was bombed. The Saudi-backed Yemen government claimed to have conducted the attack to prevent an Iranian plane from landing in Yemen. The plane was returning with a Houthi delegation that attended Ayatollah Ali Khamenei’s funeral. Saudi and anti-Houthi Yemeni officials alleged the plane was carrying Iranian military assets and advisors. The Houthis accused Saudi Arabia of carrying out the bombing and claimed to have launched ballistic missiles at a Saudi airport in retaliation.

The attacks mark a rare flare-up in the Saudi-Houthi conflict since the parties reached a truce in 2022. Tensions have been rising since the same Iranian plane was confronted by Saudi fighter jets on its way to Sanaa on July 3. Conflict between Saudi Arabia and Yemen poses renewed threats to shipping in the Red Sea just as the US and Iran have reimposed blocks to shipping traffic through the Strait of Hormuz. Saudi Arabia reportedly sought approval from the US prior to the military strikes.

Read More: Financial Times [paywall], New York Times [paywall], Reuters [paywall], Axios, Responsible Statecraft

Asia-Pacific

Japan will establish its first centralized intelligence agency since World War II as it seeks to counter foreign interference and strengthen national security. Postwar pacifist Japan, skeptical of state surveillance under imperialism, has relied on a fragmented system and close cooperation with the US for its intelligence gathering. The reform aligns with Prime Minister Takaichi’s broader effort to expand Japan’s security capabilities, building on initiatives championed by her mentor, former Prime Minister Abe. Since Takaichi took office, Japan has approved its largest postwar defense buildup and eased restrictions on weapons exports.

The move comes amid growing security concerns from China, North Korea, and Russia. The New York Times on Sunday reported weaknesses in Japan’s espionage laws have allowed a Russian military intelligence network to use the country as a hub for acquiring sensitive technology, with Japanese-made components reportedly appearing in 90% of Russian missiles and drones. Simultaneously, Tokyo’s tensions with Beijing remain elevated following Takaichi’s remarks on Taiwan in November, while the security threat from Pyongyang continues as it pushes to advance its nuclear and military capabilities. As strategic cooperation among China, North Korea, and Russia deepens, Tokyo appears increasingly convinced that a more centralized intelligence apparatus is necessary to monitor and respond to evolving regional threats.

Read More: New York Times [paywall], New York Times [paywall], The Japan Times, Korea JoongAng Daily

Americas

The US government has awarded nearly $3 million in compensation to current and former federal employees affected by Havana Syndrome. This marks the first payment made under the Havana Act, which was signed into law in 2021. The condition was first reported in 2016 among US diplomats and intelligence officers stationed in Havana. Since then, similar “anomalous health incidents” have been reported by American personnel in multiple countries. Those affected have described symptoms ranging from dizziness, nausea, and severe headaches to hearing unexplained sounds and experiencing intense pressure sensations. Some have also reported long-term neurological effects.

In a statement released on Friday, the Department of War said it remains committed to supporting personnel affected by Havana Syndrome and related incidents. Officials emphasized that the department would continue to prioritize transparency and scientific integrity in its research efforts, improve care for affected individuals, and adapt to an evolving operational environment. The department emphasized its commitment to mitigating non-kinetic threats.

The latest developments reflect Washington’s efforts to respond to the unresolved cases despite continued uncertainty. For years, speculation centered on the possibility of attacks using directed-energy or microwave-based weapons. However, a 2025 assessment by the US intelligence community concluded that it was “very unlikely” a foreign actor had used a novel weapon to harm US personnel, though some agencies stopped short of fully dismissing the theory. The issue remains sensitive for US diplomatic and intelligence agencies.

Read More: BBC, Voz, Department of War

Geoeconomics

Senegal is in a serious hidden-debt crisis. An audit commissioned after President Bassirou Diomaye Faye took office uncovered an estimated $7 billion to $13 billion in previously unreported borrowing accumulated under former President Macky Sall. Senegal’s debt-to-GDP ratio subsequently jumped from below 75% to more than 132%, forcing the government to freeze infrastructure projects, abandon promised energy-price reductions and cut health spending. A default remains possible unless Dakar secures new financing or restructures its obligations, but either course could require politically explosive austerity measures.

Senegal’s sovereign debt emergency is becoming a contest over economic autonomy and external influence. Faye favors an IMF-led restructuring, but his former prime minister, Ousmane Sonko, portrays its likely conditions, including subsidy reductions and spending cuts, as a surrender of sovereignty, and now leads a parliament capable of blocking the president’s budget and debt legislation. Prolonged deadlock could force Dakar to borrow on increasingly unfavorable terms, heightening default risk and transmitting financial stress through the West African Economic and Monetary Union. The outcome will also shape the regional balance of influence: meaningful relief could preserve the credibility of the IMF, World Bank and Western partners, while severe austerity could strengthen sovereigntist forces that reject Western institutions and favor alternative creditors and alignments.

Read More: Foreign Affairs [paywall], Reuters [paywall], Carnegie Endowment for International Peace

Disruptive Technology

Yesterday, the European Commission’s Special Panel on Child Safety Online recommended a minimum age for social media. The panel suggested that social media restrictions, similar to the “social media delay” in Australia, would improve children’s rights online but would require a societal shift in perspective. Like restricting rights to drive or buy alcohol, the panel envisions a digital ecosystem that is unlocked as children get older. Several European countries, including France and Denmark, are considering their own various proposals, compelling harmonization at the EU-level to improve the integrity of rules across the bloc. The European Commission is backing time restrictions for children under 13 and gradual access to additional platforms.

Regulating addictive online platforms is broadly popular within the EU, but could risk adding to tech frictions with the US. The EU is unlikely to adopt a blanket social media ban due to skepticism from tech-friendly capitals like Dublin, but 92% of EU citizens believe that strengthening child protections online should be a priority. However, the US may view social media restrictions as further discriminatory measures against its tech companies; notably, it warned the UK from taking similar action to restrict under-16s from social media. The US supports a lighter approach to social media governance, in which tech companies have a duty to mitigate harms to children and improve age verification.

Read More: European Commission, AP, Politico

Energy

OPEC is lowering its projections for 2026 oil demand growth. OPEC has revised its projections for global demand growth down to 780,000 barrels a day, a fall from 970,000 bpd in its last assessment. This marks the third straight downward revision from OPEC’s monthly reports. However, estimates for demand growth vary wildly between different organizations. The International Energy Agency (IEA) and the U.S. Energy Information Administration both expect contractions in demand this year of between 1 million bpd and 1.2 million bpd. In contrast to these projections, OPEC’s forecast for 2027 is optimistic, and the organization raised its forecast for 2027.

Global energy markets remain highly unstable, although prices are still holding well below their previous high point this year. Since the resumption of hostilities, Brent prices have been strongly trending upwards, but prices on July 13 were below $84 per barrel. Changes in the global political and conflict landscape will have a significant impact on how demand develops going forward, specifically regarding the US-Iran conflict and Ukraine’s war with Russia. OPEC forecast that “moderations in geopolitical tensions” could have some benefits for global demand growth in the second half of 2026.

Read More: Reuters [paywall], Oilprice.com, Wall Street Journal [paywall]

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

For more detailed analysis on related issues, see Steptoe’s International Compliance Blog. For information on industry-specific monitoring or bespoke services, please contact the team here.

By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Hoi Chung Liu, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

US Considers Removing Sanctions on Türkiye as F-35 Sale Remains Uncertain

^{“President Trump and the First Lady Visit with the President of Turkey and Mrs. Emine Erdogan“ by The White House is marked with Public Domain Mark 1.0.}

At the NATO Summit in Ankara, President Trump indicated he is considering removing sanctions on Türkiye’s Defense Industry Agency (SSB) and allowing for the sale of F-35 aircraft. Ankara was removed from the F-35 program and sanctioned in 2019 due to its purchase of the Russian S-400 air defense system. More recently, US-Türkiye relations have warmed amid political tensions with other NATO members over the issue of alliance burden-sharing. These tensions have elevated Türkiye’s standing within the Trump administration, which views Ankara as a self-reliant ally and key interlocutor in the Middle East. Lifting sanctions on the SSB would be a strategic win for Ankara, as it loosens export restrictions and permits US financial assistance to the agency. The removal of sanctions is likely, but any transfer of the F-35 to Türkiye is still contingent upon the removal of the S-400 system and credible assurances that it will not be repurchased. Furthermore, longstanding security concerns from Congress could also pose an obstacle. If the sale of F-35s ultimately does not proceed, US-Türkiye relations could face some friction, but significant disruptions to the partnership are unlikely.

US and Türkiye relations have degraded since 2016, a period in which Türkiye embraced an independent foreign policy to secure its position across the Middle East and sometimes diverged with NATO allies in places like Syria and Libya. Türkiye’s independent strategy was open to greater collaboration with Russia, culminating in the purchase of the Russian S-400 surface-to-air defense system in 2019. US officials argued that operating the S-400, designed to collect information on aircraft, could allow Russia to collect intelligence on the stealth capabilities of the F-35 fighter jet, which Ankara was at the time under contract to purchase.

Following unsuccessful attempts to convince Ankara to replace the S-400 with the Patriot air defense system, the US sanctioned Türkiye’s Defense Industry Agency (SSB), Türkiye’s defense procurement organization, pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA). Signed into law in 2017, the law imposes sanctions on Iran, Russia, and North Korea, and authorizes the president to impose sanctions on persons determined to have knowingly engaged in a “significant transaction” with Russia’s defense or intelligence sectors. The package includes a prohibition on specific US export licenses and loans, a ban on US Export-Import Bank assistance, and visa restrictions on four SSB officials. Turkish President Recep Tayyip Erdoğan decried the sanctions as a violation of the country’s sovereignty and threatened to close Turkish bases to US military personnel and assets.

Supplemental legislation prevents any sale of F-35s without the complete removal of the S-400 system from Türkiye. Section 1245 of the National Defense Authorization Act for Fiscal Year 2020 prohibits the transfer of the F-35, its parts, and any related technical data and intellectual property. However, the Secretary of War and Secretary of State are permitted to waive this limitation by submitting a written certification to Congress that Türkiye no longer possesses the S-400 and does not plan to acquire it in the future. Although Congress does not approve or reject the certification, lawmakers could still create political obstacles through political pressure or new legislative action.

Shared strategic interests have renewed efforts to lift sanctions, and the Trump administration aims to strengthen ties by resolving a longstanding source of friction. The US views Türkiye as an increasingly important partner in advancing NATO burden-sharing and addressing regional security challenges. In particular, Ankara has become one of the most influential external actors in post-Assad Syria, making its cooperation important to US objectives related to regional stability and counterterrorism. Moreover, the US sees Turkish investment and influence in Africa as a preferable alternative to a more entrenched Russian or Chinese presence. For Türkiye, acquiring the F-35 would advance military modernization goals and strengthen interoperability with NATO allies. Participation in the F-35 program would also bolster Türkiye’s defense industrial base and reinforce its position as a leading regional military power.

Congress appears to be cautious about removing sanctions. Lawmakers from both parties have argued that Türkiye’s continued possession of the S-400 presents an unacceptable counterintelligence risk to the F-35 program. Turkish media have reported that the S-400, which has not been used, will be exported to a third Gulf country, potentially reducing this opposition. Separately, members of Congress have expressed concerns over Ankara’s strategic orientation, including its continued defense and economic ties with Russia and increasingly tense relationship with Israel. As a result, efforts to transfer F-35 aircraft are not guaranteed. Although the failure to complete the sale could hinder a renaissance in US-Türkiye relations, it is unlikely to significantly undermine the broader strategic partnership, given the countries’ shared interests within NATO and in regional security.

US Developments

US Imposes New Sanctions, Revokes GL on Iran Amid Renewed Hostilities

On July 10, 2026, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions against Ali Ansari (“Ansari”), who allegedly oversees a “sprawling global network” of assets that benefit Iran’s leader, Mojtaba Khamenei (“Khamenei”), and other regime elites. Concurrently, OFAC imposed sanctions against Ansari’s Saint Kitts and Nevis-based holding company, Smart Global Limited (“Smart Global”), which it said Ansari has used to engage in large-scale embezzlement of publicly funded wealth. OFAC also sanctioned multiple Iranian exchange houses and their owners for allegedly facilitating transactions for sanctioned Iranian banks.

These sanctions follow the suspension of new sanctions designations against Iran anticipated by the Memorandum of Understanding (the “Iran MOU”) signed in mid-June. As we reported previously, renewed hostilities in the region have threatened to derail the ongoing negotiations between the US and Iran. Following further hostilities, President Trump stated on Truth Social that the ceasefire was no longer in effect, even as negotiations continue.

OFAC, in the days leading up to the new designations, issued an amended Iran-related General License (“GL”) X1, which revoked the previously issued GL X, authorizing the wind-down of transactions made pursuant to GL X through July 17, 2026. GL X implemented Point 10 of the Iran MOU by temporarily authorizing certain transactions ordinarily incident and necessary to the production, sale, delivery, or offloading of Iranian-origin crude oil, petrochemical products, or petroleum products.

Senators Find a Path Forward on Russian Sanctions Bill

On July 10, 2026, Senator Jeanne Shaheen (D-NH), the Ranking Member of the Senate Foreign Relations Committee, alongside Senators Roger Wicker (R-MS), the Chair of the Senate Armed Services Committee, Lindsey Graham (R-SC), and Richard Blumenthal (D-CT), released a statement claiming that they had “reached an agreement with the Trump Administration to move [their] updated Russia sanctions legislation [the Sanctioning Russia Act of 2025] forward.”

The Act is a sweeping sanctions and tariff-related bill first introduced in April 2025 that received strong bipartisan support in the Senate. Lawmakers reportedly sought Secretary of the Treasury Scott Bessent’s support for the bill during the NATO summit in Türkiye last week. Previously, we reported that the Act saw a renewed push in Congress in late November 2025 following President Trump’s indication that he would support the legislation, provided he retained ultimate decision-making flexibility with respect to the sanctions and tariffs contained therein. We also reported that Senator Graham had said President Trump “greenlit” the Act in January 2026, though it was never put to a vote.

It will be important to monitor the changes made to the Act during the months of negotiations between Congress and the White House. According to the Senators’ statement, the Act has indeed been updated, and if the White House has approved of the latest version, there is a strong possibility it now contains wording that would provide President Trump with greater flexibility on the imposition and retraction of sanctions, tariffs, and related economic measures.

OFAC Extends Term of License for Certain Payments with Russian Central Bank

On July 8, 2026, OFAC issued Russia-related GL 13R, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024.”

GL 13R effectively extends the term of the authorization under Russia-related GL 13 by three months, from its previous expiration date of July 9, 2026, to October 9, 2026. Russia-related GL 13 authorizes certain payments of taxes, fees, or import duties to, and purchase or receipt of permits, licenses, registrations, certifications, or tax refunds from the Russian Central Bank, National Wealth Fund, or Ministry of Finance, that would otherwise be prohibited by Directive 4 of Executive Order (EO) 14024.

Alongside GL 13R, OFAC also issued two amended FAQs:

• FAQ 999 (describing authorizations available for entities subject to Directive 4)

• FAQ 1118 (explaining the license does not authorize payment of the Russian “exit tax”)

OFAC Issues Democratic Republic of the Congo Sanctions GL

On July 10, 2026, OFAC issued a Democratic Republic of the Congo (“DRC”)-related GL 2, “Authorizing Transactions Related to Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, Software Updates, or Clinical Trials.”

GL 2 generally authorizes transactions that would otherwise be prohibited by the Democratic Republic of the Congo Sanctions Regulations (“DRCSR”), provided they are ordinarily incident and necessary to:

1. The exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to the DRC or Rwanda, or to persons in third countries purchasing specifically for provision to the DRC or Rwanda;

2. The prevention, diagnosis, or treatment of any disease or medical condition in the DRC or Rwanda; or

3. The conduct of clinical trials and other medical research activities in the DRC or Rwanda.

GL 2 does not currently have an expiration date.

UK Developments

UK Makes New Designations Under Chemical Weapons Sanctions Regime

The UK has designated seven individuals who are directors and technical specialists at leading scientific research institutes involved in Russia’s development and synthesis of toxic chemicals, and two leading scientific research institutes (SC Signal and the State Research Institute of Military Medicine (GNIII VM)) under its chemical weapons sanctions regime. The newly designated persons are Russian actors involved in the development of the deadly toxins Novichok and Epibatidine, linked to the deaths of Alexei Navalny and Dawn Sturgess. According to a press release issued by the Foreign, Commonwealth and Development Office, the designations were made ahead of the NATO Summit in Ankara and represent the latest effort by the United Kingdom to expose and deter Russia’s illegal chemical weapons activity. The action also comes after the United Kingdom and its international partners united at the Munich Security Conference in February 2026 to confirm the circumstances surrounding the death of Alexei Navalny in Russian custody.

OFSI Amends and Extends Maritime Mutual Re-Insurance Wind Down General Licence

OFSI has published an amended and extended Maritime Mutual Re-Insurance Wind Down General Licence INT/2026/8893924 (MMR GL). The expiry date of the MMR GL has been extended from 6 July 2026 to 7 October 2026. Additionally, the MMR GL has been amended to introduce a monthly reporting requirement, whereby the designated persons relying on the MMR GL must provide OFSI HM Treasury with a report setting out details of all activities and/or payments carried out under the MMR GL during that month within 14 days of the end of each calendar month.

UK Secures First Conviction for Breach of UK Russia Luxury Goods Sanctions

According to media reports, Jonathan Hornby, a businessman from Cheshire, has been convicted of breaching the UK’s luxury goods trade sanctions under the Russia sanctions regime. According to HMRC, Mr. Hornby tried to send four pieces of artwork to Russia in February 2024. After UK Border Force officers seized the shipments at Heathrow airport, Mr. Hornby (who admitted the offences at Westminster Magistrates Court) was fined £30,085. According to HMRC, the consignment was linked to Mr. Hornby’s businesses, Global Customs Systems UK Limited and In Time Worldwide Express Ltd.

UK Court Dismisses Case Against Art Gallery for Breach of UK-Russia Trade Sanctions

A judge sitting at Southwark Crown Court has dismissed the charges against Hauser & Wirth Gallery Limited and Artay Rauchwerger Solomons Limited in relation to an alleged breach of Russia’s luxury goods trade sanctions involving the artwork “Escape from Humanity” by George Condo, which was made available to Alexander Popov. The court concluded that the prosecution was unable to establish that Mr. Popov was, at the relevant time, a person connected with Russia to whom the making available of the artwork would have been prohibited. Consequently, the case was dismissed in its entirety.

EU Developments

EU Proposes New Sanctions Regime Against Migrant Smugglers and Human Traffickers

On July 9, the European Commission and the High Representative of the EU proposed a new horizontal sanctions regime targeting migrant smuggling, human trafficking, and other serious forms of organized crime. The proposed framework would enable the EU to sanction individuals and entities involved in conduct originating outside the EU that poses a serious threat to the EU’s values, the security of the EU and its Member States, or international security.

The proposal aims to disrupt the business model of organized criminal networks by restricting their movements and cutting off their profits. Under the proposed regime, listed individuals and entities would be subject to asset freezes and a prohibition on making funds or economic resources available. Listed individuals would also be subject to travel bans preventing entry into, or transit through, EU Member States.

The initiative was first announced by Commission President Ursula von der Leyen during her September 2025 State of the Union address as part of the EU’s broader defense and security agenda. In the Q&A document accompanying the proposal, the Commission stated that the new sanctions regime would complement, rather than replace, existing criminal law tools and investigations. The Commission also noted that the proposed measures would not target migrants, asylum seekers, or persons in need of international protection, and would be without prejudice to legitimate humanitarian activities.

The proposal will now be considered by the Council and requires unanimous approval by all 27 EU Member States before it can enter into force.

EU Member States Continue Discussions on the 21st Sanctions Package Against Russia

EU Member States of the Council have yet to reach an agreement on the proposed 21st package of sanctions against Russia, with negotiations continuing over several politically sensitive measures.

Speaking ahead of the Foreign Affairs Council on July 13, High Representative of the EU Kaja Kallas confirmed that a number of issues remained unresolved, preventing agreement on the package. Reports indicate that several of the package’s key measures have been scaled back during negotiations, including the proposed ban on Russian combatants’ entry into the EU. In addition, it remains unclear whether EU Member States will agree to a six-month suspension of the adjustment mechanism of the Russian seaborne crude price cap (until January 2027). The Commission pushed for the suspension to prevent the cap from adjusting above $60 per barrel, which is above the Urals crude benchmark. According to reports, several shipping-dependent Member States, including Greece, support a shorter, three-month suspension period.

Reportedly, Russian Orthodox Patriarch Kirill and Lukoil founder Vagit Alekperov have been excluded from the draft text following objections raised by Bulgaria. A statement issued following the July 9 meeting of Bulgarian Prime Minister Roumen Radev’s Cabinet argued that sanctions on Patriarch Kirill would have no meaningful economic impact on Russia, while potentially generating adverse propaganda effects against Europe. The statement also maintained that measures against Alekperov could negatively affect Lukoil Group companies operating in Bulgaria.

The proposed restrictions on imports of certain Russian fish products have also been revised during negotiations. According to reports, Germany is likely to be permitted to continue importing haddock, while Poland and Portugal are expected to receive exemptions from proposed restrictions on pollock and cod, respectively.

Asia-Pacific Developments

China Calls for End to US Embargo on Cuba at UN Debate

At a UN General Assembly debate requested by Cuba, China strongly urged the United States to end its decades-long economic, commercial and financial embargo on Cuba, arguing that the sanctions have caused severe economic losses, humanitarian hardship, and shortages of fuel, food, medicine, and essential goods. Chinese Ambassador Fu Cong said the overwhelming vote to hold the debate (136 in favor, 9 against, and 30 abstentions) reflected broad international support for lifting the embargo, which China views as a violation of the UN Charter, international law, and Cuba’s rights to sovereignty, development, and self-determination. China called for an immediate end to all unilateral and secondary sanctions, greater humanitarian assistance for Cuba, and stronger international support for the country.

China Defends Sanctions on Philippine Defense Chief Amid South China Sea Tensions

China defended its sanctions against Philippine Defense Secretary Gilberto Teodoro Jr. after Philippine President Ferdinand Marcos Jr. criticized the move as “unhelpful” and escalatory. Beijing said the sanctions—including travel bans and restrictions on transactions involving Teodoro and certain family members—were imposed in response to Teodoro’s comments on the South China Sea and condemning China’s countermeasures.

Indonesia Receives First Russian Crude Shipment Despite Western Sanctions

Indonesia has received its first shipment of 770,000 barrels of Russian crude oil under a 150-million-barrel agreement, using a government-to-government structure to navigate sanctions-related financial and compliance constraints. To avoid exposing state-owned energy company Pertamina to potential bond covenant breaches linked to transactions involving sanctioned entities, Jakarta designated the state-run agency Lemigas as the official importer of record. The arrangement relies on alternative legal, financial, and logistical channels that allow continued access to Russian energy exports despite Western sanctions and price-cap measures. The deal underscores Indonesia’s focus on securing affordable energy supplies and contributes to the ongoing redirection of Russian oil exports toward markets in the Global South.

Japan Tightens Enforcement of Russia Sanctions by Targeting Indirect Jet Fuel Exports

Japan has clarified that its ban on jet fuel exports to Russia applies not only to direct shipments but also to indirect transfers through third countries and ship-to-ship transfers at sea, as part of its sanctions against Russia coordinated with the G7 and other international partners. The announcement came after reports that Russia was preparing to import a cargo of Japanese-origin jet fuel through intermediaries amid fuel shortages linked to attacks on its energy infrastructure. Japanese Trade Minister Ryosei Akazawa said authorities are taking steps to prevent sanctions evasion through industry outreach, warnings, information sharing, and cooperation with foreign governments, emphasizing that Japan will continue to enforce strict export controls in line with international sanctions measures.

Global

Extreme weather exacts a steep human toll in Europe. European countries reported more than 10,000 excess deaths during the record-breaking heatwave hitting the continent in late June. The human costs were highest among vulnerable populations, aged 65 and above. Extreme heat disrupted power supplies, leaving people exposed to heat stroke and aggravating other medical conditions. Western Europe registered the hottest June on record. The heat is continuing into July in parts of Western Europe, fueling devastating wildfires in France and the Iberian Peninsula.

Globally, June was the second warmest on record, slightly below June 2024. The 10 warmest Junes on record have all occurred since 2015. Additionally, this month marked the 50th consecutive June with global temperatures above the 20th-century average; the last below-average June occurred half a century ago in 1976. In addition to Europe, June temperatures shattered records across the eastern and central tropical Pacific Ocean, portions of Canada, northern South America, Africa and Asia.

Read More: Euronews, World Meteorological Organization, National Oceanic and Atmospheric Administration

Europe

The Trump administration has reportedly greenlit a revised version of the Graham-Blumenthal Russia sanctions bill. The Sanctioning Russia Act of 2025, which would allow the President to impose 500% secondary tariffs on countries that buy Russian fuels, stalled amid diplomatic efforts to mediate an end to the Russia-Ukraine war. In the meantime, Ukraine’s reputation has improved with the White House. Russia is increasingly perceived as the intransigent actor; Ukraine’s defense industrial base has managed to cultivate an indigenous deep-strike capability; and Russia continues to lose momentum on the battlefield with as many as 30,000 casualties per month. It is not clear what changes were made to the Graham-Blumenthal bill, but momentum for increased sanctions authority likely stems from the US-Ukraine relationship and additional presidential flexibility.

Advancing the sanctions bill would follow up on deepening US-Ukraine defense cooperation. On the sidelines of the Ankara NATO summit, the US agreed to license the production of Patriot Pac-3 interceptors—helping close Ukraine’s air defense vulnerability—in addition to offensive ATACMs and Stinger missiles. The US and Ukraine also anticipate closer drone cooperation, with a prominent Ukrainian contractor opening a manufacturing plant in Ohio.

Passing the bill depends on the White House. The Trump administration has reportedly approved the bill on two separate occasions, only for attention to be redirected. Moreover, Senator Lindsey Graham, the bill’s chief architect and champion, died suddenly Saturday evening. Despite new momentum, the bill may again face an uphill climb.

Read More: Reuters [paywall], The Hill

Middle East

Renewed strikes between the US and Iran escalated over the weekend, severely straining the countries’ ceasefire. Tit-for-tat airstrikes have been ongoing since last Tuesday over the management and status of the Strait of Hormuz. On Saturday, the US struck 140 targets throughout Iran after the Iranian Revolutionary Guard Corps (IRGC) attacked a commercial ship transiting the strait. The IRGC asserted that the Strait of Hormuz would be closed again, alleging violations by the US of the bilateral memorandum of understanding (MOU) governing the ceasefire.

Iran is seeking to block the creation of a Hormuz transit route that avoids Iranian waters. The US Navy had been directing commercial ships to transit the strait along the coast of Oman since early May and continued to do so after the MOU was signed in June. Iran alleged that the coordination violated the MOU, which Iran interpreted as giving it control over strait traffic. The US countered that the MOU allowed free passage through the strait.

Read More: New York Times [paywall], Financial Times [paywall], Foreign Affairs [paywall]

Asia-Pacific

India and New Zealand on Saturday elevated bilateral relations to a strategic partnership during Prime Minister Modi’s visit to Auckland. The trip marks the first visit by an Indian prime minister to New Zealand in 40 years, underscoring Modi’s effort to strengthen India’s diplomatic outreach and regional standing. The two sides agreed to deepen cooperation in defense, trade, and diplomacy, among other areas. The visit follows China’s ballistic missile test launch last week and also comes as Auckland eyes joining the recently signed Australia-Fiji mutual defense treaty, signaling its determination to expand regional defense partnerships amid growing uncertainties.

The visit also comes amid growing political tensions in New Zealand over the India-New Zealand free trade agreement signed earlier this year. The agreement would reduce tariffs on 95% of New Zealand’s exports to India. The deal has faced domestic pushback within Prime Minister Luxon’s governing coalition and still requires parliamentary approval before it can enter into force. Lawmakers from the New Zealand First Party have raised concerns about perceived immigration concessions and a reported $34 billion investment commitment to India. India maintains that the agreement’s visa provisions are intended to facilitate business mobility rather than migration, while New Zealand Trade Minister McClay has said the investment provision reflects a commitment to promote investment rather than an obligation to invest that amount.

Read More: Reuters [paywall], South China Morning Post [paywall], New Zealand Foreign Affairs & Trade, Radio New Zealand, Awaaz

Americas

On Friday, Colombian President-elect Abelardo de la Espriella stated that his incoming administration would take an active role in Venezuela’s earthquake recovery. His statement declared that “the reconstruction of Venezuela after the earthquake has to be carried out by Colombia, with all that it implies.” De la Espriella also indicated that the issue would be raised with the United States and later clarified that he was proposing international cooperation rather than attempting to replace Venezuelan authorities. The comments reflected his broader vision of a more assertive Colombian regional role and signaled a willingness by the incoming government to engage directly in Venezuela’s post-disaster recovery. De la Espriella will take office on August 7.

On Saturday, Venezuela’s Foreign Ministry responded to De la Espriella’s remarks, reaffirming that the recovery and reconstruction of earthquake-affected areas is the sole responsibility of the Venezuelan state. The statement emphasized that no coordination with Colombia’s incoming government is currently planned. While Caracas left open the possibility of cooperation with foreign public and private entities, it stressed that any such arrangements would be made on Venezuela’s own terms and under its sovereign authority. The exchange reflects Venezuela’s longstanding sensitivity to perceived external involvement in domestic affairs and suggests that reconstruction efforts could become an early source of friction in relations with Colombia’s next administration.

Read More: CNN en Español [Spanish], Última Hora [Spanish], Demócrata

Africa

Namibia and China signed a series of cooperation agreements covering energy, mining, infrastructure, agriculture, education, and technology. Namibia is a strategically important source of natural resources. It is the world’s third-largest uranium producer and possesses significant lithium deposits. The country could also become Africa’s fourth-largest oil producer by 2030, following major offshore discoveries estimated at approximately 2.6 billion barrels of crude by US and European energy companies.

Economic competition between the US and China in Namibia is intensifying. Washington has sought to strengthen bilateral ties, while US energy companies continue offshore exploration. US Ambassador to Namibia John Giordano is driving cooperation on AI in support of Windhoek’s Vision 2030 strategy, which aims to advance the country’s digital economy. Despite these efforts, Namibian President Netumbo Nandi-Ndaitwah chose China for her first state visit outside Africa, underscoring both Beijing’s enduring influence and the hedging strategy pursued by many African states.

Read More: Reuters [paywall], AllAfrica, Newsweek, US Embassy in Namibia

Geoeconomics

The US-India trade deal remains unfinished. In February, India had agreed to reduce tariffs on all US industrial goods and selected agricultural products, address regulatory barriers and purchase $500 billion in US goods over five years. Washington offered to lower its reciprocal tariff on Indian products from 25% to 18%, with further relief for pharmaceuticals, gems, aircraft parts and other products. However, the Supreme Court’s subsequent rejection of the administration’s global tariffs largely erased that preferential offer, leaving India unwilling to implement the deal in its current state.

India is prepared to delay an agreement further until they receive more favorable terms. June negotiations failed to resolve New Delhi’s demands for better treatment than competing exporters and protection against additional US levies, including a proposed 12.5% tariff tied to forced-labor concerns. India also continues to resist greater agricultural access, a politically sensitive issue for farmers and small businesses. Strong exports and new agreements with the UK and EU have strengthened its negotiating position, while the impasse prolongs uncertainty for companies that expected the February framework to stabilize market access.

Read More: Reuters [paywall], DW, The Diplomat [paywall]

Disruptive Technology

The US loosened export controls on the UAE to enable greater AI and defense tech cooperation. The Bureau of Industry and Security (BIS) reclassified the UAE to the A5 group under the Export Administration Regulations, which will broadly allow greater commercial cooperation across a range of dual-use technologies, including civil nuclear deployment, oil and gas extraction, satellites, and drones. This move ends previous dual-use oversight, including in industries that contribute to missile technology, which were restricted due to the presence of UAE-based entities in Iran’s ballistic missile procurement network.

The Iran war has brought the US and the UAE closer together. As hostilities dissipate to a lower but latent level, the US will seek to rebuild the UAE’s air defense and energy capabilities. The UAE could also increase investment and tie-ups with the American defense industrial base. This deepening is a sign that the US views the UAE as aligned with regional interests rather than a balancing actor.

The growing US-UAE tech relationship likely contributed to the decision. In May 2025, the US reversed its anticipated AI diffusion rule, which cleared the way for the UAE to procure up to 500,000 of Nvidia’s most advanced semiconductors. The BIS statement from Friday emphasized that the UAE has made progress on limiting the diffusion of such chips to China, which would benefit its AI stack. Diffusion is likely a diminishing concern as China cultivates a homegrown AI stack.

Read More: Bureau of Industry and Security, Reuters [paywall]

Energy

Russia’s loss of refining capacity is presenting another challenge to the global supply of refined oil products. Russia’s decision to suspend exports of diesel, a result of Ukraine’s strike campaign against Russian refining capacity, is further disturbing global markets and worsening shortages of industrial fuel. Across the US and Europe, which no longer import Russian diesel, prices have spiked due to shortages. Diesel makes up the largest share of global oil consumption, and price increases there can spread across the economy and affect a variety of other sectors and products. Russia is the world’s largest exporter of diesel after the US, and its exit from the export market has the capacity to significantly affect global supplies. Exports had already been slowing before Moscow instituted the ban.

Russia’s energy troubles are unlikely to end soon, signaling more uncertainty for its role in global energy markets. The International Energy Agency (IEA) recently cut its assessment for Russian oil output for this year and next year. The IEA assessed that output in Russia will fall approximately 3% due to Ukrainian attacks on energy infrastructure. However, in recent months, Russian crude exports have risen due to an inability to refine oil domestically. The pressure on Russian energy output, combined with the recent resumption of hostilities in the Strait of Hormuz, creates significant uncertainty and supply risks for global energy markets. This could be further exacerbated by a recent US push to place exceedingly high secondary sanctions on countries procuring Russian energy products.

Read More: Reuters [paywall], Reuters [paywall], Oilprice.com, Politico

Transnational Crime & Corruption

Iraq is engaged in a widespread anti-corruption crackdown. The campaign began in late May with the arrest of Iraq’s deputy minister of oil and refining affairs for embezzlement. In late June, authorities announced that they had seized $107 million in embezzled funds and arrested dozens of senior provincial officials and lawmakers. State media described it as one of the largest anti-corruption efforts in recent Iraqi history.

The anti-corruption push is driven by Iraq’s new Prime Minister Ali al-Zaidi. Al-Zaidi assumed office in mid-May after being selected as a compromise candidate with a limited political record. Regional analysts suspect al-Zaidi will attempt to moderate the arrests to maintain popular public support, balance US and Iranian interests in Iraq and preserve his parliamentary coalition. Al-Zaidi may also be escalating anticorruption efforts ahead of his visit to Washington this week, where he will seek US support for foreign investment in Iraq’s petrochemical industry and broader economy.

Read More: Organized Crime and Corruption Reporting Project, OCCRP, Reuters [paywall], Foreign Policy [paywall]

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Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured interview is with Melissa Mahle, Strategic Risk Advisor.

Interview with Melissa Mahle, Strategic Risk Advisor

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Melissa Mahle is a senior advisor with Steptoe’s International Trade and Regulatory Compliance Group and leader of the Global Strategic Engagement Team’s analytical team, which produces the Stepwise Risk Outlook. Mahle is a former US intelligence officer with a background in intelligence, foreign policy advising, risk consulting and Middle East issues. She advises clients on political and security risks, crisis management, incident response, after-action reviews and business continuity. She is the author of Denial and Deception: An Insider’s View of the CIA from Iran-Contra to 9/11 (Nation Books, 2003) and, on the lighter side, she has authored children’s books and served as a Hollywood film consultant.

Stepwise Editor in Chief Anni Coonan sat down with Melissa Mahle as part of the launch of the expanded format for Steptoe’s leading risk publication, Stepwise Risk Outlook.

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Global

The International Olympic Committee provisionally lifts ban on Russia despite the ongoing war in Ukraine. This week, the IOC announced the decision to permit Russian athletes to compete in qualifiers for the Los Angeles 2028 Olympic Games, having been suspended since October 2023. The decision was based on a narrow reading of its own rules, finding that the Russian Olympic Committee (ROC) no longer includes as its members any regional sports organizations in territories falling under the jurisdiction of the National Olympic Committee of Ukraine – Luhansk, Donetsk, Kherson and Zaporizhzhia. The ROC told the IOC that it does not, and will not, conduct any activities in these territories.

International reaction is mixed. Critics argue that the IOC is condoning the ongoing Russian invasion of Ukraine, while others believe athletes should not be pawns in geopolitics. The ban was eroding before the IOC decision, with some international federations, such as those for figure skating and gymnastics, announcing new policies permitting participation of Russian and Belarusian athletes. But not all international federations plan to lift their bans, risking fragmentation across the sporting sector. The IOC has not yet decided whether Russia can display its flag and colors or have its anthem played at the Games. Russian athletes competed as neutrals at the 2024 Paris Olympics and 2026 Milano Cortina Winter Games. Most nations recognize the strategic value of sports diplomacy to advance foreign policy goals, build cultural connections, and project soft power. Russia, however, has been dogged by controversy beyond the Ukraine war, namely state-backed doping programs, undermining the legitimate achievements of its athletes and their international welcome.

Read More: International Olympic Committee, Reuters [paywall]

Europe

Former Commander-in-Chief of Ukraine’s Armed Forces Valerii Zaluzhnyi is seemingly positioning himself to run for office. Zaluzhnyi, who is currently in London as Ukraine’s ambassador to the UK, recently published an Op-ed with the Telegraph giving his thoughts on the current and future direction of Ukraine’s war against Russia. The article obliquely criticized his successor, Oleksandr Syrskyi, and by extension Ukrainian President Volodymyr Zelenskyy. Zaluzhnyi also reportedly told Zelenskyy that if elections were held this year he would run for Ukraine’s presidency despite Zelenskyy asking him to refrain to ensure national unity.

Zaluzhnyi is popular in Ukraine, and he enjoys a high level of public trust, but his polling numbers have dropped over the last year. Zaluzhnyi’s electoral backing in polling has dropped 9% over the last year, and he trails Zelenskyy significantly, although Zaluzhnyi would still come in second. Zelenskyy’s support in a future election has remained stable over the last year at slightly above 30%, so still well short of a majority. Polling results show a fragmented field, with the top three choices only getting slightly less than 60% of the vote.

Read More: Kyiv Independent, Kyiv Post, Telegraph [paywall], Associated Press, Ukrainska Pravda, Ukrainska Pravda

Middle East

Syria claimed the Islamic State was behind recent bombings in Damascus. On Thursday, Syrian authorities arrested several suspects accused of orchestrating several recent explosions in Damascus – including one near the hotel of French President Macron during his visit this week – and claimed the individuals were tied to the Islamic State. The explosions killed one person and wounded 36 others, according to the final casualty toll announced by Syria’s Ministry of Health.

The bombings could constitute a troubling resurgence of IS capabilities as Damascus struggles to assert control over the whole of Syria. Analysts have long worried that policing gaps produced by the US’ withdrawal of troops, the imperfect integration of the Kurdish-led SDF (the US’ primary counterterrorism partner) into the Syrian military, and Damascus’ general struggle to establish security throughout the country’s borders. In February, a UN assessment reported that IS had already established networks across all Syrian governorates, and in the months following the US’ withdrawal, IS spokespeople have released their first public calls to action in years.

Read More: AP, American Security Project, UN Analytical Support and Sanctions Monitoring Team

Asia-Pacific

New Zealand Prime Minister Christopher Luxon said Thursday the country is considering whether to join the historic “Ocean of Peace” defense alliance signed Monday between Australia and Fiji. Luxon’s announcement highlights shared concerns across the Pacific following China’s test missile launch earlier this week, an action several regional leaders criticized as destabilizing and indicative of Beijing’s expanding military reach.

The alliance’s deliberately open-ended structure allows additional regional partners to join, creating an opportunity for Pacific nations to strengthen defense coordination and develop collective responses to shared security challenges. Under the agreement, an attack on either party would be considered a threat to both, effectively a mutual defense treaty. For Wellington, whose only formal defense ally is Australia, joining the alliance would establish security cooperation with one of the region’s only other countries with a standing military. How Beijing views the development remains unclear, especially as China has spent the last few years cultivating closer ties with regional governments—such as policing ties with Vanuatu.

Read More: Reuters [paywall], Asia Times, CNBC, Center for Strategic and International Studies

Americas

Mexico has announced that it will pursue criminal complaints in the United States following the deaths of 17 Mexican nationals linked to Immigration and Customs Enforcement (ICE). This includes 14 who died in ICE custody and three who died during enforcement operations. The move follows the fatal shooting of Mexican national Lorenzo Salgado Araujo by an ICE agent in Houston, an incident that has drawn scrutiny from both Mexican officials and US lawmakers. Mexican Foreign Minister Roberto Velasco said President Claudia Sheinbaum instructed the government to take “forceful legal action” and seek investigations into the deaths as criminal matters. Mexico is also considering civil action against private companies operating detention facilities where several of the deaths occurred.

The dispute risks further straining US-Mexico relations amid tensions over security cooperation and trade negotiations. Sheinbaum’s administration appears determined to demonstrate a stronger defense of Mexican citizens abroad, arguing that diplomatic protests alone are no longer sufficient. Meanwhile, criticism of ICE has intensified within the United States, with four Democratic members of Congress calling for an independent investigation into Salgado’s death. In April, US authorities indicted the governor of Sinaloa and nine other Mexican officials for alleged ties to organized crime. These diplomatic strains risk spilling over into ongoing negotiations of USMCA, which has entered an annual review process.

Read More: BBC, CNN, Reuters [paywall]

Africa

Russian Foreign Minister Sergey Lavrov met with partners in the Sahel, pledging to deepen security cooperation amid ongoing jihadist insurgencies. Lavrov met with representatives from Burkina Faso, Mali and Niger to discuss ongoing counterterrorism operations and reemphasized Russia’s commitment to securing the Sahel. According to Russian state media, a memorandum of understanding was signed with the Burkinabe foreign minister to establish a framework for regular consultation between Russia’s Ministry of Foreign Affairs and the Alliance of Sahel States (AES). In addition, the parties discussed unspecified military and technical cooperation agreements, though the scope of any future assistance remains unclear. Russia’s Africa Corps has failed to recapture territory taken by insurgents in Mali.

Moscow has also expressed interest in renewing counterterrorism operations in Mozambique. Following talks with the AES, Lavrov met with the Mozambican President and offered support to fight Islamic State militants in the country’s Cabo Delgado province. The Wagner group had previously deployed to the province in 2019 but withdrew after sustaining heavy casualties.

Despite battlefield losses in Mali, Russia’s outreach underscores continued efforts to position itself as the preferred security partner for African governments. The US has made some gains in resuming security cooperation with Niger, transferring non-lethal military equipment in May. However, Washington continues to face distrust from AES members, obstructing intelligence sharing and security cooperation. Russia remains an influential actor despite tactical failures and rising unpopularity of the Africa Corps among civilian populations. However, whether Moscow can translate its diplomatic commitments into sustained operational gains remains uncertain.

Read More: Business Insider Africa, Africa News, RT, US Embassy in Niger

Geoeconomics

The Federal Reserve has named 15 outside advisers to lead five task forces that could reshape how the central bank analyzes the economy, communicates policy, and manages its $6.7 trillion balance sheet. The communications group, led by former Bank of England governor Mervyn King, former Brazilian central-bank chief Arminio Fraga, and former Treasury official Peter Fisher, will review how the Fed explains decisions under uncertainty, including its use of forward guidance, quarterly rate projections, and post-meeting communications. Former Fed governor Jeremy Stein, former Reserve Bank of India governor Raghuram Rajan, and Harvard economist Karen Dynan will examine the costs and financial-stability implications of the Fed’s balance-sheet regime. Separate panels will study whether faster private-sector and real-time data can improve policy decisions; how artificial intelligence could affect productivity, employment, wages, and inflation; and whether the Fed needs to rethink how it identifies and responds to inflation. The independently operating groups will receive support from Fed staff and are expected to begin producing findings in the fall, with most recommendations due by the end of the year.

The review is the clearest institutional expression yet of Chair Kevin Warsh’s call for “regime change” at the Fed. Warsh has already shortened the FOMC’s policy statement, removed guidance about the likely direction of rates, declined to submit his own interest-rate projection, and argued that the central bank’s large bond portfolio gives it too much influence over credit allocation and financial markets. This membership is broader and more establishment-oriented than an “outsider” reform commission, suggesting Warsh is trying to build intellectual and institutional support for lasting changes rather than impose them unilaterally on a Federal Open Market Committee whose consent he will still need.

Read More: Reuters [paywall], Board of Governors of the Federal Reserve System, Competitive Enterprise Institute

Disruptive Technology

Eight NATO members launched the Hybrid Alliance Layered Operations in Space (HALO) initiative. Germany, Finland, Canada, Denmark, Norway, Sweden, the Netherlands, and Türkiye agreed to link their military satellites into a “mega-constellation” to enable shared high-speed communications and missile tracking. This partnership is not an industrial tie-up or combined satellite project, but rather an information-sharing venture that combines NATO’s non-US space capabilities in a bid to achieve independent space-based intelligence. Canada is well-integrated into NORAD, the aerospace warning and control mission for the Arctic; Germany’s Rheinmetall and Finland’s ICEYE have previously announced a joint venture in a bid to supply the Bundeswehr’s space-based intelligence constellation; and Türkiye’s booming defense industry has included a sprint toward a sovereign space launch capability.

HALO intends to overcome the costs and coverage of single-nation satellite fleets, but could also run into a collective action problem. Within NATO, the US enjoys a de facto monopoly on space launch capabilities and low-Earth orbit satellite connectivity. Moreover, NATO Europe is not equipped to defend against anti-satellite offensive capabilities, such as jamming or interception. IISS predicts that NATO Europe will have to spend an additional $25 billion from current plans to close the capability gap with the US. Fiscal heavyweights like Germany or efficient industrial bases like Türkiye would likely have to take on an additional burden, which could increase distrust over time. Notably, France and the UK are not included in HALO as of yet.

Read More: NATO, Breaking Defense, IISS

Energy

The US, South Korea, and Japan have agreed to work together on small modular reactors (SMR). The agreement, which the three countries signed on the sidelines of the NATO summit in Ankara, foresees cooperation on deployment of SMRs to third countries. The agreement has an initial focus on the Indo-Pacific region to help partner countries meet their energy needs, according to the US State Department. The US will also allocate over $10 million in new funding for the Department of State’s Foundational Infrastructure for Responsible Use of Small Modular Reactor Technology (FIRST) Program.

This is the second US announcement of a new energy initiative with Indo-Pacific partners in recent months. In May, the US, Australia, India, and Japan, all of which make up the Quad group, signed an agreement on maritime security, port infrastructure, and energy to increase their cooperation in the region. The Indo-Pacific energy security initiative, which is part of the larger agreement, is intended to promote more resilient regional fuel and energy supply chains. The US plans to host a Quad energy security summit this year.

Russia and China are also working on SMRs both domestically and to deploy in other countries. Russia broke ground on a project in Uzbekistan that will include 2 SMRs alongside two larger units, and in 2025 China also intended to begin commercial operations at an SMR in 2026.

Read More:Reuters [paywall], US State Department, World Nuclear News, US News, Reuters [paywall], Oilprice.com

Transnational Crime and Corruption

Mexico announced an official investigation into the US’ alleged involvement in the capture of Sinaloa Cartel leader Ismael “El Mayo” Zambada García. According to the US, in July 2024, Zambada was kidnapped in Mexico by a rival drug trafficker and flown across the border to Texas, where he was “gifted” to US authorities prior to plea negotiations for the rival trafficker. US authorities have strenuously denied that they knew about, encouraged or assisted in the kidnapping. In a Wednesday press conference, Mexico’s attorney general alleged that new evidence pointed towards US involvement in the kidnapping, which would have violated Mexican sovereignty. Mexican authorities cited, in part, a museum plaque for the plane that transported Zambada describing that FBI agents “executed” the arrest of Zambada using the plane. Mexico also alleged that their investigators were denied access to the plane that transported Zambada.

The allegations are part of a rhetorical campaign between Mexico and the US over anti-cartel policy. Mexico has accused the US of conducting anti-drug special operations in its territory without permission. In April, CIA agents died in an accident while reportedly dismantling a drug lab in Chihuahua without informing Mexico City of their presence. The US has claimed that Mexico has not done enough to combat drug traffickers and that it has failed to confront political corruption from drug money.

Read More: The Guardian, El Pais [paywall], New York Times [paywall]

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Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Ian Cameron examines the 2026 NATO Summit in Ankara.

NATO’s 2026 Ankara Summit Projects Conflict Rather Than Unity

By Ian Cameron

^{"NATO Flags at the Riga Castle - Latvia (53870034739)" by Tony Webster is licensed under CC BY 2.0.}

NATO’s summit in Ankara successfully avoided major blowups and ended with a generally positive summit communique, but it also struggled in its overarching aim to demonstrate the alliance’s unity. NATO is attempting to adapt to a new strategic environment in which the US redirects attention to Asia and Europe takes on operational management. Simultaneously, NATO is reckoning with elevated levels of internal tension and unpredictability brought on by conflicts between Washington and other members of the alliance, which are challenging transatlantic cohesion.

In Ankara, European leaders confronted American leadership still focused on Iran, Greenland, and Europe’s perceived lack of progress on defense investment. At the same time, allies successfully reaffirmed support for Ukraine and announced new defense procurement deals. These dual outcomes reaffirm downside risks in NATO’s predictability and planning, as well as a lack of common vision about where the transatlantic relationship is going. However, some upside risks are also present, such as industrial projects enabled by increasing defense spending across Europe, and warming towards Türkiye, the summit’s host.

In today’s full analysis:

• Managing Tension and Projecting Unity

• Outcomes From the Summit

• Risks and Opportunities

Read the Full Report Here

Europe

Moscow has implemented a ban on diesel exports until the end of July, reflecting the seriousness of the fuel shortage caused by Ukraine’s escalating long-range strikes. Ukraine has struck up to 22 oil refineries since the beginning of 2026, including the Omsk oil refinery last week, the country’s largest, which is located about 2,500 km from the front lines. Ukraine’s strikes reflect a change in capability: FP-1 drones designed by Ukraine defense contractor Fire Point have redesigned a wing to act as an additional fuel tank, allowing drones to travel as much as 3,400 km. Ukraine has also scaled production. Russia intercepts an average of 600 Ukrainian drones per day, but some inevitably get through air defenses. As a result, up to 30% of Russia’s oil refining capacity has been taken offline, causing hours-long lines at fuel pumps. Russia has announced it will import as much as 400,000 tons of fuel per month to fill its current deficits.

Ukraine’s strategy is to increase the costs of war for Russians at home to compel negotiations. Ukrainian President Volodymyr Zelenskyy tweeted that “Russians must feel that their state is waging this war.” However, Russia’s government will aim to stabilize the diesel market through supply agreements with Mongolia and India. In the meantime, Russia will scramble to improve air defenses near oil and gas infrastructure within range of Ukrainian long-range strikes, but covering an expansive amount of territory will take time. Russia’s diesel imports will intensify a global supply glut, increasing costs for EU states too.

Read More: OilPrice.com, Politico, Financial Times [paywall], Institute for the Study of War

Middle East

Iraq agreed to US demands to halt the flow of dollars to Iran-backed militias as part of the process of restarting regular US dollar shipments. The US suspended shipments of cash, generated by Iraq’s oil revenues and routed through the Federal Reserve Bank in New York, in April in a bid to pressure Baghdad to curtail the actions of Iran-backed militias and Iran-aligned groups in Iraq. Dollar-denominated salaries for Iran-backed members of the Popular Mobilization Forces, a patchwork of militias brought under state control in the postwar period, and the black market have been a significant source of dollars for Iran following US sanctions. Baghdad reportedly agreed to take steps to stop Iran from obtaining dollars from currency exchange businesses and salary payments.

The move represents a westward shift for Baghdad amid immense pressure from the US to distance itself from Iran. The US made its preferences in Iraqi government formation this spring unusually clear: President Trump’s public disapproval of contender Nour al-Maliki as too close to Iran ultimately contributed to the confirmation of political outsider Prime Minister Ali Al Zaidi. The US-Iraq relationship has often been seen as a necessary evil in Iraq, where Iranian influence and the memory of postwar occupation weigh heavily. But al-Zaidi’s efforts to curb dollars to Iran and a policy focus on bringing weapons under state control are a step towards Washington, which wants to curb Iranian influence and make operating in Iraq safer for US companies.

Read More: Wall Street Journal [paywall], Reuters [paywall], Middle East Institute

Asia-Pacific

India and Australia on Thursday adopted a new defense and security cooperation, pledging to deepen military interoperability and coordination, maritime security, and defense industry collaboration as uncertainty in the region builds. The agreement comes just days after Beijing flexed its growing military might on Monday, launching a nuclear-capable missile into international waters for the first time with little warning to global leaders, underscoring the country’s expanding capabilities and broader nuclear ambitions. While both Canberra and New Delhi have stepped up engagement with Beijing in recent years, relations remain limited and tensions simmer.

The two leaders also announced Australia will begin selling uranium to India for “peaceful purposes,” finalizing the safeguards for their nuclear cooperation agreement signed over a decade ago. India seeks to incorporate more nuclear power into its energy mix, up from 8 GW today to 100 GW in 2047, as demand skyrockets in the energy-hungry country. New Delhi is preparing for a peak power demand of 300 GW next year to support its data centers and AI usage. Prime Minister Modi on Wednesday emphasized the need for more homegrown capabilities and clean energy supplies to protect India’s sectors from global uncertainties. For Australia, which is home to one of the world’s largest uranium reserves despite not having nuclear power generation of its own, rising global demand for nuclear energy is set to strengthen its position as a key supplier of uranium.

Read More: Nikkei Asia [paywall], Prime Minister of Australia, New York Times [paywall], Reuters [paywall], Center for Strategic and International Studies

Americas

Colombian President-elect Abelardo de la Espriella called off transition talks with outgoing President Gustavo Petro on July 7. De la Espriella, whose victory in the June 21 presidential runoff marked the latest instance of Latin America’s shift to the right, is set to take office on August 7. De la Espriella suspended the transition process after accusing the Petro administration of corruption, stating that evidence of irregular contracts came to light during the initial working sessions. Petro has refused to accept the election results, alleging fraud. However, Ivan Cepeda, the ruling party candidate who ran against de la Espriella, has conceded the election.

Immediately following the suspension of the transition process, Petro’s lawyer filed a criminal defamation complaint against a member of de la Espriella’s transition team. Petro’s team also formally requested that the Office of the Inspector General and the Office of the Comptroller General oversee the transition as guarantors. These institutions would be responsible for facilitating the transfer of information and appointing officials to attend transition sessions. However, Petro has also expressed support on X for publicly broadcasting all transition meetings. De la Espriella’s team has accused Petro of turning the transition into a spectacle.

Read More: El País, NBC, Voz

Africa

Nigeria opened its first lithium processing plant, reflecting a broader push by African governments to capture greater domestic value from the sector. Among the largest refineries in Africa, the plant is expected to process 3 million metric tons of lithium per year.

The project highlights Nigeria’s growing geopolitical importance in the race for critical minerals, and particularly access to processed lithium. Abuja’s expanding lithium sector attracted approximately $1.3 billion in Chinese investment between 2023 and 2025, reinforcing Beijing’s influence over emerging supply chains. At the same time, the US is seeking to strengthen its own access to lithium. The US Defense Logistics Agency recently announced plans to expand its stockpile of battery-grade lithium carbonate through a five-year contract worth up to $300 million to procure 16,000 metric tons. The contract has yet to be awarded, but could include Nigeria and other lithium producers on the continent, intensifying economic competition between Washington and Beijing.

Read More: Semafor Africa, Business Insider Africa, Yahoo Finance

Geoeconomics

The IMF’s new global GDP report shows a world economy that has absorbed the Iran war better than initially feared. The Fund lowered its 2026 global growth forecast to 3.0%, down from 3.1% in April and below the 3.5% average of 2024 and 2025, while raising its 2027 forecast to 3.4%. The downgrade is being driven by higher energy prices, trade fragmentation, and the direct hit from the Middle East conflict, but the damage has been cushioned by strategic oil releases, higher non-Gulf energy production, renewable energy, and continued demand tied to AI and technology investment. The IMF now expects global inflation to rise to 4.7% this year before falling to 3.9% in 2027, with energy prices still about 25% above their prewar level and the baseline assuming the Strait of Hormuz begins reopening in mid-July and normalizes by March 2027.

The country-level revisions show a continued divergence between developed and emerging economies. The US forecast was left unchanged at 2.3% growth in 2026, supported by AI-related investment and lower direct exposure to Gulf energy, while China was upgraded to 4.6% after a strong first quarter, and South Korea received a large upgrade because of AI hardware exports. India was trimmed slightly to 6.4% but remains one of the fastest-growing major economies. The euro area was cut to 0.9%, Japan was lowered to 0.6%, and emerging and developing economies were trimmed to 3.8%, with the sharpest hit in the Middle East and Central Asia, where the IMF cut 2026 growth by 1.2 percentage points to 0.7%.

Read More: Reuters [paywall], IMF

Energy

Oil prices spiked following the resumption of US hostilities with Iran. Futures for Brent crude shot up more than 7%, reaching almost $80 a barrel immediately after Trump stated that the US-Iran ceasefire deal was over. Ships are also starting to turn back from attempting to transit the Strait of Hormuz amid renewed attacks on vessels, such as damage to a Qatari LNG tanker and a Saudi-flagged crude oil tanker. However, some shipping appears to still be going through the Strait despite the resumption of American military activities and Iranian attacks on ships. The US also revoked its sanctions waiver for Iran to sell its oil.

Oil prices are still much lower than they were at their peak several months ago. At the height of the conflict, prices moved up to over $110 per barrel, and they have been trending downwards since May. While there had been fears of a supply glut due to demand destruction and increased supply from the Middle East, the flare-up between the US and Iran has the potential to undercut that possibility.

Renewed fighting around the Strait of Hormuz adds more unpredictability to global energy markets. US President Trump has opted not to restart the US blockade of Iran, and he has expressed openness to continued talks. However, the lack of stability around the Strait of Hormuz creates problems for shipping in the region. Each round of new attacks on commercial shipping undermines confidence in the Strait’s reopening and complicates the potential for future recovery of shipping. Continued instability could further drive interest in alternative energy options, expansion of production away from the Middle East, and demand for energy producers like Russia, which are not subject to closures of the Strait of Hormuz or US-Iran fighting.

Read More: Wall Street Journal [paywall], Reuters [paywall], Reuters [paywall], Oilprice.com

Transnational Crime and Corruption

US, Canadian and European authorities charged 37 members of an India-based criminal organization with conducting international smuggling, extortion and political assassination campaigns. The organization was allegedly led by Lawrence Bishnoi, a high-profile Indian gangster. According to the Department of Justice press release, Bishnoi “directed political assassinations, murders, shootings, extortions, kidnappings, drug trafficking, human smuggling, and other crimes” from his prison cell. The extortion campaigns often targeted Indian diaspora communities by threatening family members still in India. US prosecutors hinted that they may request India to extradite Bishnoi and other senior gang members to the US to ensure he could no longer manage the criminal organization from prison.

The Bishnoi enterprise was accused of murdering and attempting to murder Sikh activists based in the US and Canada. In June 2023, a Bishnoi operative murdered the Sikh political separatist Hardeep Singh Nijjar outside a gurdwara in a suburb of Vancouver, British Columbia. Then-Prime Minister Justin Trudeau accused senior Indian government officials of directing Bishnoi to conduct the assassination, setting off a severe diplomatic crisis between Canada and India. In October 2024, US prosecutors charged an Indian intelligence agent with conspiring with Bishnoi gang members to murder another Sikh activist in New York City. The charges announced this week did not reference alleged Indian government connections with Bishnoi’s gang, which India has strenuously denied.

Read More: US Department of Justice, New York Times [paywall], CBC

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Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Samuel Bloebaum examines illicit gold mining in Venezuela.

Illicit Gold Mining in Venezuela: Reform or Regression?

By Samuel Bloebaum

^{“Landslide Gold mine Lourenço Amapá Brazil“ by Redes Sociais is licensed under CC BY 3.0.}

This post is the first in a series on global trends in the illicit gold trade.

Several US-designated criminal and militant organizations, including Tren de Aragua, Cartel de los Soles, and the Colombian National Liberation Army (ELN) control significant territory in mineral-rich southern Venezuela, centered on the country’s Bolívar state. The illicit local mining sindicatos enjoyed over a decade of protection from these organizations, as well as from corrupt Venezuelan political and military officials. The mining activities primarily produce gold, which is used by the illicit actors for sanctions evasion, bribes and funding further illicit activities. The US, having captured Nicholas Maduro in January, has engaged in military cooperation and economic support with the new government in Caracas to disrupt entrenched organized crime by targeting illicit mining operations. If these efforts are successful, the new Venezuelan government could become more stable and local criminal organizations could lose a key source of revenue and money laundering. However, if implemented haphazardly, the reforms could further entrench corruption networks in the country’s mining industry.

In today’s full analysis:

• Venezuela’s Gold Economy: State-Enabled Anarchy

• The US Response: Carrot and Stick

• Potential Pitfalls

  Read the Full Report Here

Global

The US-Iran ceasefire abruptly collapses, jeopardizing early recovery gains for Gulf supply chains. On Monday and Tuesday, Iran fired missiles at three tankers transiting the Strait of Hormuz along the Omani route, precipitating US retaliation, Iranian escalation and the US decision to revoke the Iranian oil sanctions waiver. Markets responded to President Trump’s remarks that he believed the ceasefire deal to be over. Brent crude futures jumped by 5% to $78 a barrel. A small number of commercial ships successfully transited through the strategic waterway on Tuesday, but nowhere close to pre-war levels. The resumption of fighting will strengthen incentives to diversify supply chains away from the Persian Gulf.

Neither the US nor Iran was satisfied with less-than-expected benefits of the ceasefire. While attacks were scaled down, the Strait of Hormuz was not reopened to the free flow of shipping and the US sanctions waiver did not unlock all roadblocks for Iranian oil exports. In an attempt to exert control, Tehran’s new Persian Gulf Strait Authority mandated that ships must follow a regime-established route that passes along the Iranian coast and that alternatives are prohibited and required vessels to carry Iranian-approved insurance. Western maritime insurance providers were not allowing coverage for vessels to Iranian ports, interpreting this would fall outside the scope of the US sanctions waiver.

While US-Iran talks continue for a negotiated settlement, they are most likely stalled, creating incentives for both parties to reinstate pressure tactics. The ceasefire was to last 60 days (through mid-August), during which time negotiations were expected to focus on Iran’s nuclear program, US sanctions, reparations, among other issues. It is likely no coincidence that this latest escalation coincides with the mass funeral of the late Iranian Supreme Leader Ayatollah Khamenei, as a show of continuing defiance and strength.

Read More: Wall Street Journal [paywall], OilPrice.com, Reuters [paywall]

Europe

Reform UK leader Nigel Farage announced yesterday that he will stand in a by-election amid a parliamentary probe into his party’s financial disclosures. Farage allegedly failed to disclose a £5 million donation in April 2024, before he entered Parliament but during the 12-month period in which he must report “parliamentary or political activities.” Farage stated that the donation is meant to be a personal gift at his discretion, such as for personal security, and therefore did not need to be reported; however, he may have used the funds for Reform UK’s offices and staff. The parliamentary probe into the matter is ongoing and would not have a severe legal effect; at worst, it could cause a parliamentary sanction and trigger a by-election for Farage’s constituency.

By triggering a by-election outright, Farage is seizing the initiative to obfuscate a parliamentary sanction and reaffirm a democratic mandate. He called the by-election a “people versus the establishment” referendum. Moreover, Farage may seek to utilize the mini-campaign to pressure Andy Burnham, the presumptive successor to Keir Starmer as Prime Minister, to call snap elections. However, the move will not stop the parliamentary inquiry. Moreover, most parties announced they will not participate in the Clacton by-election, likely clearing the way for Farage’s re-entry to Parliament and depriving Reform UK of extra oxygen.

Read More: BBC, Deutsche Welle, Politico

Middle East

Saudi Arabia appears to be blocking payments to Emirati accounts, escalating the growing bilateral rift. The Financial Times reported on Tuesday that several sources had reported that payments from Saudi banks to UAE-based accounts belonging to individuals and businesses had been returned or indefinitely blocked since May, with no explanation. The blocking of financial flows threatens to disrupt one of the most important economic relationships in the Gulf, and intensifies the two countries’ growing strategic divide.

UAE-Saudi division has grown over misalignments on Israel, oil policy, Yemen and other proxy conflicts. The dispute broke into the open with a public spat over Emirati backing of a Yemeni secessionist group that seized territory from the Saudi-backed internationally recognised government in December. The picture fractured further with the UAE’s exit from OPEC last month, seen as a direct snub against Riyadh. But tension is based on longstanding economic competition as both countries seek to diversify away from oil, strategic misalignments in Yemen, Somalia, Libya and elsewhere, and the UAE’s alliance with Israel.

Further public animosity could threaten the regional economic order and the US’ relationships with two of its most important Gulf allies. The rivalry has affected regional economic flows before, such as with a Saudi law requiring companies to relocate regional headquarters to the Kingdom or the snarling of cross-border trade in 2021 following new Saudi import restrictions. Further division could make it more difficult for businesses to engage in the two largest regional economies and for the US to manage its critical defense and strategic relationships.

Read More: Financial Times [paywall], Middle East Eye, Semafor, Arab Gulf States Institute

Asia-Pacific

Chinese-built AI models are gaining traction among US companies due to their cost efficiency and a narrowing performance gap with leading US models. As businesses contend with rising token costs from frontier AI systems, open-source and open-weight models—many of the most capable of which are developed by Chinese firms—have become an increasingly attractive alternative. At the same time, a growing body of evidence points to rapid improvements in the performance of Chinese-built models, with many now believed to trail leading US frontier models by only a matter of months.

Beyond advances in AI model development, China is pushing ahead with plans to develop its vertically integrated domestic AI ecosystem. DeepSeek’s reported efforts to develop its own AI chip exemplify this strategy of reducing dependence on foreign semiconductor suppliers while strengthening China’s homegrown AI ecosystem. Beijing also appears increasingly willing to treat frontier AI as a strategic national asset. Recent reports indicate Chinese authorities are considering restricting overseas access to the country’s most advanced AI models, with access potentially tiered according to model sensitivity. Tighter state oversight could introduce new supply chain and geopolitical risks for US firms relying on Chinese AI services.

Read More: CNBC, Reuters [paywall], Reuters [paywall], US-China Economic and Security Review Commission, Economist [paywall], Center for Strategic and International Studies

Americas

On July 7, the UN General Assembly voted to debate US sanctions on Cuba by an overwhelming majority. In total, 136 votes were in favor of proceeding with the debate, while nine votes were against and 30 were abstentions. In the resulting session, US Ambassador to the UN Michael G. Waltz defended the US policy towards Cuba, insisting that “communism never worked,” while Cuba’s foreign minister Bruno Rodriguez accused the US of committing “genocide” against the Cuban population. The US embargo on Cuba was criticized by various regional blocs including ASEAN, the Africa Group, and the Group of 77 and China. Several European countries, including Germany, abstained from the vote. The session was the second deliberation on the embargo this year, but it did not result in a resolution condemning the US policy.

Cuba experienced its third nationwide blackout of this year on July 6. Power was partially restored the following day. Two total blackouts previously occurred within a week in March. The energy crisis has fueled public protests in a country where dissent is harshly punished by the ruling party. Angry residents banged pots in the street on Tuesday night, demanding that the government “turn on the lights.” The country remains under an effective US blockade on energy shipments. US pressure on the island seeks to force the island’s authoritarian government to implement economic reforms. Last month, Cuba’s National Assembly passed a broad set of 176 market-oriented reforms focused on opening the economy for private enterprise.

Read More: UN News, Miami Herald [paywall], CNN, BBC

Africa

The Africa Finance Corporation has secured $753 million to support completion of the US-backed Lobito Corridor railway project. The project aims to upgrade existing railway lines and build new ones connecting copper and cobalt mines in the DRC and Zambia to Angola’s Atlantic Port of Lobito. Since 2023, the US has committed over $4 billion to the railway, making the project one of Washington’s primary instruments of economic statecraft in Africa.

The latest funding marks a significant step in advancing the project, which Washington views as integral to countering China’s entrenched influence in Central Africa. Chinese companies led previous rail infrastructure projects in the region, cementing Beijing’s influence over critical mineral supply chains running through the Copperbelt. If successfully completed, the Lobito Corridor project is expected to increase the railway’s transportation capacity tenfold to 4.6 million metric tons and reduce the cost of transporting critical minerals by up to 30%. The financing also follows the successful shipment of copper through the corridor to a Belgian refinery in June, underscoring the strategic value for Western states seeking to diversify critical mineral supply chains.

Read More: International Railway Journal, Reuters [paywall], US International Development and Finance Corporation, Business Insider Africa, Atlantic Council

Geoeconomics

President Trump today ordered US officials to halt trade with Spain. Speaking at the NATO summit in Ankara, Trump cited Spain’s refusal to meet the alliance’s new 5% defense-spending target and Madrid’s unwillingness to support US operations in the Iran war. The order follows months of tension after Spain resisted US use of Spanish airspace and jointly operated bases, and it targets a country that is not a major US trade adversary but part of the EU single market. Spain’s government downplayed the threat, arguing that bilateral commerce is driven by private companies and that trade policy is handled at the EU level.

Spain enters the dispute from a position of relative economic strength. The Bank of Spain expects the economy to grow about 2.3% this year, well ahead of the eurozone, largely driven by tourism: the government expects a record 100 million foreign tourists in 2026. Spain has also become one of the EU governments most willing to deepen commercial ties with China while openly challenging Washington, further driving a wedge between the two nations. As a result, Spain has become one of Europe’s most attractive destinations for Chinese greenfield investment, especially due to its lower-cost EU production base, port access, and access to the single market.

Read More: Reuters [paywall], OECD, CSIS

Disruptive Technology

Canada anticipates buying Type 212CD submarines developed by ThyssenKrupp Marine Systems (TKMS), a procurement that could range between $20 billion and $30 billion before maintenance costs. The procurement occurs under the Canadian Patrol Submarine Project (CPSP), which seeks to deploy up to 12 Arctic-capable submarines, including four by 2034. This will replace and expand Canada’s current fleet of four Victoria-class vessels, which reach the end of their operational life by the mid-2030s. Contract negotiations are still ongoing, meaning that Canada could still turn to the runner-up bid, South Korea’s KSS-III submarine. The Type 212CD’s diamond hull and non-magnetic material make the vessel stealthier to sonar-based radar systems. The Type 212CD is diesel-powered but integrates hydrogen fuel cells to extend dive times without surfacing. As part of the deal, TKMS is reportedly exploring investment in redeveloping Canada’s Port of Churchill Manitoba, a heavy torpedo plant, and a dedicated space launch complex in Canada.

The choice of a German-Norwegian system over a South Korean system is also a deliberate choice for defense industrial coupling. The announcement coincides with the start of the Ankara NATO summit, where Canada seeks to prove its commitment to the alliance’s 5% NATO pledge. Sustained defense spending will require a defense industrial ramp-up across the alliance, benefitting from coordinated joint procurement. However, Canada’s bet on an industrial ramp-up comes with risks. Germany’s other maritime projects, such as the F126 frigate, have faltered amid subcontracting delays, consortium bickering, manufacturing errors, bureaucratic hurdles, and division of shipyard work. Such obstacles could occur with the Type 212CD consortium and Canadian partners too.

Read More: Breaking Defense, CBC, Financial Times [paywall]

Energy

Germany is planning reforms to incentivize the construction of new gas power plants. The government in Berlin has agreed to increase the maximum allowable bid per megawatt for tenders (€244,000 from €173,000). Germany intends to tender 12 gigawatts of energy capacity in 2026, and Berlin is emphasizing gas-generated energy. Simultaneously, Germany announced plans for a new state-owned strategic gas reserve, which will store up to 10% ​of Germany’s total gas storage capacity. Berlin plans to begin filling the reserve in 2027, with purchases spread out across several years.

Any new gas plants will need to be in line with Germany’s carbon neutrality goals. The gas plants are part of Germany’s move to phase out coal, and Germany has set a goal to become carbon neutral by 2045. Therefore, all new gas plants will have to be convertible to use hydrogen energy. Despite that, the plans have elicited criticism from some political groups in Germany, such as the environmentalist Greens.

Read More: Reuters [paywall], Reuters [paywall], Bloomberg [paywall], Tagesschau

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Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Dan Arbell examines the impact of 1000 days of war for Israel.

1000 Days of War: Israel’s Security Reckoning

By Dan Arbell

^{"Israel/Lebanon border.JPG" by mockstar is licensed under CC BY-ND 2.0.}

On July 2, 2026, Israel marked 1,000 days since Hamas's October 7, 2023 attack—a painful and transformative period for Israel’s security and strategic outlook. As ceremonies were held across the country, the Israeli Defense Forces (IDF) released data on the war's scope: Since October 7, more than 31,000 projectiles were fired at Israel: over 20,000 from Lebanon, 10,000 from the Gaza Strip, and more than 1,000 from Iran. Those numbers alone demonstrate the transformation of what began as a single-front catastrophe into a multi-front war that altered the security map of the Middle East. While Israel has decisively asserted its military superiority, no front has resulted in the kind of alternative political arrangement that would represent a durable strategic victory for Jerusalem and Prime Minister Netanyahu.

In today’s full analysis:

• The Gaza Strip: Tactical Dismantlement, Strategic Ambiguity

• Lebanon: From Deterrence Collapse to Forced Restructuring

• Iran: A Decapitation Without a Collapse

Read the Full Report Here

Global

Despite increasing amounts of oil transiting the Strait of Hormuz, the global energy market is expected to remain volatile in 2026. The surge of oil may not find immediate buyers because of demand destruction. China’s internal demand dropped sharply during the war, and there is uncertainty around how much is a temporary adaptation to the supply disruption and how much reflects a structural shift in consumption. For consumers, this means that an oversupplied market will eventually lead to sustained easing of prices for refined products, but not right away.

Countries that drew down on strategic stockpiles will gradually seek to refill them once the price of oil drops to a new post-war equilibrium. The International Energy Agency (IEA) estimates that since the start of the Iran war, drawdowns on global inventories of crude averaged around 2.4 million bpd. The IEA expects global oil demand to fall by 1.1 million bpd in 2026 and predicts growth to rebound to 2 million bpd in 2027 as trade flows normalize and lower oil prices and an improving economic outlook contribute to the recovery.

The Iran war will have long-lasting impacts on the energy market. Strong non-OPEC production growth (think US LNG exports and UAE exit from OPEC) and market shifts to diversify away from dependence on Gulf oil will persist. Additionally, improving energy efficiency and the gradual shift toward domestically generated cleaner energy sources will exert downward pressure on global prices.

Read More: Yahoo! Finance, International Energy Agency, World Economic Forum

Europe

France’s Court of Appeals opens the possibility for Marine Le Pen to run for President in 2027, but she may step aside anyway. In March 2025, Le Pen—France’s presidential hopeful and leader of the far-right National Rally party—received a five-year ban on politics after a first instance verdict against embezzling European Parliament funds for domestic political initiatives. Today, the second-instance verdict has commuted the sentence to a year with an electronic tag and three years suspended; her political ban was narrowed to 15 months, allowing her to run in April 2027. However, Le Pen has previously stated that she would not want to run with an electronic tag and seek authorization for every campaign event. If she holds firm on that line, then the National Rally’s “Plan B” candidate—Jordan Bardella, the 30-year-old social media firebrand—would go ahead as planned. Polling last month suggests that Bardella would win 37% of the vote in the first round, about 15 points higher than his nearest challenger.

Le Pen will hold a press conference at 8 PM local time (2 PM EST), possibly clarifying her decision on whether she will run. If she decides to run, it will be her fourth candidacy for President. Her experience on the campaign trail is an advantage over running the relatively inexperienced Bardella, and it would likely preserve the National Rally’s populist and blue-collar brand. Meanwhile, a Bardella candidacy may move the party toward the center, potentially at the expense of the base. For example, Bardella has suggested that pension reform is needed to balance the budget. Bardella has also rejected a French withdrawal from NATO’s command structure during Russia’s operations in Ukraine.

Read More: BBC, Politico, The Economist [paywall]

Middle East

Iran’s Islamic Revolutionary Guard Corps fired missiles at two commercial ships near the Strait of Hormuz. The IRGC reportedly warned ships transiting the Strait that they could come under attack, but it is not clear why the ships – one of them a Qatari LNG tanker – were targeted. The attacks are a re-escalation of hostilities in the Strait following over a week of smooth sailing, and could inflame tensions yet again. Analysts are also seeing the strikes as a demonstration of distance between the government in Tehran and the harder-line IRGC, which may object to negotiating terms.

The attack could complicate the recovery of shipping traffic in the Strait, but the US appears committed to continuing negotiations. President Trump has previously been reported as saying that he is committed to negotiations for as long as they take (even past the 60-day deadline in August) and that he would not reignite full hostilities unless an American is killed. These strikes may be the type of low-level conflict acceptable under the tenuous ceasefire as the US seeks a deal and Iran seeks to cement its control of the Strait of Hormuz.

Read More: AP News, Wall Street Journal [paywall], Wall Street Journal [paywall], The Jerusalem Post

Asia-Pacific

Pakistan’s prominence as an international mediator is growing, with Reuters reporting on Monday that Islamabad has been facilitating talks between Libya’s rival eastern and western factions since late last year. Combined with Pakistan’s ongoing diplomatic efforts between the US and Iran, its role in Libya further strengthens its image as a credible facilitator and, if sustained, could bolster its international standing and create long-term strategic opportunities.

The report states Pakistan would play “an active role” in ensuring US Senior Advisor Massad Boulos’ vision of a power-sharing arrangement in Libya would be implemented. The proposal would recognize Abdulhamid Dbeibah, leader of Libya’s western government, as prime minister and Saddam Haftar, representing the eastern faction, as chairman of the presidential council for a 36-month transitional period before national elections are held. For Pakistan, this oversight and implementation role is a step up from its more shuttle diplomacy support between the US and Iran to a key stakeholder in international peace settlements.

As in its mediation between Tehran and Washington, Pakistan maintains ties with both Libyan factions, giving it a degree of access many other external stakeholders do not equally possess. This would position Islamabad as a more balanced and capable intermediary, not wholly aligned with either camp. Pakistan nevertheless appears closer to Haftar, with Field Marshal Syed Asim Munir having repeatedly met him this past year and Islamabad signing a landmark arms deal worth $4 billion with the Libyan National Army to modernize its air and land capabilities.

Read More: Reuters [paywall], Stepwise Risk Outlook, Atlantic Council, Anadolu Agency

Americas

Brazilian presidential candidate Flavio Bolsonaro has asked the Trump administration to delay proposed 25% tariffs on Brazilian goods until after Brazil’s October elections. The Trump administration proposed the tariffs in June shortly after Bolsonaro visited the White House. The justifications for the proposed tariffs included alleged trade violations, illegal deforestation, and unfair payment practices. The proposal came as a surprise to Brasilia, after President Luiz Inácio Lula da Silva visited the White House in May and said that US-Brazil relations were improving. The timing of the proposed tariffs, closely following Bolsonaro’s visit, also led to allegations that the Bolsonaro family had invited the US pressure on Brazil.

Flavio Bolsonaro’s filing to the Office of the U.S. Trade Representative, which became public on July 3, argues that the tariffs would help Lula electorally. Lula responded by accusing Bolsonaro of treason against Brazil. The issue has added to the political polarization in Brazil, with 47% of Brazilians agreeing with Lula’s accusation that Bolsonaro has pushed the US to impose the tariffs. On the other hand, 35% believed Bolsonaro’s assertion that he had tried to prevent them. Washington has until July 15 to finalize the decision of whether to impose the tariffs.

Read More: Al Jazeera, Reuters [paywall], Valor International

Africa

Russian state nuclear energy corporation Rosatom and Rwanda held their first meeting on joint nuclear energy cooperation. As Kigali seeks to significantly expand electricity generation capacity by 2050, it signed a roadmap with Rosatom to jointly develop Small Modular Reactors (SMRs). The agreement reflects Moscow’s broader strategy of expanding its long-term influence in Africa through high-profile economic and technological partnerships. Rosatom has signed civilian nuclear cooperation agreements with over 20 African countries, intensifying geopolitical competition with the US.

The agreement follows recent initiatives from Russia to expand its diplomatic footprint. Moscow is preparing to open new diplomatic missions in the Gambia, Liberia, Togo, and Comoros. Russian state media reported that an ambassador to the Gambia was recently appointed.

Moscow’s diplomatic and economic engagement serves wider geopolitical objectives by enhancing its strategic reach and diplomatic leverage across the continent. Ports in Togo and Comoros are strategically located in the Atlantic and Indian Oceans, respectively, while engagement with the Gambia includes opportunities for cooperation in sectors such as hydrocarbons and agricultural commodities. Moreover, Russia’s diplomatic network is intended to cultivate political support in multilateral forums such as the UN.

Read More: AllAfrica, IntelliNews, TASS News, Africa Intelligence, The Jamestown Foundation

Geoeconomics

Today’s forced-labor Section 301 hearing is the next step in the Trump administration’s effort to revive its tariff power. USTR has proposed additional duties on imports from 60 economies after finding that major trading partners have not done enough to block goods made with forced labor from entering their markets. The proposed structure has two tiers: a 10% tariff on countries such as Canada, Mexico, the EU, the UK, Taiwan, Malaysia, Bangladesh, and Pakistan that USTR says have partial laws, plans, or trade-agreement commitments, and a 12.5% tariff on countries such as China, India, Japan, South Korea, Vietnam, Australia, and New Zealand that USTR says lack adequate forced-labor import prohibitions or enforcement. If USTR finalizes the forced-labor duties before the temporary Section 122 tariffs expire on July 24, the hearing could help bridge the administration from emergency tariff authority to a lasting framework.

The hearing will likely focus on whether tariffs are the right remedy. Trading partners are expected to argue that the US is using forced-labor concerns as a new legal basis for broad tariffs after earlier emergency tariffs were struck down, while companies will likely focus on exemption requests, the difficulty of supply-chain tracing, and the risk of duplicative compliance regimes. The exemptions indicate the focus of the investigation is not just about worries over forced labor: USTR carved out many products, including goods already covered by Section 232 tariffs, USMCA-compliant Canadian and Mexican imports, oil, rare earths, pharmaceuticals, aircraft parts, beef, coffee, and other food products.

Read More: United States Trade Representative, Reuters [paywall], Brookings Institute

Disruptive Technology

Yesterday, Illinois Governor JB Pritzker signed a law requiring AI developers to contract third-party AI safety audits, potentially a new standard for American AI safety regulation. The bill, which passed the Illinois legislature nearly unanimously, models a regulatory framework based on New York’s RAISE Act, which requires frontier developers to publish safety frameworks to prevent catastrophic risks and report material risks to an AI-dedicated office. The bill also requires developers to create anonymous internal reporting processes to enable whistleblowing, as well as contract third-party auditors to ensure the developers’ compliance with safety and transparency frameworks. Violations of the bill could result in fines up to $1 million in the first infraction and $3 million in subsequent infractions.

The Trump administration is pushing for a federal AI regulatory framework that supersedes a patchwork of state laws. The White House has endorsed supply-side measures to enable AI dominance—such as equipping American workers with AI skills, increasing energy production and grid interconnections to manage a data center build-out, and codifying a ratepayers’ pledge from tech companies—while also pushing for kids’ safety and protecting artists’ intellectual property rights. The White House has pushed to pre-empt or pressure states to remove AI laws viewed as burdensome; meanwhile, it is tinkering with its own AI security approach through increased coordination with AI developers on pre-release screening.

Read More: CBS News, yahoo!news, Chicago Sun Times

Energy

Global oil markets are reckoning with a potential supply glut. As prices stabilize at prewar levels and shipping in the Strait of Hormuz recovers, the amount of oil available on the global market is potentially set to overshoot demand. Kuwait and the UAE have sharply boosted production, and OPEC+ is likewise set to raise production. However, the continued availability of oil coming out of the Middle East will depend to some extent on developments between the US and Iran.

A potential oil supply glut has important consequences for geopolitical developments in Europe and the Middle East. Russia has benefited from the price spikes caused by the Strait of Hormuz’s closure, but oversupply and falling prices would likely complicate Russia’s already strained fiscal position. For its part, Tehran’s sanctions relief only extends for 60 days according to the Memorandum of Understanding between the US and Iran, which gives a limited time to export. The rate at which countries begin refilling their strategic reserves also plays a role in Tehran’s leverage over global energy markets.

Read More: Wall Street Journal [paywall], Reuters [paywall], Reuters [paywall], CNBC, CNBC, Moscow Times

Transnational Crime and Corruption

Ukrainian authorities arrested a serving military intelligence (HUR) officer and a former law enforcement officer for murdering the lead suspect of a bombing in Monaco. Anastasiia Berezovka, a Ukrainian refugee residing in Germany since March 2022, allegedly detonated an explosive device in the entrance of a Monaco apartment building on June 29. The bomb injured Ukraine-born businessman Vadim Ermolaev, his partner, and their teenage son. Berezovka fled on foot to France, drove in a rented car to Germany, and returned to Ukraine on July 1. She then contacted the HUR agent and former police officer, who had previously made transfers to Berezovka’s cryptocurrency and bank accounts. The intelligence officer admitted to Ukrainian police that he killed Berezovka, and the authorities later discovered a “torture chamber” in the former police officer’s home.

Berezovka’s target was subject to Ukrainian sanctions. Vadim Ermolaev emerged in the late 2000s as one of the 100 richest people in Ukraine. Through his Alef conglomerate, he was a prominent property developer and is credited with leading projects in the center of the Ukrainian city of Dnipro. He renounced his Ukrainian citizenship in 2019 and became a Cypriot national, alleging unfair treatment by Ukraine’s tax and justice system. Ukraine sanctioned Ermolaev in late 2023 for allegedly doing business with Russian companies in occupied areas of Ukraine and paying taxes to the authorities there.

No motive for the attack has been conclusively established. Monegasque authorities noted that the sophistication of the bomb suggested that Berezovka had accomplices. French, German, and Ukrainian media reported that authorities were investigating potential involvement by Ukrainian intelligence or organized crime. Ukrainian prosecutors stated that the HUR agent who killed Berezovka claimed to have been acting outside of his professional capacity. In May 2026, Ermolaev’s son reached a €8.5 million plea deal with Estonian authorities to settle charges that he ran a €100 million scam call center network in Ukraine.

Read More: The Times, Financial Times [paywall], Financial Times [paywall], Der Spiegel, Riviera Radio

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The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

For more detailed analysis on related issues, see Steptoe’s International Compliance Blog. For information on industry-specific monitoring or bespoke services, please contact the team here.

By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Kiki Dong, Sophia Yang, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

The US Ratchets Up Secondary Sanctions against Brazilian FTO Primeiro Comando da Capital

“São Paulo - Air View“ by roger4336 is licensed under CC BY-SA 2.0.

On July 1, the US Department of the Treasury designated two Brazilian nationals, three Brazilian companies, and one Portuguese company alleged to have laundered money for Primeiro Comando da Capital (PCC). Treasury alleges that São Paulo-based Victor Henrique de Oliveira Shimada, alongside his associate Stella Stefanie Nunes Henrique de Oliveira, laundered more than $30 million in illicit proceeds on PCC’s behalf. Some of this money was reportedly laundered between crypto wallets from Florida and São Paulo. Shimada faced law enforcement action in Brazil in July 2025 when one of his companies, Victory Trading Intermediacão De Negocios Cobrancas E Tecnologia Ltda (included in OFAC’s action), was found to be in a money laundering network for a Brazilian football club called the Corinthians, one of whose agents allegedly worked for the PCC.

Shimada, Stella, and their companies are designated pursuant to EO 14059, which authorizes OFAC to issue blocking sanctions on individuals who facilitate illicit drug trafficking. This is the third action against PCC under EO 14059 since their original designation in 2021, but it is the first action taken since PCC was declared a Foreign Terrorist Organization (FTO) in May 2026, alongside another Brazilian gang called Comando Vermelho (CV). This quick action following PCC’s FTO designation suggests that the US is allocating greater attention to fighting Brazilian organized crime under its regional counterterrorism framework.

PCC is the largest of Brazil’s organized crime networks. The group emerged in 1993 in São Paulo’s Taubaté prison as a response to the 1992 Carandiru prison massacre. It recruited widely across Brazilian prisons and coordinated two major uprisings in 2001 and 2006, with the latter resulting in over 150 deaths and shutdowns of 70 different prison facilities. By the 2010s, the PCC had grown sufficiently large to become a transnational criminal organization, primarily generating revenue through trafficking cocaine, arms, and proceeds for other criminal groups, in addition to membership dues. The PCC is a relatively centralized group with a General High Command (Sintonia Final Geral) and a leader, Marcos Willians Herbas Camacho, aka “Marcola.” In the past, Brazilian law enforcement has attempted to separate PCC leaders into different prisons to fragment the group, but this enabled the PCC to facilitate alliances with other local criminal gangs across Brazil. Nonetheless, personal differences among leaders have grown in recent years, and the PCC’s long-time truce with CV has broken down, resulting in direct competition and occasional skirmishes.

The designation of the PCC as an FTO followed a May 27 meeting between US President Donald Trump and Brazilian presidential contender Flávio Bolsonaro, the son of imprisoned former President Jair Bolsonaro. Since March 2026, Flávio’s poll numbers—once on par with President Luiz Inácio Lula da Silva—have dipped due to implication in the unfolding Banco Master scandal, a Ponzi scheme that has engulfed much of Brazil’s political and financial elite. Specifically, Flávio tried to raise private funds from Daniel Vorcaro, the former head of Banco Master who also has an alleged history of bribing Jair Bolsonaro’s chief of staff.

Brasília interprets Flávio’s meeting with Trump, which occurred just two weeks after Lula’s state visit to Washington, as political interference. Lula decried the FTO designation at the time as a slippery slope for US military action against Brazilian gangs, which he believes should be fought by police action. He may also fear the optics of Flávio quickly extracting policy wins on crime, an advantageous issue. Nonetheless, the FTO designation of PCC and CV has had a negligible effect on polling so far, with Lula maintaining a roughly 10-point lead in a run-off. Nonetheless, a lot could change before elections in October.

Washington would prefer Flávio Bolsonaro as president, which could open the door to closer law enforcement or joint military action against Latin American criminal groups. Moreover, a Bolsonaro presidency could consolidate a right-wing shift in the Latin American region, which could increase US FDI at the expense of competitors like China and enable closer commercial alignment, including on critical minerals. Four of Brazil’s neighbors have elected right-wing governments in the past year, and Venezuela has aligned with the US, making Brazil a left-wing island in South America. While the Bolsonaros’ pro-business policies helped Jair Bolsonaro win power in 2018, the ongoing fraud scandal that has ensnared Flávio Bolsonaro is shaking investor confidence.

On the other hand, the incumbent Lula favors a highly regulatory economic policy, recently targeting tech companies with decrees increasing liability for illegal content. Moreover, in a scenario where Lula wins re-election, Brazil would continue to lean non-aligned rather than towards Washington. By placing its bets with Flávio, the US risks damaging bilateral trust. If the US opts to continue tightening controls against the PCC, it may risk doing so without coordination with Brazilian authorities, potentially undermining policy effectiveness. Such a strategy risks reaffirming Lula’s bent toward nonalignment. For example, this could mean a closer Brazil-China bilateral trade relationship, which reached a record $171 billion in 2025.

Secondary sanctions against PCC highlights the wide risk of exposure to secondary sanctions for companies operating legitimately in Latin America, where PCC and CV have infiltrated diverse economic sectors and have embedded themselves in local supply chains. Secondary sanctions actions could increase, demanding an elevated compliance environment. Moreover, businesses could be caught in the geoeconomic escalation ladder under a scenario of degrading relations. If Brazil attempts to stymie US actions it perceives as unilateral, then the US could respond with additional tariffs under the Section 301 investigation against forced labor. In 2025, the Trump administration briefly imposed 50% IEEPA tariffs on Brazil due to internal proceedings against Jair Bolsonaro (this authority has been struck).

US Developments

OFAC Targets Cartel Fuel Smuggling

On June 30, 2026, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned two Mexican nationals and nine entities allegedly tied to a fuel theft scheme linked to the Cártel de Jalisco Nueva Generación (CJNG), a cartel that was previously designated as a Specially Designated Global Terrorist (SDGT) and Foreign Terrorist Organization (FTO).

In a statement accompanying the designations, Secretary of the Treasury Scott Bessent said that OFAC’s actions highlight the “extent to which Mexico’s cartels are expanding beyond traditional drug trafficking to generate revenue for their criminal organizations[.]” Specifically, OFAC said that Mexico-based cartels such as CJNG have in recent years become increasingly involved in the theft, adulteration, and smuggling of hydrocarbons, such as fuel and oil, in schemes colloquially referred to in Mexico as huachicol. These schemes generally involve fuel theft in Mexico, the smuggling of crude oil into the United States, and the smuggling of fuel from the United States into Mexico to evade Mexico’s import tax on fuel (known colloquially as huachicol fiscal).

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) previously issued an Alert on the financial typologies and red flags indicative of huachicol and huachicol fiscal in May 2025. Since this Alert was published, FinCEN reports that it has received over 160 Suspicious Activity Reports (SARs) that detailed over $7 billion in suspicious activity, sent primarily between the United States and Mexico and often involving Mexican cartels, most commonly CJNG. Alongside OFAC’s designations, FinCEN issued a Supplemental Alert providing additional guidance for industry on identifying and reporting the financial typologies and red flags of these schemes.

OFAC noted that its designations were the result of a collaborative effort between itself and FinCEN, and were coordinated with a South Texas Homeland Security Task Force-led investigation. OFAC previously targeted huachicol-related activity through designations on September 10, 2024, and May 1, 2025.

US Designates Ecuadorian Gang

On July 1, 2026, the Department of State designated Chone Killers, an Ecuadorian gang alleged to have committed numerous attacks on civilians and Ecuadorian government officials, as a SDGT and FTO.

The designation comes months after the United States conducted joint strikes with Ecuadoran forces inside Ecuadoran territory to combat drug trafficking. It also follows the designation of two more Ecuadoran gangs, namely Los Choneros and Los Lobos — the former of which Chone Killers was said to have originally been a faction — as SDGTs and FTOs on September 4, 2025.

OFAC Continues to Remove Russia-Related Designees from SDN List

OFAC has continued to remove multiple individuals and entities previously designated under Executive Order 14024 from the List of Specially Designated Nationals and Blocked Persons (the “SDN List”).

· On June 29, 2026, OFAC removed two Turkish nationals and five Turkish entities from the SDN List. These persons were previously designated on December 12, 2023, and June 12, August 23, and October 30, 2024 for allegedly participating in Russian procurement networks for computer numerical control (CNC) machine tools and semiconductor components.

· On June 30, 2026, OFAC removed four India-based entities previously designated on October 30, 2024, namely RRG Engineering Technologies Private Limited, Lokesh Machines Limited, Galaxy Bearings LTD, and Shaurya Aeronautics Private Limited, for, among other things, allegedly exporting microelectronics, machine tools, roller bearings, and radar equipment to Russia.

Treasury did not provide a statement on why these individuals and entities were removed.

UK Developments

HMRC Announces Compound Settlement for Russia Sanctions Breaches

HM Revenue & Customs (HMRC) has announced that Petrofac Facilities Management Limited (“PFML”) has agreed to a compound settlement of £569,157.07 in relation to breaches of the Russia (Sanctions) (EU Exit) Regulations 2019 committed during the divestment of its Russian operations between 2022 and 2023. HMRC found that PFML breached prohibitions on making sanctioned industrial goods available to a person connected with Russia and for use in Russia, as well as restrictions on providing technical assistance in relation to those goods.

The case was brought to HMRC’s attention through a voluntary disclosure, with PFML subsequently cooperating fully throughout the investigation. The enforcement action is notable for being the first time that HMRC has named a company entering into a compound settlement, bringing HMRC in line with other UK sanctions enforcement agencies. HMRC has stated it intends in future, where appropriate, to include naming as a condition when offering a compound settlement for strategic export and sanctions offences.

OFSI Publishes Findings from Ownership and Control Call for Evidence

OFSI has published an update summarising responses to its recent call for evidence on the ownership and control test under the UK financial sanctions regime. The exercise forms part of the UK Government’s wider review of sanctions implementation and enforcement and focused on the concept of “hypothetical control”, an area where firms have consistently reported practical compliance challenges. OFSI received 42 responses, with many highlighting that these issues arise most frequently under the Russia sanctions regime, particularly in relation to state-linked entities, politically exposed persons and trust structures.

Respondents reported that assessing potential control based on limited information often leads to increased compliance costs through enhanced due diligence, external legal advice and delayed business decisions. While OFSI acknowledged the value of the evidence received in informing future policy, it emphasised that the current legal framework remains unchanged and firms must continue to assess ownership and control in accordance with existing sanctions legislation and published guidance. The update indicates that the UK Government will continue considering options to provide greater clarity while monitoring further feedback from industry and international partners.

EU Developments

EU Council Updates Sanctions Listing Targeting the Proliferation and Use of Chemical Weapons

The EU Council announced new listings under the sanctions framework targeting the proliferation and use of chemical weapons. Six Russian individuals were added to the sanctions list due to their involvement in the development of epibatidine as a chemical weapon. The listings follow the confirmed presence of epibatidine in samples taken from Alexei Navalny after his death in a Russian penal colony in February 2024, and the conclusion that poisoning with epibatidine was highly likely to have caused his death.

The newly designated individuals include scientists and researchers from the Signal Scientific Centre, a researcher from the State Scientific Research Institute for Organic Chemistry and Technology, and a colonel serving as head of the department for organizing scientific work and preparing scientific staff at the Military Academy for Radiological, Chemical and Biological Defense. According to the Council, the designated individuals conducted research relating to the synthesis, testing, and applications of epibatidine. The Council considered these activities to constitute involvement in the development of epibatidine as a chemical weapon.

Individuals listed under the sanctions framework are subject to an asset freeze, a prohibition on the provision of funds or economic resources, and a travel ban within the EU. As a result of the update, restrictive measures against the use and proliferation of chemical weapons now apply to a total of 31 individuals and 6 entities.

EU to Discuss Additional Designations Targeting Entities Supporting Russia’s Military-Industrial Complex Following Kyiv Strikes

Following Russia’s large-scale missile and drone strikes against Kyiv on July 2, EU High Representative Kaja Kallas announced that she would propose the designation of additional entities supporting Russia’s military-industrial complex. Kallas further stated that the EU must continue increasing pressure on Russia in response to attacks against civilians. According to reports, the proposed designations would target five entities involved in the development and production of components that enhance the capabilities of Russian drones, including Shahed- and Geran-type unmanned aerial vehicles (UAVs).

The proposed listings were reportedly shared with EU ambassadors on July 2 and are expected to be discussed further by Member States on July 8, ahead of the Foreign Affairs Council on July 13.

CJEU Judgement on the Interpretation of “Operator” Under Russia Sectoral Sanctions

The Court of Justice of the European Union (CJEU) delivered its judgment in Case C-67/25, following a request for a preliminary ruling from the Regional Court of Saarbrücken, Germany, concerning the interpretation of Article 2f(1) of Council Regulation (EU) 833/2014. The provision prohibits operators from broadcasting, or otherwise enabling, facilitating or contributing to the broadcasting of content produced by designated Russian media outlets. In the judgment, the Court examined whether a natural person operating a website that broadcasts such content free of charge and is funded solely through donations falls within the concept of “operator” under Article 2f(1).

The Court clarified that the concept of “operator” must be interpreted broadly and includes any natural or legal person responsible for broadcasting or making available the content covered by Article 2f(1), irrespective of whether the activity is economic in nature.

The Court also confirmed that Article 2f(1) seeks to prevent the dissemination of propaganda and disinformation by media outlets under the direct or indirect control of the Russian leadership. It further considered that limiting the prohibition to commercial operators would undermine the effectiveness of the restrictive measure, as persons deriving no income from operating a website would remain free to disseminate prohibited content.

Asia-Pacific Developments

New Zealand and Australia Execute Search Warrants in Investigation of Suspected Russia Sanctions Violations

On June 29, 2026, New Zealand Police, the New Zealand Customs Service, the Australian Border Force, the Australian Federal Police, and the Australian Sanctions Office announced coordinated enforcement action in connection with an ongoing investigation into suspected breaches of New Zealand’s Russia Sanctions Act 2022 and Australia’s autonomous sanctions relating to Russia. The investigation, which commenced in December 2025 following a referral from New Zealand’s Ministry of Foreign Affairs and Trade, concerns the activities of three companies suspected of exporting prohibited assets in contravention of sanctions restrictions. Authorities executed a series of search warrants in Auckland, Christchurch, and Melbourne, and New Zealand Police also obtained a restraining order over a residential property in Christchurch under the Criminal Proceeds Recovery Act 2009.

China Adds 40 Japanese Entities to Export Control List and Watch List

On June 29, 2026, the Ministry of Commerce of the People’s Republic of China (MOFCOM) announced the addition of 20 Japanese entities to its Export Control List pursuant to the Export Control Law of the People’s Republic of China and the Regulations on Export Control of Dual Use Items. According to the announcement, the listed entities were deemed to be involved in activities that enhance Japan’s military capabilities. The designated entities include Japan’s National Institute for Defense Studies, several defense-related research institutes, and affiliated companies of major Japanese corporations. As a result of the designation, Chinese exporters are prohibited from supplying dual-use items to the listed entities, and organizations and individuals outside China are prohibited from transferring or providing China-origin dual-use items to them. Separately, MOFCOM placed an additional 20 Japanese entities on a watch list requiring enhanced scrutiny of proposed exports involving dual-use items.

Japan Reaffirms Support for Ukraine and Commitment to Sanctions on Russia

On July 1, 2026, Japanese Foreign Minister Toshimitsu Motegi met with Ukrainian Foreign Minister Andrii Sybiha in Tokyo and reaffirmed Japan’s commitment to supporting Ukraine amid Russia’s ongoing invasion. At a joint press conference following the meeting, Motegi stated that Japan would continue its close cooperation with Ukraine to further strengthen bilateral ties. The two ministers also signed a joint document concerning human resources development assistance for Ukraine, and Sybiha expressed appreciation for Japan’s continued political and economic support. The meeting forms part of Japan’s broader policy of supporting Ukraine and maintaining sanctions against Russia in coordination with the international community.

Philippine President Criticizes China’s Sanctions on Defense Secretary Teodoro

On July 4, 2026, Philippine President Ferdinand Marcos Jr. described China’s sanctions against Defense Secretary Gilberto Teodoro Jr. as “very unhelpful,” stating that the measures do not advance discussions between the Philippines and China regarding their maritime disputes and instead risk increasing tensions. Marcos made the remarks following China’s June 2026 decision to impose sanctions on Teodoro, his spouse, and child, including entry bans covering mainland China, Hong Kong, and Macao, and prohibitions on transactions with Chinese individuals and entities. While acknowledging that the measures were within China’s prerogative, Marcos stated that the sanctions could impede communication between the two countries’ defense establishments and complicate efforts to manage tensions in the South China Sea.

Global

US President Trump reengages on ending the Ukraine War on the eve of the NATO summit. Over the weekend, Trump spoke by phone with Russian President Putin for over an hour, offering to help end fighting and broker a peace agreement. Trump also spoke with Ukrainian President Zelensky. Both Ukrainian and Russian officials characterized the discussions in positive terms. The 750-mile frontline has remained frozen since late 2024, while the air campaign with drones and missiles has escalated, with mounting human and infrastructure costs.

The Ukraine War is expected to be a top agenda item during the NATO summit, which starts on Tuesday in Turkey. With the US back peddling, the burden to keep the Ukrainian military supplied has fallen to the Europeans. Member states are struggling to keep up with Ukrainian needs, evidenced by growing gaps in Ukrainian air defense effectiveness. Trump is expected to meet with Zelensky on the margins of the summit, but it is unlikely that Trump will change his approach of letting the battlefield create pressures to spur on negotiations.

Read More: CNBC, Euronews, International Crisis Group

Europe

German Chancellor Friedrich Merz revealed a package of 34 reforms last week to energize the German economy. Germany is projected to hit 0.5% growth in 2026, reaffirming a sluggish trend that has plagued the country since the COVID-19 pandemic. German exports have become less competitive globally due to high energy prices and China’s economy of scale in high-value exports like electric vehicles and lithium batteries. Job cuts in Germany’s industrial sectors—reaching 124,000 in 2025—adds pressure to Germany’s social programs, and negative population growth threatens pension sustainability.

The package will gradually increase the retirement age to 67 and allow pensions to increasingly invest in equity options, similar to Sweden’s pension system. Moreover, the government will raise the top tax rate from 45% to 47%, grant €10 billion in tax relief to lower-income households, accelerate electricity grid expansion to connect green and wind farms, and aim to cut 8% of the German federal workforce through digitization. One of the more controversial measures is to require workers to get doctor’s notes for sick days.

Merz hopes that a “summer of reform” can rejuvenate his coalition. Germany’s centrist coalition, often at odds on economic policy, negotiated past their differences for a year, declining in popularity to a combined 34% in the latest national polls. Meanwhile, the far-right Alternative for Germany (AfD) leads at 26%. In the eastern German state of Saxony-Anhalt, where elections will be held in September, AfD polls at 41%, possibly enough to secure an outright regional government majority.

Read More: AP, Reuters [paywall], Deutsche Welle

Middle East

Damascus postponed the long-awaited first session of its transitional parliament, planned to convene today. Syrian President Ahmed al-Sharaa made 70 presidential appointments to the parliament late last week, completing the composition of the transitional legislative body following partial elections in October. The indirect elections had produced a largely male and Sunni body, and al-Sharaa had been expected to appoint minorities and women (of which he appointed 15). The parliamentary session was set to begin today, but was unexpectedly canceled, with no reason specified.

The delay – which will also postpone elections – exemplifies Syria’s persistent challenges establishing effective, inclusive governance. Al-Sharaa’s post-militant government has struggled to exert control throughout the country and to convince Syria’s many minorities that Damascus is committed to a truly representative government. Last month, the UN reported that Syria had made no progress integrating the Druze-majority province of Sweida following a ceasefire agreement (and Sweida had not elected representatives to the transitional parliament). The postponement of the legislature is caused by and will exacerbate Syria’s messy unification process, and risks harming domestic and international confidence in the nascent government.

Read More: BBC, Al Jazeera, The Syrian Observer

Asia-Pacific

Beijing over the weekend announced its coast guard will continue to strengthen “law-enforcement patrols” in the waters east of Taiwan, underscoring a new wave of Chinese coordinated pressure on the self-governed island. Taken together with the patrols China conducted east of Taiwan last month, the East China Sea is emerging as the latest arena in which regional actors—many of which have strong economic ties to Beijing—will be tested diplomatically in how far they respond to China’s expanding maritime power projection.

​June’s patrols were launched following bilateral Japan-Philippines discussions regarding their overlapping EEZ and continental shelf claims east of Taiwan. China’s Ministry of Natural Resources on Thursday stated bilateral talks should “immediately cease” and instead be expanded to include China. Analysts argue Beijing is using the talks as a pretext to expand its law enforcement operations in the area, gradually incorporating the waters into its broader administrative claims through what has been described as a “presence as claim” strategy.

Observers have noted an uptick in Chinese coast guard operations over the past month, alongside increasingly frequent military drills around Taiwan. As of Friday, Taiwan has recorded over 110 Chinese military and Coast Guard vessels operating across the First Island Chain. While China has previously patrolled waters east of Taiwan before and routinely conducts military operations around the island, Saturday’s announcement signals an additional layer of sustained maritime pressure on Taiwan and regional actors.

Read More: New York Times [paywall], China Coast Guard, Financial Times [paywall], Reuters [paywall], Nikkei Asia [paywall], Lowy Institute

Americas

The death toll from Venezuela’s earthquakes has reached 3,342. The figures were released on Sunday by Venezuela’s information ministry, which also reported 16,470 injured and 17,345 homeless. This does not include the people who are still unaccounted for, which the UN estimated at 50,000. Nearly two weeks after the devastating twin quakes on June 24, Venezuela is still coming to terms with the scale of the destruction. While official rescue efforts are winding down as the odds of finding survivors diminish, some international rescue crews have started heading home, while others continue to hold out hope. At least 6,400 have been rescued.

On July 5, Venezuela’s 215th Independence Day, interim President Delcy Rodriguez gave a speech defending the government’s response to the catastrophe. The rescue effort has largely been led by civilian volunteers, who have openly accused the government of negligence. Outrage spread over social media networks as the ruling party sought to take control over the grassroots response, putting restrictions on relief efforts that were aligned with the opposition.

The United States has so far contributed $300 million to Venezuela’s earthquake response. The US also deployed around 900 military personnel to aid with search and rescue. John Barrett, the top US diplomat in Venezuela, has said that the US would remain engaged in Venezuela as long as necessary to address current priorities, including providing shelter and basic necessities to the population. The US Geological Survey has estimated that the total losses from the earthquakes could reach billions of dollars.

Read More: Reuters [paywall], New York Times [paywall], The Guardian

Africa

Ghana fully settled a $700 million Eurobond ahead of schedule, marking notable progress in its economic recovery. The payment is part of the country’s Eurobond Debt Exchange Programme, bringing total repayments to $2.1 billion since January 2025. After experiencing one of Africa’s worst sovereign debt crises in 2022, Ghana has stabilized inflation, strengthened the cedi, and begun rebuilding investor confidence.

Following successful debt restructuring and continued progress under IMF-backed reforms, Ghana’s economy has grown faster than expected. The country’s stronger fiscal position supports investment in mining and enhances supply chain reliability. Africa’s largest gold producer, Accra exported more than 100 tons of gold in 2025, making the country a key node in the global gold market.

Read More: Business Insider Africa, ODI Global, Africa Business Insight

Geoeconomics

The IMF is pushing back against a new form of opaque emerging-market borrowing after Nigeria arranged a $5 billion credit line with First Abu Dhabi Bank through a total return swap. The structure lets a sovereign effectively exchange its own bonds for cash, creating a collateralized loan that can look cleaner in official debt statistics than a conventional bond issue. Nigeria pledged roughly $6.7 billion of naira-denominated bonds as collateral, or about $1.33 for every dollar available under the facility, but the IMF has said it will count the full collateral amount in Nigeria’s debt stock.

Higher global interest rates are pushing developing countries to borrow debt in more complex and risky ways. Total return swaps can create hidden pressure points because if the bonds used as collateral fall in price, the borrower may face margin calls or demands for additional cash just as market conditions are worsening. Investors are also worried that early-repayment triggers and other preferential lender terms are not fully disclosed, leaving bondholders unable to assess how much senior or secured debt effectively sits ahead of them.

Similar structures have already appeared in Senegal and Angola, showing why investors are worried. First Abu Dhabi Bank reportedly has a €300 million swap with Senegal that can be called if the country’s credit rating falls below a specified level, while Angola’s government had to put up $200 million in extra collateral on a $1 billion JPMorgan total return swap because the deal was secured by $1.9 billion of Angolan government bonds whose value had declined after a bond selloff.

Read More: Financial Times [paywall], Reuters [paywall], Lazard

Disruptive Technology

Anthropic has restored access to its most powerful AI models, Mythos 5 and Fable 5, after the US Commerce Department removed licensing requirements for foreign nationals. Commerce Secretary Howard Lutnick stated that Anthropic agreed to proactively detect and report security risks and malicious activity, in addition to coordinating pre-release testing of future models. Anthropic also stated it imposed additional measures to prevent ill-intended users from accessing a suspected “jailbreak” and utilizing Fable 5 for cyber offensive purposes. Top models developed by other American AI developers are also being held from release upon further government evaluation, suggesting greater certainty toward a routinized or mandatory screening framework as AI models improve in capability.

The US government is embracing AI competitiveness as the first priority in its AI strategy. A permanent hold on top American AI models was unlikely, especially as Chinese open-source competitors—such as from Zhipu—are reportedly close to the cybersecurity capabilities of Mythos. Other software companies dedicated to AI use cases, like cybersecurity firm 360 (the developer of Tulongfeng), have utilized China’s open-source architecture to make Mythos-like cybersecurity tools. The US fears that the proliferation of AI-empowered cyber capabilities to competitors like China could cede commercial influence or complicate cyber deterrence.

Read More: CNBC, TechCrunch, Politico

Energy

Canada is taking a step forward in its plans to boost energy export capacity aimed at Asian markets. Canadian Prime Minister Mark Carney announced a plan to build a new pipeline from Alberta’s oil fields to Canada’s Pacific coast in British Columbia. Alberta Premier Danielle Smith intends to double oil output in Alberta and have the pipeline, which could carry 1 million barrels per day, finish construction by 2035. Prime Minister Carney’s government likewise intends to accelerate the construction of new LNG projects in British Columbia, which should “more than triple” Canadian LNG production. All of this is part of a larger program to develop Canada into an “energy superpower.”

Some obstacles to the pipeline project remain despite political backing from Ottawa. British Columbia’s government has historically opposed a new oil pipeline, and while British Columbia’s government has agreed not to impede the pipeline project, the pipeline will have to follow a different route than originally envisioned by Alberta. The agreement between British Columbia and Ottawa also reaffirmed Canada’s ban on oil tanker traffic off British Columbia’s north coast. Lack of certainty regarding Canada’s regulatory environment has also caused private industry to hold back from engagement in a pipeline project.

Tensions in the US-Canada relationship are driving Ottawa’s plans for energy export diversification. Currently, Canada is dependent on the US as its primary market for energy exports, with Canada sending almost all of its oil to the US and 75% of its total exports. However, under President Trump the US-Canada relationship has become more fraught, with Washington threatening to impose 100 per cent tariffs and refusing to authorize the long-term renewal of US-Mexico-Canada trade deal.

Read More: Wall Street Journal [paywall], Reuters [paywall], Reuters [paywall], Financial Times [paywall], AP

Transnational Crime & Corruption

Philippines Vice President Sara Duterte faces an impeachment trial for alleged corruption and issuing death threats.

The Philippine House of Representatives originally impeached Duterte in February 2025, but the charges were archived by the Senate after the proceedings were ruled unconstitutional. A second impeachment was approved in May 2026 for a trial in the Senate beginning today. Despite anti-Duterte politicians recently achieving control of the Senate, they are unlikely to reach the two-thirds majority needed to convict Duterte and remove her from office.

The trial is the culmination of a dispute between the Duterte and Marcos political dynasties. President Ferdinand Marcos Jr. and Duterte, daughter of former president Rodrigo Duterte, joined forces for the 2022 elections but

fell out amid a series of political disputes. Duterte claimed that President Marcos had planned to kill her and stated that she had instructed an assassin to kill the president should she die. Duterte’s supporters also accused Marcos of allowing the arrest and extradition of Rodrigo Duterte to the International Criminal Court.

Read More: New York Times [paywall], New York Times [paywall], Bloomberg [paywall], Foreign Policy [paywall]

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Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Elton Smole and Carter Spahn examines the state of the USMCA review process.

North American Trade at a Crossroads on the Deadline of USMCA Review

By Elton Smole and Carter Spahn

^{“President Trump at the Signing Ceremony for the USMCA“ by The White House is marked with Public Domain Mark 1.0.}

On July 1, 2026, the United States, Mexico, and Canada must decide whether to extend the US-Mexico-Canada Agreement (USMCA). When USMCA was initially negotiated in 2020, the parties agreed to a 16-year term. However, the US proposed a “sunset clause,” which calls for the parties to meet six years after the agreement’s implementation for review. With USMCA’s sixth anniversary now upon us, it appears unlikely that the agreement will be extended by 16 years, meaning it will enter an annual joint review process until 2036, with termination on the table. The US wants to extract additional concessions to narrow its trade deficit and avoid the transshipment of Chinese goods, while Mexico and Canada seek to broadly preserve USMCA. Amid strained US relations with its neighbors, the rocky negotiations risk a continuation of tariffs on Mexican and Canadian goods and greater uncertainty around long-term investment decisions from companies.

In today’s full analysis:

• From NAFTA to USMCA

• North American Leaders Divided on Key Revisions

• High Stakes and Emerging Risks

Read the Full Report Here

Global

The World Bank drops its target for 45% of its funding to go to climate financing. The Trump administration has pressured the international lender, arguing that the goal distorted economic decision-making and moves the bank away from its core mission. The World Bank decision came after months of negotiations, with European and developing countries supporting retaining the target and the climate action plan. However, the US holds effective veto power as the largest contributor to the bank. Significantly, the World Bank Group announced at the same time that it extended the Climate Change Action Plan, first adopted in 2016.

World Bank leadership is signaling that the drop of the planning target is unlikely to impact actual climate-related financing. Demand remains strong and the switch to a “smart development” strategic framework that targets real-world development outcomes, such as job creation, food security and adaption over migration, integrating resilience and sustainability into core lending. The new strategic framework addressed US objection by focusing on results, rather in amount of spending. The climate focus does not disappear, but is termed as “climate co-benefits” to development projects supported by the bank.

Read More: Reuters [paywall], Financial Times [paywall], World Bank

Europe

The EU and China are establishing a high-level consultative mechanism to balance the bilateral trade relationship, standing at an annual EU deficit of €360 billion. The EU’s Trade Commissioner, Maroš Šefčovič, suggested that tangible results could be seen by October across four buckets of dialogue: trade and investment balancing, export controls, intellectual property rights, and WTO reform. The first step will be setting up a mechanism to monitor trade flows and identify spikes that could warrant a ministerial-level meeting.

The agreement undertakes a cooperative managerial rather than confrontational approach. The EU is worried about the competitiveness of its industrial base, which is struggling against the economies of scale and lower energy costs of Chinese competitors. At the same time, the EU does not want to trigger Chinese export controls on critical minerals as it embarks on its own industrial policy, like the anticipated Industrial Accelerator Act (IAA), which will utilize public procurement to cultivate European champions in the electric vehicle, battery, and renewable sectors.

The dialogue gives the European Commission flexibility while EU member states settle on a China approach. The EU bloc is divided on how to engage China. Some, like France, seek greater protection of European champions, while countries like Germany favor free trade. After a European Council summit in mid-June, the Commission is reportedly drafting additional trade tools to give the bloc greater leverage in negotiations and potential escalation.

Read More: Politico, Reuters [paywall], Stepwise Risk Outlook

Middle East

President Trump was briefed on options to return to all-out war with Iran but has opted to continue negotiations, sources in the Administration told the Wall Street Journal. The briefing (and the fact that they were leaked) point both to the US’ commitment to the diplomatic path and to a desire to maintain some leverage over Tehran in the form of potential future attacks. The president has repeatedly publicly threatened to return to active conflict if Iran does not concede at the negotiating table, but the incentives to seek a deal are strong for the US, chief among them the economic shocks of a full re-closure of the Strait of Hormuz. President Trump was previously reported to say he would only return to hot conflict if an American was killed.

Trump also reportedly okayed negotiations with Iran stretching past August 18th, the 60-day deadline in the MOU. The tacit extension of the deadline gives the talks more time to work than the 60-day cap, which was already seen as quite short. However, it puts into question other elements of the MOU that are also on a 60-day timer, like Iranian commitments to provide safe passage through the Strait (already inconsistently applied) or oil and gas sanctions waivers. The Trump administration was always unlikely to restart the conflict in the thick of midterm campaigning, though, and may be allowing for an imperfect but stable ceasefire to carry through November.

Read More: Wall Street Journal [paywall], The Jerusalem Post, Time Magazine

Asia-Pacific

An Indonesian court sentenced the country’s most prominent tech tycoon to 10 years in prison on Tuesday. Nadiem Makarim, who co-founded the app Gojek, was convicted of abuse of power and causing losses to the state over a contract to purchase Google computers while Makarim was minister of education. Prosecutors alleged that the non-competitive contract cost the government around $85 million in markups.

The high-profile case has shaken investor confidence in Indonesia. Critics within Indonesia’s legal community have questioned the fairness of the trial, raising concerns about the impartiality of the country’s legal system. This comes as investor confidence has already been shaken by an uncertain MSCI review of Indonesia’s status as an emerging market, and by the policies of President Prabowo Subianto. Subianto has introduced plans to expand government control of commodities exports.

Read More: New York Times [paywall], BBC, Reuters [paywall]

Americas

Keiko Fujimori is the winner of Peru’s razor-thin presidential elections. She will take office on July 28. The results will be certified by Peru’s electoral court on Friday. Fujimori defeated leftist challenger Roberto Sánchez by just 49,641 votes, taking 50.1% of the vote. She will become the first female president of Peru after one of the closest elections in the country’s history. She will also take office during a period of deep political division, increasing crime, and profound distrust in political institutions. Fujimori has proposed a strong-handed approach to restoring order in the country, which has drawn comparisons to her father, former president Alberto Fujimori, who was imprisoned for human rights abuses committed during his rule.

Fujimori’s victory makes Peru the latest example of a broader rightward shift across Latin America. Colombia recently elected a conservative political outsider, who will take office on August 7. Chile and Bolivia have also transitioned to the right in the past year. Brazil will hold a historic election this fall, and the right-wing candidate Flavio Bolsonaro is currently embroiled in a major corruption scandal, boosting support for the incumbent leftist president Lula da Silva. Still, the overall trend has aligned much of Latin America closely with the second Trump administration.

The State Department congratulated Fujimori on her electoral victory. The statement highlighted the Trump administration’s aim of expanding collaboration with Peru on security cooperation, investment, and trade. In strengthening ties with Peru, Washington seeks to hedge against the increasing influence of Beijing in the region, which recently completed a $1.3 billion port project in Chancay, Peru.

Read More: The New York Times [paywall], The Guardian, State Department

Africa

The Democratic Republic of the Congo (DRC) is the latest African country to sign a strategic partnership agreement with Nigerian conglomerate Dangote Group, reflecting broader shifts in energy security and intra-African trade. The Dangote Petroleum Refinery has positioned Nigeria as a major exporter of refined petroleum products to African markets, particularly as import-dependent economies seek alternative fuel suppliers following supply chain disruptions from the Iran war.

Dangote Group is rapidly emerging as a strategic force reshaping Africa’s energy market through expanding cross-border partnerships and investments. The company unveiled an ambitious industrial expansion plan to increase its total refining capacity to 2.1 million barrels per day while investing an additional $46 billion in refining, cement, and fertilizer projects between 2026 and 2028. As part of this expansion, the refinery imported crude oil from the UAE for the first time, underscoring its evolution into a globally integrated refining hub.

The company is also reshaping Africa’s financial architecture by testing new sources of domestic capital for large-scale industrial development. Its planned initial public offering, expected to be the largest in African capital markets history, represents an important test of whether African investors can finance world-scale industrial assets. Success could provide a blueprint for mobilizing domestic capital to support the continent’s long-term industrialization and economic development.

Read More: Business Insider Africa, Reuters [paywall], Semafor Africa

Geoeconomics

China is expanding its export-control campaign against Japan, adding 20 Japanese entities to a restricted list that bars Chinese exporters from supplying them with dual-use goods. The new list includes Japan’s National Institute for Defense Studies, ground, naval, and air systems research centers, and multiple Mitsubishi and Kawasaki-linked defense and industrial entities. Beijing also placed another 20 Japanese entities on a watch list, meaning Chinese exporters can no longer use general licenses for those customers and must instead submit individual license applications with end-user risk assessments and written commitments that the goods will not support Japan’s military capabilities.

China is using export controls the same way the United States has used them against China: as a tool to shape security competition through supply chains. China’s Commerce Ministry said the measures are meant to curb Japan’s “remilitarization” and prevent Chinese-origin dual-use goods from strengthening Japan’s defense sector. Japan rejected the action, with Chief Cabinet Secretary Minoru Kihara calling the measures “absolutely unacceptable” and urging China to withdraw them. As a result of the export controls, Japanese companies now face added uncertainty when trying to source Chinese-origin dual-use inputs.

Read More: Associated Press, New York Times [paywall], CSIS

Disruptive Technology

The UK announces a four-year Defence Investment Plan, eyeing defense spending at £80 billion per year by 2029 and £15 billion in anticipated budget trims. The plan de-emphasizes old expensive naval systems, like Type 83 guided missile destroyers and Type 32 frigates, to place emphasis on Common Combat Vessels that act as a “mothership” for collaborative uncrewed crafts, like uncrewed missile platforms and uncrewed sensor platforms. The plan also adopts the same crewed-uncrewed teaming design for the Global Combat Air Programme, a joint venture alongside Italy and Japan. About £5 billion will be allocated to scaling production of autonomous drones, similar to those used on Ukraine’s frontlines.

The plan follows the recent resignation of Defense Minister John Healy, who wanted more funding allocated to the armed forces. Outgoing Prime Minister Keir Starmer has U-turned on efforts to improve government coffers, which has constrained the ability to invest in defense at the annual scale of comparable powers, like France and Germany. The new Defence Investment Plan will improve Starmer’s standing at next week’s Ankara NATO Summit and institutionalize the spending pledge in the next Labour government. However, the next Prime Minister, presumably Andy Burnham, will have to unlock an additional £4.7 billion to finance the full extra-budgetary £15 billion of modernization investments.

Read More: Politico, GOV.UK, BBC

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The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

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By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Kiki Dong, Isabella Rao, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

The Trump Administration is Continuing its Crackdown on Transnational Scam and Fraud Networks

^{“Phnom Pen at dusk” by Calmuziclover is marked with CC BY 2.0}

On June 23, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions against 9 individuals and 26 entities reportedly linked to the Prince Group. The US government alleges the organization to be a leading transnational criminal organization based in Cambodia. The sanctions, which were imposed pursuant to Executive Order 13581, target the Prince Group’s leadership and entities linked to them across Asia. Treasury also amended a rule from October 2025 against the Huione Group, alleged to be one of the Prince Group’s critical entities for money laundering, to cover any successor entities.

According to Treasury, cyber-enabled scam and fraud crimes cost Americans more than $10 billion dollars in 2024 and have grown over the past several years. Many of these scam operations are run by transnational criminal organizations based in Southeast Asia. While these organizations target victims of their fraud operations through various methods, they also use forced labor to man their operations by trafficking victims under the promise of legitimate work.

OFAC’s addition of new Prince Group-linked individuals and entities to the SDN list is part of a government-wide initiative across the Trump administration to target scam center groups that has been ramping up over the past year. In October 2025, Washington, in coordination with the United Kingdom, released its first tranche of sanctions against the Prince Group, sanctioning 146 entities. In January 2026, Chen Zhi was arrested by Cambodia and extradited to China following a joint US-China transnational crime investigation. Beijing had reportedly been investigating the Prince Group since 2020. In March, the White House issued Executive Order 14390 on combating cybercrime, fraud, and other predatory schemes, and in June the FBI announced Operation Riptide, a “coordinated law enforcement campaign targeting criminal actors and the key services they rely on” under the direction given by Executive Order 14390.

In conjunction with the sanctions, the US has brought a number of enforcement actions against the Prince Group. After the arrest of Chen Zhi in January, the head of the Huione Group Li Xiong was likewise arrested in Cambodia in April and extradited to Beijing.

Large seizures of cryptocurrency have also been a major element of the US’ campaign against the Prince Group. The joint US-UK action in October 2025 seized more than $14 billion worth of bitcoin, the largest known seizure of bitcoin in history. Alongside the most recent sanctions announcement, the US Department of Justice (DOJ) seized a cloud computing account used by the Huione Group’s subsidiaries, which DOJ referred to as “a part of a technological backbone” that supported the Prince Group’s activities.

Washington has worked with several international partners in its efforts to dismantle the Prince Group. The US, UK, and South Korea have all sanctioned the Prince Group, and the US has coordinated with both UK and Chinese authorities on actions against the Prince Group. Singapore and Hong Kong have also taken steps to sanction entities linked to the Prince Group. Vietnamese police caught two groups trying to set up online scam operations in the country’s north in June. Sri Lankan authorities have made more than 1,000 arrests of foreign nationals this year in raids on alleged scam centers. A raid in Colombo in June resulted in the arrests of 18 Chinese nationals and one national of Laos.

Most importantly, Cambodia, where the Prince Group is primarily based, has greatly increased its focus on combating large-scale criminal organizations based in the country, such as allowing the extradition of Prince Group leaders to China and liquidating a bank founded by Chen Zhi. Cambodia has also begun reforming its legal environment to promote fairness, transparency and efficiency in the commercial sector and to boost the country’s overall attractiveness for businesses.

Given the Trump administration’s prioritization of actions against the Prince Group and against the overall illicit scam economy, it is likely that Washington will continue to focus on combatting and dismantling groups linked to the cyber scam sphere and seizing assets that are derived from the proceeds of the alleged criminal activity. Both the FBI’s Operation Riptide and Executive Order 14390 demonstrate continued political will in this area. Washington has cooperated with international partners on these efforts, which will likely continue, and Washington may look to expand international cooperation if these groups successfully relocate their operations to other countries in the region. However, it is also possible that the administration could step up pressure on other countries and entities to take more decisive actions against transnational criminal organizations conducting scam operations as groups relocate.

US Developments

Renewed Hostilities Threaten US-Iran MOU and Negotiations

On Sunday, the US and Iran agreed to halt a series of tit-for-tat strikes that began late last week and resume talks on the Memorandum of Understanding (MOU) in Qatar on Tuesday. The renewed hostilities between the United States and Iran had threatened to sidetrack the negotiations to end the conflict. The attacks reportedly began after Iran fired on a container ship as it passed through the Strait of Hormuz and included strikes on Iranian military targets around the Strait and American assets in Bahrain and Kuwait.

Earlier in the week, on June 22, 2026, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License (GL) X, which implemented Point 10 of the MOU by generally authorizing transactions ordinarily incident and necessary to the production, sale, delivery, or offloading of crude oil, petrochemical products, or petroleum products of Iranian origin. GL X is the first implementation of a significant, but potentially temporary, shift in US sanctions policy toward Iran. We covered the legal and policy impact of the MOU and GL X in last week’s update and a recent blog post.

US Continues to Impose Sanctions on Overseas Scam Operations

On June 23, 2026, OFAC sanctioned nine individuals and 26 entities allegedly connected with the Prince Group, an organization previously designated as a Specially Designated National (SDN) and a Transnational Criminal Organization (TCO) on October 14, 2025. In a statement accompanying the designations, Secretary of the Treasury Scott Bessent said that “[t]he Trump Administration is united in its efforts to dismantle these overseas criminal enterprises, and Treasury will continue using its tools to disrupt the networks behind this egregious fraud and protect Americans.”

Separately, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed amending its October 2025 Rule, which designated the Huione Group, allegedly a supporter of Prince Group, a financial institution of “primary money laundering concern.” The proposed rule would amend the definition of Huione Group to include H-Pay Service PLC (“H-Pay”) and any successor entity, which, if promulgated, would subject H-Pay to the “special measures” imposed on the Huione Group by the October 2025 Rule, which would effectively sever H-Pay from the US financial system.

The Trump administration continues to target alleged Southeast Asia-based scam centers and their affiliates. OFAC previously imposed sanctions on individuals and entities linked to alleged scam centers on April 23, 2026, as well as May 5, May 29, September 8, October 14, and November 12, 2025.

State Department Applies More Sanctions Pressure on Cuba

On June 23, 2026, the Department of State announced sanctions against five entities and one individual to “further the Trump Administration’s comprehensive push to end the Cuban regime’s malign activities, both in Cuba and across [the western] hemisphere.”

Specifically, the State Department targeted three entities affiliated with Grupo de Administración Empresarial S.A. (GAESA), allegedly a “Cuban military-controlled umbrella enterprise,” which was previously designated on May 7, 2026; two entities allegedly involved in Cuba’s metals and mining sector; and one adult family member of Alejandro Castro Espin, who was designated on June 4, 2026. The designations were made pursuant to Executive Order (EO) 14404, which was issued on May 1, 2026, and which we covered in the May 4, 2026 edition of the Sanctions Update.

These designations follow related actions taken by the Trump administration to exert pressure on the Cuban regime on June 11, June 4, May 18, and May 7, 2026.

OFAC Issues New Sudan-Related Sanctions

On June 26, 2026, OFAC imposed sanctions against eight individuals and entities allegedly linked to procurement and recruitment networks that fuel the ongoing civil war in Sudan. According to OFAC, these networks have enabled both the Sudanese Armed Forces (SAF) and Rapid Support Forces (RSF) to expand the scale and intensity of their conflict.

Specifically, OFAC designated multiple entities affiliated with the Defense Industries System (DIS), Sudan’s largest defense enterprise, which allegedly supports arms and materiel procurement for the SAF and which was previously designated by OFAC on June 1, 2023. OFAC also imposed sanctions against three individuals alleged to be affiliated with a transnational network recruiting former Colombian military personnel to fight in Sudan for the RSF, marking the third tranche of such designations (following related actions in December 2025 and April 2026).

On the same day, the Department of State announced that it was imposing a second round of sanctions on Sudan pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act. Among other things, these sanctions were said to include “opposing loans or financial or technical assistance to Sudan from international financial institutions, further export restrictions by the Commerce Department, and a bar on Sudanese state-owned air carriers from operating in the United States.”

Treasury Sanctions Rwandan Gold Refinery

On June 25, 2026, OFAC sanctioned multiple individuals and entities alleged to be part of a network coordinating with the March 23 Movement (M23), a US and UN-designated entity, to smuggle minerals from eastern Democratic Republic of the Congo (DRC) to Rwanda.

According to OFAC, this action supports the US-brokered Washington Accords, an agreement signed by the DRC and Rwanda on December 4, 2025, intended to facilitate peace following the escalation of violence in eastern DRC in January 2025, which resulted in M23 capturing Goma, the capital of North Kivu province.

OFAC Sanctions ISIS Facilitators

On June 22, 2026, OFAC sanctioned three individuals and six entities in multiple jurisdictions for allegedly facilitating transactions on behalf of the Islamic State of Iraq and Syria (ISIS). Specifically, OFAC said that the designations target individuals and entities that enable ISIS to move funds among its regional affiliates, including through cryptocurrency.

In a statement accompanying the designations, Secretary Bessent said that the “United States will leverage every tool at its disposal to crush ISIS’s remaining capabilities and protect American lives.”

OFAC Amends Lukoil-related GL

On June 25, 2026, OFAC issued an amended Russia-related general license (GL) 131G, “Authorizing Certain Transactions for the Negotiation of and Entry Into Contingent Contracts for the Sale of Lukoil International GmbH and Related Maintenance Activities.”

We covered GL 131 in previous Sanctions Updates on November 17 and December 8, 2025. Broadly, GL 131 authorizes certain transactions related to the negotiation of and entry into contracts with PJSC Lukoil (Lukoil) or any of its affiliates for the sale, disposition, or transfer of Lukoil International GmbH (LIG) or any of its majority-owned entities, subject to certain restrictions.

GL 131G extends the term of the GL by around 30 days, from June 27, 2026, to July 25, 2026.

Alongside GL 131G, OFAC issued two amended Russia-related FAQs, which reflect the change to the license: FAQ 1224 and FAQ 1225.

OFAC Removes Multiple Russian Persons from SDN List

OFAC has continued to remove multiple individuals and entities from the List of Specially Designated Nationals and Blocked Persons (the “SDN List”) that were previously designated under Russia-related sanctions authorities.

• On June 23, 2026, OFAC removed three individuals previously sanctioned pursuant to EO 14024, namely Anton Alekseevich Krugovov, Tamara Aleksandrovna Topchi, and Natalya Vladislavovna Puzyrnikova.

• On June 24, 2026, OFAC removed seven individuals, two entities, and two vessels previously sanctioned pursuant to EO 14024.

Treasury did not provide a comment on why these individuals and entities were removed.

UK Developments

OFSI Amends Prince Group Insolvency General Licence

OFSI has amended General Licence INT/2026/9491628, which permits certain insolvency-related payments and activities involving the sanctioned Prince Group and its subsidiaries (the “Prince Group GL”). The principal amendment introduces a revised definition of “Permitted Insolvency Activities”, clarifying that payments and other actions connected with insolvency proceedings are authorised where they are carried out under the direction of, or with the consent of, an insolvency practitioner, provided they do not make funds or economic resources available to any designated person other than the Prince Group designated persons or their subsidiaries. The amended definition also confirms that the revised permissions apply only while the insolvency practitioner continues to act in that capacity.

The amendments also make consequential changes throughout the Prince Group GL by expanding the scope of authorised persons able to rely on the licence, including insolvency practitioners, designated Prince Group entities and subsidiaries, and updating the associated notification and record-keeping requirements. The Prince Group GL otherwise continues to facilitate the orderly administration of insolvency proceedings involving the Prince Group while maintaining safeguards to prevent funds or economic resources from being made available contrary to the Global Human Rights Sanctions Regulations 2020. Parties intending to rely on the Prince Group GL should review the amended version carefully to ensure compliance with the updated permissions and conditions.

OFSI and OFAC Publish Joint UK–US Sanctions Guidance

OFSI and OFAC have published joint guidance providing a comparative overview of the UK and U.S. sanctions regimes. Produced under the UK–US Enhanced Partnership following an in-person meeting between the two authorities in London in January 2026, the guidance is intended to help businesses understand the key similarities and differences between the two frameworks. It compares core aspects of each regime, including sanctions lists, licensing processes, reporting obligations, record-keeping requirements and broader compliance expectations.

Alongside the guidance, OFSI has published a blog highlighting the continued success of the UK–US Enhanced Partnership, which has now entered its fifth year. The blog explains that the initiative is intended to maximise the effectiveness of sanctions, minimise unintended consequences and make sanctions easier for businesses to understand and implement through closer cooperation between the two authorities. The publication of the comparative guidance underscores the increasing alignment between OFSI and OFAC and provides a practical resource for organisations managing cross-border sanctions compliance programmes.

OFSI Clarifies Amended Lukoil International General Licence via New FAQ

OFSI has published new FAQ 196 following its recent amendment to General Licence INT/2025/8031092, which permits the continuation of business involving Lukoil International GmbH and its subsidiaries (the “Lukoil GL”). The amended licence removed the previous requirement for funds made available, directly or indirectly, to or for the benefit of Lukoil International GmbH or its subsidiaries to be paid into a frozen account. The new FAQ clarifies the practical effect of this change and provides additional guidance for businesses relying on the Lukoil GL. Importantly, OFSI confirms that the amendment does not permit funds to be made available to or for the benefit of PJSC Lukoil, the UK designated Russian parent company. The FAQ therefore distinguishes between the treatment of Lukoil International entities operating under the licence and the continuing asset freeze applicable to PJSC Lukoil. Businesses intending to rely on the Lukoil GL should review both the amended licence and FAQ 196 carefully to ensure they understand the revised permissions and continue to comply with the Lukoil GL’s conditions.

EU Developments

EU Council Renews Economic Sanctions Against Russia

On June 25, the EU Council renewed the restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine for another year, until July 31, 2027. The decision follows the agreement reached by EU leaders at the European Council summit on June 18-19 to prolong the economic sanctions against Russia for an additional twelve months.

The shift from the previous six-month renewal cycle to a twelve-month period reduces the frequency with which unanimous approval by all 27 Member States is required to maintain the sanctions, thereby limiting recurring opportunities for individual Member States, such as Hungary and Slovakia in previous renewal rounds, to exert leverage or delay the renewal of the measures.

The sanctions regime, first introduced in 2014, covers key sectors of the Russian economy through sectoral restrictive measures targeting trade, financial services, energy, and dual-use goods and advanced technologies. The restrictive measures have been significantly expanded through successive sanctions packages, adopted in response to Russia’s war of aggression against Ukraine.

EU Council Reviews Sanctions Listing Under South Sudan Regime

The EU Council recently concluded its periodic review of the list of persons subject to restrictive measures under the South Sudan sanctions regime and determined that the designation of one individual should be maintained. Specifically, the Council confirmed that Michael Makuei Lueth, former Minister for Information and Broadcasting and currently Minister of Justice and Constitutional Affairs, remains subject to restrictive measures, while updating the statement of reasons underpinning his designation. The revised statement confirms Makuei Lueth’s ongoing obstruction of the political process in South Sudan, including interference with the 2015 Agreement on the Resolution of the Conflict in South Sudan (ARCSS) and the 2018 Revitalized ARCSS (R‑ARCSS), as well as more recent conduct restricting political and democratic space in 2025.

The restrictive measures under Decision (CFSP) 2015/740 include an asset freeze, a prohibition on making funds or economic resources available, and a travel ban within the EU.

EU Council Renews Sanctions Against Haiti

The EU Council extended the restrictive measures against Haiti under Council Decision (CFSP) 2022/2319 until July 29, 2027. The sanctions regime currently targets nine individuals and one entity responsible for threatening the peace, security or stability of Haiti, or for undermining democracy or the rule of law in Haiti. Designated individuals and entities are subject to asset freezes and a prohibition on making funds or economic resources available. In addition, designated individuals are also subject to a travel ban within the EU.

Asia-Pacific Developments

China Retaliates Against US Blacklists with Procurement Ban and Export Controls on Defense-Linked Firms

On June 22, 2026, China announced a series of sanctions-related measures targeting US companies. The Ministry of Finance barred government procurement entities from purchasing products manufactured by 46 designated US firms, including Raytheon Missiles & Defense, while exempting US-invested companies operating in China. Separately, the Ministry of Commerce added 10 US entities, including Red Cat Holdings, Inc., Teal Drones, Inc., IMSAR, Jaia Robotics, Inc., Ball Aerospace & Technologies Corp., Oshkosh Defense, MP Materials Corp., and USA Rare Earth, Inc., to China’s export control list, prohibiting exports of Chinese dual-use items to those firms. China reportedly said the measures were a response to the US Department of Defense’s recent expansion of its Chinese Military Companies List, adding major firms such as BYD and Baidu.

Russia Urges South Korea to End North Korea Sanctions and Halt Pressure Campaigns

Russia sharply criticized South Korea’s regional security policy and sanctions stance, according to statements from the Russian Foreign Ministry and reporting by NK News. On June 25, 2026, Russian Deputy Foreign Minister Andrei Rudenko told South Korean Ambassador Lee Seok-bae that Seoul was aligning with Western “anti-Russian” actions and urged it to abandon pressure and sanctions against North Korea, arguing that joint military exercises with the United States near the DPRK were increasing tensions on the Korean Peninsula. Russian Foreign Ministry spokesperson Maria Zakharova echoed the criticism, warning that recent South Korea-US naval and air drills conducted near North Korean waters could undermine regional security. The remarks came after South Korea joined G7 and European leaders in condemning Russia–North Korea military cooperation and calling for North Korean denuclearization.

Global

Bank for International Settlements warns that an AI investment bubble could damage the global economy. The Brussels-based watchdog organization, a central bank of central banks, monitors the global economy and issues warnings about systemic risks. In its annual economic report released yesterday, it warns that disappointing returns on the massive investment in the tech sector could trigger a sudden pullback in financing, leading to a protracted investment bust. The current investment exuberance is similar to previous technology breakthroughs that attracted capital in excess of market capacity, such as the dotcom boom of the 1990s.

AI investment appetite is being fed by technology companies raising hundreds of billions of dollars to fund AI projects. Analysts are pointing to the SpaceX $25 billion bond sale right after its IPO as a signal that the market has entered into “bubble territory.” While the BIS report notes the upside risks that AI could raise productivity significantly, enabling companies and economies to grow, an investment bust could endanger financial stability. The interplay of record-high public debt with the increasing role of highly-leveraged hedge funds creates a new sovereign-financial stability nexus and poses growing financial stability risks. Governments will have less room to respond to future recessions or crises and need to take steps now to strengthen financial stability.

Read More: Financial Times [paywall], BIS Annual Economic Report, World Economic Forum

Europe

EU member states approved the revised Turnberry trade truce on Friday, but lingering tensions loom over the deal. On Thursday, the US opened the comment period for a Section 301 investigation into Germany’s pharmaceutical sector after a draft law, aiming for a speedy adoption in the summer, would mandate pharmaceutical cost reductions for patients covered by public insurance. US Trade Representative Jamieson Greer suggested that Germany may be underpaying pharmaceutical companies and shifting the burden of financing R&D to American consumers. Another trade hotspot is among digital service taxes (DSTs). Although there is no formal Section 301 investigation into European DSTs, a broad investigation into the EU’s Digital Markets Act and Digital Services Act could potentially encompass DSTs as a form of discrimination against American companies. US President Donald Trump threatened 100% tariffs on European countries on Friday if they implement or enforce DSTs.

The European Commission has the right to suspend the trade truce under the revised Turnberry deal if the US imposes new taxes above the 15% ceiling. The Commission stated it could respond “swiftly and decisively” if Trump were to violate the terms of the Turnberry deal or threaten the EU’s regulatory autonomy. Successive US administrations have criticized the EU’s DSTs and digital regulations, but differences have not disrupted the broader $1.5 trillion trading relationship.

Read More: AP, Deutsche Welle, Financial Times [paywall]

Middle East

The US and Iran agreed to halt attacks after a weekend of tit-for-tat strikes. The flare-up of violence started with an airstrike (unclaimed, but almost certainly Iranian) on a shipping vessel transiting the southerly, Omani route through the Strait of Hormuz, against Tehran’s orders to use the northern Iranian route. From Thursday to Sunday, the US and Iran exchanged attacks on Iranian military targets around the Strait and US assets in Bahrain and Kuwait before announcing a halt on Sunday.

The path forward for the MOU still seems unclear. US officials announced the pause in fighting, and President Trump on social media announced that Iran and the US would resume talks on broader peace negotiations in Doha on Tuesday. But Iran denied that the talks would be taking place, has not publicly commented on the Sunday ceasefire, and is publicly maintaining its right to “administer” the Strait. Ship traffic slumped to mid-war lows again as a result.

The shaky agreement likely will not endanger talks in the near term, but it reveals the cracks in the foundation. MOU negotiations have already weathered several violations of the agreement, and talks will likely continue as long as both sides think a deal is possible or that they can benefit from a pause in fighting. But both sides are far apart on key issues, exacerbated by vagueness in the MOU – Iran alleges that its current actions in the Strait are permitted under the agreement, which only requires Iran to make safe passage possible.

Read More: Washington Post [paywall], Al Jazeera, New York Times [paywall], The Times of Israel

Asia-Pacific

Japanese Defense Minister Koizumi Shinjiro met with his South Korean counterpart Ahn Gyu-back in Seoul on Sunday. In a step up for security ties between the two neighbors, South Korea and Japan reaffirmed their commitment to denuclearization of the Korean peninsula. The two countries agreed to bilateral cooperation on improving regional stability, including further partnerships with the United States. They also held joint naval trainings earlier this month, while Tokyo has been entering “minilateral” groupings for security cooperation with other nations in the region, including Australia and the Philippines. Ahn described the current regional situation as “a grave security environment.”

The talks were the first between Tokyo and Seoul’s defense chiefs in 11 years, marking a notable improvement in security ties. Relations between the East Asian neighbors grew closer in 2025, after a period of tension going back to 2019, when Seoul pulled out of the joint GSOMIA intelligence-sharing agreement. During the two-day visit over the weekend, the countries sought new ways to increase defense cooperation, including exchanges between their aerobatic teams, Blue Impulse and the Black Eagles, as well as joint search-and-rescue exercises. The renewal comes as North Korea continues to develop its nuclear program and strengthen ties with Russia.

Read More: Reuters [paywall], NHK, The Japan Times

Americas

The death toll from two major earthquakes in Venezuela has risen to 1,450 with at least 46,000 reported missing. The quakes struck northern Venezuela on Wednesday, with coastal La Guaira and the capital Caracas heavily impacted. Search-and-rescue efforts continued over the weekend, as international teams and civilian volunteers rushed into the hardest-hit areas. The Venezuelan authorities were forced to restrict access to the disaster zone in La Guaira after the flow of volunteers transporting donations clogged transport routes, delaying rescue crews. As of Saturday morning, only authorized personnel were allowed to enter the area.

The catastrophe is a severe test for the government of Delcy Rodríguez, which is seeking to assert its legitimacy through the disaster response efforts. It is also a key test of the Venezuelan government’s relationship with the administration of US President Donald Trump, who asserted that the US would ‘run’ Venezuela after the capture of Nicolás Maduro in January. The US has sent rescue crews from Virginia and California, and the US Southern Command announced that it will send a special Air Force Response team to help restore operations at Simón Bolívar International Airport. The US Navy also dispatched two warships to waters off the coast of Venezuela to support life-saving efforts.

The opposition in Venezuela has also organized response efforts, criticizing the ruling party’s planning and leadership. Opposition groups claimed that the ruling Chavista party has sought to take control over aid, banning grassroots organizers from labelling supply drop-off sites as “Donation Centers” if they were not government-authorized operations. An official from the opposition party Vente accused the ruling party of using the tragedy to strengthen its grip on power in Venezuela. The leader of the opposition, María Corina Machado, requested help from the White House to facilitate her return to Venezuela, which White House officials reacted to with frustration, describing the request as ill-timed.

Read More: FT [paywall], New York Times [paywall], Politico, NBC

Geoeconomics

Freight shipping costs are surging as companies rush goods into the United States. Rates on major Asia-US and Asia-Europe routes have reached their highest levels since the 2024 Red Sea crisis, when Houthi attacks forced ships away from the Suez route. The cost of shipping a 40-foot container from China to the US east coast rose to $7,880 last week, up 62% from a month earlier, while China-to-Mediterranean rates rose 47% to $6,431. The Platts Container Index climbed 80% in the 30 days to Wednesday, reaching its highest level since April 2022.

The driver is frontloading. US tariff deadlines are pulling forward the normal peak-season shipping rush that usually builds ahead of Black Friday and Christmas, as importers try to land goods before new levies hit in late July. The Trump administration is preparing tariffs of at least 10% on dozens of countries over forced-labor concerns, with China, the EU, India, Japan, and the UK among the major economies targeted, and further tariffs on industrial goods expected next month. The result is greater inflation: companies trying to avoid tariffs are bidding up freight capacity now, which raises landed costs even before the tariffs themselves arrive.

Read More: Financial Times [paywall], Wall Street Journal [paywall], OECD

Disruptive Technology

China-based Zhipu’s most recent model, GLM 5.2, shows comparable bug-finding capabilities as Anthropic’s Opus 4.8. This means Zhipu’s latest model is close to the cyber capabilities of the American frontier models Mythos 5 and Fable 5, which are currently offline after a Department of Commerce order directed Anthropic to restrict access for foreign nationals. Moreover, GLM 5.2 is about an eighth of the cost of Opus 4.8 and an open-weight model, meaning it can be modified by startups (or malicious actors) to create similar models.

China’s narrowing of the AI capabilities gap adds pressure for the US to define its AI approach. The alarm caused by Mythos’ bug-finding capabilities compelled the White House to create a voluntary screening program, but the Commerce Department escalated this to export controls, signaling a pivot or conflict within the US’ AI regulatory approach. US hesitation on AI policy comes as Chinese companies allegedly train their models on American frontier models (i.e., distillation) and find innovative ways to create homegrown compute. The preference for open-weight models narrows the amount of time needed to train new models.

Read More: CNBC, Wall Street Journal [paywall]

Energy

Berlin has come out in favor of delaying the EU’s planned rules governing methane emissions. Germany’s government has added its voice to a growing number of EU members, including Italy, Poland, and the Netherlands, which are urging Brussels to suspend implementation of EU rules on methane imports. The primary worry regarding the regulation is that it could endanger Europe’s security of energy supplies. The EU’s methane regulation came into effect for some areas in 2024, such as obligating producers in the EU to monitor and repair methane leaks, and starting in 2027, the regulation will begin to apply to imports of traditional energy sources to the EU. This puts the member countries on course to conflict with EU energy commissioner Dan Jørgensen, who has said the Commission will not reconsider the legislation. However, the EU has drafted plans to suspend penalties for companies that breach the law for a period of time to allow for adjustment.

The US and other energy-producing countries have heavily lobbied Europe to postpone implementation of the methane regulation. Multiple countries have pushed the EU to rewrite the rules on methane emissions with the warning that the policy could disrupt exports of energy supplies to Europe. Industry groups have also strongly opposed the regulation as harmful. The US, Qatar, Nigeria, and Algeria, all of which export gas to Europe, have called for a pause to the law’s implementation and urged “targeted amendments.” US Secretary of Energy Chris Wright has warned that the EU’s regulation would make it impossible for the bloc to import LNG from the US.

Read More: Reuters [paywall], Financial Times [paywall], Politico EU

Transnational Crime & Corruption

Anti-immigrant violence in South Africa is poised to escalate tomorrow. A coalition of vigilante groups, led by the March and March movement, set June 30 as a deadline for all immigrants to leave South Africa. South African security forces are preparing for significant civil unrest. Foreigners in South Africa, accused of taking jobs and social services from South African nationals, have been targeted with escalating violence over the last five years, with 148 killed since 2022. Vigilantes have attacked perceived foreigners on the street, blockaded hospitals rumored to be treating migrants and burned down immigrant-owned shops.

Anti-foreigner violence has strained South Africa’s foreign relations and its struggling domestic economy. Foreign embassies in South Africa have rushed to repatriate thousands of their nationals before the June 30 deadline. South African businesses are preparing for severe disruptions around the country. Previous civil unrest in South Africa in 2021 descended into widespread commercial looting and destruction of property.

Read More: Financial Times [paywall], Bloomberg [paywall], The Economist [paywall], ACLED

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Chris Dantes examines US diplomatic attempts to resolve Libya’s political crisis.

US Reengagement in Libya and the Prospects for Peace

By Chris Dantes

^{“LIBYA TRIP - Tripoli talks advance U.S. Army relationship with Libya land forces - MAY 2010“ by US Army Africa is licensed under CC BY 2.0.}

Representatives from the US, Egypt, Saudi Arabia, and Türkiye met in Cairo last week to discuss proposals aimed at resolving Libya’s political crisis. The country’s energy sector has shown signs of recovery but remains vulnerable to persistent instability and corruption. Insecurity has facilitated the cross-border movement of terrorists and arms, exacerbating jihadist insurgencies across Africa. Against this backdrop, the US and regional powers have sought to broker peace between the rival governments in Tripoli and Tobruk. A successful power-sharing agreement could position Libya as a key energy producer and counterterrorism partner. But past peace initiatives unraveled as opposing factions, prioritizing their interests and emboldened by foreign backers, prolonged conflict. Failure to broker a lasting settlement could reverse recent gains in oil production and discourage foreign investment. Moreover, long-term instability could enable the expansion of the Islamic State.

In today’s full analysis:

• US Interests and Peace Proposal, Explained

• The Decline of Middle Power Competition

• A Unified Libya is Possible, But Risks Remain

Read the Full Report Here

Global

China expands its tool kit for counter-sanctions measures, creating new risks for international businesses. Beijing lawmakers are reviewing a new law that will enable state prosecutors to file civil lawsuits against foreign organizations and persons who allegedly harm China’s interests. This law would be used as a countermeasure against foreign sanctions and trade restrictions. If passed, which is likely, foreigners in China, either residents or visitors, face increased risks of being denied permission to exit China, pending the resolution of litigation. Businesses face court orders to pay compensation and damages, as well as criminal penalties for compliance failure. Earlier this year, China adopted administrative measures adopting counter-measures against foreign entities discriminating against China’s industrial or supply chains (Decree 834) and a new regulatory regime enabling the government to take measures against foreign entities complying with coercive trade measures against China (Decree 835).

China’s build-out of its regulatory toolkit coincides with continued Western trade actions against China. The addition of Chinese national champions, such as Alibaba, to the US Department of War’s “Chinese Military Companies” list, aka 1260H list, has once again inflamed US-Sino trade tensions. The EU has launched multiple Foreign Subsidies Regulation investigations targeting Chinese investments, the most recent being the May 2026 investigations into JD.com’s proposed acquisition of a German retailer specializing in consumer electronics and home appliances. The G7 discussed Chinese trade policy, where participants warned against “China Shock 2.0,” a surge of highly subsidized Chinese exports.

Read More: Wall Street Journal [paywall], CNBC, European Union, World Economic Forum

Europe

European leaders gear up for the Ankara NATO summit from July 7-8. On Wednesday, Berlin hosted the leaders of NATO Europe’s five top militaries—Germany, France, Italy, the UK, and Poland—to define a common European position across a host of controversial issues before the NATO summit, such as mediating an end to the Russia-Ukraine war, assisting the Iran war offramp, and increasing European operational leadership of NATO. The “E5” will seek to replicate the relative success of the recent G7 summit in Evian-les-Bains, in which the US and Europe agreed in principle to extend sanctions on Russia. Simultaneously with the E5 gathering, NATO Secretary-General Mark Rutte visited the White House, where he argued that the Trump administration has unlocked NATO Europe’s military spending and largely utilized basing rights in Europe to support operations in Iran.

Last year’s summit at The Hague found consensus around the 5% GDP spending pledge, but the Ankara summit will face tougher questions on burden-shifting and doctrine. The US is pushing for a “NATO 3.0” strategy, in which the alliance adjusts its objectives as a deterrence-first and European-led organization. That means fewer out-of-area operations, peacekeeping, or exchanges with non-NATO partners. Last week, the US announced a six-month review of US forces in Europe, which followed reports of a planned drawdown of F-15 fighter jets and maritime reconnaissance aircraft reserved for NATO operations in Europe. The US is frustrated with NATO Europe after some allies, like Spain, restricted basing rights for US aircraft involved in Iran. Europe, meanwhile, is concerned about the US abandonment or renewed gestures toward annexing Greenland.

Read More: Politico, Associated Press, Stepwise Risk Outlook

Middle East

US Secretary of State Marco Rubio wrapped up a tour of the Arab Gulf, attempting to assuage anxieties about a deal with Iran. Rubio attended a meeting of the Gulf Cooperation Council in Bahrain, preceded by visits to the UAE and Kuwait (both heavily targeted during the war), with the message that the US is not going to undermine Gulf interests in a prospective deal. It is a tough sell: Gulf capitals’ primary concern, Iran’s proxies and missile and drone programs, are not on the negotiating agenda; they have the most to lose from a re-closure of the Strait, and they worry Iran will use the $300 billion development fund to modernize its military.

The visits come as Gulf states are adapting to the post-war regional order – potentially by reducing reliance on the US. Countries like Saudi Arabia are shifting spending away from ambitious megaprojects towards pipeline networks that bypass the Strait of Hormuz and upgrading military hardware and defense. The value of the American security umbrella, which puts targets on Arab countries, rather than protecting them, is being questioned. While some countries, like the UAE, are doubling down on the US, others are seeking their own détentes with Iran and seeking to reduce their military reliance on the US.

Read More: Reuters [paywall], Washington Post [paywall], New York Times [paywall], Arab Gulf States Institute

Asia-Pacific

MSCI has extended Indonesia’s downgrade review until November. In January, the index provider warned that it was considering downgrading the status of Indonesia’s equity market from “emerging” to “frontier.” The market has been grappling with a loss in investor confidence, and the prospect of a downgrade to “frontier” risked the prospect of a capital outflow in the billions. In the review process, MSCI is looking at Indonesian transparency reforms, investor concerns around opacity in shareholding structures, and suspicions of coordinated trading. This year, the rupiah is the worst-performing major currency in Asia, and Indonesia’s stock market has been the weakest in the region.

MSCI kept South Korea in the “emerging” market category in its decision on Tuesday. Seoul has been aiming for MSCI’s Developed Markets watchlist, a key step towards inclusion in the “developed” markets category. A key barrier for South Korea’s progress in the ranking has been the limited convertibility of the Korean won in offshore currency markets. While MSCI acknowledged some progress, investor concerns have not been fully addressed. On July 6, South Korea will open 24-hour trading in the dollar-won spot ​market.

Read More: CNBC, Wall Street Journal [paywall], Reuters [paywall]

Americas

Two devastating earthquakes struck Venezuela on Wednesday. The 7.2 and 7.5 magnitude quakes, which occurred in close succession, were the largest that the country has experienced in over a century. More than a day after the quakes, officials and civilians are still gauging the level of destruction that has occurred. The epicenter was about 100 miles west of Caracas, with heavy damage reported in the capital and the coastal city of La Guaira. Many residential buildings in Caracas have fully collapsed, and the search for survivors is ongoing.

Acting President Delcy Rodriguez has declared a state of emergency. In an announcement on state television, she announced that the airport in Caracas was closed, trains were not running, and school was cancelled for the next few days. As of Friday morning, the confirmed death toll is 589, with 2,980 injured. The death toll continues to rise, with the US Geological Survey estimating that fatalities could be in the thousands or tens of thousands. The Venezuelan government’s ability to respond to the disaster will be a defining factor of Rodriguez’s political future.

The United States has pledged to support Venezuela’s recovery efforts. The Department of State is deploying a regional Disaster Assistance Response Team (DART), along with search-and-rescue teams. Secretary of State Marco Rubio said in a statement on Thursday that the immediate focus was on locating survivors who remain buried under rubble. Countries from across the Latin American region and across the world have offered support and resources to aid Venezuela’s disaster response.

Read More: Reuters [paywall], AP, NBC, State Department

Africa

Al Qaeda militants launched attacks in Niger’s capital, reflecting a major deterioration in the capabilities of the AES. Fighters from al Qaeda affiliate Jama’at Nusrat al Islam wal Muslimin (JNIM) attacked the Diori Hamani International Airport, killing 11 soldiers and two civilians. The airport is a key target as it is co-located with Nigerien Air Base 101, the headquarters for the Alliance of Sahel States (AES) security organization.

Separately, the Islamic State Sahel Province (ISSP) conducted multiple sophisticated attacks against Nigerien military bases. Militants overran and looted two bases near the Mali-Niger border, killing approximately 85 soldiers. ISSP also claimed to have destroyed 22 vehicles and seized weapons caches. The attack highlights ISSP’s growing operational capabilities, strengthening its position in competition with its more dominant regional rival, JNIM.

JNIM and ISSP are escalating the scale and lethality of attacks to compete for influence across the Sahel. Mali, Niger, and Burkina Faso continue to be overwhelmed by JNIM and face an increasingly capable ISSP insurgency. Competition between the groups is likely to produce more frequent, complex, and strategically significant attacks, further challenging the AES members’ ability to secure major population centers and critical infrastructure.

Read More: Al Jazeera, Critical Threats

Geoeconomics

The second Pax Silica summit in Washington is concluding today with moderate success. Thirty-five countries signed a Joint Statement on AI Opportunity, aligning behind a pro-growth and pro-innovation approach to AI regulation while also committing to trusted supply chains and the infrastructure needed to power the next phase of AI deployment. The European Commission formally joined the initiative this week, and the Netherlands joined earlier, giving the effort more weight because Dutch participation brings ASML’s home government into the framework. Italy is also expected to join, with Foreign Minister Antonio Tajani and Secretary of State Marco Rubio expected to sign a memorandum of understanding after an earlier delay caused by a Trump-Meloni dispute over Iran.

The agenda is greater than chips. Pax Silica is designed to secure the full AI industrial stack, from energy and critical minerals to advanced manufacturing, semiconductor production, data infrastructure, and AI models. India used the summit to seek semiconductor investment and multilateral funding, including potential access to a US $250 million Pax Silica seed fund meant to support critical mineral extraction, processing, infrastructure, and manufacturing assets tied to trusted partners.

Pax Silica has become the Trump administration’s largest second-term effort at coalition building. The summit shows Washington understands it still needs large international cooperation to accomplish certain strategic goals, making Pax Silica important not just as a technology initiative, but as a test of whether the administration can translate “America First” diplomacy into a multilateral partnership.

Read More: Financial Times [paywall], Reuters [paywall], The National Interest

Disruptive Technology

A tight memory chip market is adding inflationary pressure across the tech world. Memory chips that transfer or store data are in high demand due to an AI-induced data center rollout. Demand for one type of memory—NAND, which saves information without power—is particularly increasing, but NAND demand is typically lower than DRAM, the standard type of memory chip. Building new fabs and production lines could take billions in investment and up to two or three years. In the meantime, memory chip producers are increasing margins to manage the current market. Price increases could reverberate across a range of goods, from smartphones, cloud computing, video game consoles, and cars. Bloomberg Economics notes that the average year-over-year price increase for memory kits was 237%, and that the peak price increase could be in February 2027.

A memory chip crunch could spur enthusiasm for extending interventionist policy on AI-enabling GPUs, like Nvidia’s chips. The trend in semiconductor regulations is to preserve a US advantage in computing, such as through export controls, subsidies, or capital investment to chip fabs, and the failed GAIN AI Act, which would have required American chip consumers to be prioritized over foreign buyers. Regulations modeled on prioritizing American demand could be revived in the memory chip domain if the memory chip price crunch increases pressure for intervention. Moreover, policymakers may become interested in derisking investment in memory chip production capacity, such as through equity stakes or subsidies. Nonetheless, intervention is also risky, given that the memory chip market is typically volatile and could cool.

Read More: Wall Street Journal [paywall], The Straits Times, Center for a New American Security

Energy

Iraq has reportedly considered exiting OPEC if it is not allowed to raise its oil production quota by the group. Baghdad is reliant on oil exports for the bulk of its income and has confronted a budget crisis due to the closure of the Strait of Hormuz. Although Baghdad would prefer to remain in OPEC with a higher quota, if that is not possible, Iraq will “consider all available options.” Iraq produced 1.48 million bpd in May, a drop from over 4 million in February before the beginning of the US war with Iran. Baghdad recently approved a plan to boost exports through the Kurdistan-Turkey pipeline to reduce reliance on the Strait of Hormuz. Iraq’s oil ministry has also denied any intention in Baghdad to leave OPEC.

OPEC+ is currently assessing members’ oil production capacity. OPEC+, an expanded group that includes members like Russia, will determine output baselines for 2027, which in turn inform the setting of quotas for members. While Iraq has often struggled to meet its quotas, a government spokesperson has said that the country is working to return to full capacity.

If Baghdad were to leave OPEC, it would be a major blow to the group. Iraq is a founding member of OPEC, which was founded in Baghdad in 1960, and Iraq is also OPEC’s second-largest producer. OPEC also suffered a hit to its membership earlier this year, when the UAE, OPEC’s third-biggest producer, exited the group. Abu Dhabi left the group to pursue its own strategy on investments and output. OPEC has already struggled with internal disunity and the rise of American oil output. Another major exit from OPEC would further weaken the oil-producing bloc’s ability to shape global energy markets.

Read More: Reuters [paywall], CNBC, Wall Street Journal [paywall], Atlantic Council

Transnational Crime and Corruption

Governments are increasingly targeting illicit gold mining, refining, and trafficking operations funding militants in South America and Africa. On Thursday, the US announced new sanctions on a Rwandan gold refinery accused of processing over 60kg of gold sourced from Congolese trafficking networks controlled by the Rwanda Defense Force and their local allied militia, M23. The US alleged that M23 funds its military operations and humanitarian violations through international gold sales. Earlier in June, Venezuelan military forces attacked gold mining militants in the country’s southeastern jungles, and Egyptian security forces detained hundreds of illegal miners on its border with Sudan, where gold smuggling funds the ongoing civil war.

The World Gold Council, a mining industry association, labeled global gold smuggling a “crisis” valued at over $120 billion and associated with conflict, sanctions evasion, and illicit finance. Gold prices experienced a historic rally over the last three years from $2,000/oz in 2023 to over $5000/oz in early 2026 and currently stand at about $4,000/oz. High global prices have incentivized criminal and militant organizations with international connections to invest in large-scale mining and smuggling operations. Refined gold’s untraceability also makes it useful for money laundering.

Read More: Financial Times [paywall], Reuters [paywall], Mining.com, AP

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^{Legal disclaimer: This Substack is for educational and informational purposes only and does not constitute the rendering of legal counseling or other professional services. Reading, subscribing to, or communicating through this Substack does not create an attorney-client relationship. Do not send confidential information through this platform. Consult qualified legal counsel regarding your specific circumstances.}

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Anni Coonan examines potential obstacles to the Iran deal.

What Could Block the Iran Deal

By Anni Coonan

^{“Hezbollah Headquarter Airstrike 2024“ by Jimmyp84 is marked with CC0 1.0.}

US-Iran negotiations started off rocky this week in Switzerland. Iranian negotiators ended Sunday talks early over American threats to resume bombing if a deal is not reached. The walkout followed days of Israeli strikes on Lebanon and Iran’s declared closure of the Strait of Hormuz (although ships continued to transit the waterway). Nonetheless, Pakistani and Qatari mediators expressed optimism following the second day of talks, and some concrete progress was announced. Both the US and Iran, plus energy importers and Gulf countries, deeply want a durable deal and are clearly committed to substantive negotiations. If a deal is not reached, it will likely be disagreements over the conflict in Lebanon or misalignment on the scope of restrictions on Iran’s nuclear program that scuttle it. Markets are holding steady on optimism around the new talks, but the hurdles are significant. A failure to come to a deal will put a stop to sanctions relief and $300 billion in development projects, not to mention risking the re-closure of the Strait of Hormuz and renewed global economic disruption.

In today’s full analysis:

• The Lebanon Issue

• Nuclear Particulars

• The Spoilers that Weren’t: Hormuz, Missiles, and Proxies

Read the Full Report Here

Global

Unwinding Iran sanctions will be a complex process, politically and technically. The US partially lifted Iran oil sanctions on Monday, enabling Iranian oil exports. The 60-day general license covers crude oil, petrochemical products of Iranian origin and permits dollar-denominated trade, related banking and insurance services. Extension of the 60-day period depends upon successful progress of current negotiations between the US and Iran, as well as Iran’s strict compliance with the terms of the ceasefire agreement. Adherence to the ceasefire by all parties has been rocky thus far, but the agreement remains in force.

Moving beyond waivers, actual unwinding of the laws, executive orders and international sanctions and embargos will be complex and not all at once. Since the 1970s, US sanctions on Iran have been imposed under a variety of authorities and programs, related to its nuclear program, human rights and support for terrorist groups. Some can be lifted or amended by Executive Order, while others will require acts of Congress. There are 14 key active Executive Orders specific to Iran and at least nine statutes. The White House does not currently enjoy a consensus that supports the terms of the Iran MOU, and snap-back provisions are likely to be part of the political debate. Businesses will have good reasons to view transactions with Iran as high risk, with the evolving legal landscape, requirements for due diligence in a historically non-transparent business environment and exposure to sanctions-evasion risks on remaining sanctions.

Lifting of Syria sanctions can serve as a reference, as they too were complex with international dimensions. The US and EU started easing sanctions in January 2025, with the UN Security Council lifting terrorism-related sanctions on the new transitional leadership in November and the US repeated the Caesar Act in December 2025, the cornerstone of American secondary sanctions. While removal of Syrian sanctions enjoyed broad international political consensus, many international financial institutions remain reluctant to deal with Syria, 18 months after the fall of the Assad regime. Businesses must still navigate complex export controls and licensing requirements as some sanctions targeting former regime leaders remain in place.

Read More: Reuters [paywall], US Department of Treasury, US Department of Treasury, Harvard University

Europe

A conflict over historical memory from the Second World War is opening a rift between Warsaw and Kyiv. Polish President Karol Nawrocki announced the intention to revoke Poland’s highest state award from Ukrainian President Volodymyr Zelensky following a decision in Kyiv to name a military unit after the Ukrainian Insurgent Army (UPA), a military group from the 20th century that fought for Ukrainian independence from Russia. While in Ukraine the UPA evokes a long history of resistance to Moscow, Poland considers the UPA as a terrorist organization that killed thousands of Polish citizens and worked with Nazi Germany. The dispute has triggered internal conflict between Nawrocki and Polish Prime Minister Donald Tusk, who are from rival parties, and the conflict has also escalated, with Zelensky opting to skip the Ukraine Recovery Conference, which is taking place in Gdansk on June 25 and 26.

The dispute threatens to undermine a close partnership grounded in shared security concerns towards Moscow. Warsaw has been one of Ukraine’s staunchest supporters since Russia’s full-scale invasion, and Poland has served as the logistical hub for much of the military support from the US and from European partners that has gone to Ukraine. Poland has also accepted millions of Ukrainian refugees since 2022 and provided significant military and financial support to Ukraine.

This is not the first time that Ukraine and Poland have feuded since 2022, though. In 2023, the former government of Poland, which was led by the populist party Law and Justice (PiS), blocked imports of Ukrainian grain from entering the country under pressure from Poland’s agriculture sector. Nawrocki has also cast doubt on Kyiv’s prospects to join the EU and NATO. Polish public opinion has also taken a more negative turn towards Ukraine, which the conflict over the UPA will likely exacerbate.

Read More: New York Times [paywall], Kyiv Independent, Kyiv Independent, Politico EU, AP, Ukrainska Pravda

Middle East

Syria has made no progress integrating Sweida nearly a year after deadly sectarian violence. In a new report, a UN investigation confirmed that more than 1,700 in the southern province of Sweida – mostly Druze civilians – were killed, and that Syrian government forces, tribal fighters and Druze groups may have committed war crimes. Most concerningly, it assesses that no progress has been made on the implementation of the September 2025 roadmap for confidence-building and reintegration in Sweida.

The report highlights Syria’s deep governance challenges and threats to its economic rebound. The government in Damascus, led by a member of the former Sunni group Hayat Tahrir al-Sham, has struggled to build confidence domestically and abroad in its ability to ensure security throughout the country and to integrate Syria’s various minorities. Since taking power, Damascus has semi-successfully quelled various sectarian clashes and promised pathways to representation in the army and the government. Inability to make good on those promises threatens renewed clashes (instability the region can ill afford) and a stop to significant foreign aid and investment, a crucial lifeline for Syria’s future.

Read More: Reuters [paywall], Brookings Institution, Center for Strategic and International Studies

Asia-Pacific

New Delhi hosted the 16th BRICS National Security Advisors’ meeting on Monday and Tuesday. BRICS, which represents nearly half the global population and around 40% of the world’s GDP by purchasing power parity, is increasingly focused on security cooperation. Chinese Foreign Minister Wang Yi was in attendance, holding bilateral talks with a number of foreign officials on the sidelines of the gathering. These included India’s National Security Advisor Ajit Doval, Deputy Secretary of Iran’s Supreme National Security Council Qadir Nizamipour and South Africa’s Minister in the Presidency Khumbudzo Ntshavheni. In his address to BRICS partner countries, Doval outlined a stronger role for the bloc to combat emerging threats, including cooperation on counter-terrorism, cybersecurity, maritime security, and fighting transnational crime. India is pushing for expanded intelligence sharing among member countries of the bloc.

Bilateral talks between Doval and Wang signaled progress toward a normalization of ties between India and China. India’s foreign ministry described the talks as “constructive and forward-looking,” and Wang called for the resumption of bilateral dialogue mechanisms. He also urged exchanges in trade, finance, law enforcement, and media. Relations between New Delhi and Beijing have been improving after a period of friction that started with a border clash in 2020. In a statement released through China’s foreign ministry, Wang called for proper handling of sensitive issues and mutual respect for the two nations’ core interests. Wang also described BRICS as a mechanism to advocate the promotion of multi-polarization amid a shifting geopolitical landscape.

Read More: Reuters [paywall], China Daily, India Today

Americas

Bolivian President Rodrigo Paz declared a state of emergency on Saturday after blockades paralyzed the country for weeks. Protestors opposing Paz, the country’s first right-wing leader after decades of leftist rule, included workers’ unions, farmers, and supporters of former President Evo Morales. Upon taking office, Paz sought to stabilize the country’s economy, cutting fuel subsidies to shrink the national deficit. Responding to the economic situation, protestors have called for Paz to resign and blocked key roads, exacerbating shortages of fuel, food, and medical supplies. The economy has been at a standstill for more than 50 days, business groups estimated more than $2 billion in losses, and at least 14 people have been killed in the unrest.

Under the state of emergency, Bolivia’s police began clearing roadblocks. Six officers of the Bolivian Air Force were killed on Sunday after a light aircraft crashed while patrolling a blocked highway. As more roadblocks are cleared, security forces are preparing to push into the Chapare region, where Morales has been refusing to appear in court since 2024. He is accused of financing the demonstrators to seek impunity from an investigation into alleged abuse of a minor during his presidency.

The US State Department released a statement on Tuesday describing the unrest as a “grave threat” to democracy in Bolivia. It stated that a “violent minority” seeks to disregard the will of Bolivians who recently elected Paz. Since taking office, Paz announced plans for a $1.5 billion economic cooperation deal with the US to supply fuel. The joint statement was released with other countries in the Latin America region, including Argentina, Bolivia, Canada, Chile, Costa Rica, ​Dominican Republic, Ecuador, ​El Salvador, Guyana, Honduras, Jamaica, Panama, Paraguay and Peru. Latin America is experiencing a historic shift to the right, with recent elections in Chile, Peru, and Colombia.

Read More: CNN, AP, Reuters [paywall], Bloomberg [paywall]

Africa

The US and Kenya are close to finalizing a critical minerals cooperation agreement. The framework includes the development of several untapped deposits, including copper, graphite, lithium and nickel mines. Most notably, the US secured a preliminary deal to develop Mrima Hill, a niobium mine valued at $62.4 billion. President William Ruto stated that local processing would occur domestically, in line with a trend across African countries to capture more domestic value from the mining sector.

The agreement strengthens the US position in the competition for critical minerals. Mrima Hill was a highly contested project between American, Chinese and Australian companies. If finalized, the deal would advance US efforts to diversify its critical mineral supply chains. At the same time, Chinese companies remain deeply entrenched across the continent’s mineral-rich nations, such as the DRC. As competition between the US and China intensifies, Kenya’s mineral sector is likely to become an increasingly important arena for geopolitical influence and investment competition.

Read More: Semafor Africa, Business Insider Africa, Ecofin Agency

Geoeconomics

US manufacturing jobs are now weakening sharply, even as the administration continues to promise a manufacturing revival. S&P Global’s June flash PMI showed factory employment falling at the fastest monthly pace since May 2020, when the pandemic shut down large parts of the industrial economy. The employment index dropped from 51.6 in May to 47 in June, moving from expansion into contraction. US factory employment has fallen by 77,000 jobs, and private manufacturing construction spending has fallen to $15.2 billion, down about 16%, since President Trump’s second term began, undercutting the White House’s argument that tariffs and industrial policy are quickly rebuilding the blue-collar workforce.

Manufacturing output is still growing, but part of that expansion reflects companies pulling forward production because they fear future supply disruptions and price increases tied to the Iran war. At the same time, firms are dealing with rising raw-material costs, shifting tariff policy, and uncertainty over whether recent demand can last. Factory job cuts are running at the highest pace since 2009 if the pandemic is excluded, and about one-fifth of surveyed executives said they were still struggling to find workers willing or able to work in factories.

The labor constraint makes the manufacturing slowdown harder to reverse. In manufacturing, foreign-born workers made up 19.2% of durable-goods workers and 22.3% of nondurable-goods workers in 2024. If this administration’s immigration restrictions reduce the available labor pool, tariffs and industrial policy may raise demand for domestic production without creating the workforce needed to meet it. The counterpoint to that argument is that productivity could improve because automation and AI will allow individual workers to produce more, filling the gap.

Read More: Financial Times [paywall], Manufacturers Alliance

Disruptive Technology

China has taken the lead on the most powerful supercomputer in the world with LineShine, which is based in Shenzhen’s National Computer Center. Using only standard computer processing units (CPUs), the computer exceeded 2.19 exaflops in the High Performance Linpack benchmark. In other words, it has the ability to solve 2.2 quintillion calculations per second, more than any other supercomputer right now. The LineShine computer is also more efficient than the runner up, El Capitan, which is based in the US’ Lawrence Livermore National Laboratory. LineShine achieved a speed of 52.07 Gigaflops/Watt, while El Capitan operates at 60.94 Gigaflops/Watt.

LineShine’s non-reliance on CPUs instead of graphics processing units (GPUs) suggests there is a diversity of architectures in developing powerful supercomputers. China has reentered the supercomputer “top 10” for the first time in 2017 by designing around efficiency. The use of CPUs means that China can unlock vast reserves of compute despite not having access to frontier American GPUs, like the type of semiconductors produced by Nvidia, which can do multiple tasks at the same time. Instead, LineShine uses specialized circuitry in its CPUs to accelerate separate computing tasks and thereby achieve a similar outcome to GPUs. The creator of these types of powerful CPUs is based in the UK and not subject to American export controls, and China is likely now capable of advancing this type of technology independently.

Read More: yahoo!tech, Top500, The New York Times [paywall]

Energy

China is reportedly preparing a second LNG import terminal to increase its shipments from Russia. The Longkou terminal, which is located in the Shandong province, will serve cargoes from Russia’s heavily sanctioned Arctic LNG 2 plant. Currently, China imports LNG from the Russian project through the Beihai terminal in Guangxi, and the new terminal will significantly expand China’s capacity to absorb exports from Arctic LNG 2, which is designed to produce almost 20 million metric tons annually. China is the only known importer of cargoes from Arctic LNG 2, with the first LNG shipment reaching China in August 2025, and since then, China has taken 2.6 million tons of LNG through the Beihai terminal.

Energy cooperation is a part of the larger Russia-China partnership and offers relief to Russia’s energy sector. Since Russia began its full-scale invasion of Ukraine, its gas business, which was concentrated in Europe, has suffered significantly. An increase in exports to China would provide major relief to the Arctic LNG 2 project, which stalled due to sanctions. In April, construction modules meant for Arctic LNG 2 left China, after having been trapped there for over 2 years due to sanctions on the project. However, there are also areas of disagreement in energy cooperation between Beijing and Moscow. During his most recent visit to China, Russian President Vladimir Putin failed to finalize an agreement on the Power of Siberia 2 gas pipeline, a priority energy project for the Kremlin that has been stuck for years over disagreements on pricing.

Read More: Reuters [paywall], High North News, Moscow Times, Carnegie Endowment for International Peace

Transnational Crime and Corruption

The years-long investigation into alleged foreign bribery of European Union officials produced a new EU-wide arrest warrant. Belgian authorities accused Greek member of parliament Dimitris Avrampopoulos, who was European Commissioner for Migration, Home Affairs and Citizenship from 2014 to 2019, of participating in a criminal organization that routed bribes from foreign nations to influence EU policymaking. Avrampopoulos was an honorary board member of the NGO Fight Impunity from 2021 to 2022, which allegedly organized influence operations funded by Qatar, Morocco and Mauritius. He denied any wrongdoing and promised to waive his parliamentary immunity.

The “Qatargate” scandal emerged after raids by Belgian authorities in 2022. The alleged leaders of the bribery operation, Pier Antonio Panzeri, Eva Kaili and Francesco Giorgi, face ongoing prosecutions for corruption, money laundering and participating in a criminal organization. In 2024, the EU established the European Ethics Body in the wake of the scandal, though it remains non-operational due to boycotts within the European Parliament.

Read More: Politico.EU, Atlantic Council, Transparency International

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The Sanctions Update, compiled by attorneys from Steptoe’s award-winning International Regulatory Compliance team and the Stepwise: Risk Outlook editorial team, publishes every Monday (subscribe here). Guided by the knowledge of Steptoe’s industry-leading International Trade and Regulatory Compliance team, the Sanctions Update compiles and contextualizes weekly developments in international regulatory enforcement and compliance, as well as offers insights on geopolitical context, business impacts, and forthcoming risks, and non-sanctions news updates.

For more detailed analysis on related issues, see Steptoe’s International Compliance Blog. For information on industry-specific monitoring or bespoke services, please contact the team here.

By Evan T. Abrams, Meredith Rathbone, Karl Hopkins, Guy Soussan, Alexandra Melia, Wendy Wysong, Ali Burney, Quentin Johnson, Elliot Letts, Algirdas Semeta, Melissa B. Mahle, Anni Coonan, Thomas Goldstein, Zayna Dembinski, Samuel Bloebaum, Elton Smole, Ian Cameron, Wilson Zhao, Zoey Hong, Kiki Dong, Hoi Chung Liu, Jonathan Eaton, Carter Spahn, Chris Dantes

The Lede

EU Member States Negotiate 21st Sanctions Package against Ticking Clock

^{"Participation of Ursula von der Leyen, President of the European Commission, in the G7 summit" by Audiovisual Service of the European Commission is licensed under CC BY 4.0}

European Union (EU) Member States are currently discussing the details of the bloc’s 21st proposed sanctions package related to Russia, introduced by the European Commission on June 15. The process is influenced by timing considerations linked to the Russian oil price-cap mechanism and by differing positions among Member States on proposed listings. These factors may affect the pace and scope of negotiations as the EU aims to conclude discussions by mid-July, before the summer recess in Brussels.

Tight Deadline for Consensus on Russian Oil Exports

The 27 EU Member States have approximately three weeks left to agree on the details of the new sanctions package. This timeline is relatively short, as negotiations on the 20th sanctions package earlier this year lasted a little over six weeks.

Under the EU’s current revised price-cap mechanism, the cap is automatically adjusted based on the average price of Russian Urals crude. Recent disruptions in the Strait of Hormuz caused global oil prices, including for Russian Urals crude, to increase sharply. If the price-cap adjustment were to occur as scheduled on July 15, the formula would potentially raise the cap to approximately $70 per barrel, allowing Russia to earn more from oil exports. To avoid this, Commission President Ursula von der Leyen proposed freezing the cap at $44.10 until January 2027.

Although the EU can amend its own sanctions, the oil price cap is fundamentally a G7 measure. Its effectiveness depends on coordinated implementation by coalition members providing shipping, insurance, and financial services for oil transactions under the mechanism. Reports indicate the Commission has been consulting with G7 partners, expecting support from the UK and Canada, but coordination remains an important political consideration. Interestingly, the 21st sanctions package appears to have been intentionally timed to coincide with the G7 summit in France, allowing EU leaders to discuss the package and raise key objections and concerns early in the negotiation process. During the summit, G7 members confirmed in a joint communique that it was “the right moment to proceed” with renewed sanctions on Russian energy exports.

Third-Country Sensitivities

Beyond Russia, the proposed 21st EU sanctions package includes transaction bans on 20 third-country banking, cryptocurrency, and oil trading firms, and introduces a full prohibition on cryptocurrency transactions between Russia and entities in third countries. An EU official later indicated that the affected countries include India, China, Türkiye, Kyrgyzstan, Kazakhstan, and the United Arab Emirates. Sanctions on Indian firms would mark a notable expansion of EU measures beyond previous targets, which focused mainly on entities in China, the UAE, and Central Asia.

Observers have noted ongoing concerns regarding Indian companies’ purchases of Russian oil and the export of dual-use goods to Russia. Past US sanctions against Indian entities for similar activities led to diplomatic and commercial frictions between Washington and New Delhi. Any comparable EU measures could have implications for EU–India relations, particularly as the two sides finalize a free trade agreement. They will also bring the EU closer to the imposition of secondary sanctions. Member States are therefore expected to consider carefully how such sanctions are implemented to balance enforcement objectives with broader economic and diplomatic interests.

Intra-EU Divisions

Bulgaria has publicly raised objections to an aspect of the sanctions package. On June 17, Foreign Minister Velislava Petrova said that Bulgaria opposed proposed sanctions targeting Russian oil giant Lukoil and Patriarch Kirill, the head of the Russian Orthodox Church. She argued that targeting Lukoil would be too disruptive for European countries still reliant on Russian energy facilities. Bulgaria’s only oil refinery is owned and operated by Lukoil. Similar proposed sanctions on Kirill in 2022 were previously dropped following opposition from Hungary.

The targeting of Lukoil will follow the sanctions recently imposed on its subsidiary, accused of operating unsafe “shadow fleet” vessels in the recent “mini sanctions package” released by the EU on the 15th.

Expected Agreement

Historically, the European Union has reached compromise decisions on sanctions, which require unanimous approval and renewal every six months. Recent developments suggest a potential shift in the renewal practice. According to press reports following the European Council summit of June 18, EU leaders agreed to extend the renewal period for Russia sanctions from six to twelve months. This change would reduce the frequency of renewal negotiations and could ease pressure on Member States to repeatedly secure consensus within short timeframes.

While Member States may raise objections regarding specific sanctions targets, effective early negotiations at the G7 conference and limited Member State objections increase the likelihood that the EU will reach agreement on the proposed package before the July 15 deadline.

US Developments

US-Iran MOU Provides for Sanctions Relief, but Questions Remain

On June 17, 2026, the trajectory of US sanctions against Iran took a significant turn when President Trump and Iranian President Masoud Pezeshkian signed a 14-point Memorandum of Understanding (MOU) for further negotiations to end the Iran War.

As it relates to sanctions, the MOU broadly outlines three types of relief for Iran, which can be thought of as (i) immediate relief, (ii) benchmarked relief, and (iii) long-term relief.

Immediate Relief

Paragraph 9 of the MOU provides for a “sanctions moratorium” while a final agreement is negotiated. During this period, the US “will not impose any new sanctions” on Iran, effectively pausing the Trump administration’s “Economic Fury” campaign and related actions under National Security Presidential Memorandum 2 (“NSPM-2”).

Paragraph 10 of the MOU commits the US Department of the Treasury to issuing waivers for the “export of Iranian crude oil, petroleum products and derivatives, and all associated services including banking transactions, insurances, [and] transportation” immediately upon signing by the two parties.

On June 22, 2026, OFAC implemented this commitment through the issuance of Iran-related General License X. With certain limitations, the GL broadly authorizes “all transactions prohibited by the above-listed authorities that are ordinarily incident and necessary to the production, sale, delivery, or offloading of crude oil, petrochemical products, or petroleum products of Iranian origin….” This includes transactions involving vessels blocked under a number of sanctions authorities. The GL is valid through 12:01 a.m. Eastern Daylight Time, August 21, 2026.

Benchmarked Relief

As opposed to the relief which enters into force upon signing of the MOU, there are a few levers which will only be pulled if and when the Iranian regime meets certain “benchmarks.”

For example, Paragraph 11 of the MOU states that the US will, upon signing of the MOU, undertake to make fully available for use the frozen or restricted funds and assets of Iran. Moreover, the US will undertake to issue all “necessary licenses and authorizations” for the release of these funds.

However, Paragraph 11 also states that the US and Iran “will mutually agree on the procedures related to the release of these funds during the negotiations” (emphasis added), signalling that a release mechanism has not yet been determined and may be subject to negotiation. However, Paragraph 11 does not expressly condition the release of funds on the completion of a final agreement.

Long-term Relief

While the MOU holds that a sanctions moratorium and licenses for the export of Iranian crude oil and related activities will take effect immediately, and while Paragraph 11 carves out room for discussions on the release of frozen or restricted funds and assets, there are yet more provisions within the MOU that will only enter into force after a final agreement is reached.