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 what US troops in Ecuador means for the future of counternarcotics in Latin America.

US Troops in Ecuador Present New Model for Counternarcotics in Latin America

By Elton Smole

^{“940th Military Police Company Conducts Exercise El Gato with Ecuadorian Armed Forces” by Staff Sgt. Caleb Sooter is marked with Public Domain Mark 1.0.}

The presence of US forces in Latin American counternarcotics operations has entered a new chapter as the Trump administration steps up engagement with Shield of the Americas partners to authorize direct land strikes and joint operations with US military personnel to combat cartels. The US has historically supported allied anti-narcotics operations in the region through equipment and intelligence sharing. The new model being deployed in Ecuador represents a shift to more direct involvement, which the Trump administration seeks to replicate across the region. This model has been welcomed by some right-wing governments, but comes with legal and geostrategic downside risks, including that strikes over the past year have failed to meaningfully achieve their intended purpose of reducing drug trafficking to the US. Still, the recent US actions in Ecuador appears to be setting a new model for US military involvement across the Western Hemisphere.

In today’s full analysis:

• Ecuador Raids Target Transnational Groups with US Boots on the Ground

• US Security Cooperation Terms Remain Uneven Across the Region

• Limited Results and Risks to Regional Stability

Read the Full Report Here

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Global

Amid a global shortage of diesel fuel, the US demands the EU draw down on emergency inventories or risk a US diesel export ban. EU countries hold nearly 109 million tons of emergency crude and fuel stocks. The EU’s emergency diesel stocks are mainly in Germany and France, accounting for about 35% of the total EU stockpile. The US has asked the EU to release 120 million barrels of diesel in the next six months, an amount equal to about one month of total EU diesel consumption. The average price of diesel in the EU has soared by around 40% since January, creating domestic pressures to increase available supply.

With major disruptions in global trade due to conflict, top producing countries are imposing diesel export bans, or considering new bans. The US, the largest global exporter (15.4% of the global market in 2025), is considering a diesel export ban due to rising prices and voter discontent with rising transportation costs and overall inflation. Russia, the second largest (9.5% in 2025), first imposed a partial export ban in September 2025, extending a full ban in July 2026, citing domestic needs related to the Ukraine War. Persian Gulf producers are struggling to get their diesel to market (about 10% of global supply) due to the blockage of the Strait of Hormuz. Chinese refiners have suspended exports of oil products to regions beyond Hong Kong and Macau until further notice from Beijing for domestic energy security.

Read More: Reuters [paywall], Yahoo!Finance, Reuters [paywall], Deutsche Welle, Politico

Europe

Slovakia Prime Minister Robert Fico raised the possibility of snap elections in January 2027 amid coalition division over the dismissal of a government minister from parliament. Tomáš Taraba, the former Deputy Prime Minister and Minister for Environment, had fallen out of favor with his own party, the Slovakia National Party (SNS), for continuing decarbonization initiatives against the wishes of SNS leadership. Taraba agreed alongside Fico and SNS in May to step down as Minister if the dispute was ongoing by the end of September, but he had refused to step down. Independents that back Fico’s government voted against it to dismiss Taraba from parliament, weakening the government’s thin majority.

If an election were held, Fico’s coalition is expected to lose seats. Fico’s left-wing Smer party is polling at about 17%, six points lower than its 2023 result. Fico’s coalition partners are fairing worse, with SNS polling at 2% (three points lower) and the social-democratic Voice – Social Democracy party polling at 7% (eight points lower). The highest polling party is currently the liberal Progressive Slovakia party at 20%. If Fico’s government collapses, parliament will have a chance to form a coalition based on the 2023 election results before snap elections.

Read More: RBC Ukraine, Reuters [paywall]

Middle East

The Syrian government met with Hizballah officials for the first time in a bid to calm tensions. Syria reportedly pledged not to intervene in Lebanon (including pledging not to answer US requests to create a peacekeeping presence there) and asked Hizballah to help stop cross-border smuggling and dismantle its remaining sleeper cells in Syria. The meeting was mediated by Turkiye and did not result in any concrete agreements. The parties have a troubled history: Syria under Assad leadership occupied Lebanon and exerted significant influence there for over 30 years until 2005, while Hizballah fighters fought on the side of President al-Assad during the civil war.

The meeting was reported days after Syria claimed to find an active Hizballah cell preparing rocket attacks. On Tuesday, Syrian intelligence services reportedly “thwarted a sabotage plot” in Daraa in which Hizballah agents were preparing rocket launchers, apparently for attacks against the Syrian state. Hizballah in Lebanon disputed the reports; the plans may have been undertaken by a splinter cell more closely aligned with Iran, which would prefer a destabilized Syria to better serve as a corridor for proxy activity.

Read More: Reuters [paywall], The Times of Israel, CNN, Al Majalla

Asia-Pacific

Chairman of the House Select Committee on China John Moolenaar yesterday called on the State Department to investigate strengthened China-ROK ties, arguing it poses “significant risks” to US interests. In a letter to Secretary of State Marco Rubio, Moolenaar highlights increased leader-level engagement and South Korean semiconductor investments in China, as well as what he characterizes as more lenient regulatory treatment of Chinese firms than US companies. He specifically contrasts Seoul’s treatment of Chinese e-commerce platforms with its handling of US-based Coupang, arguing the disparity could disadvantage American firms and increase Chinese access to Korean consumer data.

The letter comes as trade, investment and greater Korean contributions to regional security become increasingly central to the Washington-Seoul alliance. In exchange for tariff relief, Seoul pledged $350 billion in US investment. However, conflicting accounts of the talks and investment details have frequently protracted trade talks between the two allies. Most recently, President Trump yesterday announced South Korea would invest some $200 billion in US projects, including $54 billion for the Alaska LNG pipeline. In contrast, South Korea’s Industry Ministry Kim Jung-kwan earlier today pushed back on Trump’s characterization of the investment, stating “Putting out figures, or using definitive language, goes far beyond what was agreed.”

Read More: House Select Committee on China, The Chosun Daily, US Department of Commerce, Wall Street Journal [paywall], Channel News Asia

Americas

A controversy over Our Lady of Aparecida, Brazil’s patron saint, has become a flashpoint in Brazil’s elections just days before the first round of voting. Flávio Bolsonaro sparked the controversy after saying he would “declare Brazil belongs to Jesus Christ” if elected, prompting claims that he intended to remove Our Lady of Aparecida as Brazil’s patron saint. Evangelicals make up a key part of Bolsonaro’s base, as Catholicism is on the decline in Brazil. The claims about Our Lady of Aparecida, who is especially important for Catholics, were amplified by Lula supporters on social media. Bolsonaro then denied the allegations, calling them “fake news,” but the dispute has become a late campaign issue that could hurt him among Catholic voters in his tight race against Lula. Fake news and misinformation more broadly remain a key concern in the campaign. Brazilians will go to the polls on October 4 for the first round of voting.

Read More: AP, WRAL, Financial Times [paywall]

Africa

Explosions in Addis Ababa were reportedly drone strikes carried out by a rebel group. Explosions were heard in the capital and have been attributed to drone attacks by a rebel group affiliated with the Alliance for Survival, according to a source linked to the rebels cited by Reuters. If accurate, the attack marks the first in Ethiopia’s capital and a major escalation in the ongoing conflict between Addis Ababa and the Tigray People’s Liberation Front (TPLF).

In addition to the risks of greater regional instability and external actors becoming involved, the conflict could undermine regional counterterrorism initiatives. Ethiopia is reportedly considering withdrawing its 3,000 troops from the African Union Stabilization and Support Mission in Somalia (AUSSOM) to support operations against the TPLF, a move that could create a significant security gap along the Ethiopia-Somalia border.

Combined with Uganda threatening to withdraw all 4,500 troops by August 2027, AUSSOM will shrink substantially if one or both countries follow through on these actions (AUSSOM has approximately 11,900 troops in total), increasing the risk of a major resurgence in al-Shabaab activity. In such a scenario, the Federal Government of Somalia (FGS) would likely rely more heavily on Türkiye, its principal foreign security partner, but Ankara’s growing unpopularity among the anti-FGS coalition is likely to weaken the counterterrorism response significantly.

Read More: Reuters [paywall], Bloomberg [paywall], Somali Guardian, Stepwise Risk Outlook

Geoeconomics

US economic growth was revised higher for the second quarter as consumer spending and investment proved stronger than previously estimated. Real GDP expanded at a 2.2% annualized rate, up from the previous 1.5% estimate. First-quarter growth was also revised upward, from 2.1% to 2.5%. Consumer spending grew at a 3.8% pace, accelerating from 0.7% in the first quarter, while business investment excluding housing increased 9%. Private domestic demand, which combines consumption and fixed investment while excluding trade, inventories and government spending, rose 4.6%. Imports increased 12.6%, partly reflecting purchases of computer chips and other equipment supporting AI investment, subtracting nearly 1.7 percentage points from the GDP calculation. The Atlanta Fed’s GDPNow model points to continued momentum, estimating third-quarter growth at 3.7% on September 30, down from 5% following new consumption and trade data. That remains a preliminary model estimate ahead of the government’s October 29 release.

Rising Treasury yields could make that growth harder to sustain. The 10-year yield reached 5.34% on October 1, its highest since 2002, while the 30-year yield touched 5.68%. Persistent inflation concerns and stronger economic activity have reinforced expectations for elevated interest rates, while heavy government borrowing and corporate debt issuance for AI infrastructure are adding to bond supply. The selloff continued even after softer August inflation data reduced expectations for an October Fed hike. If sustained, higher yields would raise mortgage and corporate financing costs, discouraging home purchases and business investment. They could also weigh on equity valuations, weakening the wealth gains supporting household spending.

Read More: BEA, Reuters [paywall], The Wall Street Journal [paywall], Reuters [paywall], Brookings

Disruptive Technology

ICYMI: On Tuesday night, tech leaders signed a voluntary AI “self-policing” pledge at the White House. The accord, which President Trump called “morally binding,” involves four pledges. First, leading AI developers committed to “robust internal controls” to ensure model alignment in crucial high-risk areas, like cybersecurity, biosecurity, and chemical threats. Second, the developers committed to having internal teams ensure those controls work as intended. Third, the developers agreed to partner with third-party external auditors, similar to Dario Amodei’s calls for “embedding” third parties to ensure safety. Fourth, an independent committee of these companies’ board of directors will receive reports from the internal team and auditors.

The pledge is non-binding but appears to coalesce the industry and the White House closer toward an AI safety regulatory framework. As more hacking and misalignment incidents occur, momentum for stronger AI safety protocols is growing. The pledge bridges President Trump’s preferred emphasis on American AI dominance while also embracing the prospect of a federal third-party evaluation regime similar to Illinois, the only state with a mandatory embedding policy.

Read More: Associated Press, CBS News, The Hill

Energy

OPEC+ intends to keep their output targets unchanged at their upcoming meeting. While many of the group’s members have been raising production in recent months, they are still producing at well below their quota levels due to the fallout from the war with Iran. OPEC+ had increased output targets steadily throughout the year up until October, but according to reporting, there will likely be no more alterations to production targets in the fourth quarter of this year. OPEC+ is currently producing 25 million barrels per day (bpd), around 5 million less than in February.

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

Transnational Crime and Corruption

The US sanctioned 10 people and entities connected to an ATM robbery ring connected to the Tren de Aragua (TdA) criminal group. According to the release by the Office of Foreign Assets Control (OFAC), the robbers carried out “jackpotting” attacks on ATMs in the US by installing malware on the machines that caused them to dispense cash without debiting an account. The TdA-linked scheme reportedly stole millions of dollars through jackpotting attacks, which were then largely laundered through cryptocurrency conversions. Since October 2025, 98 individuals have been indicted by the Department of Justice over ATM jackpotting schemes, many of whom allegedly had “extensive direct and indirect links” to TdA.

The jackpotting malware was reportedly developed by Anibal Alexander Canelon Aguirre (a/k/a Prometheus), a Venezuelan national and one of the FBI’s Ten Most Wanted Fugitives. Since at least 2024, Prometheus has allegedly provided the malware to US-based robbers and laundered the stolen cash through cryptocurrency transactions. Cryptocurrency diligence group Chainalysis linked Prometheus’ and his associates’ transactions to major stablecoin money laundering operations based in Mexico, Colombia, and Venezuela. The sanctioned individuals’ wallet addresses all utilized mainstream cryptocurrency exchanges to deposit stablecoins worth over $4.77 million, though it is unclear how much of this sum is derived from the jackpotting attacks.

Read More: US Department of the Treasury, Miami Herald, Chainalysis, Federal Bureau of Investigation

Defense

Germany is looking at potential partnership options for its next-generation fighter jet. Berlin is reportedly considering two potential paths for developing its next-generation fighter jet: joining the Global Combat Air Programme project with the UK, Italy and Japan or beginning a new joint development program with Spain and Sweden. Germany is in talks with Britain about potentially joining GCAP, which London is pushing for. However, Berlin reportedly sees a partnership with Sweden and Spain as more aligned with Germany’s needs and as more beneficial for Germany’s work share on a development project.

Germany’s joint development program with France fell apart earlier this year. Berlin had been partnering with Paris for years on the Future Combat Air System (FCAS) program, which collapsed this summer over disagreements over workshare, technology and knowledge sharing, and strategic requirements. Spain was also involved in the FCAS program.

Germany is rapidly increasing its defense expenditures and building its defense industrial base. Berlin is investing heavily across a number of different capability areas, and Germany’s defense expenditures are outstripping those of other European leaders like France and the UK. Germany is also directing the large majority of its investment and procurement into its own defense industrial ecosystem.

Read More: Welt [paywall] [in German], Politico EU, Stepwise Risk Outlook

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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 Samuel Bloebaum examines recent findings from the UN Crime Congress.

UN Crime Congress: Emerging Threats and International Divisions

By Samuel Bloebaum

^{“United Nations Office on Drugs and Crime - LOGO.jpg“ by Mariakikuta is licensed under CC BY-SA 4.0}

The United Nations Office on Drugs and Crime’s (UNODC) 15^th Congress on Crime Prevention and Criminal Justice 9, hosted in Abu Dhabi from September 26 through October 1, has revealed technology’s key role in facilitating new and dangerous varieties of transnational crime as well as deep divisions in the international community’s crime fighting agendas. The conference also marks the culmination of Abu Dhabi’s successful drive to revive the UAE’s international anti-money laundering reputation.

In today’s full analysis:

• Congress Priorities and Emerging Threats

• UAE: From Grey List to Anti-Crime Coordinator

• Divergent Visions for Cooperation

Read the Full Report Here

Or listen to the full report here:

Listen to the news:

Global

Russian-NATO tensions escalate with Russia’s threat to use nuclear weapons against NATO to protect its sovereignty in Kaliningrad, its Baltic Sea exclave. NATO is responding with criticism of Russian nuclear saber-rattling, noting NATO is a defensive alliance, but NATO leaders are increasingly concerned about Russian hybrid operations targeting NATO infrastructure. Russia remains bogged down in Ukraine, unable to make significant gains on the ground this year and is looking to other tactics to shore up its offensive capabilities. Russia controls the world’s largest nuclear arsenal, with an estimated 4,400 stockpiled warheads, of which 1,796 are strategically deployed, making nuclear risks credible.

The Baltic states are under constant Russian pressure. Moscow is using a mix of overt pressure and covert subversion, including information operations to sow discontent among the Russian-speaking population, amplify polarizing narratives and spread fear. Russia has also engaged in deniable sabotage of critical undersea cables, cyber disruption, airspace violations and border provocations by creating artificial migrant flows. While talk of a limited Russian military incursion into the Baltic region is nothing new, few think that Russia could muster a large enough force to overcome the combined forces of Estonia, Latvia and Lithuania.

Read More: Financial Times [paywall], EuroNews, EU Observer, Atlantic Council

Europe

The White House is reportedly looking at trading sanctions relief for Moscow releasing political prisoners. The Atlantic is reporting that John Coale, who the administration recently nominated to be special presidential envoy for hostage affairs, is pushing for the US to provide sanctions relief to Russia in exchange for the Kremlin releasing political prisoners. US President Donald Trump has reportedly embraced the strategy, and Coale has been testing it with Russian ally Belarus. Earlier this month, Minsk released 25 political prisoners in exchange for Washington removing sanctions on a state chemicals company, and Belarus has repeatedly released prisoners in deals with the US.

The sanctions relief push will potentially be coordinated with Trump’s envoys for the Russia-Ukraine war. Coale intends to cooperate with Steven Witkoff, one of Trump’s primary negotiators for a potential end to the conflict, who has been a point of contact for the administration with Russia.

The timing of potential sanctions relief clashes with the recently signed Lindsay Graham sanctions bill. Earlier this month, Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 into law, which allows the administration to impose tariffs on buyers of Russian energy. It also sanctions many Russian actors, although the sanctions are largely discretionary and can be waived by the White House.

Read More: The Atlantic [paywall], CBS News, New York Times [paywall], Stepwise Risk Outlook

Asia-Pacific

China on Tuesday opened a new air force support and training center in Laos, expanding its overseas military presence. The China-Laos Joint Support and Training Center and the China-Laos Friendship Aviation Academy are the new logistics facilities at the Ban Keun airport. China’s Ministry of National Defense said they are now operational and will be used to support air force training, including pilot training. The facility will reportedly be jointly maintained by China and Laos. The opening underscores decades of close Laos-China relations, underpinned by extensive economic, infrastructure and political cooperation.

The facility marks China’s first publicly recognized overseas military site focused on air force support and training and signals Beijing’s interest in deepening its security presence in Southeast Asia. China officially acknowledges only one dedicated overseas military support base, in Djibouti, and has a joint training and support center at Cambodia’s Ream Naval Base. Phnom Penh maintains that no Chinese personnel or warships are permanently stationed at Ream. The Laos facility could further expand the PLA’s ability to conduct training and sustain operations in mainland Southeast Asia and the South China Sea, while strengthening China’s access to regional transport and trade corridors.

Read More: Reuters [paywall], South China Morning Post [paywall], Global Times

Americas

The US restricted the visas of 27 Latin American individuals over alleged corruption and narcotrafficking on Monday. The State Department announced that it had revoked existing visas or imposed visa ineligibilities affecting nationals of Bolivia, Colombia, Ecuador, and Peru, targeting individuals accused of involvement in corruption or drug trafficking. Bolivia accounted for the largest share, as visas were revoked for 12 prosecutors, judges, former officials, a police colonel, and a businessman, while nine additional Bolivians without current visas were made generally ineligible for future visas. The US also revoked visas for Colombian businessman Euclides Torres Romero and Senator Martha Peralta Epieyu, two unnamed Ecuadorians, and Peruvian judge Juan Carlos Nunez Matos. Additionally, Washington designated Bolivian Attorney General Roger Mariaca for allegedly accepting bribes to facilitate narcotrafficking, making him and his immediate family ineligible to enter the US.

The move expands Washington’s use of visa restrictions as a regional pressure tool. The US has recently used similar measures against individuals in Mexico associated with the ruling Morena party. In these cases, the measures were used against individuals in countries that are members of the Shield of the Americas coalition, under which participating governments have pledged coordination on sanctions, designations, and financial measures against criminal actors. The recent focus on Bolivia, Colombia, Ecuador, and Peru reflects Washington pairing regional security cooperation with pressure on officials whom partner governments view as obstacles to counternarcotics and anti-corruption efforts. The action against Mariaca is particularly notable because it directly targets the sitting head of Bolivia’s prosecutorial system.

Read More: State Department, The Hill, AP [paywall]

Africa

Turkish F-16s conducted airstrikes near the town of Baidoa in support of Somali military operations against anti-government forces. Türkiye continues to provide support for the Federal Government of Somalia (FGS) as rising tensions between Mogadishu and state governments have prompted clashes between federal and state security forces. The strikes follow a previous Turkish airstrike in the town of Dolow on September 4, which the Jubbaland state government alleged was intended to target General Mahad Abdirahman, a former senior defense official who now opposes the FGS. In addition, opposition forces aligned with the former president of South West state, who was deposed by the FGS, accused Türkiye of targeting the president with strikes in early July and September.

Greater Turkish intervention could intensify internal political tensions and further fragment the security environment. Ankara is a critical security partner for Mogadishu and has significantly increased airstrikes against al-Shabaab this year. In turn, Türkiye’s state-owned energy company is conducting deepwater oil drilling in Somalia’s Exclusive Economic Zone, underscoring Ankara’s growing interest in a more secure and politically stable Somalia. If allegations that Türkiye is targeting opposition figures prove true, however, such operations are likely to generate further resistance from state governments and could escalate conflict between FGS and state security forces. This could create a security vacuum that criminal groups and al-Shabaab are likely to exploit. Intensifying anti-Turkish sentiment in Jubbaland or other areas is also possible, as the September 4 airstrike reportedly sparked multiple protests across the state.

Read More: Agence France-Presse, Critical Threats, Critical Threats

Geoeconomics

US inflation came in below expectations in August, giving the Federal Reserve more room to delay its next rate increase. The Fed’s preferred inflation measure, the Personal Consumption Expenditures price index, rose 0.3% from July, below the 0.4% forecast, while core PCE, which excludes food and energy, increased 0.2%. Annual headline and core inflation stood at 3.4% and 3.0%, respectively, both unchanged from July’s revised readings: changes to how the government measures software prices, portfolio-management fees and legal services lowered previously reported inflation, meaning the improvement partly reflects measurement changes. July’s annual headline rate was previously reported at 3.7%, and core inflation at 3.3%. Consumer spending nevertheless rose 0.9% in August, or 0.6% after inflation, showing that household demand remained strong.

Expectations for an October hike have weakened, although another increase before year-end remains in play. The Fed raised its benchmark rate by 25 basis points to 3.75%–4% on September 16. New York Fed President John Williams said on September 29 that there was “no need for urgency” and that one further increase late this year could be appropriate. Following Wednesday’s inflation release, futures markets assigned roughly a 47% probability to an October hike, compared with about 70% on Monday; much of that decline had already occurred before the PCE report. The decision will depend on whether subsequent data show inflation becoming more persistent despite September’s tightening.

Read More: Reuters [paywall], New York Fed, MarketWatch [paywall], Brookings

Disruptive Technology

ICYMI: Anthropic released an IPO prospectus highlighting potential risks, including a concentrated customer base and AI model unpredictability. The prospectus foresees a valuation of more than $2 trillion, surpassing the SpaceX IPO and doubling the company’s most recent valuation. However, several fiduciary and societal risks remain. In terms of the business, Anthropic’s capital expenditure expectations remain high at a planned $518 billion on cloud, computing, and infrastructure in the coming years. The company expects rapid growth to meet those obligations (the company’s annualized revenue is reported at $65 billion for 2026), but the company faced an operating loss of $8 billion in 2025, surpassing revenue ($4.6 billion). Moreover, about a quarter of revenue is concentrated among two large customers. In terms of downside societal risks, the company warns that AI misalignment—and at a potentially catastrophic scale—could threaten humanity, and not least public or regulatory pushback. Anthropic CEO Dario Amodei has called to “pace the frontier” of AI development.

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

Energy

Energy flows out of the Middle East seem to be moving back towards their prewar levels. Data from the analytics firm Kpler indicates that Middle East exports of crude have returned to slightly below 80% of levels before the US war with Iran began. So far in September, flows from the region have reached 16.328 million barrels per day (bpd), the highest level since late February. The shift upwards in oil leaving the Middle East is occurring on the back of increased exports from Saudi Arabia and the United Arab Emirates. For example, Saudi Arabia has been able to shift exports back towards the Strait of Hormuz following damage to its pipeline to the Red Sea. In February, regional exports were around 19.5 million bpd.

Despite the increases in export flows, prices are remaining elevated as the US and Iran remain stalled on efforts to end the war. Futures prices for Brent crude are still over $100 dollars per barrel, and oil will likely see a monthly price increase of 14% in September, the biggest monthly move upwards since July. West Texas Intermediate will only increase 4% this month but still remains elevated. US President Donald Trump has recently ruled out easing sanctions on Iran and rejected an Iranian peace proposal.

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

Defense

German defense technology company STARK has presented its new 12-meter-long Vanta 12 Unmanned Surface Vessel (USV). The Vanta 12 is outfitted with STARK’s artificial intelligence platform Minerva and, according to the company, can autonomously patrol and monitor large tracts of ocean for long periods; it can also be outfitted with effectors to engage potential threats. According to STARK, the USV has a range of 1200 nautical miles and can reach speeds of up to 40 knots. The Vanta 12 was tested at the NATO REPMUS exercise this month together with manned and unmanned systems. The Vanta-12 is the latest in the Vanta series. Berlin has already procured STARK’s 6-meter-long Vanta-6 system. The series is designed to host different sensors and effectors depending on the requirements of the customer.

Read More: Hartpunkt [in German], Naval News

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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.

Listen to the news:

Global

Patterns in global LNG energy trade are shifting under the weight of geopolitical conflict, demonstrating that global gas markets are rebalancing to build in greater resilience. Energy trade is no longer organized solely around the cheapest supplier or shortest route. The preference for buying LNG on the spot market is giving way to renewed interest in long-term LNG contracts to mitigate against acute shortages or unaffordable bills. Countries and companies are prioritizing diversification to reduce dependence on one dominant source or market. This is creating strong incentives for alternative suppliers and markets for LNG, with the market expected to grow by 7% in 2026.

Canada is now poised to become a major LNG supplier to Asia and Europe. Canada’s decision to become an energy superpower is being driven by a domestic re-evaluation of the value of fossil fuels to national economic security under the Carney government. The souring of relations with the US has created further incentives to develop the Canadian oil sands for export to Asian and European markets. New policies supporting investment and easing regulatory and permitting uncertainty have unlocked the sector, drawing the interests of energy majors to form international consortiums such as Canada LNG. Proposed LNG export projects could enable Canada to send 55% of its natural-gas exports to non-US markets by the early to mid-2030s, according to the government’s estimate.

Read More: Wall Street Journal [paywall], Financial Times [paywall], International Energy Agency

Europe

EU defense ministers discussed a bloc-wide “emergency security protocol” yesterday, but reception appears icy. In her annual State of the European Union speech about two weeks ago, European Commission President Ursula von der Leyen proposed a “European Security Council” to coordinate responses to hybrid or conventional threats. This emergency protocol would therefore be similar to Article IV in NATO, which is when allies can convene upon request to discuss a security matter (this was triggered twice last year due to Russian drone incursions onto NATO territory). But some officials reportedly view the EU as the wrong forum to discuss these matters due to stringent transparency rules. The EU’s chief diplomat, Kaja Kallas, emphasized in a press conference that discussions over an emergency security protocol are “initial” and there was a strong understanding that such a protocol would not duplicate NATO’s Article IV.

Read More: Politico, Financial Times [paywall], European External Action Service

Middle East

US forces are scheduled to pull out of Iraq by Wednesday, ending the military presence after 23 years. The withdrawal, agreed to by Washington and Baghdad in 2024, is widely celebrated in Iraq. However, it risks creating a security vacuum. Pro-Iranian militia groups are poised to seek greater influence over security and politics. Sunni tribal leaders are concerned about a resurgence of ethnic conflict. Islamic State (ISIS) fighters remain embedded in the Sunni community and could seek to exploit the US withdrawal to reassert its agenda to establish a caliphate in Iraq.

The future of the US relationship with Iraq is uncertain. Some analysts assess that the departure of troops is yet another example of the US abandoning its partners. Others, opposed to the US “forever wars,” argue that Iraq needs to move forward with security reform, disarming militias and integrating fighters into Iraq’s Armed Forces, measures that could not be taken while the US “occupying force” remained in the country. The departure will allow the US and Iraq to normalize the bilateral relationship, shifting focus to diplomacy and trade. Baghdad wants US companies to stay and invest in the country’s future. Their presence, if coupled with continued US intelligence cooperation, counterterrorism support and security assistance, could help create a new foundation for the bilateral relationship and the prospect for greater stability in the Arab heartland.

Read More: Reuters [paywall], Atlantic Council

Asia-Pacific

South Korea on Tuesday said land mines that severely injured two South Korean soldiers in the demilitarized zone (DMZ) were “highly likely” to have been planted by North Korea. The explosions occurred roughly 30 feet south of the Military Demarcation Line (MDL), on the South Korean side of the border. South Korea’s military said evidence indicated the mines were North Korean and appeared to have been deliberately planted, rather than having migrated from the North, amid Pyongyang’s recent border fortification efforts.

Seoul’s military has called the incident a clear violation of the Korean War armistice and warned of “appropriate and corresponding” measures, while President Lee Jae Myung has called for a thorough investigation before determining a response. The distinction is significant: the UN Command has said recent North Korean fencing, road repairs and defensive mine-laying do not violate the armistice if they remain north of the MDL, while mines placed south of the MDL would constitute a violation. The incident overall complicates Lee’s efforts to prioritize engagement with Pyongyang, potentially forcing Seoul to balance its push for dialogue with a military response if North Korean responsibility is confirmed.

Read More: Yonhap News Agency, NK News, Wall Street Journal [paywall], Reuters [paywall]

Americas

The Venezuelan government released more than three dozen political prisoners over the weekend. According to human rights groups, 39 dissidents were freed from across multiple prisons between Friday and Saturday. Eight were accused of narco-terrorism, and six were accused of working with the US government to overthrow former Venezuelan President Nicolas Maduro. As of September 18, 344 political prisoners reportedly remained in detention, after the Venezuelan government announced it had freed 131 people. More than 1,000 political prisoners have been freed so far this year.

The recent release coincided with the second round of talks between the Venezuelan interim government and the opposition. The first round of negotiations in August focused on earthquake recovery and retrieving frozen overseas funds. In the talks, the opposition is led by Dinorah Figuera, while Maria Corina Machado remains in exile. The talks are ostensibly aimed at eventually holding elections. At the UN General Assembly last week, Venezuela’s interim President Delcy Rodriguez promised that Venezuela would eventually hold elections, although she did not give a timeline. The ongoing release of political prisoners, despite having slowed in recent months, provides concrete momentum for the ongoing opposition talks.

Read More: Al Jazeera, ABC, BBC [paywall]

Africa

The Ethiopian National Defense Force (ENDF) reportedly captured the strategically located town of Alamata as part of its push to regain control of Tigray’s capital. Alamata lies near Tigray’s southern border with Amhara and serves as a key logistics hub for the movement of troops, fuel, and supplies. The ENDF is advancing toward Mekelle, Tigray’s capital, in an effort to reverse recent tactical gains made by the Tigray People’s Liberation Front (TPLF) across the region. The TPLF appears to retain control of all three airports in Tigray, which are typically under federal authority, limiting the ENDF’s ability to airlift reinforcements directly into the region. During the first Tigray war, however, control of Alamata shifted multiple times, highlighting that this tactical success may prove temporary.

Meanwhile, fighting continues across the neighboring Afar and Amhara regions. The ENDF remains engaged with both the TPLF and the Amhara Fano Nationalist Movement, a rebel group affiliated with the Alliance for Survival. The Tigrayan rebels’ offensive into Afar may be aimed at disrupting supply routes from Djibouti, Ethiopia’s key economic partner and principal gateway to Red Sea trade. The TPLF has yet to capture sufficient territory to effectively block these trade corridors. If it were to do so, however, it could significantly shift the conflict in the rebels’ favor while likely triggering a major escalation from Addis Ababa.

Read More: Reuters [paywall], Al Jazeera, Critical Threats, Council on Foreign Relations

Geoeconomics

US Section 232 pharmaceutical tariffs expanded on September 29, exposing imported patented medicines and their ingredients to a default duty of 100%, subject to extensive exemptions. The April order had already taken effect for designated companies on July 31; the latest deadline extends it to remaining manufacturers. Generics and biosimilars remain outside this round. Covered products from the EU, Japan, South Korea, Switzerland and Liechtenstein face a 15% rate unless they qualify for lower treatment, while British products receive zero Section 232 duties. Commerce also clarified exemptions for specified specialty medicines from designated trading partners, including India, covering categories such as cell and gene therapies and plasma-derived treatments. Imports used solely for clinical trials, research or other noncommercial purposes also qualify for zero duties.

The policy ties tariff relief to US manufacturing commitments and drug-pricing concessions. Manufacturers with approved US production plans can qualify for a 20% rate, while those also accepting most-favored-nation pricing agreements, linking American prices to lower prices abroad, can receive zero duties through January 20, 2029. The 20% rate is scheduled to rise to 100% in April 2030. These arrangements could encourage investment in American production, but additional American factories may also continue relying on foreign ingredients, meaning that domestic investment alone will not eliminate the supply dependencies used to justify the tariffs.

Read More: US Customs and Border Protection, White House, Commerce Department, American Action Forum, Chemistry Today

Disruptive Technology

ICYMI: A DC appeals court upheld the Pentagon’s designation of Anthropic as a supply chain risk. The designation, which previously was only applied to foreign companies, disallows the Pentagon and any military contractor from using Anthropic’s applications in their operations or supply chain. The company was designated after pushing back against the Pentagon’s use of Claude for military operations, which is a violation of Anthropic’s code. Politically, the Trump administration and Anthropic also diverge on whether to slow down AI development and how to regulate AI deployment. In the meantime, Anthropic could petition the full DC Court of Appeals or appeal to the Supreme Court. A separate but parallel supply chain risk designation was struck down by a San Francisco appeals court in August.

Read More: The Hill, Politico, CNBC

Energy

Russia will restrict the amount of energy data it publishes going forward. Russian President Vladimir Putin has approved a decree tightening rules governing the publication of data about the country’s energy trade. The new decree prohibits publication and access to any information about Russia’s export contracts: volumes, prices, method of transport, payment settlements, and other relevant details. The decree will also affect what media outlets can publish.

The move is designed to hinder efforts at sanctions enforcement by Western countries. It is the continuation of past decisions to restrict outside access to information about Russia’s trade and economic situation in order to undercut sanctions against the country. For example, Russia had already shut off access to official data about crude oil production prior to the new decree.

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

Defense

The Navy’s revitalization efforts for public shipyards will likely take longer than originally expected. The Government Accountability Office (GAO) has reported that the Shipyard Infrastructure Optimization Program (SIOP) – which the Navy originally estimated at $21 billion dollars – will actually run up a price tag of almost $200 billion. The GAO also assessed that SIOP could take decades longer than originally estimated by the Navy, lasting 50 years instead of the original assessment of 20 years. The GAO report concluded that the initial estimate, made in 2018, “omitted key costs” and that factors such as commodity prices are also contributing to increases in the overall price tag. The SIOP is designed to revitalize the US’ four public shipyards in Virginia, Maine, Washington and Hawaii that handle repairs for the Navy’s nuclear-powered vessels.

Read More: Breaking Defense, Defense One, Business Insider

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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, Kuangqi Zhong, Andy Xu Sofia, Jake Fitzpatrick, Carter Spahn, Chris Dantes

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The Lede

US Lifts Sanctions on Eritrea as Conflict in Ethiopia Reignites

^{"Ethiopian soldiers under AMISOM training for combat" by AMISOM Public Information is marked with CCO 1.0.}

On September 18, the Office of Foreign Assets Control announced the expiration of Executive Order 14046, ending 11 designations, including sanctions on Eritrea’s ruling party and military. The Biden administration deemed Eritrean authorities complicit in Ethiopia’s alleged human rights abuses during the war against the Tigray People’s Liberation Front (TPLF), leading to sanctions and a decline in relations. Recently, the Trump administration has sought to balance relations with both countries to stabilize the Horn of Africa, using the lifting of sanctions as an initial step toward expanding engagement with Asmara. However, the TPLF’s declaration of a “defensive war” against Ethiopia on September 23 and ongoing attacks could escalate into a full-scale war and invite Eritrean involvement, particularly as its rivalry with Ethiopia has intensified and caused Asmara to align with the Tigrayan rebels. If this occurs, the US could reimpose sanctions on Eritrea and potentially sanction Ethiopia if it perceives both sides are resistant to peace talks, which would likely be mediated by Washington.

The Ethiopia-TPLF Conflict, Explained

The first Tigray war began in November 2020 after months of worsening tensions between Addis Ababa and the TPLF. The TPLF was the dominant political force in the country until the appointment of Prime Minister Abiy Ahmed Ali, an ethnic Oromo, in 2018. Despite promising to heal decades of ethnic strife, the federal government delayed national elections, extended Abiy’s term, and opposed local elections in Tigray, creating tensions with Tigrayan authorities that culminated in armed conflict. Although historically an adversary of Ethiopia, Eritrea sided with Addis Ababa in the war, motivated by its longstanding rivalry with the TPLF and border security concerns. Other rebel groups entered the conflict: the Oromo Liberation Army allied with the TPLF, while Fano militants fought alongside the government.

The war ended in 2022 with the signing of the Pretoria Agreement, but the agreement did not fully address the TPLF’s grievances. Key political and territorial disputes were never resolved in the years following the agreement, including massive population displacement and restrictions on the authority of the Tigrayan government. The agreement also excluded Eritrea and the Fano militias, undermining a previous reset in Ethiopia-Eritrea relations and contributing to a Fano insurgency in 2023.

The End to a Fragile Peace and Possibility of Regional Conflict

Following drone strikes in Tigray by the Ethiopian military in August, the TPLF and six other rebel groups announced the formation of the Ethiopian Peoples’ Forces Alliance for Survival last week. The alliance, which also includes the Fano militias that fought the TPLF in the war, outlined the organization’s objectives as overthrowing the Abiy government and establishing a democracy, the details of which are unclear as the groups have historically advocated for different governance structures. Days later, fighting erupted in the Tigray, Afar, and Amhara regions. The TPLF seized the airport in Mekelle, Tigray’s capital, and claimed their attacks were defensive measures against bombardments from federal forces.

It remains unclear how federal forces will respond beyond retaking territory seized by Tigrayan rebels. Expanded drone strikes in Tigray or an occupation of the region are possibilities, but doing either would likely invite greater retaliation from the TPLF and potentially trigger insurgencies in neighboring regions.

In addition to the risk of a prolonged war between Addis Ababa and the TPLF, regional and external actors could become involved, creating a complex proxy conflict in northern Ethiopia. Ethiopia-Eritrea relations have worsened in part due to statements from Abiy that access to the Red Sea (Ethiopia has been landlocked since Eritrea’s independence in 1993) is an existential issue. Eritrea interprets these statements as a threat to its sovereignty and fears Ethiopia seeks to eventually control its port of Assab. To counter Ethiopia’s regional ambitions, Eritrea has increasingly aligned with the Sudanese Armed Forces (SAF), the TPLF, and Fano militias, a network that Ethiopia characterizes as a shadow military alliance known as Tsimdo. The extent of these groups’ cooperation is unclear; however, Eritrean officials have visited Tigray, indicating deepening security ties to hedge against Ethiopia.

A broader regional conflict, in turn, could provide Gulf states with an opportunity to expand their influence across the Horn of Africa. The UAE has substantial interests in Ethiopia, including agricultural imports, investments, and security cooperation. Moreover, the UAE has allegedly used Ethiopia as a training and logistical hub for the Rapid Support Forces, the paramilitary group fighting the Saudi-aligned SAF in Sudan. As Saudi-UAE competition has intensified in Sudan and elsewhere, Riyadh may cultivate deeper ties with Eritrea to counter Abu Dhabi and secure the Red Sea, although the extent to which it would support Eritrea in a conflict is uncertain.

US Interests and Potential Response

As efforts to resolve the Sudan war have stalled and Somalia becomes increasingly unstable, the Trump administration is seeking closer partnerships with Ethiopia and Eritrea, leveraging potential investment deals and other bilateral economic agreements to dissuade both actors from going to war or further engaging in proxy conflicts. A major Ethiopian offensive in Tigray could displace thousands, leading to refugee flows that could further destabilize the Horn and extend far beyond the region. Another core interest is stabilizing the Red Sea and cooperating with littoral states, including Eritrea, to maintain maritime security as trade through the Bab el-Mandeb is increasingly under threat by the Houthis and Somali piracy.

The US Ambassador to Ethiopia, Ervin Massinga, condemned the TPLF attacks and warned that sanctions would be imposed on other rebel groups that join (the TPLF was sanctioned earlier this year). If Eritrea provides arms to the TPLF, the reimposition of sanctions is possible, particularly if the conflict drags on and Asmara shows little willingness to participate in peace negotiations. At the same time, sanctions on Ethiopia are also possible for the same reasons, as the Trump administration has previously sanctioned multiple parties in African conflicts to compel all sides to reach a peaceful settlement. However, sanctions alone are unlikely to bring the parties to the negotiating table given their limited effectiveness during the first Tigray war and the strategic imperatives at stake, particularly if the UAE backs Ethiopia. Brokering a lasting settlement will likely require significant reforms to the administration of Tigray, conditions that Addis Ababa may resist.

Implications for Businesses

Should the US impose sanctions on Ethiopian officials or the Ethiopian National Defense Force, businesses will have to navigate a more complex regulatory environment. Major investment initiatives, such as Washington’s push to secure US investment in the Bishoftu International Airport—positioned to become Africa’s largest air hub—are likely to be disrupted if the TPLF expands targeting of critical infrastructure. Other future projects, such as the Nigerian Dangote Group’s planned petroleum pipeline through Djibouti and Ethiopia, are unlikely to move forward in a prolonged conflict regardless of whether additional regional actors become involved. Any of these scenarios could significantly raise the risks of operating within the country, delay US, Chinese, or Gulf investment in critical sectors, and disrupt intra-African trade at a time when food scarcity is worsening in unstable and war-torn Sub-Saharan African states. Eritrean involvement could increase perceived geopolitical risk in the Red Sea, potentially raising risk premiums and shipping costs.

US Developments

US and China Extend Trade Truce by Two Months

On September 23, Treasury Secretary Scott Bessent announced the US and China agreed to extend their trade truce by two months. Originally set to expire on November 10, Secretary Bessent said the US-China economic détente will be extended to January 10, 2027. The agreement followed a meeting between Secretary Bessent and his Chinese counterpart, Vice Premier He Lifeng, and coincided with the start of President Xi Jinping’s three-day state visit to Washington, DC.

The extension is a continuation of the Busan Agreement between the US and China, which was agreed upon in October 2025. The Busan Agreement suspended Chinese export controls on rare earths, and the implementation of the US Bureau of Industry and Security’s (“BIS”) Affiliates Rule, which extends the application of the Entity List restrictions to affiliates owned 50 percent or more by an Entity List entity. Although not explicitly stated by Secretary Bessent, US officials reportedly confirmed that the two-month extension applies to the BIS Affiliates Rule.

President Donald Trump recently received authority under the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 that would permit him to impose tariffs of up to 100 percent on China due to its status as a major market for Russian oil. We covered the bill in our previous update. The trade truce appears likely to delay President Trump’s use of the bill’s tariff authorities against China.

Although the Busan Agreement has delayed US imposition of further tariffs and export controls on China, it has not prevented sanctions designations involving Chinese individuals and entities. Many sanctions designations involving China-based individuals and entities over the past year were made under the Treasury’s Iran sanctions program. Most notably, on the day of the launch of “Operation Economic Outcast,” the Treasury Department designated numerous Chinese entities, individuals, and vessels as part of a broader action involving nearly 60 targets for allegedly supporting Iran.

In their discussions this week, President Trump reportedly told President Xi that Chinese help for Iran is unacceptable. On September 25, David Purdue, the US Ambassador to China, said that the US “made it very clear to [China] weeks ago that… any help they’d give Iran, whether it be direct or indirect, whether it be intelligence or parts or military equipment, was totally unacceptable.” We expect that the Trump Administration will continue to sanction Chinese persons allegedly involved in sensitive sectors of the Iranian economy, such as oil and defense.

Countries Ban Iranian Airlines Following US Sanctions on Iran’s Aviation Sector

Last week, several countries suspended flights operated by Iranian airlines to and from their airports, reflecting the broader impact of recent US measures targeting Iran’s aviation sector.

On September 24, the United Arab Emirates, the Middle East’s busiest aviation hub, announced it would suspend all flights by Iranian airlines. The UAE’s General Civil Aviation Authority said the flights were suspended “in light of the US ban imposed on Iranian airlines from using airports in various countries around the world.” Other countries that suspended flights from Iranian airlines include Oman, Iraq, Azerbaijan, Georgia, and Turkmenistan. On September 8, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) sanctioned 36 targets for supporting Iran’s aviation sector, including 27 Iranian commercial airlines. We covered the sanctions on Iran’s aviation sector in our September 14 update.

OFAC Consolidates Information on Enforcement Penalties and Removes Syria General License

On September 24, OFAC issued a final rule adding the Sanctions Penalties Regulation. The new regulation consolidates information about enforcement procedures and penalties, including the rights of US persons being investigated for violations. The information was previously located throughout 31 CFR chapter V. The new rule became effective on September 25.

On the same day, OFAC issued another final rule amending the Terrorism List Government Sanctions Regulations and removing and reserving a Syria-specific general license in order to implement the removal of Syria from the State Sponsor of Terrorism list.

OFAC Removes One Individual and One Entity from the DRC Sanctions List

On September 23, OFAC removed François Olenga and Safari Club from the Specially Designated Nationals List. Olenga was designated in 2017 for allegedly undermining democratic processes in the Democratic Republic of Congo, while Safari Club was designated for being owned or controlled by Olenga. OFAC did not provide comment on the delisting.

UK Developments

OFSI Introduces Presumption of Denial for Licence Applications Involving Designated Iranian Banks

OFSI has published guidance introducing a new licensing approach for transactions involving five designated Iranian banks: (i) Bank Sepah, (ii) Melli Bank plc, (iii) Bank Saderat, (iv) Persia International Bank; and (v) Bank Tejarat. With immediate effect, HM Treasury will apply a presumption of denial to licence applications involving these banks, meaning applications will generally be refused unless there are clear and compelling grounds for an exception. OFSI has also published FAQ 204 providing further detail on how this approach will operate in practice, confirming that applications will continue to be assessed on their individual facts but generally will only be granted when required by law or in exceptional and urgent circumstances. Examples include circumstances involving risks to life or environmental safety, essential regulatory payments, the preservation of assets, or the orderly wind-down of operations. The FAQ therefore indicates that the threshold for licensing transactions involving the five banks will be significantly higher than under OFSI’s ordinary case-by-case licensing approach, with applicants expected to demonstrate why their circumstances justify an exception to the general presumption of refusal.

OFSI has also confirmed that it will not renew the Iran Interim Basic Necessities General Licence (INT/2025/7628424) when it expires on October 22, 2026. Transactions currently relying on that licence will therefore cease to be authorised after expiry unless another applicable general licence or a specific HM Treasury licence is available, making it important for firms currently relying on the licence to assess alternative authorisation arrangements ahead of the deadline.

EU Developments

EU Council Renews Russia Asset Freeze Sanctions Regime for Three Years

On September 22, the EU Council renewed the restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine under Council Decision 2014/145/CFSP and Council Regulation (EU) 269/2014, until September 22, 2029. The renewal extended the targeted financial sanctions and travel bans applicable to more than 3,000 listed individuals and entities and, for the first time, provided for their renewal for a three-year period rather than the customary six-month period.

At the same time, the Council removed Russian businessmen Alisher Usmanov and Mikhail Fridman, as well as Andrey Falaleev and Redbird Corporate Services Ltd., from the EU sanctions list. In addition, the entries of 104 individuals and 71 entities designated under the EU asset freeze sanctions regime were updated.

According to reports, EU Member States agreed to delist Alisher Usmanov and Mikhail Fridman as part of a political compromise that secured unanimous support for the three-year renewal of the sanctions regime. France reportedly advocated for Usmanov’s removal amid negotiations with Azerbaijan concerning the release of French nationals detained in the country. The day after the Council adopted the renewal, Azerbaijani President Ilham Aliyev pardoned French national Martin Ryan, who had been convicted on espionage charges. Meanwhile, Luxembourg reportedly supported Fridman’s delisting during the negotiations, against the backdrop of a $16 billion arbitration claim brought by Fridman concerning assets frozen by the Grand Duchy under EU sanctions.

The negotiations proved contentious, with Latvia initially opposing the proposed delistings before ultimately abstaining and allowing the renewal decision to be adopted. Following the decision, Latvian Prime Minister Andris Kulbergs reportedly indicated that Latvia would look to impose national sanctions measures against the delisted individuals.

EU Council Announces News Listing Targeting Russian Hybrid Threats

The EU Council recently adopted restrictive measures against an additional individual involved in Russia’s continued hybrid activities, in particular Foreign Information Manipulation and Interference (FIMI) targeting the EU and its Member States and partners. The newly designated individual under the restrictive measures in view of Russia’s destabilizing activities is Russian media figure and former senior executive of Russia Today France, Xenia Fedorova.

According to the Council, Fedorova participated in the implementation and dissemination of RT France’s editorial line, including narratives aligned with those promoted by the Russian authorities in the context of Russia’s war of aggression against Ukraine. Following the suspension of RT’s broadcasting activities in the EU, Fedorova continued to disseminate such narratives through French media outlets, including CNews, Europe 1, and Le JDNews. The listing also notes that French authorities publicly identified Fedorova as relaying Kremlin disinformation and adopted an expulsion measure against her in July 2026.

With this update, EU sanctions in response to Russia’s destabilizing actions now apply to a total of 81 individuals and 20 entities.

EU Council Updates Sanctions Listings Targeting Individuals and Entities Associated with the Taliban

The EU Council updated the entries relating to 24 individuals and one entity under the restrictive measures directed against certain individuals, groups, undertakings and entities in view of the situation in Afghanistan, following an update at the UN level. Changes under Council Regulation (EU) 753/2011 reflect the March and April decisions of the UN Security Council Sanctions Committee updating the identifying information of 24 individuals associated with the Taliban, as well as that of Haji Khairullah Haji Sattar Money Exchange (HKHS). According to HKHS’s updated listing, Taliban leaders have used HKHS to disseminate funds to Taliban shadow governors and commanders and to receive informal money remittance transfers for the Taliban.

Asia-Pacific Developments

China imposed export restrictions on an additional two precursor chemicals used in the production of fentanyl

On September 22, 2026, China expanded its export control regime on drug-related precursor chemicals by adding two more substances to the list of chemicals that require export permits for shipments to the United States, Canada, and Mexico, bringing the total number of controlled chemicals to 18. The move came ahead of a meeting between Chinese President Xi Jinping and US President Donald Trump and reflects continued pressure from the United States, which has long criticized China as a major source of precursor chemicals used in the illicit manufacture of fentanyl, methamphetamine, and other synthetic drugs.

China Criticizes Expanded US Sanctions Campaign Targeting Iranian Aviation Sector

On September 22, 2026, China reaffirmed its opposition to US sanctions against Iran, with Foreign Ministry spokesman stating that Beijing rejects unilateral sanctions that are not authorized by the UN Security Council and opposes the extraterritorial application of US laws. At the same time, US Treasury Secretary Scott Bessent announced that, beginning September 23, the United States would seek to effectively halt the global operations of Iranian commercial airlines by enforcing sanctions against 27 Iranian airlines and related aviation entities.

Japan Reaffirms Support for Ukraine and Sanctions Pressure on Russia

On September 22, 2026, Japanese Prime Minister Sanae Takaichi reaffirmed Japan’s support for Ukraine during her first formal meeting with Ukrainian President Volodymyr Zelenskyy on the sidelines of the UN General Assembly, pledging to continue coordinating with the international community on assistance to Ukraine and sanctions against Russia. Takaichi emphasized that sustained international support is essential to achieving a fair and lasting peace, while Zelenskyy thanked Japan for its humanitarian and energy assistance.

South Korean President Urges Sanctions Relief for North Korea in Exchange for Nuclear Freeze

South Korean President Lee Jae Myung has called on the United States to consider easing sanctions on North Korea in exchange for a freeze on Pyongyang’s nuclear weapons and intercontinental ballistic missile programs, arguing that existing sanctions have had limited effectiveness and that diplomacy offers the only realistic path forward. Lee advocated a step-by-step approach in which sanctions relief and other incentives would help build trust following a negotiated freeze, eventually encouraging North Korea to scale back its nuclear arsenal.

Australia Expands Russia Sanctions as It Commits to Long-Term Ukraine Support

On September 23, 2026, Ukraine and Australia signed a 10-year bilateral security agreement during the UN General Assembly, formalizing long-term cooperation in defense, energy security, democratic reforms, and broader geopolitical coordination. The agreement highlights the expanded pressure on Russia by imposing 106 new sanctions designations, including measures targeting 38 vessels associated with Russia’s “shadow fleet” used to circumvent restrictions on fossil fuel exports, as well as organizations involved in the indoctrination and militarization of children, including Ukrainian children taken from occupied territories.

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Global

A new UN Environment Programme report examines the risks and impacts of living in an era of 1.5°C, focusing on adaptation and development approaches responding to changing conditions. The report assesses that mitigation and adaptation are interconnected and mutually reinforcing. They must advance together, responding to emerging risks. Weak mitigation will increase impacts and potentially divert funds to emergency responses, while mitigation efforts that are not adapted will be vulnerable.

The report also urges urgent actions to limit emissions to mitigate overshoot of 1.5°C, saying there are no good outcomes in remaining above 1.5°C. Those outcomes include intensified extreme weather, ecosystem loss, submersion of coastal regions, and severe damage to human health, food security, water supplies, nature, cities, infrastructure and economies. In addition to sustained reductions in greenhouse gas emissions, further investment and deployment of carbon dioxide removal should be pursued. The UN’s most optimistic scenario has warming peaking around 1.8°C before declining.

Read More: UN Environment Programme, Overshoot Commission

Europe

German Foreign Minister Johann Wadephul held a surprise bilateral meeting with Russian Foreign Minister Sergey Lavrov on the sidelines of the UN General Assembly’s high-level week. This is the first interaction between the German and Russian chief diplomats since the full-scale invasion of Ukraine in February 2022. Wadephul shared that he discussed Russia’s recent hybrid activity, including the failed August attack on Ukrainian cargo planes at the Leipzig Halle international airport, and that Germany can defend itself amid further provocation.

The Wadephul-Lavrov meeting could suggest that Germany sees an opportunity for Ukraine mediation. Germany has suggested that it would support Russia-Ukraine peace talks if Moscow took them seriously. Momentum for renewing peace talks is growing, especially after the Trump administration’s recent shuttle diplomacy between Moscow and Kyiv. The US is also reportedly planning to invite Russian President Vladimir Putin to the Miami G20 summit, which Wadephul commended as an “opportunity” to advance serious negotiations. Germany may attempt to directly involve itself, either as a European voice or a European “track,” and compete with other European players to become a mediator.

Read More: Politico, Financial Times [paywall], Council on Foreign Relations

Asia-Pacific

According to US Ambassador to China David Perdue, President Trump asked Chinese President Xi Jinping whether China would like to buy US weapons during high-level talks last week. Following Perdue’s statement, the White House said it has no plans to sell arms to China, while the State Department said US law prohibits such sales. The comments come as Trump continues to hold up a $14 billion arms package for Taiwan, despite longstanding US policy to provide Taiwan with defense articles and services for its self-defense. Trump said in May that he was holding the Taiwan sale because it was a “very good negotiating chip” in dealings with China.

The remarks raise questions among US allies about the consistency of Washington’s regional security commitments. The US has maintained an arms embargo on China since 1989, while Beijing remains a principal US strategic and military competitor. Although the White House and State Department quickly clarified that there are no plans to sell weapons to China, Perdue’s comments add uncertainty for Asian partners about how the administration will balance US-China engagement with its existing security commitments in the region.

Read More: New York Times [paywall], South China Morning Post [paywall]

Americas

Colombia will seek financing from the IMF to address its fiscal crisis. Colombian President Abelardo de la Espriella announced during a Sunday night televised address that his government would begin discussions with the IMF led by Finance Minister Miguel Gomez. De la Espriella emphasized the severity of Colombia’s fiscal situation in the speech, stating that the “balance is in the red” and placing the blame on the previous government of leftist Gustavo Petro. IMF loans are often tied to austerity measures, which can be deeply unpopular and have recently caused unrest in Bolivia.

The announcement represents a dramatic policy shift for De la Espriella’s administration. Just weeks ago, Gomez stated that Colombia would not turn to the IMF and would rely on other measures to balance the budget. However, De la Espriella said during his televised address that state revenues were no longer covering debt servicing and operating expenses, making it necessary to borrow in domestic and international markets. Colombia’s public debt stands near 60% of GDP, and the government estimates a deficit of 9.4% of GDP for 2027, up from the Petro government’s projection of 6.7%.

Read More: El Pais [Spanish], ColombiaOne, Bloomberg [paywall]

Geoeconomics

The US and China have agreed on a framework to reduce tariffs on roughly $60 billion in bilateral trade following last week’s Trump–Xi summit. Under the “30-for-30” arrangement, each government identified approximately $30 billion in imports from the other country for more favorable tariff treatment, measured using 2024 trade values. China’s proposed reductions cover US agricultural products, medical devices and cosmetics, while the US list includes Chinese household appliances, toys and children’s car seats. The reductions remain subject to domestic legal procedures. The two governments also advanced their trade and investment boards and established an agricultural working group to address market-access barriers. These measures accompany the extension of their existing trade truce through January 10, 2027.

The package could lower costs for selected businesses. Lower Chinese duties would improve the competitiveness of US corn, wheat, meat and dairy exports, while reduced US tariffs could ease costs for retailers importing covered consumer goods. Soybeans were excluded from China’s list, leaving a major American agricultural export outside the tariff relief. The $60 billion figure describes existing trade covered by the proposed reductions, so it does not establish how much additional business the agreement will generate. The agricultural working group could help by addressing regulatory barriers that prevent sales even when tariffs are revoked.

Read More: USTR, White House, The Korea Times, CSIS

Disruptive Technology

Google will send its first “Suncatcher” orbital data center into space on October 1. The experimental design is small, about the size of a refrigerator containing about four AI-enabling tensor processing units (TPUs). A typical data center would host thousands of these chips, but the idea is to launch clusters of satellites with dozens of these TPUs. To get there, Google wants to test whether an orbital data center is both technically and logistically feasible, while also identifying unforeseen engineering challenges in space, including the TPUs’ fragility to radiation in space, orbital and launch forces, and extreme temperatures. Google also wants to test whether the TPUs function effectively after six years, which is when the satellites are expected to reenter Earth’s atmosphere. Some Google analysts noted that, like Waymo, a viable new service could take at least a decade of tinkering and progress.

Orbital data centers are supported across the AI industry. SpaceX, which is facilitating the Suncatcher launch, has bet its own valuation on the prospect of becoming a major AI player, partially on the assumption that it is poised to be a first mover on data centers in space. Orbital data centers could gain traction as the political costs grow to the high energy demand of terrestrial data centers.

Read More: Ars Technica, The New York Times [paywall]

Energy

The EU is pushing member states to cut energy demand amid rising prices. EU Commissioner for Energy and Housing Dan Jørgensen wrote a letter to EU ministers on September 25 asking them to consider tools to reduce demand for gas and electricity. At the same time, Jørgensen offered assurances that there is no risk to the EU’s “security of supply” despite global supply issues and price volatility. The EU depends on imports to meet its energy needs, with foreign suppliers providing about 80% of the EU’s gas needs. Starting in January, the EU will also phase out purchases of Russian LNG.

The EU is looking at low gas storage levels going into the winter. Across the EU, gas storage is only at 70%, which puts it more than 10% below where it was at this point last year. Storage levels vary across the bloc and some countries, such as Germany, have stockpiled barely more than 50% of total capacity. In a best-case scenario, Germany can likely only reach 77% of capacity before winter, according to Germany’s gas storage industry association INES.

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

Transnational Crime & Corruption

UK authorities arrested five individuals near a Royal Air Force base and charged them with planning a terror attack. The men, all London-based UK nationals, were charged under the UK’s Explosives Act and Terrorism Act, but no official information has been released about their motivations. UK and US authorities claimed that the arrested individuals had been known to intelligence services. The men were arrested after a local resident near the RAF base called the police and reported seeing three vans blocking a road near the base.

Media reports indicated that investigators suspected Iran was behind the plot. The RAF base near the arrests had been used as a staging point for US strikes on Iran, and the Iranian government has specifically threatened to target the facility in retaliation. Iranian government representatives denied any link to an attack on the base. UK domestic intelligence has repeatedly warned of Iran-sympathetic and -directed groups carrying out arson attacks and hate crimes in the UK since the start of the Iran war.

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

Defense

South Korea is introducing its first domestically developed fighter jet into its armed forces. Seoul has reached a significant milestone in its national arms industry with the entry into service of Korea Aerospace Industries (KAI) KF-21. South Korea has already bought 40 KF-21s in its Block 1 configuration, which will have a primarily air-to-air role. South Korea is also working on a Block 2 of the KF-21, which will have air-to-ground capabilities, and Seoul is reportedly considering purchasing 80 jets in this configuration. The KF-21 is a 4.5-generation fighter and will field a mixture of sensors and weapons from both South Korea and Western suppliers.

South Korean defense exports have surged in recent years. Seoul’s defense exports have started widening from primarily tanks and self-propelled howitzers to air defense systems, missiles, and aircraft as the country sees a major expansion in its defense exports business. South Korea is exploring exports of the KF-21 to Indonesia, and South Korea has also been exporting air defense interceptors to the Middle East as countries grapple with the fallout of the US war with Iran. South Korea has also developed strong defense industrial ties with countries in Europe like Poland, which has become a major purchaser of South Korean defense products.

Read More: Breaking Defense, Seoul Economic Daily, Lowy Institute

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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 first-ever Dissent Channel by Thomas Goldstein and Ian Cameron debates whether German Chancellor Friedrich Merz will resign.

Dissent Channel: Will German Chancellor Friedrich Merz Resign?

By Thomas Goldstein and Ian Cameron

^{“Prime Minister Keir Starmer and Friedrich Merz visit Airbus (54661461238)“ by Number 10 is licensed under CC BY 4.0.}

Welcome to Dissent Channel, a new Stepwise segment in which Global Strategic Engagement Team analysts will debate the impacts of geopolitical developments. Today, Germany: in September, three regional elections occurred in the German states of Saxony-Anhalt, Mecklenburg-Vorpommern, and Berlin. The Christian Democratic Union (CDU), the party of current chancellor Friedrich Merz, experienced disastrous results. The CDU’s vote share in Mecklenburg-Vorpommern was the worst in the party’s history, reaching just 4.9%, below the threshold to enter regional parliament.

The CDU’s decline has raised questions about Merz’s survival as chancellor or whether he will be forced to step down. Our team’s Europe analysts, Ian Cameron and Thomas Goldstein, debate Merz’s future.

In today’s analysis:

Ian Cameron – Merz will survive the fallout of the recent regional elections, but he is losing the ability to govern effectively

Thomas Goldstein – Merz may resist stepping down, but his Chancellorship appears terminal

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Global

At the UN, 80 countries signed a joint statement demanding the immediate reopening of the Strait of Hormuz. The statement, led by Bahrain, called for safe, secure, and unimpeded transit for all commercial vessels without the imposition of tolls, conditions, or illegal charges. The statement also condemned Houthi actions, including the resumption of conflict in Yemen, strikes on Saudi Arabia, and Red Sea shipping attacks, warning that an advance toward the Bab el-Mandeb Strait further imperils global trade. The statement followed an unsuccessful effort by Bahrain to secure UN Security Council support for a similar draft resolution, vetoed by Russia and China in April.

Reopening the strategic waterway has become a central demand by the US in the negotiations with Iran, which resumed on the margins of the UN this week. Iran is reportedly feeling the economic squeeze from the expanding blockade, now extended from maritime to Iran’s airlines. But the US is also under pressure from the elevated energy prices feeding inflation in the run-up to midterm elections. It is possible that another temporary deal could be reached, but the fiery speeches at UNGA demonstrate the difficulty of de-escalation when both sides continue to threaten escalation.

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

Europe

The right-sovereigntist Alternative for Germany (AfD) and left-populist Alliance Sahra Wagenknecht (BSW) reportedly struck a loose agreement to elect an AfD speaker and BSW vice-speaker in Saxony-Anhalt. If confirmed, this will be the first demonstrated parliamentary cooperation between far-right and far-left factions in Germany’s postwar history. The AfD, which won nearly 44% of the vote in September 6 elections, previously dismissed a coalition with the BSW, which won only 5.3%. Nonetheless, the BSW could support a minority AfD government or elect regional leader Ulrich Siegmund in some sort of quid pro quo. This would bring the AfD to power in a federal state for the first time and pose a major test for the party.

Several obstacles remain for formal AfD-BSW cooperation. The BSW is internally divided on cooperation with the AfD, which converges on migration and a dovish approach to Russia but otherwise radically disagrees on economic policy. The AfD may calculate that cooperation is the wrong approach. It wants to rule without any coalition partner and has signaled willingness to bide more time and exploit the dysfunction of the political center’s multiparty coalitions. The AfD caucus will meet on Tuesday to discuss the merits of the reported deal.

Read More: Tagesspiegel [in German], Stepwise Risk Outlook

Americas

The US and Argentina launched an investment agreement on Wednesday with a focus on critical minerals. The agreement will finance up to $7 billion in infrastructure projects in Argentina with the aim of boosting Argentine natural gas and critical mineral exports. Argentine Foreign Minister Pablo Quirno and US Deputy Secretary of State Chris Landau met to discuss the agreement in New York at a forum on supply chains and energy infrastructure.

The agreement seeks to secure $6 billion in investment for a large-scale Argentine LNG project. Through the project, Argentina is seeking to convert its natural gas reserves into an export industry. However, Argentina still lacks sufficient infrastructure to process, liquefy and transfer the gas to international markets. The agreement with the US also covers investments in critical minerals. Argentina has large deposits of lithium and copper that make up key components in green energy technologies.

Read More: ABC, Yahoo! Finance, InsideTrade

Energy

Russia is lowering its projections for both natural gas production and exports. The revision to natural gas expectations comes as Europe is preparing to end all purchases of Russian LNG starting in January 2027. However, natural gas production for this year will still outstrip 2025’s production. Energy export projections are used to inform Russia’s budget due to their impact on Russian state revenues, and Russia’s budget up through 2029 will incorporate the new forecasts. Russia also recently revised its output projections for oil to a 17-year low. Across the energy sector, although primarily targeting oil, Ukraine has been waging a campaign against Russia’s energy infrastructure.

Europe had remained a significant buyer of Russian LNG despite its sanctions regime. In July, the EU purchased a record amount of LNG from Russia’s Yamal LNG facility. In the first half of 2026, almost all Yamal LNG cargoes were directed to the EU.

Read More: Reuters [paywall], Moscow Times [in Russian], Kyiv Independent

Defense

Italy has placed an order for two new naval destroyers with a state-backed defense company. Italy will purchase two DDX destroyers from Orizzonte Sistemi Navali (OSN), a joint venture between state shipyard Fincantieri and state defense company Leonardo. The deal was arranged by OCCAR (Organisation Conjointe de Coopération en matière d’Armement), the EU’s defense procurement office. The ships are meant to replace Italy’s two currently operational Horizon-class destroyers, but all four will operate simultaneously for a period before the current ships are retired.

Earlier this year, Rome asked for €8 billion ($9.3 billion) in cheap loans from the EU for defense spending. Italy had originally considered €14.9 billion but ultimately scaled back. Rome had hesitated somewhat regarding SAFE due to political pressure to prioritize public spending over defense. Italy has had difficulty raising its defense spending, which only reached 2.8% in 2026.

Read More: Defense News, Defense Post, Defense News

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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 examines Bolivia’s loan agreement with the IMF and the potential for renewed unrest.

Bolivia Braces for Renewed Unrest as IMF Loan Arrangement Advances

By Elton Smole

^{“La Paz, Bolivia, morning light” by VassilPhoto is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.}

Bolivia’s Congress approved a $1.9 billion loan agreement with the International Monetary Fund (IMF) on Friday, giving conservative President Rodrigo Paz a major victory but raising the risk of renewed unrest. The loan’s conditions include the elimination of fuel subsidies, and pump prices rose 83% after the government issued Supreme Decree 5716 on Saturday, eliminating a diesel subsidy that Paz said cost $55 million per week. Unions responded with a national assembly to organize opposition to the loan agreement, setting the stage for a continuation of nationwide roadblocks that have paralyzed the country twice over the past year.

Paz, who took office last November after nearly two decades of socialist rule by Evo Morales’s Movement for Socialism (MAS) party, has aligned Bolivia with the Trump administration. He has moved to open the country to foreign investment, and has so far managed to push through sweeping economic reforms while forcefully quelling domestic unrest. After months of road blockades by unions, farmers, and supporters of Morales, Paz deployed security forces to clear the blockades under a state of emergency, which Bolivia’s Congress recently extended from September 17 to December 17. With international support, Paz has demonstrated his ability to withstand domestic pressures and will continue his stronghanded approach as the country braces for another wave of unrest.

In today’s full analysis:

• Economic Reforms Open the Door to Foreign Investment

• Road Blockades, an Early Test for Paz, Set to Continue

• Reforms March Ahead, Despite Risks of Unrest

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Europe

ICYMI: The EU and the Philippines reached a “substantial agreement” in trade negotiations on Tuesday. The framework of a free trade agreement (FTA) appears to be the removal of 94% of tariff lines, including European machinery and Filipino agrifood exports; the opening of the Philippines’ procurement market; partial harmonization of sanitary and phytosanitary rules on food products; rules facilitating digital trade, including data transfers; and an ambition to facilitate European investment in sustainable energy and critical mineral projects. An FTA with the Philippines will likely expand the volume of bilateral trade, which was already €17.6 billion in 2025.

An EU-Philippines FTA bolsters the bloc’s diversification from the US and China. The EU continues to hold fast to the WTO-backed liberalized trading order, as reflected by the EU’s progress in advancing FTAs with the Mercosur bloc, Australia, and India in the past couple of years. The EU will be especially interested in the Philippines’ critical mineral reserves, including copper, nickel, and cobalt.

Read More: European Commission, AP, Politico

Middle East

President Trump’s Board of Peace unveiled a $2.45 billion recovery plan for Gaza. The 66-project plan, the text of which has not been publicly released, was announced at a meeting of the multinational board on the sidelines of UNGA in New York this week. The plan sets a six-month roadmap for the implementation of early postwar reconstruction of Gaza, where an estimated 80% of all structures have been destroyed.

Optimism for the plan is muted given that it does not address the lack of progress on the peace plan or, yet, the makeup of a promised international stabilization force. Progress on last year’s Israel-Hamas peace deal has stalled for months, with Israel and Hamas at odds over the timeline for Hamas to disarm and Israel to withdraw, and clashes and strikes are common. Early reporting on the plan indicated that details about standing up a government and the makeup of a long-awaited multinational stabilization force would be included, but early details have not emerged. The deal will be good for Gaza if it can be implemented, but there is no clear way to do that as yet.

Read More: Axios, BBC, International Crisis Group

Asia-Pacific

Today US President Donald Trump is hosting Chinese President Xi Jinping at the White House as part of a three-day summit. After a lavish welcome ceremony including military bands and a flyover of US military jets, the pair are set to cover a range of issues in bilateral talks. One central topic of discussion will be AI. US Treasury Secretary Scott Bessent indicated that China was eager to engage with the US on AI issues, including coordination on identifying risks from rogue AI agents or non-state actors, and would likely agree to a national security notification system for AI risks. However, Trump said he does not expect that the talks will result in the imposition of concrete guardrails on AI development.

Read More: New York Times [paywall], CBS, CNN, Bloomberg [paywall]

Americas

The United States and 14 regional partners announced new cooperation measures under the Shield of the Americas initiative. In the Joint Statement on Defending Hemispheric Sovereignty, released Tuesday, the countries commit to deeper cooperation on economic security and countering transnational criminal organizations. Participating governments, including Argentina, Bolivia, Chile, Colombia, Ecuador and Peru, pledged greater intelligence sharing and security cooperation, while also exploring investment screening, protecting critical-mineral supply chains and promoting trusted suppliers for digital infrastructure. The initiative is organized around three pillars: economic cooperation, anti-crime sanctions coordination and multilateral engagement.

The initiative’s first joint action will target 24 narco-terrorist organizations. The list includes MS-13, Tren de Aragua, the Sinaloa and Jalisco New Generation cartels, Colombia’s ELN and FARC dissident groups, and several Brazilian and Ecuadorian criminal organizations. Participating governments intend to pursue measures including asset freezes, visa and immigration restrictions, and penalties for individuals who knowingly provide material support to the groups. They also plan to seek consultations through the Organization of American States under the Rio Treaty, potentially providing a framework for broader collective action.

Read More: US Department of State, Al Jazeera, Buenos Aires Times

Geoeconomics

The US and China have agreed to extend their trade truce through January 10, 2027, giving negotiators two additional months to pursue a broader agreement. Treasury Secretary Scott Bessent announced the extension on September 23 after meeting with Chinese Vice Premier He Lifeng. The agreement postpones the November 10 expiration of the Busan framework, which paired US tariff relief with Chinese commitments to ease critical-mineral export restrictions and purchase American agricultural goods. Negotiators are also discussing tariff reductions on roughly $30 billion in non-sensitive goods, alongside financial services and agricultural purchases. Bessent said it remained unclear whether a broader deal could be completed by the new deadline.

The extension gives businesses more time to plan shipments, but implementation problems continue to undermine the truce. Bessent said China was meeting its commitment to purchase 25 million tons of US soybeans but lagging on other agricultural purchases, while US officials have also reported shortfalls in rare-earth deliveries. Deeper disagreements also remain: Washington wants Beijing to reduce industrial subsidies and reliance on export-led growth, while China seeks relief from US restrictions on sensitive technologies.

Read More: Reuters [paywall], White House, South China Morning Post [paywall], CSIS

Energy

Tankers are becoming a bottleneck in global energy supplies. The war in the Middle East has created shortages in Very Large Crude Carriers (VLCCs), as those ships must take slower, less efficient routes, thereby limiting their availability. The going rate to hire a supertanker from the Middle East to China has risen more than 40-fold this year, and the cost of shipping oil from Brazil to China has likewise spiked. The issue has been exacerbated by large numbers of ships waiting in the Middle East to load their cargoes. The spiking shipping costs and the lack of availability are driving down the amount of oil refineries can access and afford.

The tanker shortage is compounding with other issues affecting energy supplies. Strikes against Russian and Middle Eastern energy infrastructure have been continuing, such as the recent damage to a Saudi pipeline, and are acting as another damper on global supplies. Global refining capacity has also suffered from the drops in diesel exports from both Russia and the Middle East.

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

Transnational Crime & Corruption

A hacking group claimed to have stolen the personal information of thousands of FBI employees as well as sensitive investigative files. The group, ShinyHunters, said it had exploited a previously unknown bug in Oracle’s PeopleSoft human resources and financial software to access FBI systems. Representatives from the group provided multiple media outlets with samples of the stolen data, which included the names, titles, home addresses, phone numbers, and medical information of thousands of FBI employees, job applicants, and their spouses.

ShinyHunters threatened to release or sell the data and has been accused of extortion in the past. An FBI advisory earlier this year alleged that ShinyHunters frequently demanded ransom payments from victims of its hacks. The group disputed the FBI’s allegations and claimed to not be financially motivated, demanding that the FBI advisory be taken down in exchange for deleting the stolen data.

The hack could expose FBI investigators working on sensitive anti-terrorism and national security-related initiatives. The data sample released to news media included references to the FBI working on counterespionage initiatives and telecommunications intercept operations not previously publicly disclosed by the bureau.

Read More: 404 Media, Reuters [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 Carter Spahn examines the economy of the new space race.

The Race to Build the Space Economy

By Carter Spahn

^{“KENNEDY, JOHN F. - PRESIDENT - Houston, Texas Visit“ by NASA is marked with Public Domain Mark 1.0.}

We choose to go to the Moon in this decade and do the other things, not because they are easy, but because they are hard. – John F. Kennedy, 1962

Countries no longer choose to go to space; they have to.

US-Soviet competition at the peak of the Cold War thrust the world into the space age, defined not only by intergovernmental competition and national pride, but also by economic necessity. Since 1965, corporations have sent assets into orbit to claim market share in telecommunications, television broadcasting, remote sensing, and weather monitoring. Space-based infrastructure has lowered costs and improved productivity on Earth by enabling services that support most of the world’s economy.

Today, a new space race has taken off. Driven by falling launch costs, rapid private-sector innovation, and intensifying strategic competition between the US and China, space represents both a commercial market and a domain of national power. While the depths of space are infinite, viable opportunities are finite. Being first in space is no longer merely a symbolic act of planting a flag on the moon. Rather, it secures the most valuable places to operate, where you can build the infrastructure that could make it cheaper for later arrivals to become customers instead of competitors. That infrastructure could make space a place to manufacture specialized materials and medicines, generate energy, and extract resources, creating new products for Earth and the means to sustain economic activity beyond it. As the US and China compete for primacy in space, the stakes of showcasing the supremacy of their differing innovation ecosystems are on full display. This time, the contest will be measured not only by extraordinary national achievements; the outcome will shape which companies and countries build and profit from the next economy, and the terms on which everyone else can access it.

In today’s full analysis:

• Building an Economy Beyond Earth

• A New Era of Competition

• The Implications of the Next Economy

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Global

US President Trump reversed positions and now backs a ban on diesel exports as a way to curb record fuel prices. Diesel prices have hit record levels due to supply constraints caused by the Iran and Ukraine wars, surging more than 70% since late February. High fuel prices create a vulnerability for Republicans in the approaching November elections, creating political pressure to provide some relief to US consumers, with whom the affordability of food and other necessities is of great concern.

A diesel export ban would likely create more problems than it would solve. US Energy Secretary Wright is warning that a ban would create regional market disruptions, with gluts in the Gulf Coast forcing producers to reduce production, not just of diesel but other distillates, such as jet fuel. A ban would not lower prices beyond several weeks. S&P Global Energy estimates that U.S. refiners would need to reduce crude runs by nearly 2 million barrels a day—more than 10%—to eliminate the resulting diesel surplus.

An export ban would remove the single largest source of global diesel from the market, risking a surge in the global price of diesel. Of the 8 million barrels of diesel traded globally by sea each day, the US supplies about 1.5 million barrels, about 20% of market share. An export ban would hit developing countries hard and send shockwaves across Europe, which is heavily reliant on imports of American petroleum products. With Mexico and other Latin American economies relying on US diesel (Latin America buys nearly two-thirds of US diesel exports), a ban risks driving up prices for US supply chains for food and agricultural products. Additionally, other countries could retaliate by reducing or cutting off fuel exports to US regional markets, such as California and the East Coast.

Read More: Reuters [paywall], Wall Street Journal [paywall], American Petroleum Institute, Atlantic Council

Europe

On the sidelines of the UN General Assembly, the US, Denmark, and Greenland signed a defense agreement allowing two additional US bases in Greenland. As part of the deal, the US will be allowed to open bases at Narsarsuaq in the south and Mestersvig in the east, as well as expand the current Pituffik Space Base, which collects information for missile warning systems and space surveillance. The agreement reaffirmed the US military’s right to access Greenland for the defense of the NATO area covered under Article 5, including via President Trump’s envisaged Golden Dome missile defense system, which is still in conceptual stages. No non-NATO country will be allowed to open military installations in Greenland or invest in or operate mining projects without consent from the US, Greenland, and Denmark. If Greenland becomes independent, it maintains Denmark’s responsibilities and obligations.

The agreement ends the transatlantic Greenland dispute, for now. The US appears to have achieved its military objectives of expanding its Arctic military presence and preventing a Russian or Chinese foothold on the island. Moreover, ratifying and implementing the agreement could take a few years, extending beyond the Trump administration’s tenure. Nonetheless, the US could revisit the agreement if it becomes perceived as outdated, such as if Russia’s Arctic build-up accelerates. The Trump administration will likely prioritize the Golden Dome in the short term.

Read More: Politico, Associated Press, CBS News

Middle East

Iran and the US held their first negotiations in months, raising hopes for a settlement. Washington and Tehran held talks via shuttle, mediated by Qatar, on the sidelines of the UN General Assembly in New York. Iranian conditions for an end to the war reportedly included an end to hostilities on all fronts, a halt to US “acts of aggression,” an end to the naval blockade, and the release of frozen Iranian funds. US conditions were not reported, although any deal would likely be limited in scope (similar to the summer MOU).

Oil prices fell on hopes for diplomacy, even as rhetoric escalated and strikes in the region were reported. At his UNGA speech, President Trump said he had a decision between negotiation and “annihilating” Iran. Over the last several days, the IRGC reportedly struck new targets in the Strait of Hormuz, following days of reporting that the regime was considering new escalation in anticipation of potential US strikes.

Read More: Reuters [paywall], Iran International, CNN, AP, TradeWinds News, Al Jazeera

Asia-Pacific

Chinese President Xi Jinping is expected to land at Joint Base Andrews today in the first formal visit to Washington by China’s head of state in over a decade. US President Donald Trump is expected to greet Xi personally on the tarmac, kicking off the three-day state visit that will include talks with Trump at the White House on Thursday. Trade is expected to top the agenda, which also includes artificial intelligence and Taiwan. A key focus will be whether the two sides can extend their October 2025 trade truce, which suspended higher US tariffs while China eased restrictions on critical rare-earth exports. It is set to expire in November.

Expectations for major breakthroughs or business deals remain low, and the summit is likely to focus more on preserving the current détente than resolving deeper disputes. Xi has an incentive to extend the truce as China contends with an economic slowdown, while Trump faces pressure to avoid higher consumer prices ahead of the November midterm elections. Beijing also retains leverage through its dominance of critical-mineral supply chains, while Xi is expected to press Trump on Taiwan, including a pending multibillion-dollar US arms sale that Trump has so far withheld approval for.

Read more: BBC, New York Times [paywall], Wall Street Journal [paywall], Reuters [paywall]

Americas

A UN report released on Monday concluded that US boat strikes against alleged drug smugglers plausibly constitute crimes against humanity. The report by UN special rapporteur Ben Saul found reasonable grounds to believe that 68 strikes carried out between September 2025 and August 2026, which killed at least 223 people, amounted to crimes against humanity of murder under customary international law. Saul rejected the Trump administration’s argument that the strikes were justified as self-defense against designated terrorist organizations, arguing that drug trafficking does not constitute an armed attack. He also said the strikes were neither necessary nor proportionate.

The US has continued the campaign under Operation Southern Spear despite ongoing legal scrutiny. The Pentagon announced two additional strikes in September, bringing the total to 70 vessels and 234 people killed since the campaign began a year ago. The most recent strike, on Saturday, killed four people in the Caribbean. The UN finding raises the prospect of individual criminal liability for officials who ordered or carried out unlawful strikes. The Trump administration has continued to defend the campaign as part of its broader effort against narco-terrorism. The UN report could nonetheless intensify pressure for greater scrutiny.

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

Africa

War has erupted in Ethiopia’s Tigray region, ending a fragile peace between Addis Ababa and the Tigray People’s Liberation Front (TPLF). The TPLF seized the airport in Mekelle, Tigray’s capital, and declared war on the Ethiopian government. The Tigray regional government stated it was responding to “intensive bombardments” by federal forces on Tuesday, including airstrikes, drone attacks, and artillery fire. The declaration followed an announcement that the TPLF had formed an alliance with other ethnic rebel groups seeking to overthrow Prime Minister Abiy Ahmed Ali’s government. Fighting has also been reported in the neighboring regions of Afar and Amhara. Other members of the alliance do not appear to be engaging federal forces but could soon declare war on the government.

Read More: Radio France Internationale, DW

Disruptive Technology

ICYMI: The US and China have agreed to advance an AI safety dialogue. US Treasury Secretary Scott Bessent stated that he and Chinese Vice Premier He Lifeng agreed to establish a formalized dialogue on AI safety with a direct line of communication regarding AI incidents, thereby following up on a similar commitment from May 2026. An operationalized dialogue could become a forum to discuss technical protocols and how to respond to determined AI risks. A dialogue also leaves substantial flexibility for how to manage AI safety as both the US and China fine-tune their policy approaches. A separate 22-country declaration at the UN, led by Finland, calls for managing AI risks through an international institution similar to the IAEA, but neither the US nor China signed onto the document.

Read More: Yahoo!finance, Reuters [paywall], Politico

Energy

The US is considering an investment fund for rebuilding energy infrastructure in the Middle East. The proposal, which the US is calling the Partnership for Allied Trust and Construction (PACT), would see the US commit $5 billion dollars and ask partners in the region to match with their own $5 billion contribution. PACT also aims to reduce the reliance on the Strait of Hormuz for regional energy shipping. The Development Finance Corporation (DFC) would manage the fund. It is unclear when or if other regional countries would sign onto the initiative and commit their own money.

The US war with Iran has resulted in extensive damage to regional energy infrastructure. By April 15, the conflict had led to as much as $58 billion dollars of damage to energy infrastructure. While active hostilities have significantly lessened since earlier phases of the war, damage is still accumulating. A major Saudi Arabian east-west pipeline that Riyadh uses to reroute oil from the Strait of Hormuz suffered significant damage this month, although it has now partially returned to operation. However, a full restart likely won’t occur for at least a month.

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

Transnational Crime and Corruption

Russian government-backed payment processor A7 allegedly developed an international money laundering network to help Russian firms evade sanctions. A Financial Times investigation found that at least $6.9 billion was laundered through A7 front companies that accessed the international financial system, in violation of international sanctions. The funds were reportedly used to acquire “war-related goods.” A7’s front companies reportedly used a sophisticated system of forged invoices to disguise the nature of their transactions.

A7 began the alleged money laundering operations in 2024 and shifted its strategy over time. Initially, most of A7’s front companies set up bank accounts in Kyrgyzstan, with much of the money routed through the state-controlled Trading Company of the Kyrgyz Republic. After several Kyrgyz banks were placed under scrutiny for facilitating suspicious A7-linked transactions, the shell company network diversified towards the UAE and Hong Kong. 17 separate front entities opened bank accounts with First Abu Dhabi Bank, which is over 55% owned by the Abu Dhabi government and ruling family. The bank facilitated over $1.7 billion in payments for A7 entities and helped them convert Emirati dirhams into dollars, euros and renminbi.

Read More: Financial Times [paywall], Wall Street Journal [paywall], Open Source Centre

Defense

Seoul is looking to partner with the EU on space-based communications infrastructure. South Korea signed an agreement with the EU last week on cooperation in the realm of secure satellite communications and to explore South Korea’s integration into the EU’s IRIS2 satellite communications constellation. The agreement establishes a working group that will exchange information about current and future programs for satellite communications, joint applications and technical areas of future cooperation. The cooperation could potentially involve the future linkage of Seoul’s planned military communications satellites with the EU’s IRIS2.

IRIS2 has not yet launched but is set to begin its first phase by the end of 2029. The constellation will ultimately include 348 satellites primarily in Low Earth Orbit (LEO) but also 18 in Medium Earth Orbit (MEO).

Read More: Defense Industry Europe, Hartpunkt [in German]

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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 the potential impacts of the US F-35 sale to Saudi Arabia.

The US Sale of F-35s to Saudi Arabia: How, Why and What Next

By Anni Coonan

^{“F35 Lightning during the Oregon International Airshow” by Air Force Senior Airman Alexander Cook is in the public domain.}

On September 17th, the US announced the pending sale of F-35 fighter jets to Saudi Arabia. The Kingdom has long sought the purchase, but it has proven controversial for critics in Washington concerned with Saudi Arabia’s ties to China and consequences for Israel’s qualitative military edge. Washington’s agreement to sell Riyadh the world’s most advanced multirole stealth fighter would make it the first Middle Eastern country other than Israel to operate the aircraft. And occurring against the backdrop of an escalating US-Iran war, the sale could have significant implications for the regional balance of power, Gulf defense independence, Iranian security perceptions, US-Gulf partnerships, and the operating environment for regional businesses and international commodities.

In today’s full analysis:

• Why Riyadh Wants F-35s, and why the US Wants to Sell Them

• Lingering Concerns: Chinese Tech and Israel’s QME

• What the Sale Means for the Region

Read the Full Report Here

Or listen to the full report here:

Listen to the news:

Global

Russia gives its backing to the expansion of the UN Security Council while maintaining the existing veto system. The UN Security Council is composed of five permanent members with veto powers, including Britain, China, France, Russia and the US. There are ten non-permanent members, elected for staggered two-year terms, split up by world regions for a global balance: Africa and Asia with five seats, Western Europe and other states with two seats, Latin America and the Caribbean with two seats and Eastern Europe with one seat. The Russian statement came in the context of Turkish calls to reform the global body.

UN Security Council reform has been under discussion for decades without progress. Formed in 1945, the last reform of the organization was in 1963, increasing non-permanent seats from six to ten. Permanent members support expansion in principle but disagree over various proposals to make the body more representative, inclusive and democratic. There is some agreement in principle to adding G4 nations (Brazil, Germany, India and Japan). However, permanent members oppose altering or restricting the existing veto power of current members, citing concerns about diluting the council’s effectiveness. Given the current geopolitical rivalry, it is unlikely that discussion of reform will advance, and the effectiveness of the body will continue to be limited by disputes among the veto-wielding permanent members.

Read More: Reuters [paywall], Stimson Center

Europe

The EU is still struggling to agree on its latest sanctions package. Latvia was the sole vote opposing a compromise that would have extended most sanctions for three years in exchange for delisting two Russian oligarchs. France, Luxembourg, and Slovakia have drawn pushback from other EU countries with their attempts to delist the two oligarchs to further national policy goals. The ambassadors of the EU member states will continue negotiations today, and they have until the end of the day to reach unanimity.
The EU is increasingly running up against sanctions deadlines. While the EU will almost certainly find a compromise — all sanctions will lapse if one isn’t found — the last several rounds of sanctions negotiations have demonstrated that it’s becoming more difficult for member states to compromise and negotiate on sanctions issues.

Read More: Politico EU, Reuters [paywall], Kyiv Post

Middle East

Iraq’s Prime Minister pledged to disarm his country’s Iran-backed militias by June 27, 2027. Iraq is under mounting pressure from the US (and, increasingly, attacks by its Gulf neighbors) over its close ties to Iran and Iran-backed elements active in the country or under the umbrella of Iraq’s unwieldy patchwork of militias. Iraqi Prime Minister al-Zaidi, a political newcomer, made the claim for the first time in a weekend profile with the New York Times. This deadline is separate from al-Zaidi’s pledge to bring the Iran-backed groups under full control of the state by September 30 (recently recast as the start of the regulatory process).

The announcement comes on the eve of the US’ wind-down of Operation Inherent Resolve; it will withdraw final troops from Iraq following a 20+ year presence. President Trump made the promise to al-Zaidi, whom he backed in government formation, over the summer. The withdrawal of US troops and end of the US-backed d-ISIS coalition’s military mission is a concession to al-Zaidi, given the historic unpopularity of US troops in Iraq. But the withdrawal could pose risks for an ISIS resurgence (especially as Syria, whose military is stretched thin, has taken over the operation within its borders).

Read More: New York Times [paywall], Euronews, Atlantic Council, Al-Monitor [paywall]

Asia-Pacific

North Korea launched two short-range ballistic missiles off its eastern coast on Sunday. These tests brought the total number of ballistic missiles launched by North Korea this year to 15. This is three times the amount launched last year. The office of the Prime Minister of Japan issued a warning as the missiles fell into the Sea of Japan.

South Korean President Lee Jae Myung called on US President Donald Trump to ease sanctions on Pyongyang in exchange for an agreement that freezes its nuclear weapons program. This is a break with decades of South Korean policy towards North Korea. Despite describing such an agreement as unpalatable, he also said there is no realistic alternative. Russia and China have both increasingly embraced North Korea as a strategic partner. North Korea recently opened its first road bridge to Russia and is repairing a previously abandoned bridge to China. North Korea has also sent troops to support Russia’s war in Ukraine.

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

Americas

Eighteen suspects were extradited to the US from Haiti on Sunday over the 2021 assassination of Haitian President Jovenel Moïse. They were among 30 individuals indicted for the attack, who are allegedly Colombian mercenaries who posed as Drug Enforcement Administration (DEA) agents. According to the indictment, they killed Moïse for personal gain. They will face justice in Florida. The former Haiti Ministry of Justice employee Joseph Badio is accused of being the mastermind behind the plot. A Florida jury convicted four men in the killing in May, and five others have pleaded guilty.

Haiti’s first elections in a decade are scheduled for December 13. Haitian officials are pushing ahead with preparations, despite continued outbreaks of violence. Armed groups control large areas of the capital, Port-au-Prince, and observers fear that the violence could undermine the electoral process. Haitian officials have called for increased security forces and electoral observers to support the process, as elections originally planned for August 30 were pushed back due to the security challenges.

Read More: NPR, ABC, Al Jazeera

Africa

Seven Ethiopian rebel groups announced an alliance against the Ethiopian government, marking a major escalation in tensions between Addis Ababa and Tigrayan militants. The alliance includes the Tigray People’s Liberation Front (TPLF), which fought the Ethiopian government in a civil war from 2020 to 2022, as well as Oromo and Fano rebel groups. The announcement follows armed clashes between the TPLF and the Ethiopian National Defense Force in August amid disagreements between Tigrayan authorities and Addis Ababa over the implementation of the Pretoria Agreement, which was signed to end the Tigray war.

A war in Ethiopia could draw in other Horn of Africa states and their Gulf backers, further destabilizing the Red Sea region and creating a proxy conflict that would be difficult for the US to contain. Eritrea, a longstanding rival of Ethiopia, has deepened ties with the TPLF to counterbalance Addis Ababa’s regional ambitions, while the Sudanese Armed Forces have also strengthened relations with Asmara and could potentially support Eritrean efforts to undermine Ethiopia. Ethiopia has also accused Eritrea of supplying arms to the group. Meanwhile, Saudi Arabia and the UAE back Eritrea and Ethiopia, respectively, and a broader conflict involving multiple African states could prompt the Gulf countries to increase support for their preferred actors in pursuit of their regional interests.

At the same time, it is unclear how effectively the alliance can function given the conflicting objectives of its member groups. The Amhara Fano National Movement previously fought alongside the Ethiopian government against the TPLF during the Tigray war. These political differences could weaken or ultimately fracture the alliance, though the risk of conflict between the government and the TPLF or other rebel groups would remain.

Read More: Reuters [paywall], Al Jazeera, The Soufan Center, Stepwise Risk Outlook

Geoeconomics

The IMF and World Bank have approved reforms to their Debt Sustainability Framework for Low-Income Countries, the first update since 2017. Expected to take effect in the second half of 2027, the changes expand how the institutions assess governments’ ability to manage their debt. A new domestic-debt assessment will examine vulnerabilities including banks’ exposure to their own governments. A separate long-term development assessment will consider the fiscal costs and growth benefits of investments in infrastructure, human capital and climate adaptation. The reforms also strengthen stress tests, improve checks on economic forecasts and encourage more comprehensive debt reporting, aiming to capture risks arising from increasingly diverse borrowing sources while better accounting for countries’ development needs.

The reforms aim to clarify when countries need debt relief. These assessments influence access to concessional loans and grants and help determine how much debt relief creditors must provide. More detailed risk assessments are intended to clarify which countries can address their difficulties through policy changes and financing support, and which require more fundamental action. Giving greater consideration to the long-term benefits of development spending could improve decisions about productive borrowing, but does not create additional borrowing capacity. Results will still depend on credible forecasts and complete disclosure of liabilities, with the review identifying overly optimistic long-term export and revenue projections, alongside gaps in reporting state-owned enterprise debt.

Read More: IMF, Reuters [paywall], World Bank, Carnegie Endowment

Energy

The EU will maintain its opposition to new drilling in the Arctic. The EU had been reassessing its policy towards Arctic energy exploration but ultimately decided to continue its support for a future ban on Arctic oil and gas drilling, in line with the EU’s decision not to purchase any energy supplies from future Arctic projects. Oslo had been pressuring the bloc to drop its opposition to Arctic drilling projects because, while not a member of the EU, Norway is tightly economically integrated with the EU and sells most of its energy resources to the bloc.

The EU is currently in the process of revising its Arctic policy. Earlier this month, EU leaders met in Finland to plan out the EU’s future approach towards the Arctic as the region becomes a focal point of great power competition and economic potential as a shipping route and source of resources like minerals. The EU is also preparing to unveil a new Arctic strategy, which was last updated in 2021.

The Arctic has taken on increasing importance for a range of global actors. The war in Iran has highlighted the Arctic’s potential as a shipping route, and both China and South Korea are testing routes through Russia’s Northern Sea Route. Russia operates significant energy projects in the region, and it has also been the focus of increasing military attention from Russia, NATO, and China.

Read More: Reuters [paywall], Deutsche Welle, The Guardian, High North News, Stepwise Risk Outlook

Defense

The US Army has awarded a contract to a Ukrainian defense firm for long-range reconnaissance drones. The Army is giving Skyeton a $10.64 million contract to purchase the company’s Raybird drones and the services relevant to operating the drones. The Raybird is a Ukrainian-origin reconnaissance platform with up to 24 hours of endurance and a maximum distance of 2,500 km. The exact number of systems the Army is procuring, and the purposes they will be used for, were not revealed by the Army.

Raybird systems have seen extensive combat time in Ukraine. By June of this year, the Raybird has more than 350,000 combat flight hours, with Skyeton specifically advertising it as supporting long-range fires capabilities like the HIMARS multiple rocket launcher due to its endurance.

The US has partnered with Ukrainian companies in the past on drone technologies. Ukrainian drone manufacturer F-Drones gave 2,000 drones to the US for evaluation as part of the Pentagon’s Drone Dominance program earlier this summer. Skyeton also has plans to build its primary manufacturing facility in North Carolina and to invest $3.1 million. In the facility.

Read More: Army Recognition, Stars and Stripes [paywall], Kyiv Independent

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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, Kiki Dong, Isabella Rao, Andy Xu Sofia, Jake Fitzpatrick, Carter Spahn, Chris Dantes

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The Lede

Sanctions Relief for Prisoner Release: US and French Transactional Diplomacy Tests Western Sanctions Policy

^{“2020 Belarusian protests — Minsk, 16 August p0048“ by Homoatrox is licensed under CC BY-SA 3.0.}

Western countries appear more willing to use sanctions waivers to achieve transactional geopolitical goals, opening new diplomatic avenues but also risking strain on alliances and raising compliance uncertainty for businesses. This trend is highlighted by last week’s US prisoner-for-sanctions-relief deal with Belarus and a similar proposed deal between France and Azerbaijan. Targeted sanctions waivers or full delistings can be a powerful motivator to change the behavior of political influencers. However, repeated use of such tactics could undermine the public narrative behind a sanctions campaign. It could also weaken relationships between countries coordinating sanctions efforts if individual states push for delistings in pursuit of their own policy goals. Finally, rogue states could exploit increased willingness to issue sanctions waivers for one-off prisoner deals by arresting foreign travelers to gain bargaining chips. Businesses face increased uncertainty about the direction and longevity of sanctions programs if quid pro quo waivers can be issued at any time. Multinational companies also face elevated risks that their expat employees could be arbitrarily arrested in pursuit of a sanctions delisting deal.

Belarus Deals Reveal Limits of Sanctions Relief Strategy

On September 16, US Special Envoy to Belarus John Coale announced that Belarus had released 25 prisoners in exchange for the US lifting sanctions on two Belarusian manufacturing companies. Coale also promised Belarusian President Alexander Lukashenko that US banks would unfreeze tens of millions of dollars in frozen Belarusian assets.

Since the start of the second Trump administration, the US has repeatedly used sanctions waivers on Belarusian businesses to secure prisoner releases and nudge Belarusian policy away from Russia. As of early 2025, Special Envoy Coale declared that his mission was to secure the release of over 1,200 Belarusian prisoners. In December 2025, the US lifted sanctions on Belarusian potash production, a significant engine of the Belarusian economy, in exchange for the release of 123 Belarusian prisoners, including several leading figures in the country’s opposition movements. Lukashenko freed another 250 prisoners in March 2026 after the US agreed to drop sanctions on two Belarusian banks and the country’s finance ministry.

But US sanctions relief alone has had limited success in bringing Belarus into the Western orbit. While the US delistings allowed Belarusian potash to be more easily exported to the wider world, the industry relies heavily on Russia for exports. Belarus is reportedly seeking access to more conveniently located export facilities in Lithuania, where access is blocked by EU sanctions. Belarusian opposition figures warned in June that Lukashenko was re-arresting dissidents and delaying further releases over the US’ inability to influence EU sanctions relief.

The sanctions-relief-for-prisoners strategy may face diminishing returns. The 25 prisoners released most recently are significantly fewer than the “hundreds” Coale had suggested in earlier statements. Coale told news media afterwards that he would return to Belarus in October to secure the release of “hundreds more prisoners” and negotiate with the EU to restore Belarusian potash exports through Lithuania. US media estimated that around 900 alleged political prisoners remain in Belarusian jails.

The US appears unlikely to secure EU sanctions relief on Belarusian potash, which would require a consensus among the 27 member states. US negotiators would need to overcome strained US-EU relations, in addition to deeper distrust of Lukashenko among EU member states than within the Trump administration. Without EU cooperation, Coale will likely only secure the release of an additional few dozen prisoners during his planned October visit to Minsk.

France Tests EU Unity with Sanctions-for-Prisoners Deal

Ad hoc transactional sanctions relief is particularly disruptive for the EU, where any one state can endanger an entire sanctions package by pushing for individual relief, since each package must be renewed unanimously every six months. On September 14, member states were forced to delay a vote on prolonging Russia-related sanctions by a week after France and Slovakia pushed at the last minute for the delisting of Uzbek-Russian billionaire Alisher Usmanov. According to media reports, Usmanov’s delisting was part of an indirect deal to release a French-British businessman from an Azerbaijani prison, where he was arrested on espionage charges in 2023 and sentenced in March 2026 to 10 years.

Hungary and Slovakia reportedly pushed for Usmanov’s delisting earlier in 2026, with Turkish President Recep Tayyip Erdogan also urging the EU to delist him due to “Usmanov’s sincere efforts to fully cooperate with the EU institutions, as well as taking into account humanitarian considerations.”

While debates over sanctions targets are an expected part of the EU’s rolling sanctions campaign against Russia, explicitly tying Usmanov’s delisting to a prisoner release is unprecedented for the EU. Ukraine, alongside several unnamed EU diplomats, criticized France for pushing for the delisting at the last minute. If member states do not unanimously approve the sanctions for another six-month extension, the approximately 3,000 designations on individuals and entities will automatically expire. France risks straining EU cohesion by exploiting this leverage to obtain a prisoner release. Russia could also exploit these “political delisting” debates by offering individualized delisting deals to a few EU member states every time sanctions are up for renewal, forcing the EU to go through last-minute internal negotiations every six months.

Implications for Businesses

For businesses, an increase in the use of transactional sanctions-relief deals could open up new opportunities for foreign dealmaking with newly unsanctioned companies. However, it also introduces more uncertainty into how sanctions policies are implemented and coordinated between the US, EU, and other allies. Especially under the current administration, the US is prioritizing a realpolitik approach to sanctions delistings that further national security goals, such as rapprochement with Belarus amid declining Russian influence. France also cherishes its strategic autonomy, especially in the context of the generally more multilateral EU. Both countries’ strategies split from the rhetoric of other EU member states, where norms are institutionalized within sanctions policy. Large-scale sanctions relief deals could make US-EU sanctions regimes inconsistent, and EU member state haggling, such as in the case of France, could increasingly force greater malleability in the EU’s regime. Calls to reform the EU sanctions process, such as to qualified majority instead of unanimity or decreasing the frequency of rollovers, may increase.

Businesses also face increased regulatory volatility. Companies may be less able to predict whether a sanctions designation will remain in place as delistings become bargaining chips in diplomatic negotiations. This could complicate long-term investment decisions, particularly in sectors where sanctions compliance is a significant factor in decision-making.

US Developments

The Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 Becomes Law

On September 16, the US House of Representatives passed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 by a vote of 262 to 159, and President Donald Trump signed the bill into law on September 18. Originally introduced in April 2025, the Act gained momentum after the President signaled support in November 2025, conditioned on new tariff authorities and flexibility over the imposition of sanctions. Absent a presidential waiver, the Act imposes sanctions on various persons and entities, including Russian officials, certain Russian financial institutions, and Russia’s “shadow fleet” vessels.

The Act also authorizes sanctions on persons who knowingly sell, lease, provide, or facilitate the provision of goods or services relating to Russia’s defense industrial base, including computer numerical control (“CNC”) tools, lubricant additives, specialty chemicals, chemical coatings, military-grade fiber optics, advanced sensors, items on the Bureau of Industry and Security’s (“BIS”) Common High Priority Items List, and any other products designated by US authorities as critical to Russia’s defense industrial base.

Additionally, the Act authorizes the President to impose tariffs of up to 100 percent on the largest purchasers of Russian oil and natural gas, as well as countries facilitating Russian oil sanctions evasion. The law is expected to have the most impact on China and India, which are reportedly the largest purchasers of Russian crude oil. China’s Commerce Ministry voiced its opposition to the new sanctions. President Trump is scheduled to meet with President Xi Jinping at the White House on September 24. Trade and national security issues are expected to take center stage at the meeting.

OFAC Targets Digital Asset Exchange in Operation Economic Outcast

On September 17, OFAC designated BitBank, Pishtaz Simorgh Electronic Trade Company (“Pishtaz Simorgh”), and three individuals as part of Operation Economic Outcast. According to OFAC, BitBank is a digital asset exchange controlled by OFAC-designated Iranian financier Babak Zanjani. OFAC further identified Pishtaz Simorgh as the developer of BitBank’s digital assets software. The designated individuals and entities were described as key components of Iran’s digital assets-based sanctions evasion infrastructure. OFAC previously designated multiple digital assets entities and individuals allegedly linked to Zanjani on January 30 and July 24. We previously reported on Operation Economic Outcast in a recent blog post.

State Department Sanctions Cuba’s Nickel Sector and Military R&D Apparatus

On September 17, the State Department sanctioned 11 Cuban targets, including four state-owned enterprises in the nickel mining industry, four military research and development enterprises, and three military officials. These actions were pursuant to E.O. 14404, “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.” These sanctions follow recent Cuba designations by the State Department on September 3, which included Empresa Importadora y Abastecedora del Níquel, a state-owned nickel industry support services company.

OFAC Removes Ethiopia-related Designations After Expiration of Emergency with Respect to the Situation in Ethiopia

On September 18, the national emergency declared in E.O. 14046 of September 17, 2021, “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia,” expired. Following the expiration of the national emergency, OFAC removed 11 Ethiopia-related designations. The designated parties had originally been identified in connection with alleged violence and human rights abuses in Ethiopia and the Horn of Africa region.

Alongside the expiration of the E.O. 14046, OFAC has deleted all Frequently Asked Questions (“FAQs”) related to the program from its website.

OFAC Amends General License for Transactions Involving Petróleos de Venezuela, S.A.

On September 14, OFAC issued Venezuela-related General License (“GL”) 52C, “Authorizing Certain Transactions Involving Petróleos de Venezuela, S.A.,” which replaces and supersedes GL 52B. In general, GL 52C authorizes transactions otherwise prohibited by E.O. 13884 or E.O. 13850 involving Venezuela’s state-owned oil company, Petróleos de Venezuela, S.A. (“PdVSA”), or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest (the “PdVSA Entities”), by an established US entity, subject to certain restrictions. We examined the initial version of the GL in detail in our March 23 update.

The amended GL authorizes transactions ordinarily incident and necessary to the execution and signing of contracts, agreements, and other transaction documents by certain individuals blocked under the Venezuela Sanctions Regulations acting in their official capacities on behalf of PdVSA or PdVSA Entities to effectuate a transaction authorized under the GL.

In addition, the amended GL excludes from the scope of the GL “[a]ny transaction to affect or alter the governance of PDV Holding, Inc., Citgo Holding, Inc., or CITGO Petroleum Corporation.” The amendment comes as the current supervision of Citgo is reportedly set to step down and pave the way for Venezuelan Interim President Delcy Rodriguez’s government to play a greater role.

Relatedly, OFAC also extended the delay of the PdVSA bond-related authorization. On September 14, OFAC issued GL 5Z, which authorizes certain transactions related to, the provision of financing for, and other dealings in the PdVSA 2020 8.5% Bond that are otherwise prohibited by E.O. 13835, as amended, on or after November 5, 2026. GL 5Z is the most recent extension in a long-running delay in the effective date of GL 5’s authorization.

OFAC Extends General License Related to Lukoil

On September 18, OFAC issued Russia-related GL 131J, “Authorizing Certain Transactions for the Negotiation of and Entry into Contingent Contracts for the Sale of Lukoil International GmbH and Related Maintenance Activities.” Broadly, GL 131 authorizes certain transactions related to the negotiation of and entry into contracts with PJSC Lukoil or any of its affiliates for the sale, disposition, or transfer of Lukoil International GmbH or any of its majority-owned entities, subject to certain restrictions. The license replaces and supersedes GL 131I, extending the authorization period from September 19, 2026, to October 22, 2026. We previously covered the earlier versions of GL 131 on November 17, 2025, May 4, 2026, June 1, 2026, and June 29, 2026.

UK Developments

House of Commons Library Publishes Briefing on Proposed UK West Bank Sanctions

The House of Commons Library has published a research briefing providing further detail on the UK Government’s proposed sanctions measures targeting Israeli settlements in the occupied West Bank, announced on September 8, 2026. The proposed new regime will prohibit imports of goods from settlements in the Occupied Palestinian Territories and restrict services supporting settlement expansion, including construction, infrastructure, financing and real estate services, subject to religious exemptions. Significantly, the import prohibition is expected to operate geographically rather than by reference to designated persons, with importers required to demonstrate through postcode declarations that goods do not originate from settlements. HMRC, OTSI and OFSI will monitor compliance, and the UK Government expects the necessary legislation to be introduced within six to nine months. Separately, amendments to the Global Human Rights sanctions regime are expected within weeks to facilitate faster action against settlement expansion, while the Government has also stated that it will refuse applications for arms and other export licences where the exports would materially contribute to the occupation.

OFSI Clarifies Asset Freeze Exception for Interest and Earnings on Frozen Accounts

OFSI has published FAQ 203 clarifying the scope of the asset-freeze exception permitting relevant institutions to credit frozen accounts with interest or other earnings. OFSI explains that regulation 58(3) of the Russia Regulations, and equivalent provisions under other sanctions regimes, only permits interest or other earnings to be credited to the same frozen account on which they accrued. The exception therefore does not permit a relevant institution to transfer those amounts to a separate frozen account held for the same designated person, including where that separate account has been nominated to receive the interest or earnings. Relevant institutions should consider whether an OFSI licence is required before making such payments. The clarification is intended to promote consistent application of the asset-freeze framework and reduce the risk of circumvention, and firms should ensure that their processes for administering frozen accounts distinguish between permitted credits to the originating account and transfers requiring separate licensing.

EU Developments

EU Member States Delay Renewal of Russia Asset Freeze Sanctions Regime

Following a failure to reach unanimous agreement on the renewal of the EU’s Russia asset freeze sanctions regime, EU ambassadors in Coreper agreed to postpone the expiry of the measures by seven days, until September 22. The temporary extension is intended to provide additional time for Member States to consider proposals concerning the regime’s renewal, which requires the unanimous approval of all 27 Member States. The restrictive measures apply to over 3,000 individuals and entities and were initially due to expire on September 15.

The delay follows disagreements among Member States regarding the continued designation of certain listed individuals, as reported in our September 14 Sanctions Update. In particular, Slovakia has sought changes to the sanctions list as a condition for supporting the renewal, while France has reportedly called for the delisting of Russian businessman Alisher Usmanov.

Discussions are expected to continue ahead of the revised expiry date of September 22.

European Commission Updates the EU Dual-Use Export Control List

On September 14, the European Commission adopted a Delegated Regulation updating the EU dual-use export control list set out in Annex I to Regulation (EU) 2021/821. The update incorporates amendments agreed by participating states in 2025 under the Australia Group, the Nuclear Suppliers Group and the Wassenaar Arrangement. It also reflects additional commitments accepted by all EU Member States within the framework of the Wassenaar Arrangement to subject further items to export controls.

The updated EU export control list provides for the addition of new dual-use items, including semiconductor manufacturing and testing equipment and materials, advanced computing integrated circuits and electronic assemblies, ceramic matrix composites reinforced with mullite, rotary encoders based on inductive sensing technology, additive manufacturing equipment for energetic materials, chemical vapor deposition equipment used to produce silicon carbide fibers, and technology for the development of axial compressors of gas turbine engines. The amendments also modify specific control parameters and update certain technical definitions and descriptions.

The Delegated Regulation has been transmitted to the European Parliament and the EU Council for scrutiny. If neither of the co-legislators objects to the Delegated Regulation within the two-month scrutiny period, the Delegated Regulation will be published in the EU Official Journal and enter into force following the publication.

EU Council Amends Sanctions Listings Targeting ISIL (Da’esh) and Al-Qaeda

The EU Council recently amended the entries of two individuals designated under the autonomous restrictive measures regime targeting ISIL (Da’esh) and Al-Qaeda, following an update at the UN level. Changes to Council Regulation (EC) 881/2002 reflect the September 4 decision of the UN Security Council Sanctions Committee to update the identifying information of Sanaullah Ghafari, leader of the Islamic State in Iraq and the Levant-Khorasan (ISIL‑K), and Abubakar Swalleh, an ISIL facilitator.

General Court Judgment Upholds the Designation of Polina Gagarina under EU Russia Asset Freeze Sanctions and Annuls 2025 Sanctions Relistings

The General Court of the European Union delivered its judgment in Case T‑460/24 concerning an action brought by the Russian singer Polina Gagarina seeking annulment of the 2024 and 2025 Council acts that included and maintained her name on the EU Russia asset freeze sanctions list.

The Court upheld the initial June 2024 listing and the September 2024 renewal of Ms. Gagarina’s designation. It held that the Council had established, to the requisite legal standard, that Ms. Gagarina satisfied the criterion set out in Article 3(1)(a) of Council Regulation (EU) 269/2014, which targets individuals supporting actions or policies which undermine or threaten the territorial integrity, sovereignty and independence of Ukraine. The Court found that Ms. Gagarina had regularly participated in State propaganda events that legitimized Russia’s war of aggression against Ukraine and celebrated the illegal annexation of Ukrainian territory.

At the same time, the Court annulled the March 2025 and September 2025 renewals of Ms. Gagarina’s listing. The Court found that the Council had not provided sufficiently specific, precise and consistent evidence to establish that Ms. Gagarina continued to satisfy the Article 3(1)(a) criterion at the time of the 2025 renewals.

Asia-Pacific Developments

Russia Warns Japan’s Military Expansion and Sanctions Stance Threaten Bilateral Ties

On September 16, 2026, Russia’s Foreign Ministry reportedly said Deputy Foreign Minister Andrey Rudenko told Japanese Ambassador Akira Muto that Tokyo’s expanding military cooperation with the United States and other Western partners, including the deployment of medium-range missiles, threatens Russian national security and stability in Northeast Asia. Moscow said it could take compensatory defense measures if these activities continue. Russian officials also linked the security dispute to Japan’s sanctions and support for Ukraine. Kremlin spokesperson Dmitry Peskov described Tokyo’s position as “extremely unfriendly,” saying its participation in anti-Russia sanctions limits prospects for “reciprocal concessions.” Since Japan joined Western sanctions in 2022, Russia has suspended peace-treaty talks, ended visa-free island visits and withdrawn from discussions on joint economic activities.

China and Russia Veto Renewal of UN Iran Sanctions Monitoring Panel

On September 17, 2026, China and Russia vetoed a proposed extension of the UN Iran sanctions-monitoring panel, arguing that the “snapback” mechanism was never validly invoked and that Resolution 2231 (2015) expired on October 18, 2025, ending the Council’s consideration of Iran’s nuclear file. Russia said Berlin, London, and Paris lacked the right and justification to restore sanctions, while China urged equal-footing negotiations, safeguards by the International Atomic Energy Agency and a diplomatic settlement. The US-sponsored resolution received 11 votes in favor, with Pakistan and Somalia abstaining, but failed because of the two permanent-member vetoes. The United States, European members and several other Council members maintain that sanctions were reimposed in September 2025 and warn that the failure to renew the Panel of Experts creates an independent-monitoring gap that could weaken enforcement and obscure sanctions evasion.

India and China Signal Resistance to US Sanctioning Russia and Iran Act of 2026

India and China separately responded to the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. On September 17, 2026, India reportedly said it would protect its trade and economic interests while safeguarding energy security through diversified supplies, as its status as Russia’s largest buyer of seaborne crude could expose it to potential US tariffs. On September 19, 2026, China rejected unilateral sanctions lacking UN authorization or an international-law basis, opposed secondary measures against third countries and reserved the right to take necessary action to protect its sovereignty, development interests and companies. Both governments called for dialogue and stable trade relations, while Beijing also emphasized the security of global industrial and supply chains.

Australia Declines to Join UK-Led Trade Sanctions Initiative against West Bank Settlements

Australia reportedly opted not to join a UK-led statement by 12 governments considering or committing to restrictions on trade with Israeli businesses in West Bank settlements, despite having participated in related diplomatic discussions. Australia’s Department of Foreign Affairs and Trade said, “blanket import bans present practical challenges, including how to ensure they do not inadvertently harm Palestinian businesses, workers and livelihoods.” Australia said it is instead “pursuing further targeted measures, in coordination with international partners, to deter illegal settlements and settler violence.” Australia previously joined the UK, Canada, France, and Norway in June in coordinated sanctions against Israeli networks accused of “financing, enabling and carrying out violence in the Israeli-occupied West Bank.”

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Global

The energy supply disruptions in the Middle East are creating opportunities for increased uptake in the use of marine biodiesel. The Middle East conflict has driven up the cost of diesel, making biodiesel prices competitive, priced at $985 a ton today compared to marine gasoil at $1,528 per ton. While the market drivers may lead to stabilization of diesel prices during 2026, EU carbon emission rules for shipping create a secondary push that may accelerate the shipping industry’s adoption of biofuels to comply with the EU’s Renewable Energy Directive III. Sales of marine biodiesel blends in Rotterdam, a global leader in biofuel production, rose sharply year on year in Q2 2026 and more than doubled from the previous three months.

Maritime transport emits about 3% to 4% of all carbon dioxide emissions in the EU. Companies must buy and use special permits for carbon emissions, covering 100% of emissions for trips starting and ending at an EU port and 50% of emissions for trips between an EU port and an external port. The EU Emissions Trading System came into force in 2025 with a phased implementation. Effective 2027, maritime companies will be required to pay for 100% of all reported emissions.

The shipping industry remains skeptical that it will meet the global targets of the International Maritime Organization’s Net-Zero Framework. The Trump Administration strongly opposes the IMO Net-Zero Framework. The EU is delaying many of its climate-change related programs. However, policies that align with sound market signals have a greater likelihood of proceeding on schedule. Vessels capable of running on methanol, ammonia or ethanol are already entering the fleet.

Read More: Financial Times [paywall], European Commission, gCaptain.com

Europe

Internal pressure increases against German Chancellor Friedrich Merz after yesterday’s regional elections. In the eastern German state of Mecklenburg-Western Pomerania, Friedrich Merz’s center-right Christian Democratic Union (CDU) is projected to receive only 4.9% of the votes, failing to surpass the 5% hurdle to enter the regional parliament. This is the single worst result in the party’s history and will likely be attributed to Merz’s personal unpopularity. Like in Saxony-Anhalt, the populist-right Alternative for Germany (AfD) was the election winner, securing 38.3% of the vote. However, the center-left Social Democrats (SPD) will likely be able to form a government alongside the Greens, the postcommunist The Left, and the populist-left Alliance Sahra Wagenknecht (BSW). In Berlin, the ruling CDU lost to The Left, which secured 25.6% of the vote. The result signals that voters want something different than the established center parties: altogether, the CDU, SPD, and the Greens lost 19.7% from Berlin’s 2023 election.

Merz signaled that he will continue the government’s reform agenda. Merz acknowledged that the result was a “disaster” but argued that the difficulty of passing his reforms only make them more urgent. Among those reforms are raising the retirement age to 67 and cutting taxes for the middle class. Calls for Merz to step aside within the CDU may increase in the coming days, but the only feasible way to change chancellors is if Merz decides to step down himself.

Read More: AP, Tagesschau [in German] Stepwise Risk Outlook

Middle East

Competing signals out of the Iran war: on the one hand, both the US and Iran hinted at new escalation. Over the weekend, President Trump threatened that the Islamic Republic would be wiped out if it did not capitulate on nuclear negotiations, building on threats from last week. Iranian media cited intelligence that a new escalation was coming, threatening significant retaliation.

On the other hand, negotiations appeared to be increasingly on the table. Qatari sources told media that both sides had signaled openness to new talks, while President Trump said that he was open to meeting with Iranian President Pezeshkian during the upcoming UN General Assembly. Both sides need a deal as much as ever, with military assets dwindling and economic disruption continuing despite the partial reopening of the Strait of Hormuz.

Read More: Reuters [paywall], Middle East Eye, Fox News

Asia-Pacific

Myanmar last week released US citizen Adam Castillo after three months in detention, reportedly following efforts by the Trump administration. Castillo was arrested at the airport in Yangon, Myanmar’s commercial hub, in June, where he founded and has run his security risk management firm AGS Myanmar since 2013. He was reportedly detained over an alleged breach of trust involving a lobbying contract intended to improve US-Myanmar trade relations and promote rare-earth exports. Castillo, a former Marine who led the American Chamber of Commerce in Myanmar from 2023 to 2025, denies misconduct.

US officials traveled to Myanmar to secure Castillo’s release, marking Washington’s most significant engagement with Myanmar since the 2021 coup. While the delegation’s stated purpose was limited to Castillo’s case, the visit comes as Myanmar’s military-backed government seeks greater international legitimacy following elections, which are widely recognized as illegitimate, earlier this year. Washington has reportedly explored access to Myanmar’s critical minerals, which could provide the junta a potential avenue for broader engagement. One proposal involves Washington brokering peace between the government and the Kachin Independence Army (KIA), which controls the territory containing major rare-earth deposits. Castillo reportedly pitched this proposal to the US government last year.

Read More: ABC News, The Irrawaddy, NPR, Reuters [paywall], Stepwise

Americas

US President Donald Trump will meet interim Venezuelan President Delcy Rodriguez on Tuesday in New York. The meeting will take place on the sidelines of the UN General Assembly leaders’ reception and will be the first face-to-face meeting between Trump and Rodriguez. It will also be the first meeting between sitting leaders of the US and Venezuela since Barack Obama and Nicolas Maduro met in Panama in 2015. Rodriguez arrived in the US on Monday to represent Venezuela at the UN. She was formerly the vice president of Nicolas Maduro, who is currently awaiting trial in New York on federal drug-trafficking charges.

Rodriguez seeks to use the occasion to strengthen the legitimacy of the interim government. Venezuela’s Communications Ministry released a statement highlighting her appearance as an example of Venezuela rejoining the international diplomatic community. This comes as the UK made the decision to upgrade diplomatic ties and appoint an ambassador to Caracas. As opposition leader Maria Corina Machado remains in exile in Panama, critics of Rodriguez have raised concerns that the longer the status quo remains in place, the less likely a democratic transition will become.

Read More: Reuters [paywall], Miami Herald, AP

Africa

The US International Development Finance Corporation approved a $414 million debt facility to support development of a uranium mine in northern Niger. Canadian company Global Atomic Corporation is securing financing from the DFC to advance the Dasa project, the highest-grade uranium deposit in Africa. The decision comes as Russia has significantly expanded ties with Nigerien military junta leader Abdourahamane Tiani, particularly after helping thwart a coup attempt in late August. Russia’s security cooperation and expanding role in regime protection have enabled Moscow to gain outsized influence over the country’s mining sector.

The agreement could allow the US to counter Russia’s growing influence over global uranium supply chains, but worsening political tensions and insecurity pose significant risks to businesses. The coup attempt exposed substantial dissatisfaction with Tiani among military units that play a key role in combating jihadist violence. In addition, rebel activity has intensified. The Patriotic Liberation Front and allied groups have reportedly mobilized hundreds of fighters and threatened to resume attacks against the junta for the first time since 2024. In the past, Nigerien rebels repeatedly targeted the Benin-Niger oil pipeline and gold mines in the eastern and northern parts of the country. Amid increasing jihadist attacks, the security environment could become even more fragmented as militia activity grows, and key government economic assets may become targets.

Read More: Al Jazeera, Critical Threats, Stepwise Risk Outlook, Stepwise Risk Outlook

Geoeconomics

The US is expected to delay announcing new tariffs targeting alleged industrial overcapacity until after the September 24 Trump–Xi summit. Officials have been considering a 7.5% tariff on Chinese goods, although the final rate and announcement date remain unsettled. That proposal would bring tariffs introduced on China during Trump’s second term to roughly 20%, excluding duties retained from earlier administrations. The measures stem from a Section 301 investigation into government policies that Washington says sustain excessive manufacturing capacity and displace US production. USTR is examining subsidies, preferential lending, state-owned enterprises and policies that support production while suppressing domestic demand, citing industries including automobiles, batteries, semiconductors, solar panels and steel.

The investigation extends tariff uncertainty to several countries that businesses have used to diversify production away from China. Launched in March, it covers 16 economies, including the EU, Japan, South Korea, India, Mexico and Vietnam. Alongside the separate forced-labor investigation, it forms part of Washington’s effort to replace emergency tariffs struck down by the Supreme Court in February with duties under other statutory authorities. The breadth of the investigation means shifting sourcing from China to another manufacturing hub could still leave companies exposed to additional tariffs, depending on the eventual findings and measures.

Read More: Bloomberg [paywall], USTR, Atlantic Council

Disruptive Technology

President Trump hints at an “AI Force” to monitor the development of AI and prevent catastrophic risks. The details and powers of such a force remain unknown. President Trump will likely seek to leverage tools already at his disposal, putting such a force under the White House’s Office of Science and Technology Policy or the Commerce Department, which leads the pre-release voluntary model screening program. The AI Force could also be an informal expansion of a team under a new AI czar to replace David Sacks, who transitioned from that informal role in March to co-chair the President’s science advisory council alongside Michael Kratsios, and interface directly with frontier AI labs and other industry stakeholders.

President Trump has reiterated his concerns with “pacing” AI development. Leading AI labs came to a consensus last week after Dario Amodei, the head of Anthropic, called for slowing down capability development and embedding third-party evaluators in AI labs. Those calls come as AI labs increasingly disclose misalignment incidents where AI models escape testing environments and hack external actors. Nonetheless, President Trump remains concerned about overregulation conceding a qualitative edge to China. The announcement of an AI Force is unlikely to signal a full pivot in policy objectives.

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

Energy

Beijing is pushing Iran to reduce conflict fallout on regional energy infrastructure. China has reportedly asked Iran to limit strikes by the Houthis in Yemen on Saudi Arabia’s energy infrastructure. Beijing was acting on a request from Riyadh, according to reporting, and oil prices ticked down slightly on the back of the news. Oil prices have been moving upwards in recent weeks, boosted by fears of escalation in the Middle East and by events such as a strike on an east-west pipeline in Saudi Arabia that Riyadh has used to reroute its energy exports away from the Strait of Hormuz.

China has played a key role in managing the impacts of the global energy crisis. Since the outbreak of the US war with Iran, Beijing has markedly dropped its imports of crude oil, helping to cushion global shortages. China maintains a very large strategic reserve of oil, which it has built up in recent years. However, it is unclear how Chinese oil imports will develop going forward. While crude imports to China fell over 40% year on year in June, in July and August China’s oil imports rebounded with a 22% increase from June to July.

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

Transnational Crime & Corruption

Malaysia’s king pardoned the country’s former prime minister accused of being involved in the 1MDB scandal. Najib Razak, Malaysian prime minister from 2009 to 2018, was convicted of graft in 2020, including for transferring money from the country’s 1MDB sovereign wealth fund to his personal bank account. Najib was initially sentenced to 12 years in prison and fined about $51 million. But a former Malaysian king halved the sentence to six years in 2024 and reduced the fine to about $12.2 million. As part of this new pardon, Najib will serve out the rest of his sentence under house arrest and pay the $12.2 million fine.

Senior Malaysian politicians have criticized the pardon. Anthony Loke, minister of transport and Secretary General of the Democratic Action Party, resigned from Prime Minister Anwar Ibrahim’s cabinet in protest. Anwar has promised to consider snap parliamentary elections if divides in his government deepen over the pardon.

Read More: New York Times [paywall], South China Morning Post [paywall], Reuters [paywall]

Defense

The US has cleared a new fighter jet sale to Saudi Arabia. The US Department of State recently allowed the potential sale of Lockheed Martin’s F-35 Lightning II fighter jets to Saudi Arabia. The deal would be worth approximately $24.3 billion, and it would still need congressional approval. Saudi Arabia had begun asking for the jets over a year ago, and the sale would be a significant change in policy for the US regarding the overall military balance in the Middle East between Israel and other major regional players.

Türkiye is also interested in helping Riyadh meet its military needs. Turkish foreign minister Hakan Fidan recently said that Ankara would be ready to support Saudi Arabia in its ongoing conflict with Yemen’s Houthis as part of the trilateral defense agreement between Saudi Arabia, Türkiye, and Pakistan. In particular, Fidan offered support in areas like technical issues where Türkiye would be well positioned to assist Riyadh. The US has resisted calls by Saudi Arabia to assist it against the Houthis. The trilateral defense agreement commits all members to treating an attack on any member of the group as an attack on all the members.

Read More: Reuters [paywall], Defense News, 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 The Analysts' Brief examines the upcoming Trump-Xi meeting.

The Analysts’ Brief: The Upcoming Trump-Xi Meeting

By Zayna Dembinski, Thomas Goldstein, Anni Coonan, and Carter Spahn

^{“Welcome ceremony of Trump by Xi Jinping (3)” by The White House is marked with PDM 1.0.}

With less than a week before President Xi Jinping is scheduled to arrive in Washington for talks with President Donald Trump, expectations for a major breakthrough remain low. The September 24 summit comes as the November 10 expiration approaches for the one-year trade truce that eased tariffs and paused several trade and export-control measures. Meanwhile, tensions over AI and the ongoing war in Iran add new points of friction to an already fragile relationship. The meeting will test whether Washington and Beijing can extend the relative stability of the past year, or whether mounting economic and geopolitical tensions will begin to unravel it.

In today’s full analysis:

Zayna Dembinski, Asia Pacific analyst: Beijing is unlikely to leave next week’s summit with firm assurances of more predictable US policy

Carter Spahn, geoeconomics analyst: The summit could expand trade while preserving the strategic barriers reshaping US–China commerce

Thomas Goldstein, tech analyst: Thorny disagreements over tech issues continue to steer bilateral competition

Anni Coonan, Middle East analyst: The Iran war looms over the summit as China remains one of the last remaining economic levers on the Iranian regime

Read the Full Brief Here

Or listen to the full brief here:

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Global

The 81^st session of the UN General Assembly General Debate starts on Monday, convening world leaders to discuss global cooperation at a time of deep strain in the international order. Khalilur Rahman of Bangladesh will preside over the session, under the theme of “Restoring trust, managing transformation: A United Nations that delivers for all.” In addition to statements by world leaders outlining their positions and priorities, key events will include climate change, development, pandemic prevention, global racial justice and the total elimination of nuclear weapons. The UN, founded as part of the post-World War international security architecture, is widely viewed as an organization in crisis and in need of reform, unable to meaningfully manage today’s security challenges.

The Trump Administration has little interest in the official UN agenda and will focus on advancing American national and economic security priorities, both during UN sessions and on the margins. The US delegation will likely focus on implementing the Board of Peace initiative on bringing stability and reconstruction to Gaza, galvanizing support for economic isolation of Iran to compel Tehran to stop blocking freedom of navigation through the Strait of Hormuz, and lobbying for Washington’s preferred candidate to replace UN Secretary-General Guterres, who appears to be Rafael Grossi, the current head of the IAEA. President Trump’s bilateral meeting with Chinese President Xi is the highest-stakes meeting on Trump’s agenda.

Read More: United Nations, Foundation for Defense of Democracies, International Crisis Group

Europe

Romanian President Nicușor Dan nominated Siegfried Mureșan as Prime Minister in a third attempt to form a government in five months. Mureșan comes from the center-right National Liberals and is currently a Member of the European Parliament and the vice-president of the umbrella center-right European People’s Party. He has ten days to form a cabinet but faces a steep and narrow prospect of winning support from the Social Democrats (PSD), which withdrew from a coalition with the National Liberals, centrist Save Romania Union, and the Hungarian ethnic rights party after disputing the coalition’s tough austerity agenda. The latter three parties have consensus with Mureșan’s leadership, but without PSD’s support, they must attempt to form a minority government with support of other parties. The only other party with enough seats to back the government, the ultranationalist Alliance for the Unity of Romanians, would prefer to exploit the political instability to pressure snap elections, which have never occurred in Romania’s post-Communist history.

Read More: Associated Press, Euractiv, Politico

Middle East

JP Morgan analysts said they would stop attempting to model an Iran endgame after President Trump blew past their analytical redlines. JP Morgan’s global commodities had been operating under the assumption that the occurrence of one or several economic redlines – including oil above $100, gas near $5 a gallon, and 10-year Treasury yields above 5% - would force the US into an agreement to open the Strait. With all economic red lines now crossed, the off-ramp for the war is less clear, not more, and the conflict is escalating further.

Meanwhile, President Trump said he is once again considering a restart to major military escalation. A month-long push to shift to economic escalation with the announcement of Operation Economic Outcast has largely failed, with Iranian strikes and the reignition of the conflict in Yemen forcing a more active kinetic conflict. The US may see a new hot war as the only way to force concessions from Iran. But it is not clear how much more active conflict the US can sustain, with US stocks of missile interceptors dwindling and the cost of the Iran war reportedly at $3 billion a month.

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

Asia-Pacific

Longstanding US intelligence concerns over Chinese access to Saudi military and telecommunications infrastructure are resurfacing as Washington moves the F-35 sale to Riyadh into its final review stage. The concerns center on whether China could gain access to sensitive F-35 technology through its military and security ties with Saudi Arabia. The State Department on Thursday approved the potential $24.3 billion sale of up to 48 F-35s and 49 engines, triggering a 30-day congressional review. A detailed Pentagon intelligence assessment issued months ago and reviewed by the New York Times examines Chinese military access to Saudi bases and Riyadh’s use of Chinese telecommunications equipment. Similar concerns were raised in a DIA assessment last year.

The sale highlights Washington’s challenge of limited, but deepening, Chinese security ties with Middle Eastern countries. While the US remains the region’s primary security partner, with Riyadh still the largest buyer of American defense equipment, Beijing continues to expand its foothold in a region it considers economically vital. China has used arms sales to deepen security ties with the region, including selling Saudi Arabia ballistic missiles since the late 1980s and helping Riyadh develop domestic missile production capabilities and improve missile operations. The precedent of the UAE, where concerns over Abu Dhabi’s ties to China contributed to the suspension of F-35 talks in 2021, underscores the potential complications for Washington as it expands advanced defense cooperation with Gulf partners.

Read More: US State Department, New York Times [paywall], New York Times [paywall], The Washington Institute for Near East Policy, Breaking Defense

Americas

Venezuelan authorities arrested former Mayor Javier Oropeza, a prominent opposition leader, on Thursday. Oropeza’s arrest came just two days after he had returned from exile, drawing international condemnation, including from within the US. Rep. Carlos Gimenez (R-FL) publicly criticized the Delcy Rodriguez government’s decision to detain Oropeza, which he described as “unjust.” Oropeza was released just hours later, on Thursday night, after Dinorah Figuera also demanded his release. Figuera is leading the opposition in ongoing talks with Venezuela’s interim president Delcy Rodriguez.

Despite his subsequent release, the arrest of Oropeza raises the political risks for Nobel laureate opposition leader Maria Corina Machado, who is reportedly considering a return to Venezuela. Machado is currently in Panama. According to multiple sources in the Venezuelan opposition, Machado will return to Venezuela; however, the date of her return remains uncertain. The Trump administration had previously asked her to delay her plans to return to the country after two devastating earthquakes. She has the highest approval rating of any Venezuelan political figure, although her support dropped from 72% in July to 53% in August.

Read More: Yahoo! News, NTN24 [Spanish], Voz, Reuters [paywall]

Africa

The US agreed to extend funding for the UN Support Office in Somalia (UNSOS) for one year amid growing political instability and insecurity. UNSOS, which operates on a budget of approximately $500 million, provides critical logistical support to the African Union Support and Stabilization Mission, including fuel, medical services, and transportation. Reuters reported in July that the Trump administration planned to block funding for the office due to frustration with Mogadishu’s limited progress in taking the lead on counterterrorism. Meanwhile, al Shabaab has regained territory and influence since launching an offensive in February 2025. Analysts have warned that a reduction in international support could exacerbate jihadist violence, a concern that likely contributed to Washington’s decision to temporarily maintain funding.

The one-year extension provides a narrow window for Mogadishu and the African Union to achieve measurable gains against al Shabaab. Key indicators of progress will likely include improvements in territorial control, operational effectiveness, and the Somali government’s ability to independently manage security responsibilities. Renewed US funding for UNSOS beyond this extension remains unlikely, particularly if Mogadishu fails to demonstrate tangible progress toward assuming greater responsibility for the country’s security.

Read More: Reuters [paywall], Reuters [paywall], International Crisis Group

Geoeconomics

South Korea is pushing back against US demands over how its $350 billion investment pledge will be deployed. President Lee Jae Myung said on September 18 that an agreement on implementation was close, but some proposed terms remained unacceptable to Seoul. The package, negotiated last year in exchange for US tariff relief, includes $150 billion for shipbuilding and $200 billion for other strategic investments. Projects under discussion include a $22.3 billion gas-fired power plant in Texas to supply AI data centers and semiconductor facilities, alongside up to eight nuclear reactors estimated to cost roughly $15 billion each. These proposals remain under negotiation, with financing and commercial terms still being worked out.

The disagreement concerns how much risk South Korea should bear for projects selected by Washington. Under the framework for the $200 billion strategic investment portion, President Trump selects projects after consulting Seoul, which supplies the funding and could face higher tariffs if it refuses. Cash distributions are divided equally up to specified repayment and return amounts, with additional distributions split 90% to the US and 10% to Korea. Seoul insists that investments must be “commercially reasonable,” and Lee says negotiators are still debating how Korea would recover its investment, share profits and handle projects that lose money. That creates a risk that Seoul could finance projects serving US industrial priorities without earning enough to justify its financial exposure.

Read More: Reuters [paywall], Reuters [paywall], White House, Korea Economic Institute of America

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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 Algeria's intervention in the Niger coup attempt.

Niger Coup Attempt: Algeria’s Assertive Sahel Policy and Potential Challenges to US and Moroccan Strategic Interests

By Chris Dantes

^{“Secretary Blinken Meets With Algerian President Tebboune” by U.S. Department of State, United States Government Work}

One day after the attempted coup in Niger in late August, Algeria deployed two air patrol squadrons to support the Nigerien junta – a move that marks Algiers’s first foreign deployment since 1973 and a notable shift from its historical non-interventionist policy. The deployment reflects Algeria’s broader effort to secure its southern border, rebuild relations with the Alliance of Sahel States (AES) (comprised of Niger, Mali and Burkina Faso), and regain influence amid growing regional and external competition. Niger is particularly important to Algeria as it occupies a central position in Algeria’s economic and energy ambitions and is its closest diplomatic partner in the AES. At the same time, Morocco, a regional rival, is expanding its economic and diplomatic presence across West Africa and promoting alternative energy corridors. As Algeria adopts a more assertive Sahel policy, its competition with Morocco could complicate US relations with both states, fragment regional counterterrorism cooperation, and increase political and commercial risks surrounding major infrastructure and energy projects.

In today’s full analysis:

• Algeria’s Interests and AES Reengagement, Explained

• Morocco’s Power Play in the Sahel

• Implications for US Strategy and Risks to Businesses

Read the Full Report Here

Or listen to the full report here:

Listen to the news:

Europe

The US House of Representatives passed the Graham Russia sanctions bill yesterday evening. The legislation is the first major bill in support of Ukraine since a 2024 aid supplemental. The bill empowers the White House to issue 100% stacked tariffs on the top five global importers of Russian crude and oil products, the top five countries enabling transshipment of those exports, and any country that increases purchases of Russian fuels 30 days after the bill is enacted. The President has complete discretion on whether to apply the tariffs and the blocking sanctions prescribed by the bill. The President can waive blocking sanctions if notification and a report are given to Congress that explain the national security grounds of a delisting.

China and India are the most likely targets of the 100% stacked tariffs, but the President may prioritize this tool as negotiating leverage instead. When President Trump interpreted IEEPA as having a flexible tariff authority, he had briefly issued a 25% stacked tariff on India for purchases of Russian crude, which were removed upon the conclusion of a bilateral trade deal. Trump did not apply the tariffs to China in a bid to preserve a fragile truce in the April 2025 trade war. The White House will likely continue to prioritize market stability when engaging with China and India, but the new tariff authority could act as negotiating leverage for interlinked issues in bilateral relationships.

Read More: Politico, Stepwise Risk Outlook

Middle East

The US is investigating whether Iran is behind cyberattacks on two energy tankers bound for American ports, which risk broadening the war. The two tankers were transiting the Strait of Gibraltar when they were hit by attacks, raising concerns that Iran could be seeking to disrupt another maritime chokepoint or damage a US port. Ships run on integrated systems that, if compromised, could result in an explosion, a collision, or an oil spill.

Cyber attacks have been an active, but secretive, front in the US-Iran war. US officials have declined to put a number on the attacks, but analysts say cyber warfare is an increasingly important tool for Iran as the war escalates. Over the last several months, Iran has hacked SS7 (a major telecommunications protocol that allowed it to locate US troops), attacked US water facilities in six states, conducted cyber espionage against US and Israeli leaders, and targeted critical American infrastructure. Analysts say Iran has previously been relatively constrained (perhaps due to damaged capabilities following March strikes on the IRGC’s cyber and information warfare headquarters), but the cadence could now be increasing.

Read More: Wall Street Journal [paywall], NBC, CSIS

Asia-Pacific

South Korean President Lee Jae Myung on Wednesday called to build a “new Silk Road” with Central Asia, seeking to translate ties with the region into deeper cooperation on trade, critical minerals and infrastructure. Speaking at the inaugural Korea-Central Asia Business Summit, which brought together all five Central Asian leaders in Seoul for the first Korea-Central Asia summit, Lee called for cooperation to expand beyond bilateral relationships to a regional framework. The leaders adopted the Seoul Declaration, which establishes a 30-year vision for cooperation across critical sectors and institutionalizes a biennial leaders’ summit, with Kazakhstan set to host the next gathering in 2028.

Seoul’s outreach reflects an effort to diversify its supplies of energy and strategic minerals while positioning South Korean companies across Central Asia’s emerging industrial value chains. The summit emphasized critical minerals, energy and supply-chain cooperation, with Lee advocating for partnerships that extend beyond importing raw materials to include exploration, processing and manufacturing. The push follows three days of bilateral meetings that produced more than 70 agreements and memorandums of understanding covering energy, mining, infrastructure, technology and investment. Deeper engagement broadens resource-poor South Korea’s access to strategic resources and also creates new markets for Korean technology and industrial expertise, crucial for Central Asian countries interested in speeding up their infrastructure modernization.

Read More: The Korea Herald, Yonhap News Agency, The Korea Times, Organisation for Economic Co-operation and Development

Americas

Brazil’s Supreme Court decided on Tuesday to postpone the decision on whether to open an investigation of Justice Alexandre de Moraes. Moraes, who led the prosecution of Jair Bolsonaro for an attempted coup in 2023, is accused of advising disgraced banker Daniel Vorcaro, whose arrest in November 2025 kicked off the Banco Master scandal. Justice Andre Mendoca recently unsealed a police dossier with WhatsApp messages between Moraes and Vorcaro, making Moraes the most recent of numerous powerful figures in Brazil’s political establishment to be tied to Vorcaro. The Bolsonaros, as well as other members of the supreme court, have also been ensnared in the scandal. Any decision on whether to investigate Moraes will likely come after the upcoming October elections.

The accusations against Moraes have upended the race between Flavio Bolsonaro and incumbent Lula. Lula had been consistently leading in the polls throughout the summer, as Bolsonaro was in the spotlight for allegedly receiving millions from Vorcaro to produce a film about his father, Jair Bolsonaro, who was sentenced to over 27 years and is currently under house arrest. Due to the public association between Moraes and Lula, and because of Moraes’ role in prosecuting Bolsonaro, Lula has taken a hit in the polls, and the two candidates are now neck and neck.

Read More: Reuters [paywall], The Guardian, AP

Africa

Somaliland President Abdirahman Mohamed Abdullahi “Irro” is in Washington to secure US recognition. President Irro plans to meet with officials at the White House and Capitol Hill to advocate for US recognition of Somaliland as a state, offering a future military base agreement, investment opportunities and access to the port of Berbera, and access to minerals (the details of which are very unclear). The US already cooperates with Somaliland security forces but has avoided recognition to preserve its partnership with Mogadishu, which views the breakaway territory as part of Somalia. US recognition of Somaliland remains unlikely, but the partnership may deepen as Somalia faces greater insecurity and political fragmentation, potentially complicating coordination of counterterrorism and counterpiracy operations between the federal government and state authorities.

Read More: Semafor, Stepwise Risk Outlook

Geoeconomics

The Federal Reserve raised interest rates for the first time since 2023 and signaled further tightening as inflation remains persistently above target. The FOMC voted unanimously on September 16 to raise its benchmark rate by 25 basis points to 3.75%–4%. Sixteen of 18 policymakers projected at least one additional increase this year, with the median forecast implying a 4%–4.25% target range at both the end of 2026 and the end of 2027. Officials raised their 2026 forecast for PCE inflation to 3.7%, from 3.6% in June, and projected a return to the 2% target in 2029. They also increased their growth forecast to 2.3% and lowered projected unemployment to 4.1%, indicating greater confidence in the economy’s resilience.

The decision reflects the Fed’s judgment that strong employment and investment give it room to prioritize inflation. Chair Kevin Warsh said summer inflation readings had not demonstrated meaningful improvement in underlying price pressures, while robust business lending and spending suggested that financial conditions were still supporting economic activity. The Fed therefore viewed the increase as withdrawing some monetary support, with further action possible if inflation fails to slow sufficiently. Warsh also emphasized preventing higher prices in individual sectors from spreading across the economy and keeping inflation expectations anchored. The unanimous decision puts him at odds with President Donald Trump, who renewed his call for rates of 1% or less.

Read More: Warsh’s Remarks, Reuters [paywall], Financial Times [paywall], Reuters [paywall], FOMC Economic Projections

Disruptive Technology

The European Commission presented its proposal for child social media restrictions until the age of 15. Dubbed the “EU KIDS Act,” the legislation would codify a ban on social media, AI assistants, and some online gaming until the age of 13. During ages 13 and 14, children can have “mini accounts” on social media accessed through a guardian’s account. Commission President Ursula von der Leyen, a doctor herself, wants to prioritize putting parents in the “driver’s seat” with regard to screen time for kids. In her State of the European Union speech on Wednesday, von der Leyen noted that “young Europeans now spend four to six hours per day on screens,” a capture of attention “depriving children of childhood.”

Social media restrictions are overwhelmingly popular but still face challenges to adoption. Member states may hold considerable debate on the legislation’s enforcement mechanisms, such as an envisaged age verification app and defining “addictive design features” for platforms to restrict for children. These could include endless content scrolling, automatic video playback, geolocation, live video streaming, and virtual rewards for playing. The focus on design restrictions rather than an outright ban follows legal challenges to a French ban on social media for under-15s, which was struck down by its Constitutional Court in mid-August.

Read More: Yahoo!news, Le Monde [paywall], Special Panel on Child Safety [pdf]

Energy

Germany is planning new incentives to boost gas storage levels. Germany’s Economy Minister Katherina Reiche wants to introduce new market incentives to make more gas available this winter. The incentives include increasing a planned autumn tender for Long Term Options and allowing Trading Hub Europe to take gas deliveries from traders to make use of in the future. Reiche’s ministry intends to decide on the incentives by September 21, according to reporting.

Europe is going into the winter with exceedingly low storage levels for gas. Germany’s storage levels are only at 53%, the lowest level for the past 15 years. The storage association INES has warned that a bad winter could lead to supply issues as early as January.

Read More: Reuters [paywall], Oilprice.com, The Guardian

Transnational Crime & Corruption

President Donald Trump designated 23 countries as major illicit drug producers and removed Venezuela from a sub-list of countries that “failed demonstrably” to implement counternarcotics policies. The 23 listed countries were identical to those designated on last year’s “Major’s List,” including India, China, the Dominican Republic, Colombia and Pakistan. Venezuela had been on the “failed demonstrably” sub-list since 2005. With Venezuela’s removal, the remaining countries deemed to have failed to implement counternarcotics reforms are Afghanistan, Bolivia, Myanmar and Colombia. Citing national security reasons, Trump’s determination stated that the US would continue providing assistance to Bolivia, Myanmar and Colombia.

The determination praised Venezuela for counternarcotics cooperation with the US. It noted the capture of former President Nicolás Maduro and the assassination of Tren de Aragua leader Niño Guerrero. It also praised new US-friendly leaders elected in Bolivia and Colombia and urged them to implement counternarcotics reforms to be removed from the “failed demonstrably” sub-list. Colombia was added to the sub-list last year, and Bolivia has been present since 2008. The determination also criticized Brazil, which is not currently one of the 23 designated countries, for failing to confront drug cartels in its territory.

Read More: White House, Department of State, Reuters [paywall]

Defense

The US war with Iran has cost at least $38 billion. According to a new report by the Congressional Budget Office, by the end of July the war had cost the US almost $40 billion and resulted in depletions in weapons stocks that could take five years or more to rebuild. According to the report, which only covered direct costs from the war, munitions costs were the source of most of the spending on the conflict.

Washington has been rapidly creating new programs to accelerate production of key systems. The Pentagon recently announced two new 7-year deals to bolster production of air defense interceptors, and earlier in August the Pentagon also announced another deal to boost production of Tomahawk missiles.

Depleted stockpiles have also had consequences for countries interested in or reliant on US weapons. The war with Iran has overloaded demand for Patriot missile interceptors, and shortages of systems like Tomahawk missiles have led to complications for countries like Germany that are interested in procuring them. However, that could also create momentum for more US allies to take over a role in supply chains for US systems.

Read More: ABC News, The Hill, Defense News, 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 Anni Coonan examines Iran's wartime economy.

How Iran’s Wartime Economy Works, and How Long it Can Last

By Anni Coonan

^{“Vakil Bazaar, Shiraz, Iran” by Diego Delso is licensed under Creative Common License.}

In recent weeks, the US has escalated economic pressure on Iran in a bid to exacerbate Tehran’s financial woes and precipitate a return to the negotiating table without escalating militarily. While the pressure is having an effect, Iran’s war-torn economy, hardened by years of economic isolation, remains resilient. What is the state of Iran’s economy? And how exactly is it weathering escalating economic pressure without fear of imminent collapse? Iran retains effective sanctions evasion strategies honed over years (and still largely successful under heightened pressure), maintains cross-border trade in key goods, and its regime is insulated from the complaints of everyday Iranians. While the cessation of oil exports through the Strait of Hormuz hurts, Iran still assesses that it can endure Operation Economic Outcast longer than the US can tolerate broad Middle East disruption.

In today’s full analysis:

• The Scale of Disruption

• Resilience Strategies

• How Long Can This Last?

  Read the Full Report Here

Or listen to the full report here:

Listen to the news:

Global

The World Trade Organization warns in a new report that the global trade system is at a critical juncture, with erosion of support for WTO free trade rules risking long-term trade growth. The multilateral trading system has been one of the most successful frameworks of international economic cooperation in modern history. The splintering of the world trade system into geopolitical blocs would cut economic activity, reducing global exports by 18.6% and economic output by 5.1% by 2050. An alternative path would see flows of exports and imports centered on free trade agreements, which have proliferated in recent years, lowering exports by 26.9% and GDP by 6.9%, with the poorest countries suffering the largest losses.

The lack of reform at the WTO is undermining member state support. The organization has been paralyzed by disagreements. In reaction, member states are adopting trade policies, such as tariffs and industrial policy subsidizing critical industries, under the WTO national security exception. This exception allows member countries to break normal trade rules to protect their essential security interests. Because the WTO Appellate Body is not functioning, member states can unilaterally define the scope of national security, making the exception the rule.

Read More: Wall Street Journal [paywall], World Trade Organization, Council on Foreign Relations

Europe

European Commission President Ursula von der Leyen urged new security measures in her annual State of the European Union address. She called for the creation of a “European Security Council” that brings together EU and like-minded countries—like the UK, Canada, and Ukraine—to discuss regional security issues, akin to NATO Article IV. On economic security, von der Leyen stated that the bloc’s €1 billion daily trade deficit with China has “reached a tipping point,” but she did not elaborate on the Commission’s upcoming proposals to rebalance trade flows. Von der Leyen did not delve deeply into the EU budget, which may dominate upcoming Council meetings, but she urged the EU to take “new own resources” (i.e., revenue-raising measures like taxes) for a larger EU budget capable of investing in the bloc’s competitiveness.

Von der Leyen invited Canada to become an “associate member” of the EU. Von der Leyen laid out a new “alliance of the future” with Canada, a close like-minded partner, that includes greater tech, defense industrial, critical mineral, and energy integration. Von der Leyen also hinted at a “flagship” joint project in the Arctic. Associate membership in the EU has not been defined or tried before, but it will likely not include a customs union so that Canada can maintain its obligations to the USMCA free trade area. Canadian Prime Minister Mark Carney may elaborate on what “associate membership” entails in a speech to the European Parliament tomorrow.

Read More: European Commission, Politico, Wall Street Journal [paywall]

Middle East

US officials met with the Iran-backed Houthis in Oman over the weekend to confirm the lack of US involvement. The meeting, reported today by Western media, was facilitated by Muscat and resulted in a promise from the Houthis not to attack any vessels belonging to the US, Israel, or any country besides Saudi Arabia. It is unclear if the US made reciprocal promises.

The meeting underlines Saudi Arabia’s lack of options as its conflict with the Houthis escalates. Saudi Arabia is in an extremely difficult position with oil exports cut off from both its Red Sea and Arab Gulf ports. It is unclear how Riyadh can deal with the Houthi problem: it has no desire to get mired in a renewed conflict that was a serious drain and reputational risk the first time around, nor can it cajole any partners to join efforts to push the Houthis back. Pakistan and Türkiye, members of the Mecca Pact that ostensibly includes a mutual defense agreement, have signaled that they will not join the fray. Saudi officials are headed to Egypt this week, where they will likely be similarly rebuffed. And the US, Saudi’s onetime partner in Yemen and main security guarantor, has reportedly told Riyadh that it will not get involved.

Read More: Reuters [paywall], Al Jazeera, Associated Press, Axios, Responsible Statecraft

Asia-Pacific

China’s new exit-entry rules took effect yesterday, allowing Beijing to bar Chinese citizens deemed potential national technology or industrial security risks from leaving the country. Unveiled in July, the rules target citizens who are believed to have engaged in illegal or criminal activities abroad that threaten China’s national security and interests, as well as those who violate technology import or export controls in ways that could endanger China’s “national industrial or technological security.” Exit bans can last six months to three years. Foreign nationals can also be denied entry for one to five years for providing false information on visa applications or falling under one of China’s countermeasure lists.

The rules formalize Beijing’s growing efforts to prevent the overseas transfer of sensitive technology and talent, particularly in strategic sectors such as AI. While travel restrictions have long applied to officials and state employees with access to sensitive information, Beijing has increasingly scrutinized overseas travel and foreign ties among civil servants and employees of state-backed enterprises. Authorities have already taken action against key AI personnel, including the co-founders of Chinese-founded AI startup Manus in March, preventing them from leaving China while reviewing its acquisition by a US firm. Beijing ultimately blocked the acquisition, underscoring its willingness to intervene when Chinese-developed AI capabilities risk moving overseas.

Read More: The State Council The People’s Republic of China, Wall Street Journal [paywall], Reuters [paywall]

Americas

The UK on Tuesday announced it will appoint an ambassador to Venezuela, upgrading its diplomatic representation in Caracas and strengthening its ability to support Venezuela’s democratic transition. London said the move will facilitate engagement with interim President Delcy Rodríguez and her government, support British nationals and businesses, and promote regional stability and security. The UK downgraded its diplomatic mission to Caracas to a chargé d’affaires in 2019. London emphasized the appointment does not constitute an endorsement of Venezuela’s 2024 election process or any particular political party.

The move reflects a growing wave of international reengagement with Venezuela following Maduro’s ousting, as governments look toward reestablishing channels with Caracas. The EU’s ambassador arrived in Caracas on Monday, coinciding with Venezuela’s appointment of a new ambassador to Brussels, following similar moves by the US and Italy. Such efforts of reengagement mark a shift from 2018 to 2019, when numerous governments recalled or downgraded diplomatic representation and several, including the US, severed diplomatic ties, over Venezuela’s shift to authoritarian rule.

Read More: House of Commons, Demócrata, Demócrata

Africa

The US will impose new visa restrictions on South African officials amid a continued deterioration in bilateral relations. The Department of State announced that the restrictions will target South African officials deemed complicit in discrimination against Afrikaners or other minorities. The policy follows months of fraught US-South Africa ties, after the Trump administration accused Pretoria of failing to address genocide and discrimination against Afrikaners. Pretoria continues to reject these accusations.

The US-South Africa relationship is likely to remain tense, but cooperation in Pretoria’s mining sector continues for the time being. The US recently backed South Africa’s Phalaborwa rare earths project with a $50 million investment through the US International Development Finance Corporation. South Africa is the US’ leading source of chromium, palladium, platinum and zirconium, while also supplying significant quantities of manganese and vanadium. The diplomatic row has so far not disrupted US involvement in developing the Phalaborwa site. However, greater restrictions on South African officials and other sources of pressure could result in Pretoria suspending or reducing economic cooperation with the US, including in its mining sector.

Read More: CBS, US Department of State, PBS, Center for Strategic and International Studies

Energy

Russia and Ukraine continue striking with attacks on energy infrastructure despite US announcement of temporary ceasefire. US President Donald Trump had previously announced that Ukraine and Russia had agreed to refrain from attacking energy infrastructure. Trump also claimed that Ukraine and Russia’s respective energy campaigns were the main driver of global fuel shortages. While both sides expressed interest in such an arrangement, both sides launched strikes on September 15 against energy targets. Ukraine attacked the Syzran oil refinery in Russia’s Samara region, and Russia struck energy and port facilities.

Trump’s push to protect energy infrastructure in Europe is happening in parallel to disruptions in the Middle East and rising prices. Brent futures reached $108 a barrel yesterday and have been steadily rising since late August. Last week, a drone attack damaged a major pipeline in Saudi Arabia equivalent to 4% of global supplies, which could likewise impact energy markets going forward.

Read More: NBC News, Reuters [paywall], Kyiv Independent

Transnational Crime & Corruption

Hackers used a compromised Italian governmental email system to solicit personal information from the fintech firm Revolut. Revolut, thinking it was communicating with Italian law enforcement, handed over personal information for almost 700 customers, including their addresses, phone numbers, passport details and transaction histories. Hackers claimed to have targeted accounts associated with individuals holding large amounts of cryptocurrency and are reportedly demanding ransom payments from Revolut for the stolen data to be destroyed.

The breach could expose affected customers to in-person “wrench” attacks to steal crypto. According to cryptocurrency compliance organization Chainalysis, $58 million in cryptocurrency was stolen through violent attacks in 2025, with an additional $30 million stolen through similar attacks in the first half of 2026. The attacks are especially prevalent in France, where a hack of French tax records revealed personal information on major cryptocurrency holders. The Revolut hack also reportedly disproportionately affected France- and Switzerland-based customers.

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

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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 Dan Arbell examines the precarious situation in the West Bank.

Rising West Bank Tensions Draw Sharper International Pressure on Israel

By Dan Arbell

^{“Israeli West Bank Barrier” by Justin McIntosh is licensed under CC-by-2.0.}

The recent surge in settler violence across the West Bank has drawn international rebuke and complicated Israel’s partnerships, all against the backdrop of a contentious election. The spike also coincides with a potent anniversary: September 13 marks thirty-three years since the signing of the first Oslo Accord, which established interim Palestinian self-rule and set a five-year timetable for negotiating a permanent settlement on borders, Jerusalem, refugees, and settlements. Observers marking the date this year haven’t missed the gulf between Oslo’s original ambition and today’s trajectory: record settler violence, open talk of annexation, and a Palestinian Authority (PA) which is now widely seen as a hollow shell. The escalating violence has prompted international rebuke but is unlikely to slow down, posing new risks for businesses and the broader region’s increasingly complex strategic landscape.

In today’s full analysis:

• A Government Policy Sharpened by the Election Clock

• A Palestinian Authority Too Weak to Respond

• Mounting Frustration Triggers International Rebuke

Read the Full Report Here

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Europe

Permanent Representatives from EU member states agreed to delay the rollover of Russia sanctions to September 22. After three rounds of talks yesterday, EU member states could not find the necessary unanimity to renew sanctions on roughly 3,000 individuals and entities for another six months. Core to the dispute is the potential delisting of Alisher Usmanov and Mikhail Fridman, two Russian oligarchs that Slovakia wants off the list. France backed Bratislava’s request, but did not detail why beyond a “specific” national security issue; the Financial Times reported that Usmanov’s delisting could be part of a prisoner exchange deal. On the other hand, Mikhail Fridman, who made his fortune in the chemicals and investment sectors, is challenging the EU sanctions regime in court. Slovakia and Hungary under Viktor Orban have routinely called for his delisting.

The sanctions delay is a precedent but a negative signal for bloc cohesion on Russia. The EU has delayed discussions on sanctions packages and renewals before, but this delay suggests that fights over Russia sanctions will continue even on more routine actions. Passing an anticipated 22^nd Russia sanctions package—envisioned by chief diplomat Kaja Kallas as expanding the list of sanctioned companies, individuals, and vessels by a third—will remain an uphill battle. Recent calls from countries like Sweden to renew discussions on backing loans to Ukraine on immobilized Russian assets could also fall flat.

Read More: Politico, yahoo!news, Reuters [paywall]

Middle East

A fuel price hike has sparked the largest protests in Syria since the fall of Assad. Demonstrators burned tires in Hama, Khan Sheikhoun and Maarat al-Numan and blocked key roads between Aleppo and Damascus, threatening to block border crossings. The protests came after the Syrian Ministry of Energy raised diesel prices by 40% and high-octane gas by 26-28%, the steepest price hikes since the Iran war began. Damascus said that the prices reflected intensifying global price pressures and shortages imposed by the three-month closure of the Baniyas refinery for its first comprehensive maintenance program.

The protests underline Damascus’ struggles to deliver economic growth to ordinary Syrians, which is make-or-break for its legitimacy. An estimated 90% of Syrians live below the poverty line, and making good on promises of broad-based economic growth is a key hurdle for President Ahmed al-Sharaa’s young democracy. Sharaa ended subsidies (which were often funded by Captagon sales during the Assad regime) and is attempting to transform the economy via FDI (which has been significant but is not quick). The ongoing protests are a major test for the new democracy, which was already struggling not to become a casualty of the ongoing Iran war.

Read More: Reuters [paywall], Al Jazeera, The New Arab, DW

Asia-Pacific

China’s State Security Minister Chen Yixin on Sunday called for greater government oversight of AI, warning generative AI poses growing risks to China’s political and national security. In the Ministry of State Security’s first public statement on AI, Chen warned malign actors could use generative AI, such as by spreading political rumors, to threaten China’s “political security, institutional security, and ideological security.” He also cited espionage and intelligence-leak risks from the use of foreign AI products within China, signaling Beijing increasingly views AI governance through a national-security lens.

The statement comes as US AI leaders debate slowing AI development or ceding Washington’s competitive advantage over China. Anthropic CEO Dario Amodei’s Saturday proposal to slow frontier AI development acknowledged the toughest dilemma would be if the US slowed while China continued advancing. He argued tighter restrictions on AI chips and semiconductor manufacturing equipment, efforts to curb chip smuggling and model distillation, and stronger AI security measures could widen the US lead over the next 3-5 years. China’s Foreign Ministry rejected such warnings Monday, calling them “fearmongering” and saying confrontation would disrupt global AI governance.

Read More: WeChat, Financial Times [paywall], New York Times [paywall], Dario Amodei, CNBC, NPR

Americas

Colombian President Abelardo De La Espriella on Sunday announced new protocols allowing the National Police to enter public universities to stop them from serving as “sanctuaries of violence.” The National Police will now be allowed to enter universities when there are acts of violence, vandalism or terrorism. The government will establish a national protocol to distinguish peaceful protests from demonstrations involving violence, danger, criminal acts or extraordinary disruptions to public order. De La Espriella emphasized that peaceful protests remain protected under the Constitution and law.

The announcement follows violent incidents during protests near the National University of Colombia in Bogota on Friday, when a demonstration that began at the university resulted in clashes, infrastructure damage and the evacuation of the campus. The measures are consistent with De La Espriella’s broader security agenda, which has emphasized strengthening state authority and taking a harder line against crime and armed groups. The protocol could nonetheless heighten tensions with student groups and university officials over the boundaries of university autonomy and the government’s authority to intervene on campuses.

Read More: El Tiempo [paywall], La FM, DW

Geoeconomics

Long-term US Treasury yields have reached their highest levels since 2007 as rising oil prices reinforce expectations of renewed Federal Reserve tightening. The benchmark 10-year yield touched roughly 5.04% on September 15, while the 30-year yield reached about 5.40%. Renewed attacks on Saudi Arabia and stalled regional diplomacy have kept Brent crude above $105 per barrel, increasing concern that energy costs will sustain inflation. Markets priced in roughly a 93% probability of a Fed rate increase on September 16, according to CME’s FedWatch tool. With that move largely anticipated, investors will focus on whether Chair Kevin Warsh signals further increases and how the Fed’s updated forecasts balance persistent inflation against the risk of slower growth.

The pressure on long-term borrowing costs extends beyond the Fed’s next decision. Large federal deficits and corporate borrowing for AI infrastructure are increasing the supply of bonds competing for investors’ money, while concerns about Washington’s fiscal outlook are adding to the compensation investors demand. Higher Treasury yields raise the benchmark for mortgage and corporate financing and make government bonds more competitive with equities. They also increase federal interest expenses as existing debt matures and is refinanced. Treasury Secretary Scott Bessent’s expanded bond repurchases have provided little sustained relief from rising yields: the buybacks purchase older, less actively traded Treasury securities to support market liquidity, but because the purchases are financed through new issuance, they do not resolve the underlying federal deficit.

Read More: The Wall Street Journal [paywall], Reuters [paywall], Financial Times [paywall], Peterson Foundation

Disruptive Technology

The Senate will put the Clarity Act to a procedural vote today after President Trump reportedly agreed to new ethics provisions. The bill, which would place most crypto regulation under the oversight of the Commodity Futures Trading Commission, has been delayed since passing the House over a year ago due to disputes between crypto issuers and banks on stablecoin rewards, as well as Democratic opposition to the draft ethics language, which reserves enforcement action exclusively to the Justice Department. Under the new proposed language, state attorneys general can also take enforcement action. Officials with “significant” financial interests in cryptocurrency must also divest or put those activities under a blind trust.

The Clarity Act’s passage is not guaranteed. Some Republicans reportedly dislike the ethics amendment compromise. Meanwhile, some Democrats may demand stronger language, such as full crypto divestiture for officials. Banking groups continue to advocate for stronger restrictions on stablecoin holding rewards, which they fear could lead to capital flight toward what are functionally uninsured and unregulated savings accounts.

Read More: Axios, The Hill, CNBC

Energy

Saudi Arabia’s damaged pipeline could shut down 4% of the world’s oil supply. Riyadh reportedly has stocks of oil on its Red Sea coast that can still be exported, but those will only last for 5-7 days. However, since Saudi Arabia’s pipeline has been shut down since September 11, the country will need to restart its supply transit to the Red Sea in order to avoid a massive fall in its exports. However, estimates for how long repairs could take varies, with the range of estimates running from five to six weeks to the potential for partial oil transport to resume while repairs take place.

Saudi Arabia has been rerouting oil through a massive east-west oil pipeline to get its supplies to markets. The pipeline has redirected 4 million barrels per day away from the Strait of Hormuz to the Yanbu port. 4 million barrels per day is equivalent to around 4% of global daily supply. A drone attack by Iranian-backed militias in Iraq damaged the pipeline to the Red Sea on September 11. Even before the pipeline was damaged, Saudi oil supply had already dropped to a multi-decade low.

The Houthis in Yemen have also taken control of islands along the Red Sea shipping route. This could complicate Saudi energy shipping through the Red Sea even if Riyad is able to bring the oil pipeline back online rapidly. The Houthis have also targeted Saudi oil traveling north into the Mediterranean.

Read More: Reuters [paywall], AP News [paywall], The Guardian

Transnational Crime and Corruption

A South African judicial commission is revealing the extent of violent criminal activity with political influence in the country. The Judicial Commission of Inquiry into Criminality, Political Interference and Corruption in the Criminal Justice System, led by retired judge Mbuyiseli Madlanga, is investigating organized crime influence in South Africa’s judiciary and police. Thursday will mark one year since the commission was opened in the wake of public allegations that senior South African police officials colluded with organized criminals. The commission is tasked with proposing judicial reforms in November. The World Bank estimated that organized crime in South Africa cost the country 10% of its potential GDP due to security costs and theft.

The commission has been targeted by assassinations and other violent attacks. In December 2025, one of the commission’s witnesses was murdered by a police special forces officer after the witness’s police misconduct allegations led to the suspension of several officers. Another police reservist with alleged knowledge of additional misconduct reportedly committed suicide two days after an assassination attempt in February 2026. An international organized crime watchdog recorded almost 2,500 assassinations in South Africa since 2000.

Read More: The Economist [paywall], BBC, Human Rights Watch, Global Initiative against Transnational Organized Crime

Defense

The US has acknowledged that it maintains “on-orbit” space weapons. US Air Force Secretary Troy Meink stated yesterday that the Air Force has “on-orbit” space control weapons for protecting US forces against “hostile enemy action.” Meink made the announcement while delivering the keynote speech at Air & Space Forces Association’s 2026 Air, Space & Cyber Conference, and during the speech he also underscored the importance of maintaining American dominance in space. Meink declined to provide any more details on what exact capabilities he was referring to, but his statement was the most open public acknowledgement to date about America’s use of space control weapons. Space is becoming an increasingly critical domain for potential future military conflict, and countries like the US and China have been undertaking steps to prepare for the possibility that a future military conflict could extend into outer space.

Read More: Defense News, Defense One, Reuters [paywall]

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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, Hoi Chung Liu, Andy Xu Sofia, Jake Fitzpatrick, Carter Spahn, Chris Dantes

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The Lede

Western Trade Restrictions on Israeli Settlements Expand Amid West Bank Tensions

^{“Prime Minister of Israel Benjamin Netanyahu” by Russia Presidential Press and Information Office is marked with Creative Commons Attribution 4.0.}

Twelve Western countries on Tuesday announced coordinated measures targeting trade with Israeli settlements in the West Bank, including new UK-led sanctions, marking a significant expansion of Western economic restrictions over Israel’s settlement policy. The joint statement — issued by the foreign ministers of Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain, Sweden, and the UK — confirmed plans to introduce national and EU-level restrictions on trade in goods originating from Israeli settlements, while some governments said they are actively considering additional measures. The announcement followed the UK government’s decision, coordinated with France and Canada, to bring forward national measures to ban trade in goods with the settlements. The move comes as EU member states fail to reach consensus on more far-reaching bloc-wide responses, prompting individual governments to explore national restrictions while continuing to push for EU-level action.

The restrictions reflect growing Western concerns that Israel’s settlement expansion and settler violence are making a two-state solution increasingly unviable. Canada, France and the UK said “systematic settlement expansion,” including Israel’s decision to advance the E1 settlement project, and a “dramatic increase in settler violence,” pose a “direct and urgent threat” to a two-state solution. The three governments said they would take further action, while reiterating their support for Israel’s security and a “close and productive partnership” with Israel. The statement comes almost one year after the three nations recognized the State of Palestine. Moreover, UK Foreign Secretary Ed Miliband on Tuesday said Britain now officially endorsed the 2024 International Court of Justice advisory opinion which concluded that Israel’s continued presence in the occupied Palestinian territory is unlawful. Miliband also accused “settler terrorists” of perpetrating “ethnic cleansing” against Palestinians in parts of the West Bank.

The Canada-France-UK package will ban imports of goods from Israeli settlements and impose targeted measures on settlements and entities or individuals that facilitate or profit from them. The UK is separately implementing a broader package that also includes restrictions on organizations and businesses involved in settlement construction, infrastructure, financing and real estate, a ban on UK advertising for properties in illegal settlements, and sanctions against “extremist settlers” who have supported or incited violence against Palestinians. London will also halt new export licenses for weapons and other goods that could “materially contribute to the occupation.” The ban on trade with illegal Israeli settlements is expected to go into effect six to nine months from now. The scope of the French and Canadian measures beyond the jointly announced import ban has yet to be fully defined.

The latest measures escalate earlier Western sanctions, which targeted named individuals and organizations, to cover (once implemented) all trade in settlement-origin goods. In June, Canada, France and the UK coordinated sanctions against settlers and their supporters in response to settler violence, building on earlier measures targeting specific individuals and organizations. Tuesday’s measures therefore represent a broader economic approach by restricting commerce linked to settlements themselves, joining several Western governments that have or are in the process of imposing restrictions on settlement goods, including Ireland, Spain, the Netherlands, Norway and Belgium.

The measures triggered an immediate diplomatic response from Israel against the UK, raising the risk of a broader deterioration in relations between Israel and its Western partners. Israeli Foreign Minister Gideon Sa’ar announced the closure of the British Consulate in Jerusalem, removal of British representatives from the International Gaza Support Center in Kiryat Gat, termination of British activities to train Palestinian Authority security forces under the British Support Team in Ramallah, and entry bans on 11 British members of parliament and Fahad Ansari, a London-based human rights lawyer and director of Riverway to the Sea, a Palestine legal rights and advocacy organization. Sa’ar described Miliband’s statements as “outrageous lies” and accused the UK government of “systematically acting against the state of Israel.” Israel has so far limited its announced countermeasures to the UK, although Sa’ar warned that other countries could face measures at Israel’s discretion.

The direct commercial impact is likely to be limited, but could increase compliance complexity and operating uncertainty for companies with exposure to Israel and the West Bank. The UK imported an estimated £38 million ($51.4 million) in goods from the occupied territories in 2025, a fraction of the £6 billion ($8.1 billion) in total UK-Israel trade. However, companies importing Israeli goods will face greater scrutiny over the origin of products and may need additional documentation to demonstrate that goods do not originate from restricted settlements. The UK has long tried to distinguish between goods produced within Israel’s pre-1967 borders and those originating in settlements, which do not receive preferential tariffs under the UK-Israel trade agreement. However, mislabeling concerns have persisted. The newly announced ban raises the stakes of an existing origin-verification challenge and may, in practice, require companies to establish that they are not importing goods prohibited from entering the UK.

More broadly, the coordinated announcement adds to the fragmentation of the Western sanctions environment, with national restrictions developing alongside existing EU rules and potential future EU-wide measures. Momentum has increased for EU member states to discuss bloc-wide trade restrictions on Israeli settlements during the European Council in October. If the EU ultimately reaches a qualified majority (55% of states representing 65% of population) on broader restrictions, Tuesday’s measures could serve as a foundation for a more unified European regime.

US Developments

Treasury Ratchets Up Its Pressure on Iran in Operation Economic Outcast

Last week, the Department of the Treasury announced several significant measures targeting Iran as part of Operation Economic Outcast, which is the Trump Administration’s ongoing campaign to impose greater economic pressure on the Iranian government. We previously reported on Operation Economic Outcast in a recent blog post. The measures announced last week include the following:

· On September 8, the Office of Foreign Assets Control (“OFAC”) indefinitely suspended three Iran-related aviation general licenses (“GL”), which authorized certain transactions related to overflights of Iranian airspace (31 CFR § 560.522), certain bunkering and emergency repairs for non-Iranian carriers (31 CFR § 560.529), and the reexportation of certain civil aircraft to Iran on temporary sojourn (Iran GL J-1). OFAC also suspended its licensing policy (31 CFR § 560.528) related to the exportation or reexportation of goods, services, and technology to ensure the safety of civil aviation and safe operation of US-origin commercial passenger aircraft. OFAC said it will consider aviation safety-related requests on a case-by-case basis. OFAC also issued Iran GL DD, which authorizes certain transactions that are ordinarily incident and necessary to the wind-down of any transaction previously authorized under 31 CFR § 560.522, 31 CFR § 560.529, or Iran GL J-1 through 12:01 a.m. eastern daylight time on September 23, 2026.

· On the same day, OFAC sanctioned 36 targets for supporting Iran’s aviation sector, including 27 Iranian commercial airlines. The sanctions were imposed pursuant to the April 24, 2026 determination under Executive Order (“E.O.”) 13902 that persons operating in the aviation sector of the Iranian economy are subject to sanctions. OFAC also sanctioned eight entities based outside of Iran, which allegedly provided support to Mahan Air, a sanctioned Iranian airline. These actions build on OFAC’s April and July 2026 sanctions actions against persons allegedly servicing Mahan Air’s domestic and international flights. OFAC also issued Counter Terrorism GL 37, which authorizes certain transactions that are ordinarily incident and necessary to the wind down of any transaction involving certain of the sanctioned entities through 12:01 a.m. Eastern Daylight Time on September 23, 2026.

· On September 10, OFAC published a new Statement of Licensing Policy for the Iranian Transactions and Sanctions Regulations (“ITSR”). OFAC stated that there is now a presumption of denial for specific license requests to engage in activities prohibited by the ITSR and other Iran-related authorities except as required by law or in certain exceptional and urgent circumstances, such as risks to life, limb, or environmental safety. OFAC said its Licensing Division immediately began denying most outstanding Iran-related specific license requests. OFAC stated that it will maintain this licensing policy until Iran stops obstructing the Strait of Hormuz, attacking US personnel and partners in the Gulf, and pursuing nuclear and conventional weapons.

· OFAC sanctioned 14 individuals and five entities for allegedly supporting Kata’ib Hizballah (“KH”) and Hizballah, which aid Iran in evading sanctions and collaborate with Iran’s Islamic Revolutionary Guard Corps-Qods Force. The action was taken pursuant to E.O. 13224, which targets terrorists and their supporters, and E.O. 13902.

· OFAC also announced a $1,427,230 settlement with an unnamed US individual, in which the individual agreed to settle their potential civil liability for providing management consulting and advisory services to one of Iran’s leading software solutions companies and receiving Iranian-origin dividends to their US bank accounts, and acquiring real property in Iran.

· The Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) also issued two publications alerting financial institutions and the public to Iranian sanctions evasion and facilitation networks. FinCEN issued an alert to assist financial institutions in identifying and reporting procurement networks supporting Iran’s aviation industry. FinCEN also issued a Whistleblower Bulletin encouraging the public to submit information about sanctions and anti-money laundering violations related to Iranian sanctions evasion and illicit finance schemes involving Iran’s terrorist proxies.

These new measures reflect the Treasury Department’s efforts to impose economic pressure on Iran at a faster pace. Meanwhile, the broader conflict involving Iran, the United States, and their respective allies continued to escalate throughout the Middle East. On September 11, the Houthis, an Iranian-backed militia in Yemen, seized an island in the Red Sea, threatening the flow of oil through the Bab al-Mandeb Strait. Saudi Arabia also announced it had shut down an important oil pipeline after it was attacked by drones launched from Iraq.

Treasury Targets Chinese Online Marketplace Over Cybercrime

On September 9, OFAC sanctioned Xinbi Guarantee, a Chinese-language platform that allegedly operates a large illicit online marketplace used to support cyber scams, fraud, money laundering, and other criminal activity targeting Americans. OFAC also designated two Southeast Asia-based entities for providing applications that support Xinbi Guarantee’s operations.

OFAC alleges that Xinbi Guarantee’s marketplace connects transnational criminal syndicates, including scam center operators, with vendors offering financial services, technology, and other goods for criminal operations. OFAC estimates that Xinbi Guarantee processed the equivalent of over $24 billion in digital assets and fiat currencies through its marketplace and platforms, with most transactions occurring in Southeast Asia. The designations were taken pursuant to E.O. 13581, which targets transnational criminal organizations (“TCOs”), as amended by E.O. 13863.

State Department Designates Los Tiguerones as a Foreign Terrorist Organization

On September 9, the US Department of State designated Ecuadorian crime syndicate Los Tiguerones as an FTO and a SDGT. The State Department alleged that Los Tiguerones is linked to narcotrafficking and other illicit activity, along with numerous attacks targeting civilians, law enforcement officers, and journalists, including the live takeover of an Ecuadorian television station in 2024. The action was taken pursuant to E.O. 13224, which targets terrorists and their supporters.

House May Soon Consider the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026

On September 11, the House of Representatives Committee on Rules (“Rules Committee”) scheduled a September 14 meeting to consider a rule governing consideration of the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026. Approval by the Rules Committee would clear the way for House floor consideration later in the week. The bill passed the Senate on August 7 by a bipartisan vote of 86-11. The bill faces opposition from many House Democrats.

Representatives Gregory W. Meeks (D-NY), Don Beyer (D-VA), and Richard Neal (D-Mass.) issued a joint statement arguing that the bill’s expanded tariff authorities and what they described as its “failing to mandate sanctions on Russia” were “unacceptable.” The three lawmakers, who serve as ranking Democrats on key congressional committees, have called for “bicameral, bipartisan negotiations.”

First introduced in April 2025, the legislation gained momentum after President Donald Trump signaled support last November, subject to him obtaining new tariff authorities and retaining flexibility over the imposition of sanctions. The bill underwent significant amendment earlier this year, which we covered in an update on July 20, 2026.

UK Developments

Illumina Cambridge Pays £7.4 Million Settlement for Russia Sanctions Breaches

Illumina Cambridge Limited has paid HM Revenue & Customs a £7,438,840.13 compound settlement for breaches of the Russia (Sanctions) (EU Exit) Regulations 2019. Between July 2022 and January 2023, the company transferred sanctioned goods between two overseas companies within its corporate group for export to Russia, in breach of Regulation 25(1), which prohibits making certain military, maritime and restricted goods available to persons connected with Russia or for use in Russia. Illumina Cambridge voluntarily disclosed the breaches to HMRC. The substantial settlement highlights the enforcement risk arising from intra-group transactions and overseas supply chains, and reinforces the importance of ensuring that sanctions controls capture transfers between affiliated entities where goods are ultimately destined for sanctioned jurisdictions.

UK Reintroduces Wide-ranging Sectoral Sanctions on Iran and Issues Shah Deniz General Licence

The UK has published the Iran (Sanctions) (Amendment) Regulations 2026, which will enter into force on September 29, 2026, and reintroduce a range of sectoral sanctions previously lifted as part of the Joint Comprehensive Plan of Action (JCPOA). The measures significantly expand trade restrictions covering sectors including energy, oil and petroleum products, petrochemicals, natural gas, precious metals and diamonds, maritime goods and sectoral software and technology. They also introduce financial restrictions on certain loans, investments and joint ventures involving persons connected with Iran, relationships with Iranian financial institutions, insurance and reinsurance, and certain Iranian sovereign bonds. Further measures include restrictions on Iranian aircraft entering the UK and expanded powers to specify and restrict vessels connected with Iran’s nuclear programme or malign or destabilising activity. Alongside the new restrictions, the UK has issued a General Licence supporting the continued operation of the Shah Deniz gas field, authorising certain energy-related goods, technology, brokering and associated financial services that would otherwise be prohibited, and has amended existing General Licence INT/2025/7363752 to permit certain financial services necessary for the project. Both the new licence and amendments are scheduled to take effect alongside the new sanctions on September 29, 2026.

OFSI Updates Guidance on Permitted Travel Expenses for Licence Applications

OFSI has updated its guidance on permitted travel expenses for sanctions licence applications, clarifying both its scope and the evidence expected from applicants. The guidance now confirms that it applies not only to travel by UK designated persons, but also to travel by legal representatives and other individuals where an OFSI licence is required to make the relevant payments. It emphasises that applicants should provide sufficient supporting evidence at the outset, with OFSI able to return incomplete applications for resubmission or refuse applications where adequate evidence is not provided. The revised guidance also confirms that OFSI may, in exceptional circumstances, license flights in a higher class than would ordinarily be permitted and, where higher-cost travel or accommodation is insufficiently justified, may instead license a lower amount equivalent to the permitted rates. Applications will continue to be assessed on their individual merits, while outdated mileage rates have been removed and links to related OFSI guidance updated.

EU Developments

EU Faces Deadlock on Renewal of Russia Asset Freeze Sanctions Regime

According to early reports, EU ambassadors of the Council failed to reach unanimous agreement on the renewal of the EU’s Russia asset freeze sanctions regime during a September 14 meeting, just one day before the restrictive measures are due to expire. The sanctions regime, which provides for the individual designations of over 3,000 individuals and entities, requires the unanimous approval of the 27 Member States for its renewal.

Slovakia continued to oppose the rollover unless certain listed individuals, including Russian businessmen Alisher Usmanov and Mikhail Fridman, were removed from the sanctions list. France has reportedly attempted to create a compromise by proposing the delisting of Usmanov only. Discussions also focused on whether the regime should be extended for six months, in line with previous practice, or for a longer 12‑month period.

EU ambassadors are expected to reconvene for further negotiations ahead of the expiry deadline.

General Court Judgment Upholds the Designation of Roman Abramovich under EU Russia Asset Freeze Sanctions

The General Court of the European Union delivered its judgment in Case T‑358/25, dismissing an action brought by Russian businessperson Roman Abramovich seeking the annulment of Council acts adopted in March and September 2025 that maintained his designation under the Russia asset freeze sanctions regime.

The General Court upheld the legality of the Council’s decision to maintain Abramovich on the EU sanctions list and confirmed the validity of the listing criterion set out in Article 3(1)(g) of Council Regulation (EU) 269/2014, which targets leading businesspersons operating in Russia and persons active in economic sectors generating substantial revenue for the Russian Government.

With regard to the application of the listing criterion, the Court noted that Abramovich remains one of the main shareholders of Evraz, one of Russia’s largest steel and mining groups, and also holds a shareholding in Norilsk Nickel, a major palladium and refined nickel producer. In addition, the Court found that the steel and mining industries represent a substantial source of revenue for the Russian Government.

Asia-Pacific Developments

China-Iran Trade Network Bypasses Sanctions

A reported barter-style trade mechanism has enabled Iran to circumvent Western sanctions by exchanging oil exports for credits that can be used to purchase billions of dollars’ worth of Chinese goods and services, including medicines, vehicles, communications equipment, infrastructure projects, and reportedly some military-related items. The arrangement relies on intermediaries and a special purpose vehicle (SPV) that operates largely outside traditional international banking channels, helping shield participants from sanctions exposure while allowing China to secure discounted Iranian oil. Sources cited in the report estimate that $2 billion to $2.5 billion moved through the mechanism in the past year, with much of the funding directed toward infrastructure development in Iran. The system has reportedly been in place since 2021 and reflects the broader strategic partnership between China and Iran.

China and Russia Oppose Reimposition of UN Iran Sanctions

China and Russia jointly challenged Western efforts to restore UN sanctions on Iran during a contentious UN Security Council meeting, arguing that the legal basis for the 2015 nuclear deal’s “snapback” mechanism expired when UN Security Council Resolution 2231 lapsed in 2025. Both countries maintained that there are no valid legal grounds to revive the previous sanctions regime and warned that unilateral attempts to do so undermine the Council’s authority and prospects for a diplomatic resolution. In contrast, the United States, United Kingdom, and France argued that the snapback process was lawfully triggered due to Iran’s non-compliance with its nuclear commitments and that the sanctions remain in force.

Australia Weighs Targeted Israel Sanctions

Australia is considering a new round of targeted sanctions aimed at deterring violence by Israeli settlers and the expansion of settlements in the West Bank, but has ruled out joining the United Kingdom’s proposed ban on trade with Israeli settlements. Penny Wong, Australia’s foreign affairs minister, said the government is coordinating with international partners on targeted measures but has concerns that a blanket trade ban could have unintended consequences for Australian businesses, Palestinians, and Israelis. While criticizing settlement expansion and settler violence as undermining the prospects of a two-state solution, Australia has opted for a more limited approach than the UK, which, alongside several European partners and Canada, is pursuing broader restrictions on settlement-related trade and other measures.

Vietnam Considers Aircraft Leasing Deal as Russia Grapples with Sanctions

Vietnam is reviewing a Russian proposal for a “wet lease” arrangement under which Vietnamese airlines would provide aircraft, crews, and maintenance services to Russian carriers, highlighting Vietnam’s potential role in helping Russia address aviation challenges caused by Western sanctions. According to Russian Transport Minister Andrei Nikitin, discussions are ongoing following bilateral talks in Moscow. Russia has sought similar agreements with several countries as sanctions have cut its airlines off from new Boeing and Airbus aircraft, spare parts, and maintenance services, contributing to the grounding of a significant portion of its civilian fleet.

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Global

The House Rules Committee will consider the Graham Russia sanctions bill today. The bill would allow President Trump to impose 100% stacked tariffs on the top five importers of Russian gas and oil, the top five countries enabling transshipment of those goods, and any country that purchases new shipments of Russian fuels. This would effectively act as leverage against China and India, the two most likely targets for tariffs. The bill would also mandate blocking sanctions across Russia’s political leadership and sectors that support the war economy. However, the legislation gives the White House the discretion on when to apply these restrictive measures or even waive blocking sanctions, as long as individual waivers are accompanied by a report to Congress.

The road to adoption remains fuzzy. The sanctions bill passed the Senate 86-11, but House Democrats appear more skeptical than their Senate colleagues. Rep. Gregory Meeks, the top House Democrat on the foreign affairs committee, urged his colleagues not to grant the White House a flexible secondary tariff authority and for the Senate to instead pass the Ukraine Support Act, which focuses exclusively on blocking sanctions and aid to Kyiv. House minority leader Hakeem Jeffries echoed those concerns. Without substantial Democratic support, House Speaker Mike Johnson may need almost every Republican legislator to vote for the bill. This could feasibly occur if President Trump explicitly backs the bill. The House is slated to adjourn until after the midterms by the end of this week.

Read More: The Hill, Politico, Stepwise Risk Outlook

Europe

Sweden’s left bloc, led by the Social Democrats, appears poised to retake power after yesterday’s parliamentary elections. The final count remains too close to call at a 0.45% difference as of Monday morning, with the left bloc, led by former Prime Minister Magdalena Andersson, receiving 176 seats and the right bloc, led by Ulf Kristersson’s center-right Moderates, 173. If these numbers hold, Sweden will likely receive a left-leaning government. One question is whether Andersson can bridge the divide between the liberal Center Party and the formerly communist Left Party, both of which have pledged not to work together. If not, Andersson may have to break bloc politics, such as through a grand coalition with the Moderates.

Sweden’s foreign policy will remain consistent. The Social Democrats have echoed the ruling Moderates on the direction of Sweden’s strategic shift toward increased defense spending as NATO’s newest member. However, the left bloc is less eager to participate in nuclear deterrence initiatives and instead prioritize global non-proliferation. Parties historically opposed to NATO, like the Greens and The Left, remain partial to Sweden’s strategic autonomy and may support alternative security frameworks in Europe after the Ukraine war.

At the EU level, the Party of European Socialists (PES) strengthens. Sweden, dependent on a similar export-oriented model as Germany, will continue to support open trade and act within the “frugal” bloc. However, Andersson’s return means that Sweden may prioritize PES’ legislative initiatives. That includes a stronger EU role in green industrial policy, tech sovereignty, and due diligence regulations.

Read More: CBC, European Council on Foreign Relations, Atlantic Council

Middle East

A planning meeting between Iran and Gulf leaders in Oman was canceled. The meeting, planned for Monday morning between Gulf foreign ministers and their Iranian counterpart in Salalah, Oman, was postponed by the Omani foreign minister “in the interest of consensus.” Gulf leaders were expected to seek a separate understanding with Iran as US-Iran talks remain stalled and escalating fighting in the Persian Gulf and in the Red Sea have further constrained Gulf oil exports.

The cancellation highlights the increasingly tenuous position of US Gulf allies – increasingly targeted by Iran with little support from a US that is spread thin and loath to escalate. Throughout the war, Gulf capitals have found themselves the primary target for Iranian attacks attempting to up the pressure on the US, and Gulf leaders would like a deal and an end to conflict at almost any cost. But the ongoing violence has exacerbated regional frustrations with the US as a primary security partner and spurred efforts to deal directly with Iran (such as paying tolls to access Hormuz, against the US’ wishes).

Saudi Arabia is in a particular bind as the US has declined to get involved in the escalating Houthi conflict. The proxy conflict between the Saudis and the Iran-backed Houthis has grown hot in recent days, culminating in the Houthi seizure of key sites along the Bab al-Mandeb Strait, but the US reportedly declined a Saudi request to contribute firepower. Saudi Arabia, with the majority of its oil exports now cut off and no desire to reenter a hot war with the Houthis, feels it must pursue its own agreements to ensure its security.

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

Asia-Pacific

Voting began today in the Philippines’ Bangsamoro region, marking its first parliamentary election since the region was established. The Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) was established following a 2014 peace agreement between the Philippine government and the Moro Islamic Liberation Front (MILF), the country’s largest Muslim separatist movement. The agreement ended decades of conflict that killed more than 120,000 people and displaced more than two million. BARMM was formally established in 2019, with an interim government governing the region since then.

The election comes amid tensions within BARMM and divisions within the MILF, raising concerns over potential post-election instability. Those competing for power include former MILF rebels, rival factions and established political clans, setting the stage for a contest between groups with competing visions for the region’s political future. Some MILF figures have warned of unrest if they perceive electoral manipulation or fraud, while the group has faced criticism over suggestions that it intends to retain political influence. Manila has deployed military forces to key areas, reflecting concerns that election-related tensions could escalate into violence and further destabilize the fragile peace process.

Read More: Philippine News Agency, Reuters [paywall], Al Jazeera

Americas

The US added Ecuadorian gang Los Tiguerones to the list of Foreign Terrorist Organizations (FTOs) last week. The move came during US Secretary of State Marco Rubio’s trip to South America, which also included visits to Colombia and Peru. Rubio met with Ecuadorian President Daniel Noboa and praised Ecuador as the US’ most “aggressive” partner in combating transnational criminal groups. Ecuador has recently been subject to boat strikes targeting suspected drug trafficking vessels in the Pacific Ocean, and Ecuador has agreed to allow US-led strikes on Ecuadorian land to combat narco-trafficking. Violence in Ecuador has been consistently on the rise in recent years, and Noboa was elected in 2025 with a mandate to crack down on crime.

With the recent designation of Los Tiguerones, the list of US-designated FTOs has grown to 21. The label was long reserved for terrorist organizations such as the Islamic State, who used violence for political ends. However, the Trump administration has increasingly used designations as a means of putting pressure on transnational crime groups, especially in the Americas. Mexico is now home to eight designated groups, the most of any country, while two Brazilian transnational gangs recently joined the list. Ecuadorian FTOs also include Los Lobos, Los Choneros, and The Chone Killers. Los Tiguerones, which formed in 2019 as the armed wing of Los Choneros, was involved in the live takeover of an Ecuadorian television station in 2024.

Read More: State Department, PBS, PBS

Africa

The surge in Somali piracy is possibly being supported by the Houthis. The internationally recognized government in Yemen claimed that the Houthis met with Somali pirates in June to discuss targeting vessels. This follows reports from Puntland intelligence officials in January that the Houthis supplied pirates with arms and GPS satellite devices. Al Shabaab, which has deepened cooperation with the Houthis, provides pirates with training and weapons, highlighting increasingly interconnected ties between al Shabaab, the Houthis, and Somali criminal groups. Recent hijackings have reportedly been more technologically advanced, with pirates using Starlink internet to maintain communications and track potential targets.

The nexus between terrorist and criminal groups emerges amid increased political tension in Somalia that could undermine counter-piracy operations. Ongoing conflict between the Federal Government of Somalia (FGS) and Puntland is creating instability that could be exploited by non-state actors. Moreover, both claim jurisdiction over the waters along Puntland’s coast. Officials from the semiautonomous region stated that they are chiefly responsible for counter-piracy operations in the area and rejected any naval presence from Türkiye, a close security partner of Mogadishu.

Read More: Critical Threats, The Guardian, ACLED, Stepwise Risk Outlook

Geoeconomics

The BRICS New Delhi Declaration calls for wider use of local currencies and closer trade cooperation as members push back against unilateral tariffs and sanctions. Adopted during the 18^th BRICS Summit in India on September 12, the declaration supports further work on connecting national payment systems, settling trade in local currencies and expanding local-currency financing through the New Development Bank. Members also endorsed closer customs cooperation and a study of mechanisms allowing small exporters to obtain financing against unpaid invoices. The text criticizes tariffs inconsistent with WTO rules and secondary sanctions that members regard as contrary to international law, while calling for IMF and World Bank reforms that would give developing economies greater influence.

Despite the call to action, the summit’s most significant proposals remain at the planning stage. The summit announced no common BRICS currency or unified payment network, and many initiatives remain under study or subject to domestic approval. Members also differ over the purpose of financial cooperation: India emphasizes lower transaction costs and economic development while preserving Western relationships, whereas China and Russia seek a stronger geopolitical role for the bloc. Those differences suggest that progress will come through individual payment links and customs agreements, which could gradually reduce currency-conversion costs and improve access to working capital.

Read More: New Delhi Declaration, Reuters [paywall], New Development Bank, Chatham House

Disruptive Technology

ICYMI: France hosted an international space summit last week, calling for the world to protect space as a global commons. The summit had mixed results. On the one hand, the summit did not have widespread attendance. France was perceived as pushing a European strategic autonomy agenda, calling for the EU to develop its own sovereign spaceflight capability independent from NASA and ending its “geographic returns” principle to enable greater public investment. American companies canceled appearances, and German Chancellor Friedrich Merz skipped the event, despite Germany co-chairing. Momentum is growing for Europe to develop independent infrastructure from the US, but space associations from France, Germany, and Italy stated that €60 billion in investment will be needed. Germany is also channeling its defense spending spree into its independent space satellite and launch infrastructure.

Read More: France24, Politico, Le Monde [paywall]

Energy

President Donald Trump has called on Zelenskyy to stop attacking Russia’s production capacity for diesel. Trump justified his message to Zelenskyy with the claim that Ukraine’s strikes against diesel production infrastructure were “hurting the world.” This year Kyiv has undertaken a major campaign against Russian energy infrastructure, which has resulted in shortages and caused Russia to pause exports of diesel. The US price of diesel fuel topped $6 a barrel last week.

The US has intervened with Ukraine before about strikes on Russian energy infrastructure. Earlier this summer, Vice President JD Vance personally asked Ukraine to cease strikes against export infrastructure at the Russian port of Novorossiysk after Kyiv’s strikes caused disruptions in exports of Kazakh oil through the Caspian Pipeline Consortium, which transports the overwhelming majority of Kazakhstan’s production.

The US will host a Russian official at G20 energy talks in Houston. A Russian official will be present at G20 Ministerial Meeting on Energy Abundance, which lasts from September 14 through 16. The US has appealingly been slowly integrating Russia back into G20 gatherings, such as earlier this year when Russia attended a G20 meeting of finance ministers.

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

Defense

Germany is considering an agreement with US-Israeli defense firm Covenant Industries for cruise missiles. Berlin is interested in Covenant’s Anthem cruise missile, which would help cover a gap in Germany’s long-range strike capabilities. The next version of Germany’s Taurus cruise missile is years away from being fielded, European efforts to develop their own capability are in their infancy, and although Germany has considered purchasing Tomahawk missiles the war in the Middle East has also complicated those plans.

Covenant is considering a production facility in Germany. The company currently has facilities in Texas and Israel, and the company is planning to begin serial production at a facility in Germany’s state of Saxony in 2027. The site in Saxony would be Covenant’s largest production facility. The missile reportedly has a target in the mid-six-figures.

Read More: Defense News, Hartpunkt [in German], Reuters [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 first-ever The Analysts' Brief examines the upcoming BRICS Summit.

The Analysts’ Brief: BRICS Meets in New Delhi

By Zayna Dembinski, Ian Cameron, Elton Smole, Chris Dantes and Carter Spahn

^{“XV BRICS Summit family photo” by 15th BRICS SUMMIT is marked with Public Domain 1.0}

This weekend, India will host international leaders for the 18th annual BRICS Summit in New Delhi. India, which assumed the chairmanship in January, faces the difficult responsibility of keeping the summit neutral and unified as members seek diverse objectives: Russia will look to assert its status as a global power player despite Western isolation, India and China will attempt to further their diplomatic and economic thaw, and New Delhi will continue seeking to connect members' digital currencies (as opposed to introducing a common BRICS currency) and boost global rupee usage. Meanwhile, bloc unity is increasingly tested by upcoming Brazilian elections, the Iran war, global economic pressures, and diverging relationships with partners like the US and Israel. Read our analysts’ takes below.

In today’s full analysis:

Zayna Dembinski: President Xi Jinping is confirmed to attend the BRICS Summit, reinforcing signals that China and India are seeking to rebuild ties

Ian Cameron: The summit is an opportunity for Moscow to show that Russia remains a global player

Carter Spahn: India seeks wider rupee usage, but risks US retaliation and will struggle to address the underlying trade imbalance

Elton Smole: With Brazil’s October presidential elections neck and neck, the future path of a founding BRICS member hangs in the balance

Chris Dantes: South Africa seeks deeper economic ties with BRICS members amid domestic challenges and estrangement from the US

Read the Full Brief Here

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Global

In April, a joint American, British, and Norwegian operation tracked and confronted Russian submersible vessels suspected of potentially testing the deployment of new technology to disrupt subsea cables. Russia’s Main Directorate for Deep-Sea Research (GUGI) was conducting an exercise near Svalbard, an Arctic island under Norway’s sovereignty whose extractive resources and territorial waters are shared by several countries. Svalbard is home to the SvalSat satellite ground station, which is one of the world’s largest and transmits data back to mainland Europe through two 1,400 km undersea cables. GUGI reportedly aborted the exercise after a confrontation during the joint operation.

Subsea cables are a vulnerable target for Russian hybrid warfare operations. About 95% of the world’s data and $10 trillion in daily financial transactions travel through subsea cables daily. Russian shadow fleet vessels like the Eagle S have been accused by Western authorities of deliberately dragging anchors along the seabed in an attempt to damage cables, but Russia denies this. Nonetheless, NATO member intelligence services have increasingly warned about the potential of Russia to escalate hybrid operations, as exemplified by the failed Leipzig airport drone attack in early August 2026.

Read More: Defense News, Reuters [paywall], Carnegie Endowment for International Peace

Europe

On Wednesday, the US and Poland concluded a $4 billion Foreign Military Financing (FMF) agreement. This money could act as a loan guarantee for Polish procurement of American defense systems, including Patriot or HIMARS interceptors, in addition to the build-out of an additional military base to host American troops, which could cost as much as $3 billion. The US currently rotates brigades to small bases, such as one near Poznan, but does not have permanently stationed troops in Poland. US Under Secretary of War for Policy, Elbridge Colby, is expected to visit Poland soon to tour potential sites for a military base.

The FMF agreement is a signal that Poland might be a winner from the ongoing US force posture review. There is some ambiguity surrounding the outcome of the posture review, which is slated for completion by the end of 2026, but one potential outcome is a redistribution of American conventional forces in Europe to allies perceived as pulling their weight in the alliance. Poland, sitting on NATO’s eastern flank, seeks to build one of the largest conventional forces in Europe and anticipates spending 4.8% of their GDP on defense in 2026.

Read More: US Department of State, Breaking Defense, Stars and Stripes

Middle East

Iran is producing missiles again, per media reports. On Thursday, the Wall Street Journal reported that Iran has resumed its production of ballistic missiles using stockpiled components, despite heavy attacks on missile sites and increasingly stringent trade restrictions that have limited the supply of components. The renewed production underscores the difficulty of fully dismantling Iranian capabilities, given the resilience of Iran’s illicit supply lines, although it is unclear how long its supplies will hold.

The news comes as Iran seems poised to escalate further, despite US desires to contain the war on the economic front. Over the last week, Iranian forces have taken direct aim at the US Navy in a way it has mostly avoided since the start of the war and targeted US bases in Jordan. The escalation comes as the Hormuz blockade and new sanctions further squeeze Iran’s oil exports and struggling wartime economy. Tehran is betting that upping the military ante will compel some US capitulation (potentially in the form of a return to the June Memorandum of Understanding), especially as US midterms approach. President Trump has publicly disavowed negotiations until midterms, even as separate escalation on the Yemeni front is increasing maritime pressure.

Read More: Wall Street Journal [paywall], New York Times [paywall], DW, BBC

Asia-Pacific

China purchased one million metric tons of US soybeans this week, bringing its total purchases to more than half of the annual volume Beijing committed to buy through 2028. The purchases come ahead of the highly anticipated Trump-Xi summit on September 24, where the two leaders are expected to discuss the durability of their fragile trade truce. Soybeans remain a particularly sensitive commodity for US producers and have previously been targeted by Chinese retaliatory tariffs, making purchases a visible signal of Beijing’s compliance with its trade commitments.

However, China’s willingness to purchase US soybeans comes as its trade surplus with the US widens, reaching more than $29 billion in August, up nearly 44% from a year earlier and the largest monthly gap since Trump returned to office. Moreover, China continues to deepen its reliance on Brazil as an alternative soybean supplier, underscoring the limits of the US purchase commitments. Over the first five months of 2026, more than 60% of China’s soybean imports came from Brazil, with US imports making up just 23%.

Read More: Reuters [paywall], The New York Times [paywall], AgWeb, CNBC, The Brookings Institution

Americas

Peruvian President Keiko Fujimori announced that Peru will join the Shield of the Americas. Also known as the Americas Counter Cartel Coalition (ACCC or A3C), the Shield of the Americas is a US-led regional security coalition aimed at expanding counternarcotics cooperation among member states. The announcement of Peru’s decision to join came as US Secretary of State Marco Rubio continued his tour of South America, following visits to Colombia and Ecuador earlier this week. Colombia joined the coalition in August under the new administration of Abelardo de la Espriella. Fujimori and De la Espriella were both elected in recent months amid Latin America’s shift to the right.

Fujimori began her term in July with a mandate to crack down on crime. Peru is currently the world’s second-largest producer of cocaine, after Colombia. At a joint news conference with Rubio, Fujimori said that Peru’s membership in the Shield of the Americas will allow for increased intelligence sharing and joint operations against transnational criminal groups. Peru also recently declared a state of emergency in five high-security prisons as part of an effort to ramp up security efforts.

Read More: Reuters [paywall], Al Jazeera, Politico

Africa

US Assistant Secretary of State for African Affairs Frank Garcia visited Ethiopia, Zambia, and Kenya this week to discuss future investment and financing deals. Among the areas of cooperation discussed was Ethiopia’s Bishoftu International Airport, which is anticipated to be the continent’s largest regional air hub and has become a key area of strategic competition between the US and China. Garcia advocated for US investors and pledged financing from the US International Development Finance Corporation in talks with the Ethiopian Airlines CEO.

US-Zambia relations also appear to be warming following a diplomatic row over Washington’s America First Health Strategy. Zambian officials criticized the Trump administration earlier this year, accusing Washington of pursuing a transactional approach by tying health cooperation to critical minerals access. Negotiations are ongoing to finalize a health deal and secure US access to the country’s cobalt and copper projects, but it remains unclear whether the two will be linked in the same agreement.

Garcia’s visit coincided with the US-East Africa Investment Forum in Nairobi, where further progress was made in negotiating the US-Kenya minerals deal. The US has committed to aiding Kenya in developing its capacity to process minerals locally, which Kenyan President William Ruto recently stated was a primary objective of the country’s development of its mining sector.

Read More: The Africa Report, Reuters [paywall], Semafor, Stepwise Risk Outlook

Geoeconomics

An investigation found Iran used oil revenue to finance imports from China while bypassing direct international bank transfers. Sources estimated that $2 billion to $2.5 billion passed through a special-purpose vehicle over the past year. Chinese oil buyers deposited funds with an obscure entity called ChuXin, which paid infrastructure contractors and channeled money to Chinese suppliers. Purchases included medicines, vehicles and communications equipment.

Iranian oil income can remain useful even if it never reaches an Iranian bank. Oil proceeds retained in China financed goods and infrastructure for Iran, reducing reliance on cross-border payments vulnerable to US scrutiny. These networks also extend beyond bilateral trade: Emirati companies provide shadow-banking and transshipment services for Chinese entities involved in Iran-related activity. Operation Economic Outcast may therefore struggle to close these channels while Washington remains reluctant to sanction major Chinese financial institutions, given the risk of financial disruption and retaliation from Beijing.

Read More: Reuters [paywall], The Wall Street Journal [paywall], Washington Institute

Disruptive Technology

Anthropic released a report Thursday detailing potential misuses of its AI models, including to develop suspected biological weapons. The company stated that it banned accounts that tried to evade AI models’ safeguards or appeared to be used for gain-of-function research, which is when scientists engineer new viruses to develop vaccines. Anthropic clarified that the intent of that research was unclear, so it took a preventative approach to mitigate potential catastrophic risk. Beyond potential biological weapons, Anthropic closed accounts suspected of using Claude to develop conventional weapons, like bombs and drones. These accounts were in Russia, China, and Yemen.

Read More: Forbes, New York Times [paywall], Anthropic

Energy

France and South Korea are deepening their cooperation in nuclear energy. Korea Hydro & Nuclear Power and French nuclear fuel cycle company Orano have signed an agreement for long-term cooperation in uranium enrichment. The agreement was signed in Paris during a visit by South Korean President Lee Jae Myung, and it expands on an earlier memorandum of understanding from April. Seoul and Paris also agreed to open a high-level dialogue on cooperation for the private sector in nuclear energy, and the governments also intend to sign further documents to deepen nuclear cooperation going forward.

Earlier this year, South Korea signed an agreement with Japan and the US to cooperate on small modular reactors (SMRs). The agreement focuses on speeding up the deployment of SMRs in third countries, specifically in the Indo-Pacific as an initial focus point. According to the US Department of State, the agreement should de-risk project development, enable economies of scale, and lead to increased private investment.

There is strong global interest in nuclear energy, especially in the context of the US war with Iran. Energy security has become one of the most important issues of the year, and disruptions in the Middle East have highlighted supply security vulnerabilities. Many countries are therefore looking for ways to build out domestic energy supplies, and Russia has been a key player in global nuclear energy partnerships through its state-owned nuclear company Rosatom.

Read More: World Nuclear News, US Department of State, The Diplomat [paywall], Stepwise Risk Outlook

Defense

Ukrainian defense technology companies are previewing new systems to counter Russia’s advances. At the MSPO defense industry show in Kielce, Poland, several Ukrainian producers of anti-drone capabilities are showing their solutions to Russia’s use of jet-powered drones. The companies are working to develop systems that can have top speeds of between 400 km/h and 700 km/h. Simultaneously, companies need to keep costs per system lower than the costs of the targets they are designed to intercept.

Russia has begun using jet-powered drones to overwhelm Ukraine’s air defense capacity. Ukraine had reportedly achieved around a 90% interception rate against Russia’s Geran drones, which Moscow acquired from Iran early in the war. Russia’s new drones are far harder to intercept than what Russia has used to attack Ukraine in the past, but Russia has only recently begun to apply them en masse.

Ukrainian companies are potentially preparing to begin selling their products abroad in the near future. Earlier this year in May, Kyiv announced that it was working on lifting the country’s ban on exporting defense products. A number of countries have shown interest in Ukrainian defense technology and Ukraine’s expertise in unmanned systems, and Ukraine has signed numerous deals for defense industrial cooperation with countries across Europe.

Read More: Defense News, Defense News, Ukrinform, New York Times [paywall]

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Karl Hopkins
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+1 202 261 0577
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+1 212 506 3979
acoonan@steptoe.com

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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 Thomas Goldstein and Ian Cameron examines the implications of the AfD's victory on German politics.

The AfD’s Victory in Saxony-Anhalt and the Outlook for German Politics, Trade and Economic Policy

By Thomas Goldstein and Ian Cameron

^{"Ulrich Siegmund Sprache Wahlkampf" by MatthiasK2007 is licensed under CC BY-SA 4.0.}

The populist right-wing Alternative for Germany (AfD) party won regional elections in Saxony-Anhalt on September 6, reverberating across Germany’s national politics and, by extension, across the EU’s politics. The Christian Democratic Union (CDU)-led government in Berlin has sustained a blow to its position, and the parties in the federal coalition will have to work to shore up their domestic political strength. This could lead to greater political instability in Berlin as the coalition parties are less willing to compromise their positions. This in turn could spill over into EU policymaking, undermining Berlin’s leadership role and increasing uncertainty at the EU level during a critical period for the bloc’s trade and industrial policy agendas.

In today’s full analysis:

• The Results of Saxony-Anhalt Regional Elections, Explained

• Saxony-Anhalt’s Impact on Berlin

• The Risks for Germany on the European Stage

Read the Full Report Here

Or listen to the full report here:

Listen to the news:

Europe

France and the UK are coordinating a new sanctions package on Israel due to increased settler violence in the West Bank. London and Paris are followed by Canada, Denmark, Finland, Iceland, Ireland, Norway, Poland, Portugal, Spain, and Sweden. Specifically, this bloc has pledged to introduce national- or EU-level restrictions on trade in goods with Israeli settlements in the West Bank. These actions are in opposition to “actions tantamount to the annexation of Palestinian land,” including recent plans to build 1,200 new homes in the E1 area of East Jerusalem. The new UK Foreign Secretary Ed Miliband stated that the British government “agrees that there is ethnic cleansing of Palestinians in areas of the West Bank” and criticized the previous Starmer government for not taking more expansive action.

The pathway to specific sanctions remains unclear because all the signatories but the UK and Canada must abide by EU customs law. The road to imposing EU trade restrictions is uphill and will meet resistance from several EU member states. Germany, a chief opponent, previously declared Israel’s security as a raison d’etat and has cultivated close defense industrial ties. Other countries, like Greece, have recently concluded new air defense cooperation agreements with Jerusalem, and others like Slovenia have ideological affinities with Israel’s government.

Read More: Yahoo!news, Le Monde, Politico

Middle East

Yemen’s Iran-backed Houthis seized the port of Mokha amid reignited fighting in Yemen. The city is a key Red Sea port at the southernmost tip of Houthi territory, previously mostly constrained to Yemen’s northwest, with much closer access to the southerly Bab al-Mandeb Strait. The group seized the key location in a swift ground offensive following days of escalated fighting with Saudi Arabia.

The seizure will expand the Houthis’ influence over the Red Sea. Control of Mokha will increase the Iran-backed proxy group’s ability to project power and control the flow of traffic through the Bab al-Mandeb Strait, tightening its blockade on Saudi exports and potentially expanding restrictions to other forms of trade. The group is expected to push further southward in the coming days in a bid for more direct control of the Bab al-Mandeb.

The fighting could trigger the first use of the Mecca Pact as Pakistani reportedly considering striking the Houthis at Saudi request. Turkish media reported yesterday that Pakistan is “likely” to carry out airstrikes against the Iran-backed rebels at Saudi Arabia’s request. The strikes would be a major test run for the trilateral mutual defense agreement between Pakistan, Saudi Arabia and Turkiye (which many analysts currently see as a paper tiger), as well as a significant escalation in the regionalization of the war. Open conflict with an Iranian proxy would also complicate Pakistan’s role as mediator in ongoing US-Iran negotiations.

Read More: New York Times [paywall], France 24, Reuters [paywall], Turkiye Today

Asia-Pacific

The Philippines on Tuesday unveiled its $34.4 billion AI infrastructure masterplan which the government seeks to mobilize through 2033. The plan seeks to increase the country’s installed AI data center capacity from 50 MW to 1.5 GW, as well as support deployment of high-capacity fiber networks, submarine cable systems and regional internet exchange points. Manila hopes these initiatives will boost GDP by 10%-12% via AI-driven productivity gains, new digital services and overall boosts to its workforce along the value chain.

The plan is understood to be Manila’s response to close a growing gap with Southeast Asian peers that have already attracted substantial hyperscaler investment, like Malaysia, Singapore, Indonesia and Thailand. Two US hyperscalers are reportedly assessing sites in the Philippines and seeking roughly 200 MW of capacity over five years, possibly providing an early test of whether Manila can convert its infrastructure ambitions into private-sector investment. The push also complements efforts to position the Philippines within the US-led AI and semiconductor supply chain through Pax Silica. The proposed 4,000-acre industrial hub in New Clark City is intended to support advanced manufacturing and other AI-related supply-chain activities.

Read More: Nikkei Asia [paywall], Inquirer.net, Business Mirror, US Embassy in the Philippines, Radio Free Asia

Americas

A recent poll indicated that in a potential runoff for Brazil’s October presidential elections, Flavio Bolsonaro would beat incumbent Luis Inacio Lula da Silva (Lula) by one point. While the estimate represents a technical tie, with the poll including a margin of error of two percentage points, it indicates a narrowing gap between Lula and Bolsonaro. Polls over the past few months had put Lula comfortably ahead of Bolsonaro by at least a few percentage points as the son of Jair Bolsonaro, who is serving a sentence for attempting a coup in 2023, was linked to the Banco Master scandal. The fallout from Banco Master, the biggest banking fraud scandal in Brazilian history, continues to unfold and upend Brazilian politics.

Brazil’s Supreme Court is currently facing a historic crisis, as multiple sitting justices have been entangled in the Banco Master affair. Most recently, Alexandre de Moraes, the justice who oversaw the conviction of Jair Bolsonaro, was recently tied to Daniel Vorcaro, the disgraced banker who formerly led Banco Master and was arrested at Sao Paolo airport last November. Vorcaro reportedly asked Moraes for advice while he was being investigated, including whether he should attempt to flee the country. Bolsonaro’s campaign has jumped on the controversy, seeking to portray Lula and Moraes as two sides of the same coin. As Lula’s own son faces corruption allegations, the recent developments have increased uncertainty around the election outcome. Brazilians will go to the polls on October 4 for the first round of voting.

Read More: Reuters [paywall], Valor International, O Globo [Portuguese], AS/COA

Geoeconomics

US producer inflation accelerated moderately in August. The Producer Price Index rose 0.4% from July, when it increased 0.1%, while annual inflation climbed from 4.8% to 5.4%. Goods prices increased 1.1%, with energy accounting for more than three-quarters of the advance: energy prices rose 4.2%, including a 24.1% jump in diesel. Services prices increased just 0.1%, although transportation and warehousing costs rose 2.3%. Underlying inflation was steadier: the measure excluding food, energy and trade services increased 0.3%, down from 0.4% in July, while its annual rate remained at 4.7%.

The PPI numbers, in addition to Friday’s CPI report, will be pivotal for the Federal Reserve’s September 15–16 interest-rate decision. Economists expect August consumer prices to rise 0.4% overall and 0.2% excluding food and energy. There is also disagreement about what the Fed’s decision will be: about 70% of economists in Reuters’ September 4–9 poll expect the Fed to hold its benchmark rate at 3.50%–3.75% next week, down from 90% in August, while FedWatch puts the probability of a 25-bps hike at about 70%. Financial markets have nevertheless priced in two increases by March, underscoring uncertainty about the path ahead. The meeting’s updated economic and interest-rate projections will also indicate whether officials expect persistent inflation to require multiple increases.

Read More: Bureau of Labor Statistics, Reuters [paywall], Atlantic Council

Disruptive Technology

Anthropic declined to pre-release an AI model in development, Mythos 5.1, with the UK AI Security Institute, instead sharing it only with American evaluators, including the Trump administration. Anthropic did not clarify its decision to prioritize American vetting. Some UK officials fear that the Trump administration has pushed Anthropic to pre-release powerful models potentially sensitive to national cybersecurity only with the US, which can intensify protectionism around the technology. In June, the US Commerce Department issued far-reaching export controls on Anthropic’s Fable and Mythos models after detecting a potential jailbreak method to bypass safety guardrails. If AI protectionism is here to stay, European partners may further distrust dependence on US technology services.

Read More: IT PRO, Financial Times [paywall]

Energy

Natural gas prices in Europe have reached their highest level since January 2023. European natural gas was trading at over €80 a megawatt-hour on September 9, the first time that prices have reached that level since the energy shock triggered by Russia’s invasion of Ukraine in 2022. This still leaves current prices well below their peak level from 2022, but they have doubled since the US war with Iran began. However, if prices stay at these levels, that will worsen Europe’s already troubled economic outlook in the near term.

The surge in pricing occurred against the background of a potential Ukrainian strike on Russian gas production facilities. Ukraine reportedly struck Russia’s Yamal region, which is a major hub for Russia’s gas industry. While Russian pipeline gas to Europe has largely stopped flowing, Europe still relies on Russia’s Yamal LNG project for around 5% of its gas requirements. Any disruption would compound supply issues from the Middle East.

Europe is also facing low gas storage levels heading into winter. The EU will likely enter the winter months with its lowest gas storage levels in the past 15 years. Storage levels also differ across the EU. For example, both Germany and the Netherlands have only filled their storage capacity to around 50%.

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

Defense

Ukraine has signed a long-term contract for 1,000 Patriot interceptors. During a meeting of the Ukraine Defense Contact Group (the Ramstein format), Ukraine’s defense minister Yevhen Khmara announced that Kyiv is signing contracts with allies for Patriot missile deliveries. These contracts will be funded with the EU’s loan to Kyiv. The EU recently allowed Ukraine to use €3.2 billion ($3.7 billion) from its loan for purchasing Patriots.

The decision by the EU to fund Ukraine’s Patriot purchases bends its own rules. The requirements of the EU’s loan to Kyiv, the Ukraine Support Loan, require that funds be directed to suppliers in the EU or the European Economic Area. However, because Patriots are so critical for Ukraine’s war effort, Kyiv is allowed to use EU funds for them, although Kyiv must ask for an exemption each time.

Kyiv will likely face a long wait for deliveries to begin. Due to its immediate needs and the likelihood that deliveries will only begin in the coming years based on new contracts, Kyiv is also asking its partners to provide interceptors. Germany has already agreed to give Ukraine additional PAC-2 interceptors from its stocks.

Read More: New Voice of Ukraine, Kyiv Post, Kyiv Independent

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Karl Hopkins
Partner
+1 202 429 6499
khopkins@steptoe.com

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+1 202 261 0577
mmahle@steptoe.com

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Senior Intelligence Analyst
+1 212 506 3979
acoonan@steptoe.com

Samuel Bloebaum
Senior Due Diligence Analyst
+1 602 410 6240
sbloebaum@steptoe.com

Zayna Dembinski
Analyst
+1 202 778 3567
zdembinski@steptoe.com

Thomas Goldstein
Analyst
+1 202 862 6735
tgoldstein@steptoe.com

Ian Cameron
Analyst
+1 202 327 6908
icameron@steptoe.com

Elton Smole
Analyst
+1 202 261 0556
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Carter Spahn
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Chris Dantes
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+1 202 327 6904
cdantes@steptoe.com

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 Russia's role surrounding the Niger coup attempt.

Niger Coup Attempt: Russia’s Role Highlights Evolving Defense Partnerships in the Sahel

By Chris Dantes

^{“Abdourahamane Tiani at the 2025 National Assembly opening ceremony” by Sule Barma is marked with CC PDM 1.0.}

On August 28-29, military officers and their units attacked Air Base 101 and other strategic locations in Niamey in a failed attempt to overthrow General Abdourahamane Tiani, who himself seized power in a coup d’état in 2023. The attack was suppressed largely by Russia’s Africa Corps, a paramilitary group that replaced the Wagner Group, signaling both the limited capabilities of the Nigerien junta and Moscow’s deepening role in protecting allied Sahelian regimes. This security partnership exacerbates internal power struggles and could empower jihadist insurgents, fomenting greater instability. Despite major tactical defeats earlier this year in Mali, the Africa Corps’ support in defeating Niger’s latest coup attempt demonstrated Russia’s continued value as a security partner on the continent, support which will continue to pose a substantial obstacle to US efforts to counter Russian influence in the region. The replacement of US influence with actors unwilling or unable to address the root causes of political instability in the Alliance of Sahel States (AES) is likely to obstruct key elements of the Trump administration’s Africa strategy, particularly efforts to counter terrorism and secure critical mineral projects.

In today’s full analysis:

• Tiani’s Most Significant Challenge to Power

• Russia’s Africa Corps: Leveraging Regime Protection to Maintain Influence

• The AES: An Alliance of Non-Credible Security Commitments

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Europe

President Trump called Russian President Vladimir Putin for one hour yesterday to facilitate momentum on restarting peace talks. The high-level conversation follows shuttle diplomacy from presidential envoys Steve Witkoff and Jared Kushner to Moscow and Kyiv last week, as well as an earlier visit from CIA chief John Ratcliffe, who allegedly shared a grim assessment of the war to convince Russian officials to reconvene at the negotiating table. Kyiv has indicated that talks could begin again as early as this month, but it is early to tell. As it stands, neither side appears willing to concede their objectives, and both have reason to believe it could gain a qualitative edge through the fight.

US mediation of the Russia-Ukraine war has gone quiet since the end of 2025. One explanation is that earlier attempts at diplomacy failed to make a breakthrough toward a political settlement. Another is that US attention has also been diverted to other foreign policy items, namely the Iran war, which continues at a lower intensity. The US is unlikely to allocate significant attention to mediation unless Kyiv and Moscow make overtures themselves, which could require a change on the battlefield. For Kyiv, this likely means targeting Russian logistics and energy exports; for Moscow, this may mean leveraging its attritional advantage and targeting Ukraine’s critical infrastructure.

Read More: South China Morning Post, Wall Street Journal [paywall], Financial Times [paywall]

Middle East

An Israeli newspaper reported that the UAE warned Prime Minister Netanyahu ahead of Hamas’ October 7 attack. The report alleges that Emirati President Mohammed bin Zayed spoke with Netanyahu to warn him that Emirati intelligence indicated that Hamas was planning a major operation in the coming days. The UAE declined to comment on the report, saying that intelligence sharing will remain private.

It is unclear if the report is true – but either way, it could spell significant electoral trouble for Netanyahu. The Israeli intelligence apparatus’ failure to predict and avert the October 7 attack is a major public opinion lightning rod in the country, with intelligence failures largely blamed on Netanyahu and military figures he has since dismissed. Furthering the perception that Netanyahu allowed the attack to happen could spell trouble in an election in which he is already struggling to unite the right and avoid a fractious coalition-building period.

The leak and the response also underlie growing UAE-Netanyahu tension. The UAE has remained a relatively staunch Israeli ally even as the war in Gaza has ground on, decimating Arab public opinion around Israel and the Abraham Accords. But it has increasingly criticized Netanyahu and his far-right government, likely hoping that a new prime minister would be more amenable to scaling back wars in Gaza and Lebanon and making progress on the Gaza peace process.

Read More: Associated Press, France 24, NPR, NPR

Asia-Pacific

North Korea has expanded its ground transportation links with both Russia and China, deepening its strategic and economic integration with its two major partners. On Monday, Pyongyang and Moscow opened their first road bridge across the Tumen River, connecting North Korea’s Rason region to Russia’s federal road network and broader transportation corridor. The bridge is intended to facilitate trade, tourism and people-to-people exchanges, and it also gives Moscow and Pyongyang another channel for logistical cooperation amid their expanding military ties following North Korea’s provision of troops and weapons to support Russia’s war in Ukraine.

North Korea is also nearing completion of a long-delayed road bridge with China, potentially expanding their trading capacity. Reporting today found Pyongyang is rapidly completing facilities for the New Yalu River Bridge, which connects Dandong with Sinuiju and could open soon. China completed its side of the bridge in 2014, but the project remained unused for more than a decade amid deteriorating bilateral ties, disagreements over the infrastructure on the North Korean side, and Pyongyang’s nuclear testing. Its opening would relieve pressure on aging bridges and could significantly increase cross-border cargo capacity. The infrastructure developments come as Chinese President Xi and Russian President Putin reaffirmed strong strategic ties with Pyongyang in congratulatory messages for North Korea’s September 9 founding anniversary, underscoring Moscow and Beijing’s efforts to reinvigorate relations.

Read More: Bloomberg [paywall], Reuters [paywall], Chosun, GIS Reports

Americas

Secretary of State Marco Rubio is visiting Colombia, Ecuador and Peru this week to strengthen economic and security ties. The three countries in his itinerary are led by right-wing leaders, two of which were elected this year. Expanding US influence in Latin America is a priority for the Trump administration, especially in the realm of combating organized crime through the Americas Counter Cartel Coalition (ACCC), or the “Shield of the Americas.” As criminal organizations across the region are increasingly using advanced technology, including drones, some Latin American leaders are seeking increased military support from Washington.

Rubio met with Colombian President Abelardo de la Espriella in Barranquilla on Tuesday. De la Espriella, who was recently elected with a mandate to crack down on crime in Colombia, pledged closer relations with the US. He also indicated that he would seek US support on security efforts through military operations, radar and drone technology. Colombia is also seeking relief from US tariffs that took effect in July at 12.5%. De la Espriella’s first days in office were marked by a 7.4-magnitude earthquake in the western region of Colombia. In addition to earthquake recovery efforts, De la Espriella seeks to implement an “iron fist” approach to fighting criminal groups in rural areas, including through aerial fumigation of coca crops.

Read more: Reuters [paywall], NPR, Al Jazeera

Africa

Zimbabwe has banned the export of antimony and tungsten ores, reflecting a broader push by African governments to expand domestic mineral processing and capture more value from critical resources. Both minerals are strategically important for defense and other advanced technologies. Zimbabwe’s decision follows Kenya’s announcement that it plans to process several minerals locally, including iron, graphite, and titanium. These restrictions could further complicate efforts by the US and others to reduce supply-chain vulnerabilities, as African governments may impose additional requirements on foreign mining companies to process minerals locally before export.

Read More: Bloomberg [paywall], Business Insider Africa

Geoeconomics

Eighteen maritime nations are warning that the foundations of global shipping are being undermined. In a September 8 statement, the Consultative Shipping Group, whose members include Japan, Singapore, Germany and the UK, argued that repeated disruptions now represent a structural change in how global trade operates. Conflicts in the Middle East and Ukraine, drought at the Panama Canal and discriminatory trade measures are making access to shipping routes less predictable. Meanwhile, hundreds of vessels evading sanctions operate outside standard arrangements, creating a parallel shipping system that weakens confidence and fair competition. The group called for consistent enforcement of existing international maritime rules and greater cooperation between governments, warning that shipping routes are increasingly becoming “instruments of leverage and risk.”

Higher costs and less reliable deliveries persist beyond individual crises. Longer voyages consume more fuel and keep vessels occupied for longer, reducing available capacity, while dangerous routes attract higher insurance premiums. Even reopened waterways may provide limited immediate relief: vessels have been reassigned, alternative routes booked and insurers remain concerned about renewed disruption.

Read More: Financial Times [paywall], The Wall Street Journal [paywall], Atlantic Council

Disruptive Technology

An AI researcher, Jacob Coxon, resigned from Anthropic yesterday and warned that the race to self-improving superintelligence is disincentivizing safety controls and the prevention of extinction-scale risks. He suggested that the more senior the researcher at any firm, the more they privately believe that the AI race is “gambling with” human lives. Evan Hubinger, Anthropic’s alignment science lead, clarified that he personally thinks that there is over a 10% risk that AI kills all humans within the next ten years. Coxon’s resignation follows recent calls from executives at frontier American AI developers to globally coordinate a slowdown in AI development to allow more time to perfect AI safety frameworks.

Read More: Axios, Newsweek, Politico

Energy

Moscow is opening exports from a major new oil development project. Russia has started to export oil out of its Vostok Oil project, which is the country’s largest new oil development for the last several decades. The launch of exports from the project represents a significant expansion in Russia’s Arctic energy infrastructure, and it is also an accomplishment of Russia’s ability to ride out Western sanctions aimed at halting the project. The project will be a boost to Russia’s efforts to develop the Northern Sea Route along its Arctic coast as a major energy transit and shipping route. Rosneft, Russia’s state oil company, hopes to ship 30 million tons of oil per year by the end of 2027, with potential to reach up to 100 million tons per year.

Russia is also redirecting its oil flows to Asia, specifically to China. According to Deputy Prime Minister Alexander Novak, during the first seven months of 2027, Moscow increased its exports of oil to China by 25%, for the first time becoming China’s largest supplier of oil.

Read More: High North News, RIA Novosti [in Russian]

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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, Kuangqi Zhong, Andy Xu Sofia, Jake Fitzpatrick, Carter Spahn, Chris Dantes

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The Lede

US Oil Deal and General Licenses Pave the Way for Multinationals to Expand Venezuela Operations

^{"Oil Pump Jack" by Paul Lowry is licensed under CC BY 2.0.}

In recent weeks, OFAC has issued a series of Venezuela-related General Licenses (GLs) and amendments that have expanded opportunities for new oil and gas-related investment in Venezuela. OFAC amended multiple oil-sector General Licenses removing the requirement for parties using those licenses to include a choice of law provision in contracts with the Government of Venezuela. Previously, certain GLs required that the terms of contracts entered into under those GLs be construed in accordance with the laws of a state or other jurisdiction within the US. The GLs issued over the course of 2026 have cleared the path for the Trump administration’s joint venture with North American Blue Energy Partners (NABEP), which gives the US control of over 65 billion barrels of Venezuela’s proven oil reserves. Concurrently, US oil majors and international firms are moving to launch or expand operations in Venezuela’s oil sector to capitalize on the newly accessible and abundant crude reserves.

On August 28, the White House announced the joint venture with NABEP, which it described as “the biggest oil deal in world history.” The White House explicitly stated that the agreement is strictly with NABEP, not with the interim Venezuelan government. However, the interim Venezuelan authorities did grant NABEP 100-year concessions for the 65 billion barrels across 17 oil fields. NABEP granted the Pentagon’s Office of Strategic Capital a 35% equity stake and gave the US State Department the right to purchase 20% of the off-take from NABEP fields at the cost of production. The State Department also has right of first refusal for the remaining 80% of the oil produced. The US-NABEP venture is governed by US law and is estimated to be the world’s second-largest corporate holder of proven oil reserves, holding around one-fifth of Venezuela’s 303 billion barrels of proven crude reserves.

The Trump administration has sought to open the door for more companies to capitalize on developing Venezuela’s natural resources. US oil majors initially hesitated to move back into the country following the US capture of Nicolas Maduro in January, but last week some US firms signaled plans to invest in Venezuela. International energy firms have also recently signed major deals in Caracas. India’s ONGC and Colombia’s GeoPark are on track to make deals as well.

In addition to oil, the US is supporting the expansion of Venezuela’s gold mining sector, a lucrative industry holding the fifth-largest reserves but long dominated by criminal organizations (see Sam Bloebaum’s deep dive). US Interior Secretary Doug Burgum visited Venezuela in March alongside US mining sector officials from more than two dozen companies. Burgum pledged security assurances for mining companies interested in investing in Venezuela, saying that Venezuela’s government would “ensure their security.” OFAC has issued GLs authorizing certain mining activities in the mineral sector, including certain transactions with the Venezuelan state-owned gold mining company Minerven. International firms from Canada, Switzerland and Qatar have indicated plans to move into Venezuela’s gold mining sector; however, armed groups like the Colombian ELN and ex-FARC dissident factions that currently control the mines pose a major risk that has kept more companies from rushing into the sector.

Part of the US strategy in facilitating new investments in Venezuela is an effort to displace China’s inroads in South America. Many of the oil fields that will be run by the US joint venture with NABEP were formerly Chinese-owned. Before the US capture of Maduro, China purchased the majority of Venezuela’s oil, accounting for more than half of Venezuela’s government revenue. Venezuela, the largest recipient of Chinese state-backed lending in Latin America, still owes China approximately $10 billion in oil-backed loans, which China is now increasingly unlikely to recoup. China has also invested heavily in mineral extraction across Latin America, and Chinese firms have a strong foothold in Venezuela’s telecommunications sector. Recent OFAC actions now aim to clear the way for US companies to invest in Venezuelan telecoms while explicitly blocking Chinese firms.

The US-backed development of Venezuela’s oil, gold, and telecoms sectors presents major opportunities for firms, but potential downside risks are numerous. The Trump administration is seeking to insulate investments from the interim Venezuelan government, whose future is uncertain. The government of Delcy Rodriguez is in talks with the opposition, ostensibly taking steps toward holding elections. However, a democratically elected Venezuelan government may be unwilling to uphold the concession of Venezuela’s oil rights, which conflicts with the 1999 constitution, and the US may be incentivized to preserve Rodriguez’s hold on power. It is also unclear whether a future administration in the US would be willing to preserve the Trump administration’s arrangement. The oil deal with NABEP was in part an attempt to clear the path for other US oil titans to reenter Venezuela, and Trump has continued to push major firms to reinvest, but some US firms see the state-backed competitor as a risk. Discussions are ongoing as US firms, some of which are still owed billions of dollars after previously exiting Venezuela, continue to weigh the risks of reentering against opportunities to negotiate favorable contract terms in the current political environment.

US Developments

State Department Sanctions Six Targets in Cuban Financial, Metals and Mining, and Energy Sectors

On September 3, the State Department designated five entities and one individual related to Cuba’s financial services, metals and mining, and energy sectors. These actions were pursuant to Executive Order (“E.O.”) 14404, “Imposing Sanctions on Those Responsible for Repression in Cuba and for Threats to United States National Security and Foreign Policy.”

The designated entities include Banco Exterior de Cuba, a state-owned financial institution; two subsidiaries of the state-owned petroleum company, Union Cuba Petroleo (“CUPET”); Empresa de Servicios Comandante René Ramos Latour, a state-owned mining support services company; and Empresa Importadora y Abastecedora del Níquel, a state-owned nickel industry support services company. Additionally, the State Department designated Fidel Ernesto Castro Calis, who is the grandson of Raúl Castro.

Alongside the sanctions, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued Cuba General License (“GL”) 4A under E.O. 14404. GL 4A authorizes transactions that are ordinarily incident and necessary to the official activities of third-country diplomatic and consular missions in Cuba. GL 4A broadens the authorization previously granted by GL 4 by removing a prior restriction on certain financial transfers to blocked persons.

OFAC Sanctions Turkish Bank as Part of Operation Economic Outcast

On September 4, OFAC announced sanctions against Türkiye-based financial institution Golden Global Yatirim Bankasi Anonim Sirketi (“Golden Global Bank”) and its subsidiaries for allegedly facilitating tens of millions of dollars’ worth of transactions for Iran’s Islamic Revolutionary Guard Corps-Qods Force (“IRGC-QF”). According to OFAC, Golden Global Bank was established for the purpose of providing correspondent banking services to Iranian financial institutions in order to enable China’s purchases of Iranian oil.

These sanctions are part of the Trump Administration’s new “Operation Economic Outcast,” which is a broad economic pressure campaign targeted at Iran. We covered the initiative and its implications in a recent blog post.

OFAC Generally Authorizes Venezuelan Coal Activities

On September 2, OFAC expanded the scope of three Venezuelan GLs to include authorizations for transactions ordinarily incident and necessary to certain activities relating to Venezuelan-origin coal, including those involving the Venezuelan state-owned coal company Carbones del Zulia (“Carbozulia”). The prior versions of these GLs only authorized activities related to Venezuelan-origin minerals. In particular, OFAC issued the following amended GLs:

· GL 51D, which authorizes transactions ordinarily incident and necessary to the exportation, reexportation, sale, resale, supply, storage, purchase, delivery, or transportation of Venezuelan-origin coal or minerals;

· GL 54C, which authorizes transactions ordinarily incident and necessary to the provision from the United States or by a U.S. person of goods, technology, software, or services for the exploration, development, mining, extraction, processing, refining, or production of coal or minerals in Venezuela; and

· GL 55A, which authorizes transactions that are related to the negotiation of and entry into contingent contracts for new investment in the coal or minerals sectors of Venezuela.

OFAC Issues Reminder to File the 2026 Annual Report of Blocked Property

On September 2, OFAC issued a reminder that U.S. persons holding blocked property as of June 30, 2026, must submit an Annual Report of Blocked Property (“ARBP”) by September 30, 2026. Failure to file a complete report by the deadline may constitute a violation of OFAC’s Reporting, Procedures, and Penalties Regulations and could result in an enforcement referral. Persons filing the 2026 ARBP must use spreadsheet form TD-F 90-22.50 and submit the completed form through the OFAC Reporting System (“ORS”), which OFAC adopted as its primary reporting mechanism two years ago. First-time users of ORS will need to contact OFAC to request registration instructions. For additional information, please review OFAC’s Guidance on Filing the 2026 Annual Report of Blocked Property.

US Announces New Sanctions Under “Operation Economic Outcast” Targeting Iran and Expanding Secondary Sanctions Risks

Following President Donald Trump’s announcement that the US will conduct the “most crushing economic operation ever taken against any country” against Iran, the Department of the Treasury launched “Operation Economic Outcast,” a broad economic pressure campaign targeting Iran and its supporters. According to the Treasury Department, “[e]very country will be given a defined timeline to shut down the Iran-related activity” that Treasury has identified and “[i]f they fail to act, Treasury will act.” The Treasury Department’s announcement comes amid ongoing negotiations between Iran and Oman on the joint management of the Strait of Hormuz.

As part of the operation, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) authorized secondary sanctions targeting the Iranian digital assets, technology, gold, aviation, and shipping sectors by issuing new determinations pursuant to Executive Order (“E.O.”) 13902. E.O. 13902 targets specified sectors of the Iranian economy and those conducting significant transactions involving those sectors. The determinations authorize the imposition of sanctions pursuant to E.O. 13902 on any person, regardless of location, that operates in these sectors or knowingly engages in a significant transaction involving significant goods or services used in these sectors. The measures expand sanctions exposure for non-US persons and strengthen OFAC’s authority to address third-country support for Iran’s economy.

OFAC also announced the indefinite suspension of five Iran-related general licenses (“GLs”) that had previously authorized certain cross-cultural, educational, and personal activities involving Iran. These include the sending of personal remittances to or from Iran, services related to conferences in the United States or third countries involving Iranian participants, and academic exchanges, educational services, and certain research activities involving US and Iranian educational institutions. We discuss the suspension in more detail in our recent blog post. Notably, OFAC issued new Iran GL BB, which authorizes transactions ordinarily incident and necessary to the wind down of any transaction previously authorized under the five suspended GLs through 12:01 am EDT on September 8, 2026.

Additionally, OFAC designated nearly 60 entities, individuals, and vessels allegedly involved in supporting Iran’s defense activities, military procurement efforts, cyber operations, and petroleum and petrochemical revenue generation. OFAC also issued Iran GL AA, which authorizes transactions ordinarily incident and necessary to the wind down of any transaction or the maintenance of operations, contracts, and other agreements in effect as of August 24, 2026 involving La Nivernaise De Raffinage SAS (“LNR”), a newly designated France-based cooking oil refinery, and any entity in which it owns, directly or indirectly, a 50 percent or greater interest, through 12:01 am EDT on October 23, 2026.

OFAC issued an updated alert warning that US and non-US persons face significant sanctions risks if they make payments to, receive services from, or otherwise engage with the Iranian government or designated entities seeking to control passage through the Strait of Hormuz. The alert specifically identifies the Persian Gulf Strait Authority, Persian Gulf Marine Insurance Company, and HormuzSafe Marine Services Authority, which OFAC designated for supporting the IRGC or operating in Iran’s financial sector. OFAC also warned of secondary sanctions risks for foreign parties and urged maritime service providers to conduct enhanced due diligence on vessels transiting the Strait.

The August 24 measures come just weeks after the United States and Iran agreed to a June 2026 Memorandum of Understanding that contemplated a potential pathway toward broader sanctions relief, and a week after the MOU formally lapsed. While the long-term direction of US policy toward Iran remains uncertain, Operation Economic Outcast underscores that US and non-US companies should continue to treat Iran sanctions compliance as a rapidly evolving risk area.

US Intends to Revoke Egyptian Bank’s UAE Branches Access to Correspondent Banking

On August 28, under “Operation Economic Outcast,” the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) proposed a rule that would revoke Banque Misr UAE’s correspondent banking access to US financial institutions. Banque Misr UAE reportedly consists of the Emirati branches of Banque Misr, Egypt’s second-largest state-owned bank. According to FinCEN, Banque Misr UAE serves as a “critical access node” through which the Iranian government accesses US dollars. The Central Bank of Egypt told reporters that the US measures only affected Banque Misr’s UAE branches and did not apply to any other Egyptian branches.

On the same day, OFAC designated a Hong Kong-based entity that allegedly facilitated sanctioned Iranian persons’ access to the international financial system, along with an Iranian national.

US Grants Additional Sanctions and Export Controls Relief to Syria

On August 24, the Department of State rescinded Syria’s designation as a State Sponsor of Terrorism and removed Hay’at Tahrir al-Sham (“HTS”), a political and paramilitary group currently in control of Syria’s government, from the list of Specially Designated Global Terrorists (“SDGT”), and from the List of Specially Designated Nationals and Blocked Persons (“SDN List”). The changes build on previous US actions, including the July 2025 removal of HTS from the Foreign Terrorist Organization (“FTO”) list. The State, Treasury, and Commerce Departments issued an updated Tri-Seal Advisory reflecting these developments.

As a result of the latest actions, HTS is no longer subject to US terrorism sanctions under E.O. 13224, and US persons generally no longer need OFAC authorization to engage in transactions involving HTS, provided those activities do not involve other sanctioned parties or prohibited conduct. Following HTS’s delisting, OFAC revoked Syria GL 25, which had authorized certain transactions involving the Syrian government, and updated related guidance and FAQs.

The rescission of Syria’s designation has important export-control implications because State Sponsor of Terrorism status has served as a basis for certain export restrictions affecting Syria. However, significant US export controls remain in place until the Export Administration Regulations and International Traffic in Arms Regulations are amended. A license or applicable exception is still required for exports or reexports of items subject to US jurisdiction to Syria, except for food and medicine designated EAR99. Thus, Syria remains a jurisdiction requiring an elevated export controls compliance posture. We discuss the implications of the August 24 actions, including export controls, anti-boycott, and sovereign immunity considerations related to Syria’s delisting in more detail in our recent blog post.

Finally, OFAC also designated two former HTS affiliates who it alleges continue to support al-Qa’ida-linked entities through financial and logistical support. The US government stated that these targeted sanctions demonstrate its continued focus on holding terrorist actors accountable while easing restrictions designed to support Syria’s broader political and economic stabilization.

US Sanctions Target Alleged Terrorist Support Networks

On August 26, OFAC designated three organizations and two individuals for allegedly supporting terrorist activity and extremist networks. The action targeted Autistici Inventati, an Italy-based entity, for allegedly providing digital infrastructure, hosting services, encrypted communications, and other technological support to violent far-left extremist groups, including the Kurdistan Workers’ Party, which is designated as an FTO. Simultaneously, OFAC issued Counter Terrorism GL 36, which authorizes transactions ordinarily incident and necessary to the wind down of dealings involving Autistici Inventati and any entity in which it owns, directly or indirectly, a 50% or greater interest through 12:01 am EDT on September 25, 2026.

Additionally, OFAC sanctioned Palestine Action, a United Kingdom (“UK”)-based organization proscribed as a terrorist group by the UK government in July 2025. OFAC designated Palestine Action alleging that the organization supported acts of terrorism, including acts that have physically injured UK law enforcement personnel, as well as acts intended to intimidate lawful commercial enterprises and coerce the UK Government.

OFAC also sanctioned Masar Badil, a transnational organization that OFAC alleges operates as a front for the Samidoun Palestinian Prisoner Solidarity Network. Samidoun was jointly sanctioned by the United States and Canada on October 15, 2024 for being a front organization that is owned, controlled, or directed by the Popular Front for the Liberation of Palestine, itself a designated FTO since 1997. Alongside this action, OFAC also sanctioned two members of Masar Badil for their alleged involvement in supporting the organization.

OFAC Amends Multiple Venezuela-related GLs

On August 27, OFAC issued eight amended Venezuela-related GLs:

· GL 46D, “Authorizing Certain Activities Involving Venezuelan-Origin Oil or Petrochemical Products;”

· GL 47B, “Authorizing the Sale of US-Origin Diluents to Venezuela;”

· GL 48C, “Authorizing the Supply of Certain Items and Services to Venezuela;”

· GL 50C, “Authorizing Transactions Related to Oil or Gas Sector Operations in Venezuela of Certain Entities;”

· GL 51C, “Authorizing Certain Activities Involving Venezuelan-Origin Minerals, Including Gold;”

· GL 52B, “Authorizing Certain Transactions Involving Petróleos de Venezuela, S.A.;”

· GL 54B, “Authorizing the Supply of Certain Items and Services for Minerals Operations in Venezuela;”

· GL 61A, “Authorizing the Supply of Certain Items and Services to Venezuela Related to Telecommunications.”

A party seeking to enter into a contract authorized by these Venezuela GLs with the Government of Venezuela (GOV) or certain other blocked persons (e.g., Petróleos de Venezuela, S.A. in GL 52B or CVG Compañía General de Minería de Venezuela CA in GL 51C) is no longer required to include a choice of law provision in the contract. OFAC amended these GLs to remove the requirement that the terms of such contracts be “construed and interpreted in accordance with the laws of a state or other jurisdiction within the United States.” OFAC stated that it had amended these GLs in response to investment-related reforms made by the GOV since January 2026. These GLs still require dispute resolution proceedings to occur in the United States, United Kingdom, France, or Singapore.

OFAC Extends Authorization for Certain Diamond Imports

On August 26, OFAC issued Russia-related GL 104B, “Authorizing Transactions Related to Imports of Certain Diamonds Prohibited by Executive Order 14068.” GL 104B extends authorization for the import of non-industrial diamonds that were substantially transformed outside Russia. GL 104B replaces GL 104A, which was scheduled to expire September 1, 2026, and extends the authorization through 12:01 am EDT on September 1, 2027.

UK Developments

UK Issues Movement Direction to Russian Cargo Vessel SINEGORSK

The UK Government has published details of the use of its transport sanctions powers against the Russian-flagged, registered and operated cargo vessel, SINEGORSK. According to the UK Government notice, on January 27, 2026, the vessel informed HM Coastguard that it intended to anchor in sheltered UK waters to repair a small hull defect during adverse weather. After SINEGORSK anchored at Blue Bay Anchorage within UK waters, the Centre for Transport Sanctions investigated and determined that the vessel fell within the scope of the Russia (Sanctions) (EU Exit) Regulations 2019 because it was Russian-flagged and registered and operated by a Russian-incorporated company.

On January 28, 2026, the Secretary of State for Transport exercised the discretionary power under regulation 57C of the Russia Regulations to issue a movement direction, which was served by HM Coastguard. SINEGORSK complied with the direction, leaving UK internal waters and subsequently the UK’s territorial sea. The action illustrates the practical application of the UK’s shipping sanctions, which are intended to restrict Russia’s ability to use its maritime sector to support or finance the war in Ukraine and include powers to deny in-scope vessels access to UK ports and issue movement and detention directions.

OTSI Publishes First Annual Review Covering 2025–26

The Office of Trade Sanctions Implementation (OTSI) has published its 2025–26 Annual Review, alongside an accompanying blog reflecting on its first full year of activity across compliance, licensing and enforcement (the “Review”). According to the Review, OTSI received 178 reports or referrals of potential trade sanctions breaches, with 111 (62%) originating from sectors subject to mandatory reporting obligations and 23 referrals from other UK government departments. OTSI closed 104 enforcement cases, including 41 where no breach was identified and 40 that were referred to HMRC, including for potential criminal enforcement or because the conduct predated OTSI’s enforcement powers. Around 6% of cases opened were initiated proactively, with OTSI indicating that it intends to significantly increase proactive and intelligence-led investigations as its intelligence capabilities develop.

The Review identifies implementation and enforcement of the Russia sanctions regime as a central focus and notes that a number of active investigations are expected to reach decision points during 2026–27. It also highlights the continued expansion of OTSI’s remit, including the introduction of Sanctions End-Use Controls in May 2026 to address circumvention and the expansion of its licensing responsibilities in April to cover exports of sanctioned goods and related ancillary services. Alongside enforcement, OTSI continues to emphasise compliance support through guidance, stakeholder engagement and outreach, including forthcoming sanctions workshops aimed particularly at SMEs navigating trade sanctions requirements.

UK to Double Maximum OFSI Penalty for Financial Sanctions Breaches

The UK Chancellor has announced that the maximum monetary penalty available to OFSI for financial sanctions breaches will be increased from 50% to 100% of the estimated value of the funds or economic resources involved in a breach. Under section 146 of the Policing and Crime Act 2017, OFSI can currently impose a penalty of up to the greater of £1 million or 50% of the estimated value of the breach; the announced change would increase the percentage-based limb to 100%, significantly increasing potential exposure for high-value breaches. According to a UK Government press release, HM Treasury stated that the measure is intended to strengthen the deterrent effect of the UK sanctions regime and drive stronger enforcement. The announcement signals a further tightening of the UK’s financial sanctions enforcement framework and reinforces the importance for businesses of maintaining effective sanctions compliance, screening and escalation controls.

NCA Issues Industry-wide Alert on A7 Russia Sanctions Evasion Network

The National Crime Agency (“NCA”) and National Economic Crime Centre have issued an industry-wide “flash alert” on the A7 sanctions evasion network, developed with OFSI, the FCDO and financial sector partners through the Joint Money Laundering Intelligence Taskforce. A7, established in 2024 by Ilan Shor and backed by sanctioned Russian state bank PSB and VEB.RF, is described as a cross-border payment mechanism used to circumvent sanctions, and claims to have settled more than $86 billion in its first year. The alert identifies methods used by the network to move value internationally, including overseas liquidity pools, globally registered shell companies or “sub-agents” operating local bank accounts, false invoices, VPNs used to disguise the location of operators, and promissory notes (“veksels”) that enable payments without correspondent bank transfers leaving Russia. OFSI has identified transactions between A7-linked shell companies and UK-incorporated beneficiaries, and the alert provides seven red-flag indicators for firms to assess against their existing AML and sanctions controls. The alert is particularly significant as it has been distributed across the regulated sector, underscoring expectations that firms incorporate emerging sanctions-evasion typologies into transaction monitoring and due diligence.

EU Developments

EU Considers Additional Russia Sanctions Listings Following Attempted Leipzig Drone Attack

On September 2, the German government announced that it had concluded Russia was responsible for the attempted drone attack at Leipzig/Halle Airport in August. German Interior Minister Alexander Dobrindt described the incident as a hybrid attack forming part of a broader pattern of Russian hybrid activities targeting European infrastructure and security.

The attempted attack was discussed at the informal meeting of Foreign Affairs Ministers held in Wicklow, where several Member States reportedly called for increased pressure on Russia through additional restrictive measures. Speaking at the press conference following the meeting, High Representative of the EU Kaja Kallas confirmed that work is ongoing on a package of up to 1,600 sanctions listings targeting Russia’s military-industrial complex. The package is being prepared with a view to adoption at the upcoming Foreign Affairs Council in October. Kallas further noted that at least one Member State had submitted additional listing proposals. Separately, German Foreign Minister Johann Wadephul stated that the EU would continue work in the coming weeks on further listings targeting Russian individuals.

In parallel, European Commission President Ursula von der Leyen stressed that hybrid attacks would not go without a clear response and referred to forthcoming discussions among EU foreign ministers on additional sanctions against Russia.

CJEU Judgment on the Standard of Proof for Establishing “Control” under Russia Asset Freeze Sanctions

The Court of Justice of the European Union (CJEU) delivered its judgment in Case C‑147/25 (Inter Rao Lietuva), following a request for preliminary ruling from the Supreme Administrative Court of Lithuania regarding Article 2(1) of Council Regulation (EU) 269/2014. The case concerned the inclusion of a Lithuanian electricity supplier on a national list of persons whose funds and economic resources were to be frozen on account of its alleged links with a person subject to EU sanctions.

The Court held that national authorities may compile and publish such lists in order to implement the asset-freezing obligation under Article 2(1). However, the national authority must establish that the funds and economic resources of the person concerned belong to, or are owned, held or controlled by, a person, entity or body designated under Annex I to Council Regulation 269/2014. The mere existence of a “link” between the person subject to the national measure and an EU-designated person is not sufficient to justify inclusion on a national list of persons whose assets are to be frozen.

The Court further held that the reasons for the national measure must be supported by objective and sufficiently solid evidence. The national competent authority may establish control by direct evidence or by a sufficiently specific, precise and consistent body of indicia. In that regard, the Court found that the general nature of Russia’s political regime, including its autocratic and oligarchic character, does not constitute sufficiently solid evidence capable of establishing that the President of the Russian Federation exercises control over Inter Rao Lietuva. Such circumstances may be taken into account as part of the factual context, but cannot take the place of evidence demonstrating the existence of control for the purposes of Article 2(1).

European Commission Publishes Updates to its FAQs on Sanctions Against Russia

On August 24, the European Commission published a series of updates to its FAQs on sanctions against Russia. The revised FAQs include guidance on the import ban on liquefied natural gas (LNG) under Article 3ra of Council Regulation (EU) 833/2014, clarifying the temporary exemption established under the 21st sanctions package against Russia.

The Commission also updated its guidance on the transaction ban concerning infrastructure in Russia under Article 5ae of Council Regulation (EU) 833/2014. The update includes a new question on the application of the transaction ban to listed refineries in Russia and third countries that process or refine Russian crude oil, process or blend petroleum products from Russia, or facilitate the circumvention of EU sanctions. According to the Commission, the transaction ban will apply to Georgia’s Kulevi Oil Refinery from January 25, 2027, allowing the refinery time to diversify away from Russian crude oil.

Lastly, the Commission amended its guidance on the oil price cap under Article 3n of Council Regulation (EU) 833/2014 to reflect the suspension of the price cap adjustment introduced by the 21st sanctions package. The updated guidance also provides clarification on the projects that are exempt from the maritime services and transportation ban, including the transport by vessel of crude oil originating from the Sakhalin‑2 project in Russia to Japan, as well as related technical assistance, brokering services, financing, and financial assistance.

EU Council Updates Sanctions Listings Targeting ISIL (Da’esh) and Al-Qaeda

The EU Council updated the entries of 13 individuals and eight entities under the autonomous restrictive measures regime targeting ISIL (Da’esh) and Al-Qaeda, following an update at the UN level. Changes to Council Regulation (EC) 881/2002 follow the August 18 decision of the UN Security Council Sanctions Committee to update the identifying data for 21 entries on the sanctions list.

Individuals and entities listed under the sanctions framework are subject to an asset freeze and a prohibition on making funds or economic resources available to them.

Asia-Pacific Developments

Chinese Court Freezes $300M in Nexperia Assets Amid Ownership Battle With Wingtech

The Dongguan Intermediate ⁠People’s Court has frozen up to 2.14 billion yuan ($300 million) in Chinese assets belonging to Dutch chipmaker Nexperia following a lawsuit by its parent company, Wingtech Technology. Wingtech sued Nexperia and three executives in May and is seeking 8 billion yuan in damages after being stripped of control of Nexperia by Dutch authorities over national‑security concerns. The dispute, which previously saw China impose export controls on Nexperia’s Chinese operations that disrupted shipments, gives Wingtech leverage to regain voting control, though it does not change the company’s management or resolve the broader ownership fight.

Apex Logistics Cooperates With US Probe Into Illegal Chip Exports to China

Singapore-based logistics firm Apex Logistics is cooperating with a US government investigation into whether it illegally transported restricted AI chips to China in 2024. The company has since been cooperating with the probe and plans to “continue to work with them until the matter is resolved.” Apex’s parent company, Kuehne+Nagel, affirmed that the freight forwarder maintains its commitment to export regulations.

China Demands US Lift “Illegal” Iran-Related Sanctions on Its Companies

On September 3, 2026, China’s Ministry of Commerce has urged the US to immediately lift unilateral sanctions imposed on Chinese companies and citizens over alleged ties to Iran, strongly opposing the measures as illegal actions lacking UN Security Council authorization. The spokesperson warned that these sanctions disrupt global energy security, asserting that Beijing will firmly safeguard the legitimate rights and interests of its businesses and individuals.

Beijing Warns of Retaliation as US Expands Iran Sanctions

On August 25, 2026, China rejected Washington’s renewed pressure campaign against Iran, arguing that its commercial engagement with Tehran is lawful and should not be obstructed. In a regular press conference, Foreign Ministry spokesman Lin Jian denounced unilateral sanctions lacking UN Security Council approval, saying that “economic warfare” and maximum-pressure policies “only serve to fuel tensions and lead to risk spillover, which will disrupt the global economic and financial order, and harm the legitimate rights and interests of other countries.” He urged “deescalation” and a “return to dialogue and negotiation” rather than further coercive measures. Asked whether Beijing would alter its dealings with Iran or comply with any US timetable for winding down such activity, Lin said China was monitoring developments and would take all necessary steps to “firmly safeguard our rights and interests.”

Seoul Assesses Exposure as Iran Pressure Campaign Raises Wider Economic Risks

On August 25, 2026, South Korea reportedly said it was reviewing the implications for domestic companies and financial institutions of Washington’s latest Iran-related sanctions initiative, particularly its potential secondary effects across technology, shipping, aviation, gold and digital-asset activity. Foreign Ministry spokesman Park Doo-soon said Seoul was consulting relevant agencies, although officials expect limited immediate exposure. Most Korean firms and banks have already exited Iran and bilateral trade has fallen to about USD 150 million from USD 17.4 billion in 2011. Analysts nevertheless cautioned that heightened pressure on Iran could generate broader disruption, especially if it prompts confrontation with China or affects energy markets and regional supply chains. Former Ambassador Yun Kang-hyeon said the effectiveness of the campaign would depend largely on whether major Iranian trading partners, including China, Russia, India, and Turkey, alter their conduct, while another expert warned that an extended conflict could result in indirect political and security pressures on Seoul.

Japan Faces Pressure to Defend ICC After US Sanctions Its Japanese President

On August 30, 2026, Prime Minister Sanae Takaichi reportedly faced mounting criticism over Japan’s response to US sanctions imposed on International Criminal Court President Tomoko Akane, the first Japanese national to head the tribunal. After initially describing the measures as “very regrettable,” Takaichi said they conflicted with Japan’s position and pledged to protect both Akane and the ICC, of which Japan is the largest financial contributor. Akane called the sanctions a threat to the rule of law and urged Tokyo to “make ‘maximum efforts,’ including by engaging with the United States.” Foreign Minister Toshimitsu Motegi has discussed the matter with Akane, but Japan has not publicly demanded that the sanctions be withdrawn.

China Bars Compliance with EU’s JD.com Foreign Subsidies Investigation

China’s Ministry of Justice announced that the European Commission’s cross-border information requests in its Foreign Subsidies Regulation (FSR) investigation of JD.com’s reported EUR 2.2 billion acquisition of German retailer CECONOMY amount to “improper extraterritorial jurisdiction.” Under China’s Regulation on Counteracting Unjustified Extraterritorial Application of Foreign Laws and Measures, which took effect in April 2026, organizations and individuals may not comply with or assist in implementing the identified EU measures. The ministry said the EU had sought broad and unnecessary information from Chinese entities, harming their legitimate interests. It called on the EU to stop what it described as misuse of the FSR investigation tool and warned that China would take countermeasures in accordance with law if the EU continues its approach.

Listen to the news:

Europe

The German populist right party Alternative for Deutschland (AfD) won its first regional election in Saxony-Anhalt on Sunday but faces obstacles to forming a government. The AfD won 39 seats, just three shy of an outright majority, followed by the center-right Christian Democrats (CDU) at 15 seats. This makes the parliamentary math inconclusive. Every other political party has rejected cooperating with the AfD, likely preventing them from forming a government or electing its regional leader, Ulrich Siegmund, as the Minister President. If AfD fails to break the firewall, then the CDU may attempt to approve a minority government with the tacit support of Die Linke. This would be politically awkward, given that the CDU has ruled out cooperation with that party, which descends from the ruling Communists in East Germany. The next regional leader of the CDU, which currently holds the Minister President post, may govern in an Acting capacity for as long as possible, putting the province in a political purgatory.

AfD’s victory reflects growing frustration with mainstream politics in Germany. Saxony-Anhalt is a special case—it is a sparsely populated province of 2.1 million, about half the population of Berlin—but AfD’s victory there reflects the party’s growth nationally, currently polling as the most popular party at about 28 points. German voters are increasingly frustrated with a stagnant economy, gridlocked governments, and perceptions of declining safety. Germany’s mainstream parties may have to contend with a new strategy of countering the AfD beyond the firewall, which has inadvertently made coalitions more difficult.

Read More: CBS News, Politico, Reuters [paywall]

Middle East

Yemen’s internationally-recognized government (IRG) said it had made significant gains against the Houthi rebels. Over the weekend, Yemeni and Saudi state media reported that the Saudi-backed IRG had gained territory in Hodeidah province and advanced in western Taiz. The reports follow intensified clashes late last week in which the Houthis appeared to be pushing in on Taiz to seize the port city of Mokha.

The fight could escalate pressure on Red Sea shipping and broaden the US-Iran regional conflict. If the Houthis gained control of Mokha, it would be considerably easier to exert control over the Bab al-Mandeb Strait, where the group last month announced a blockade on all Saudi trade. The renewed fighting is likely both a flare-up of the long-running Yemeni civil war (following new Saudi moves to cut the Houthis off from Iranian arms flows) and an Iran-backed effort to broaden its ongoing war with the US and further raise the economic costs of prolonging the conflict. Regardless, the Yemeni conflict is at its hottest in over three years, with international shipping lanes paying the price.

Read More: New York Times [paywall], i24, Al Jazeera

Asia-Pacific

Myanmar President Min Aung Hlaing’s three-day visit to Vietnam this weekend produced a broad expansion of bilateral cooperation, including in security, trade and investment. The visit resulted in a series of high-level commitments, including agreeing to expand military training, young-officer exchanges, search-and-rescue operations and disaster-response cooperation, while pledging not to allow individuals or organizations to use their territories for activities against the other. The two sides also committed to closer coordination within ASEAN and Mekong subregional frameworks, amid continued divisions within the bloc over Myanmar’s military rule and Naypyidaw’s subsequent regional isolation.

For Vietnam, maintaining ties with Naypyidaw preserves economic and diplomatic influence, while Myanmar is using the relationship to demonstrate growing regional engagement. Vietnam is one of Myanmar’s largest investors, with more than $2.5 billion in investment across more than 30 projects, giving Hanoi a stake in maintaining regular dialogue. For Myanmar, the visit comes as part of its broader effort to normalize relations with Southeast Asian governments and attract investment. Since taking office officially in April, Min Aung Hlaing has visited India, China, Laos, Thailand, Kazakhstan, Belarus and Russia, underscoring the junta’s efforts to diversify its diplomatic relationships.

Read More: Nikkei Asia [paywall], Reuters [paywall], NPR

Americas

Canadian retaliatory tariffs against the US took effect on September 8, escalating the US-Canada trade dispute after negotiations with Washington collapsed in August. The new tariffs target approximately $20 billion in US imports, with levies as high as 50% across a variety of sectors, including clothes, dairy, metal and wood products. The goods targeted by the tariffs, which mimic recent US tariffs against Canada, amount to around 6% of annual US imports to Canada. Goods already in transit to Canada when the measures took effect are exempt. The tariffs are expected to disproportionately affect US manufacturers in northern states like Michigan and Indiana, as well as dairy producers in Wisconsin and Vermont. However, the broader risk is that these actions will continue a cycle of retaliation that could impact an even greater proportion of US-Canada trade.

Canadian Prime Minister Mark Carney’s decision to retaliate against US tariffs is supported by most Canadians, according to recent polls. Carney’s Liberal party was also victorious in three special elections last week, including a district in Quebec held by the opposition Conservatives since 2018. The region is home to producers affected by the ongoing trade war. Canada is one of only two countries, and the only close US ally, to retaliate against US trade measures. As one of the world’s closest alliances unravels, Carney has described the trade dispute as a “war” between Canada and the US. No negotiations are currently underway between ministers or government officials from either country.

Read More: New York Times [paywall], ABC, AP, NPR

Disruptive Technology

The Pentagon reaffirmed that it still considers Anthropic a supply chain risk. The Undersecretary of War for Research and Engineering, Emil Michael, tweeted on Thursday that the Pentagon will not change its policy of uprooting Anthropic and its AI services from the US defense industrial base. His statement contradicted recent comments from Commerce Secretary Howard Lutnick, who had commended Anthropic’s cooperation on AI cybersecurity through the White House’s voluntary release pre-screening framework at a G20 innovation conference in North Carolina. Michael’s statement also defies a federal judge in San Francisco, who ruled in late August that the Pentagon’s “supply chain risk” designation was unlawful.

Emil Michael’s statement reveals that the Pentagon’s concerns remain ongoing and the administration may be divided. The Pentagon wants operational independence in its utilization of AI, even if violating Anthropic’s own code of conduct. The Commerce Department is chiefly concerned about foreign governments weaponizing Anthropic’s most powerful AI models for cyber offensive purposes. Anthropic’s address of Commerce’s concerns may offer positive momentum in the company’s relations with the administration, but tension has not entirely subsided.

Read More: Axios, Politico, Bloomberg [paywall]

Energy

Saudi Arabia is working with the International Atomic Energy Agency (IAEA) on its nuclear energy deal with the US. The IAEA announced that it is working with Saudi Arabia to develop safeguards and monitoring mechanisms as part of Riyadh’s agreement with Washington to develop a civilian nuclear power sector. According to IAEA chief Rafael ​Grossi, Riyadh is ready to adopt obligations beyond its Comprehensive Safeguards Agreement that regulates the country’s relationship with the IAEA.

The agreement with the IAEA is designed to balance out the US-Saudi agreement not including a critical oversight mechanism. The US-Saudi deal does not include the Additional Protocol, which grants the IAEA additional authority to oversee nuclear facilities and provide international monitoring. Grossi said that while the Additional Protocol would be ideal, what Riyadh is developing with the IAEA will come close to it.

The US-Saudi agreement is still facing a number of hurdles. The administration sent the deal to Congress in late August, and it has faced criticism from some Democratic lawmakers for failing to include sufficient nonproliferation measures. President Donald Trump has also stated that the agreement is conditional on Saudi Arabia joining the Abraham Accords with Israel.

Read More: Reuters [paywall], CNBC, US Department of Energy

Defense

Sweden is moving forward with a new set of artillery initiatives with the US and Finland. Stockholm intends to procure the M142 High Mobility Artillery Rocket System (HIMARS) from the US, and it will cooperate with its neighbor Finland on making the new capability operational. Finland will assist in maintenance and training as Sweden integrates the new capabilities, and Europe’s first HIMARS maintenance center will also be established in Finland. Sweden also opened other defense industrial deals such as a letter of intent to explore production of Patriot PAC-3 interceptors in Sweden.

Oslo recently finalized a deal with France for new Frigates. Sweden will buy four Defense and Intervention Frigates (FDI). Sweden had announced the intention several months ago to partner with France when it selected the FDI design for the Royal Swedish Navy’s Luleå-class. The procurement is expected to proceed quickly, with first deliveries set for 2030. The agreement between France and Sweden also establishes a long-term partnership in defense-industrial policy between Oslo and Paris.

Read More: Breaking Defense, Naval News

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