Myanmar: Normalization Without Stabilization

Risk Outlook: August 13, 2026

Aug 13, 2026

Welcome to the Stepwise Risk Outlook, which highlights and contextualizes over-the-horizon developments in key regions of the world and industries of the global market. Today’s featured deep dive by Zayna Dembinski examines Myanmar’s junta’s efforts to gain political and diplomatic legitimacy.

Myanmar: Normalization Without Stabilization

By Zayna Dembinski

^“^{MAF bombing Kyauktaw Township 2025-01-12}^{” by}^{Chun Nrein/MPA}^{is licensed under}^{CC BY 3.0}^.

Myanmar’s junta is increasingly pursuing political and diplomatic normalization despite having failed to resolve the civil war, creating a widening gap between the appearance of political stabilization and conditions on the ground. While elections and renewed engagement with regional governments may improve the junta’s international standing, they are unlikely to resolve the underlying conflict in the near term. For businesses, this means Myanmar may become more accessible diplomatically without becoming materially less risky, particularly given sanctions exposure, human-rights concerns, conflict-related disruptions and weak governance.

In today’s full analysis:

Where Myanmar Stands Today
The Junta’s Push for Political Normalization
International Reception: From Isolation to Pragmatic Engagement

Read the Full Report Here

Or listen to the full report here:

0:00

-10:09

Listen to the news:

0:00

-13:32

Global

Russia and Ukraine are attacking grain shipment infrastructure, increasing risks to exports and the global food supply chain. Both countries are targeting seaport infrastructure and vessels, bringing commerce in the Black Sea to a near halt. Russian air strikes on cargo ships in the Black Sea have stopped nearly all ship traffic in and out of Odesa, a key export terminal for Ukrainian grains. On Tuesday, Ukraine carried out another assault on the Russian Black Sea port city of Novorossiysk. Ukraine’s primary targets are military installations, oil and gas infrastructure and the shadow fleet, but grain export infrastructure is also being hit. Novorossiysk hosts two of Russia’s largest grain terminals, which have halted operations.

Both countries are seeking alternative export routes for grain, which are limited and costly. Ukraine is the 9^th largest wheat producer in the world, while Russia ranks third. Russia can redirect some grain to ports in the Baltic region or use direct rail and truck shipments to neighboring markets in Central Asia and China. Ukraine has railway networks feeding into European terminals, but transport is hampered by differing track gauges at borders. Ukraine has also used the Danube River for barge transport to Romanian ports, but drought has restricted the waterway with record-low water levels. Overland transit can only handle about 50% of the monthly volume normally shipped via deep-water Black Sea ports and adds to transportation costs, which will drive up commodity prices.

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

Europe

Today, the Clacton-on-Sea constituency votes whether to keep Nigel Farage, the leader of the populist right Reform UK party, as MP. Farage gambled that triggering a by-election would redirect attention from an ongoing parliamentary inquiry. However, no major party is running a candidate, taking the wind from Farage’s sails. Farage’s nearest opponent appears to be longtime satirist candidate Count Binface, a self-declared intergalactic space warrior.

Beyond the comedy, Farage’s showing will be one of his first tests since Prime Minister Andy Burnham took the reins of the Labour Party in late July. Farage previously called for snap elections to challenge Burnham’s unelected mandate, which is primarily about transferring financial power from Westminster to municipalities and regions. However, Farage’s fortunes have diminished, with his net approval hitting negative 32 points in late July. Moreover, a revolt by Rupert Lowe, who was kicked out of Reform UK and formed his own party called Restore Britain in February, threatens to siphon votes from the populist right in new elections. Although Reform remains more powerful, lost votes are a major problem in the UK’s plurality-based district representation system.

In most recent polling, Burnham has reversed Labour’s downward trend with a seven-point bump since his Makerfield by-election, breaking Reform UK’s 16-month streak as the most popular party. With renewed enthusiasm, Burnham may indeed mull over a snap election to secure Labour’s agenda after 2029—and that calculation may hinge on Farage’s result.

Read More: BBC, Politico, Financial Times [paywall]

Middle East

Israel deployed additional troops to the West Bank to “restore order” amid a flare of settler violence in a village there. Over the last several days, a group of settlers besieged the homes of several Palestinian families. A small army presence on Wednesday failed to defuse the situation, and Jerusalem has now effectively put the village on lockdown, reportedly dismantling most of the settler siege although clashes persisted.

The episode comes amid intensifying politicization of the settler movement ahead of October elections. In recent months, emboldened Israeli settlers have been testing the boundaries of a government that has shown them unprecedented support and has rarely punished them for overstepping the law. The environment has only grown more tense in the run-up to elections, with Prime Minister Netanyahu fighting to maintain his far-right, pro-settler allies and voting bloc. As of July, Israeli settlers were on track to kill twice as many West Bank Palestinians in 2026 than in 2025.

Read More: BBC, Wall Street Journal [paywall], NPR

Asia-Pacific

New Zealand Prime Minister Christopher Luxon on Wednesday survived a National Party caucus confidence vote, just 87 days before the November 7 general election. The challenge was brought by now-former Defence Minister Chris Penk, whom Luxon swiftly removed from his defense, intelligence, space and building portfolios. Penk subsequently announced he would leave politics and not seek reelection.

Luxon’s confidence vote was likely set in motion by a series of public troubles, calling attention to his relative lack of political experience. Luxon drew public criticism for floating the idea of a possible referendum on New Zealand’s electoral system if reelected without consulting colleagues, telling business leaders to “be adult” and returning to Wellington from a political fundraising party on the New Zealand Defense Force aircraft. Luxon, with a longtime business executive background, is often criticized for failing to connect with voters, and the country’s economy is no better than when he took office, with growth weak and unemployment at an 11-year high.

The challenge is Luxon’s second since April, underscoring persistent divisions within the National Party. While Luxon survived, the vote exposes vulnerabilities ahead of an election in which National is already narrowly trailing its main opposition party, Labour, in the polls. Further infighting could cede more ground to Labour, leaving Luxon with little room for additional missteps as he seeks to demonstrate party cohesion and rebuild voter confidence before November.

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

Americas

Venezuela and Israel announced on Tuesday that they will restore consular relations after 17 years. Venezuela previously cut ties with Israel in 2009 under Hugo Chavez. The thaw comes as Venezuela has shifted its foreign policy to align with the US, following the capture of former President Nicolas Maduro in January. Venezuela’s foreign minister announced that the decision to restore ties came after Israel sent a team to contribute to earthquake recovery efforts in Venezuela. While the shift signals a warming relationship, the two countries have not yet agreed to re-establish full diplomatic ties.

Israel has more broadly strengthened diplomatic relations with Latin American nations as the region experiences a historic shift to the right. Upon taking office in Colombia over the weekend, Abelardo de la Espriella recognized Israel’s claims over the Golan Heights, making it only the second country to do so after the US. De la Espriella has said he also plans to open an embassy in Jerusalem. Colombia had cut diplomatic relations with Israel in 2024 under leftist President Gustavo Petro. Last week, Chile and Honduras both restored their ambassadors to Israel, and Argentina’s President Javier Milei moved the Argentine embassy in Israel to Jerusalem last year. These moves signal a broad effort by regional leaders to align their foreign policy with the Trump administration.

Read More: Al Jazeera, Al Jazeera, El Pais [Spanish]

Africa

US AFRICOM signed an agreement with Somalia’s Puntland state to deepen counterterrorism and maritime security cooperation. Details remain limited, but the Puntland State House stated that the agreement will expand the US military presence in Bosaso, Puntland’s main port, to support operations against the Islamic State and protect maritime trade in the Red Sea and Gulf of Aden. US Special Operations Command Africa is seeking more direct cooperation with Puntland’s semi-autonomous government and reportedly negotiated the agreement without input from the Federal Government of Somalia (FGS), the country’s central government.

The partnership could improve the US’ ability to quickly respond to jihadist and maritime threats, but risks further weakening the FGS’ authority. The agreement comes as relations between Mogadishu and Puntland have deteriorated, with the two sides engaged in an increasingly militarized political dispute. Greater cooperation with Puntland authorities could strengthen the local forces best positioned to counter jihadist groups. While this may improve the effectiveness of joint counterterrorism and maritime operations in the short term, it could also deepen Somalia’s political fragmentation by encouraging other semi-autonomous governments to pursue similar bilateral agreements. This, in turn, could worsen tensions with Mogadishu and increase the risk of military confrontation between the FGS and regional authorities.

Geoeconomics

US inflation moderated in July as cheaper gasoline reined in the headline rate and underlying price growth remained contained. The Consumer Price Index rose 0.1% from June, when it fell 0.4%, while the annual rate eased from 3.5% to 3.4%. Core CPI, which excludes food and energy, increased 0.2% for the month and 2.5% from a year earlier, down from 2.6% in June. Gasoline prices fell 2.9% and the broader energy index declined 1.5%, offsetting modest increases in food and shelter. Shelter rose just 0.1% but accounted for roughly two-thirds of the monthly headline increase.

The report lowers immediate pressure on the Federal Reserve to raise rates. Traders reduced the implied probability of a September rate increase to about 38%, from 48% before the release. Some of July’s softness may prove temporary: lodging prices fell 2.8% following the World Cup, oil prices have since risen and core goods gained 0.2% after two monthly declines. Economists estimated that annual core PCE inflation, the Fed’s preferred measure, remained around 3.3%, well above its 2% target. Real hourly earnings also fell 0.2% from a year earlier, showing that slower inflation has not restored household purchasing power. The combination of weaker employment and persistent inflation makes a September hold more likely, while preserving the possibility of a later increase if higher energy costs spread through the economy.

Read More: Reuters [paywall], BLS, AP, Dallas Fed

Disruptive Technology

In early July, suspected China-based hackers utilized AI agents to conduct the first end-to-end autonomous cyberbreach against Taiwan government and energy company websites. The company that identified the breach, Israel-based cybersecurity firm Dream, stated that more than 2,500 personnel files were retrieved by AI agents originating from one of two possible open-source models, Hermes and OpenClaw, which can be downloaded and tinkered with. In order to conduct the attack, the hackers likely bypassed the model’s underlying safeguards with a jailbreak method of tasking the AI with an authorized exercise to test for system vulnerabilities. Multiple agents scanned for vulnerabilities, attempted cyber intrusions, and adapted tactics when attempts failed. As many as eight agents were deployed simultaneously.

This incident demonstrates AI’s disruption to cybersecurity and its geopolitical weaponization. The US has scrambled to find a new AI safety approach after frontier AI developers have disclosed that latest models have escaped testing environments and hacked other companies during training. However, there remains no international convention on the use of AI, and the coordinated network of AI safety institutes has lost momentum. The US’ voluntary but strongly encouraged AI review system by the Department of Commerce does not apply to China’s open-weight models, which are peer to American models in cybersecurity capabilities—and more powerful than the agents that conducted the July attack.

Read More: Financial Times [paywall], Cyber Security News, Tom’s Hardware

Energy

JD Vance reportedly intervened with Kyiv to stop Ukrainian strikes on a Russian port in the Black Sea. Ukraine’s strikes on the Russian port of Novorossiysk, which had disrupted exports of Kazakh oil through the Caspian Pipeline Consortium (CPC) connecting Kazakhstan to the Black Sea, had created concerns in the White House about further destabilization of global energy markets. Since Vance spoke with Ukrainian president Volodymir Zelenskyy, Ukraine has continued to target other Russian infrastructure around the port, such as the Russian naval base in Novorossiysk.

Ukraine’s strikes had severely restricted Kazakh export flows. Astana sharply curtailed oil production after the CPC terminal in Novorossiysk halted operations. The CPC loaded 600,000 fewer barrels per day in July than in May. Kazakhstan has served as a key replacement for European energy supplies in recent years and has become even more important to global markets since oil from the Middle East has dropped.

This isn’t the first time the US has tried to rein in Ukrainian attacks on the CPC. In February, the US issued a diplomatic démarche to Ukraine over a Ukrainian strike on the Novorossiysk port in late 2025. The US has also been highly aware of the impacts of the war between Russia and Ukraine since Washington’s war with Iran began. The US repeatedly issued sanctions waivers for specific categories of Russian oil earlier this year in order to assuage countries in Asia experiencing supply crunches and to keep global prices lower.

Read More: Financial Times [paywall], Reuters [paywall], Euronews, Moscow Times

Defense

Rocket Lab Corporation is expanding its international business in Europe. Rocket Lab, a launch services and space systems provider based in the US, recently founded a subsidiary in Germany to potentially build out its satellite and component production in Europe. The company sees its European presence as a way to build a regional presence for satellite constellations and to meet growing European demand.

Interest in access to space is growing across Europe. Space’s importance for defense and commercial uses is driving new initiatives and new spending. Berlin is reportedly considering the construction of its own launch site for the German military in order to secure Germany’s access to space for defense purposes, and last year Germany announced a major package of defense spending on space. Similarly, the EU announced earlier this month that it will expand the number of satellites in its IRIS2 constellation. IRIS2, which is the EU’s broadband communications satellite network, plans to begin satellite launches in 2029.

Read More: Hartpunkt [in German], NTV.de [in German], Breaking Defense, Defense Post