But when it comes to assessing Meloni, the transatlantic community would be well advised to do its homework and embrace her leadership. Her actions have clearly demonstrated a pragmatic and unambiguous values-based commitment to the transatlantic relationship. It is what she does that matters, not what others say about her.

On July 27, Meloni will travel to the White House to meet with US President Joe Biden. Her visit comes as Italy prepares to take up the presidency of the Group of Seven (G7) next year, a critically important role given today’s geopolitical events. So what can Biden expect from the Italian leader on the important issues of the day?

Italy backs Ukraine’s fight for freedom and democracy

Meloni has kept Italy clearly committed to the pillars of the EU and the transatlantic community. She has been unambiguous in her stance against autocracies. Even more notable, she has been vocally supportive of Ukraine and clearly holds Russia accountable for its unprovoked aggression. The clarity of her position contrasts with the sometimes more ambiguous positions of other Italian coalition parties.

Under Meloni’s leadership, the Italian government has continued to back Ukraine against Russia with military aid. Indifferent to low public support for military aid for the effort—just 39 percent of the Italian public voices support for increased military aid for Ukraine—she has underscored the just cause. During a speech in the Italian Senate in March, she said, “The Ukrainian people are defending the values of freedom and democracy on which our civilization is based, and the very foundations of international law.” She added, “military aid was needed to help a nation under attack.” Meloni’s Fratelli d’Italia party, along with center-right coalition parties Lega and Forza Italia, have voted consistently in support for Ukraine, even when in opposition during the government of former Prime Minister Mario Draghi.

Will China’s Belt and Road continue to lead to Rome?

Another important area of Italy’s strategic dialogue with the United States will be the issue of transatlantic coordination on China. Italy became the first and only G7 member of the Belt and Road Initiative (BRI) in 2019, when it signed a Memorandum of Understanding with China. The populist coalition government promised new trade and investment, a well-received message at the time, but the economic benefits have not come to fruition. 

Calling Italy’s membership in the BRI “a big mistake,” Meloni has indicated that she may not extend the agreement in 2024. With 51 percent of Italians holding a negative feeling about China, it may be easier for Meloni to join in a coordinated transatlantic decision on BRI.

The 2008 global financial crisis created massive opportunities for Chinese investors targeting stressed companies in search of technologies, innovation, and markets. In 2022, Italy was the second-largest import partner in Europe (behind Germany) for importing Chinese products, to the tune of more than fifty billion dollars. On the flip side, Italian exports to China make up less than 3 percent, or only eighteen billion dollars. Clearly, Italy’s optimistic vision for the BRI didn’t deliver.

Moreover, Meloni has been a strong voice in defending democratic values and criticizing China’s authoritarian crackdowns from Xinjiang to Hong Kong. She has criticized China’s mismanagement of the COVID-19 pandemic and dismissed the idea that China supported Italy during the depths of the crisis. Amid criticism of Chinese military exercises in the Taiwan Strait, she said last year that “the EU is an important market for China, that risks to be closed if Beijing decides to attack Taiwan.”

The importance of US-Italian economic relations

Beyond geopolitics, economic issues will also likely be on the agenda in the Biden-Meloni meeting. Here they have a strong base to build on. Trade between the United States and Italy has almost doubled from $52 billion to $100 billion in the last decade. Unlike with China, Italy’s trade balance with the United States has always been positive. Last year, for example, Italian exports to the United States reached $73 billion. The United States is the second-largest export market for Italy, making up 11 percent of all exports and more than 20 percent of non-EU exports. Similarly, Italy is the third-largest market in the EU and the eighth largest in the world by nominal gross domestic product; with a population of about sixty million it is the sixteenth largest export market for the United States, with significant trade and investment opportunities concentrated in high-value sectors.

Italian stock of investment in the United States has totaled more than $41 billion, supporting almost one hundred thousand American jobs. To put this it into perspective, Italian foreign direct investment in the United States is almost four times its investment in China. On the horizon, as part of the EU’s post-COVID recovery program, Italy will be the recipient of a more than $200 billion National Recovery and Resilience Plan focusing on three strategic axes: digitalization and innovation, ecological transition, and social resilience aimed at fixing structural economic challenges and inefficient infrastructure to invite serious investment from the United States. Italy ranked ninth among EU destinations for US foreign direct investment in 2022, with a stock of around $26 billion.

When Biden and Meloni meet at the White House, they will share a strong commitment to transatlantic cooperation on major geopolitical issues. The big areas of discussion will likely focus on cooperation to face global challenges, from economic growth to common security, where Italy has a very important role in North Africa and the Sahel that meets Biden’s strategy to create new diplomatic alliances in Africa and a Western alternative to China’s BRI. Strengthening economic cooperation should also be a priority, going beyond the traditional sectors in which US investments are mostly concentrated, such as manufacturing, electronics, telecommunications, and services. Washington and Rome should, for example, help facilitate new collaboration in industries working on artificial intelligence, the energy transition, and defense.

Meloni and Biden are more aligned than many observers may think. Biden should take this chance to build on her promising start.

Valbona Zeneli is a nonresident senior fellow at the Atlantic Council’s Europe Center and chair of strategic engagements at the George C. Marshall European Center for Security Studies.

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Representative Pramila Jayapal (D-WA), who chairs the Congressional Progressive Caucus, called Israel a “racist state,” touching off a controversy about America’s views toward the world’s only Jewish state.

Ahmed Charai is a Moroccan publisher and an Atlantic Council Board Director. He is also an international counselor of the Center for a Strategic and International Studies, a board of trustees member of International Crisis Group, and a member of the Advisory Board of The Center for the National Interest in Washington and Global Board of Advisors at The Jerusalem Institute for Strategy and Security in Jerusalem.

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The EU-Community of Latin American and Caribbean States (CELAC) Summit was a top priority of the Spanish government, which holds the rotating EU Council presidency. Spain met its objectives with representation from the EU’s twenty-seven member states and the thirty-three CELAC members. But it wasn’t just any representation. LAC countries sent twenty-three presidents and prime ministers to Brussels—the same number of heads of state and government who attended last year’s US-hosted Summit of the Americas, with one big difference: While Cuba, Nicaragua, and Venezuela joined their cohorts in Belgium, none received an invitation to Los Angeles.

The tone of the summit was set at the EU-LAC Business Round Table that took place immediately preceding the leaders’ meeting. Speaking to an overflow audience, European Commission President Ursula von der Leyen opened the gathering in the Berlaymont Building, the Commission’s headquarters, with an emphatic message: “Latin America and the Caribbean and Europe need each other more than ever before.” She then went on to reinforce that “Europe aspires to be a partner of choice for Latin America and the Caribbean,” while announcing more than forty-five billion euros of “high-quality European investment” that will “come with a focus on building local value chains.” Her announcement sparked a round of applause in the room among attendees, who likewise saw the importance of diversifying and deepening Europe’s partnerships. 

On the CELAC side, upon taking the stage, Brazilian President Luiz Inácio Lula da Silva highlighted key areas of mutual interest with the EU, including combating climate change and deforestation, while staying clear of comments regarding Ukraine—on which he has differed from his European counterparts. Lula’s remarks were warmly greeted as well but without the same level of excitement as von der Leyen’s financial announcement.

The takeaways: Europe—reeling from Russia’s full-scale invasion of Ukraine and its effects, along with growing apprehension over increased Chinese assertiveness—realizes that it needs to double down on its global partnerships. Here, CELAC represents thirty-two votes at the United Nations (UN). (Venezuela is unable to vote due to being in arrears in the payment of its UN dues.) CELAC is also a fountain of critical raw materials, which Europe is increasingly focused on securing to fuel its green transition. And although China was not mentioned, the summit’s focus on quality and local investments is certainly a swipe at Chinese financing and a doubling down on the EU’s strategy of diversifying its supply chains. 

For LAC countries, no convincing was needed to get regional dignitaries to show up. Europe is willing to put forward substantial strategic planning and the funding behind it as it aspires to be “a partner of choice” for LAC. Launched alongside the summit, the new EU-LAC Global Gateway Investment Agenda commits the funding announced by von der Leyen for more than 130 projects through 2027. These projects revolve around four pillars of mutual interest: a fair green transition, an inclusive digital transformation, human development, and health resilience and vaccines. These pillars also stand in stark contrast to the top-down Chinese investments in many parts of the region that have less of an eye toward long-term development objectives. 

A distinctly European approach to diplomacy

The summit also reflected the EU’s differing approach to LAC compared with the United States. Start with the invites to Brussels for Cuba, Venezuela, and Nicaragua, with Cuba’s leader, Miguel Díaz-Canel, in attendance. This reflects a softer approach on Europe’s part toward the leaders of countries where the United States has imposed sanctions over abuses of power and human-rights concerns. But it also shows that Europe has less diplomatic leverage in the region than that enjoyed by Washington. The United States was able to cajole countries into attending last year’s Summit of the Americas despite many leaders’ opposition to the snub of Cuba and Venezuela, in particular. CELAC leaders would have been less willing to do so in Brussels. This makes sense. The United States—despite concerns about the growing presence of extra-regional actors in LAC, many of which, unlike Europe, carry nefarious intentions toward US interests—remains the most important strategic partner for the hemisphere.

As well, the Global Gateway—in many respects Europe’s counterproposal to China’s Belt and Road Initiative—shows that Europe recognizes its need to match diplomatic outreach with concrete deliverables and large-scale financing. The billions that are slated to come from Europe far surpass US investment announcements at last year’s Summit of the Americas. So while Europe leaned in on specific projects, the United States used its hemispheric gathering to focus on partnership strategies to jointly tackle issues ranging from inclusive economic development to climate.  

Perhaps the biggest feat for the EU was the joint agreement on a declaration coming out of this week’s meeting. With such a diversity of interests and priorities among CELAC members and within the EU, a final joint declaration did not always seem possible. The EU’s proposed language condemning Russia’s invasion of Ukraine was a non-starter for many CELAC diplomats who tend to view the war as primarily a European problem and are concerned about getting dragged into taking a side. Meanwhile, some EU member diplomats have said they have red lines against removing the language condemning Russia’s invasion. CELAC diplomats also wanted a reference in principle that the EU should give reparations for slavery to its member states. The declaration that emerged was the product of skillful negotiation balancing EU and LAC priorities—and competing positions within each region.

Point fifteen of the declaration was the biggest achievement of the summit:

We express deep concern on the ongoing war against Ukraine, which continues to cause immense human suffering and is exacerbating existing fragilities in the global economy, constraining growth, increasing inflation, disrupting supply chains, heightening energy and food insecurity, and elevating financial stability risks. In this sense, we support the need for a just and sustainable peace. We reiterate equally our support for the Black Sea Grain Initiative and the efforts of the [UN secretary general] to secure its extension.

Although Nicaragua abstained from signing on to the declaration because of this Ukraine war language, the rest of the attendees—including Cuba and Venezuela—agreed to it. This language is a major accomplishment for Europe, while CELAC walks away with a substantial investment pledge from the Global Gateway that others could not match.

Looking ahead to 2025

Europe has clearly unleashed a newfound commitment to the Americas. This summit was a strategic balancing act to shore up European partnerships with a region that is becoming vital to global interests and solutions to world problems. However, the EU’s pledging of billions of euros is one thing; delivering the funds and leveraging them into a new economic partnership will require serious follow-up and sustained engagement. Meanwhile, CELAC countries are increasingly able to take advantage of changing global dynamics to advance regional interests. 

What would be the best course for the future? The United States and Europe should each have a seat at the table at their respective summits with LAC countries. The EU has now agreed to host a summit with CELAC every two years—the next one will be in 2025, with Colombia offering to host. The Dominican Republic will host the next Summit of the Americas that same year. Doesn’t some degree of alignment make sense heading to 2025? As in many other priority global issues, transatlantic collaboration will ultimately help to win the day. 

Jason Marczak is senior director of the Atlantic Council’s Adrienne Arsht Latin America Center. He participated in the EU-CELAC Business Round Table in Brussels preceding the leaders’ meeting. He is on Twitter at @jmarczak.

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

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Below, Atlantic Council experts explain what happened and what to expect next.

Click to jump to an expert analysis:

Markus Garlauskas: Success will require reaching beyond the officials in the NCG

Robert M. Soofer: On the agenda was the unthinkable—what to do if deterrence fails

Bee Yun Jo: The NCG was a success, even if it didn’t address all of South Korea’s security concerns

Jessica Taylor: The US and South Korea doubled down on ending the Kim regime if it uses nuclear weapons

Thomas Cynkin: Would the US trade Los Angeles for Seoul? South Koreans want to know.

Ryo Hinata-Yamaguchi: Watch what impact the NCG will have on Japan

Success will require reaching beyond the officials in the NCG

The inaugural meeting of the US-South Korea NCG is an important step in improving the assurance of South Korea, deterrence of North Korea, and the alliance’s military response capability. That senior representatives from the White House and South Korea’s presidential office led the delegations should signal the importance both sides place on following through with the Washington Declaration and set the stage for robust follow-through. However, the NCG’s engagement outside of high-level government channels may be even more pivotal to its success going forward.

The brief joint readout set out an ambitious and logical agenda of quarterly meetings to advance on several workstreams, which include some very practical measures focused not just on reassuring South Korea, but also on improving deterrence of and responses to a North Korean nuclear attack. Such a brief public readout, of course, cannot capture the full scope and detail of what has been and will be discussed at NCG meetings. Such meetings will inevitably touch upon issues that are politically sensitive, involve classified operational and intelligence information, or both. The unfortunate tendency by some South Korean and US officials, as a result, will be to keep the proceedings very “close hold” and the public readouts very brief and selective. Meanwhile, issues deemed too politically sensitive by one or both sides might not even make it on the agenda, for fear of derailing the meetings or that such discussions might leak to the press. Such an approach would not be helpful for the NCG’s goals.

The United States and South Korea should be as forthcoming as possible about the results of NCG discussions in future sessions, and they should engage outside experts extensively in a broader effort to advance the NCG’s workstreams. The benefits of such an approach, if executed, will outweigh the risks. The NCG’s proceedings should take a cue from Director of National Intelligence Avril Haines’s latest efforts on transparency, including the wise and bold step of publicly releasing the recent National Intelligence Estimate on North Korea. Ultimately, exchanging insights with a wider group of experts in parallel with official NCG meetings will help to reassure more South Koreans across the political spectrum, aid in getting the message to North Korean elites, and help to make the best use of the capabilities of government and nongovernment experts inside South Korea and the United States to achieve the NCG’s objectives.

—Markus Garlauskas led the US intelligence community’s strategic analysis on North Korea as the national intelligence officer for North Korea, after serving as the chief strategist at the US-South Korea Combined Forces Command. He is the director of the Indo-Pacific Security Initiative at the Scowcroft Center for Strategy and Security of the Atlantic Council, and tweets at @Mister_G_2.

On the agenda was the unthinkable—what to do if deterrence fails

The North Korean intercontinental ballistic missile (ICBM) test just days prior to the inaugural meeting of the NCG must have been a poignant reminder to the participants about why they were there. North Korean belligerence and the expansion of its nuclear arsenal have been sowing doubts among South Koreans about the reliability of the US nuclear umbrella. The purpose of the NCG is for the United States to satisfy its ally that it has the capabilities and the resolve to counter North Korean nuclear threats—and that Washington will take South Korean security interests into account when deciding how and when to use nuclear weapons.

On the agenda for the meeting were discussions about measures, some already in place, to share information on the nuclear threat, improve understanding about the role of nuclear weapons, and think through the unthinkable: what to do if nuclear deterrence fails and the United States and its allies are forced to respond to an initial North Korean nuclear use. Perhaps more important than the exchange of information was the establishment of protocols and processes for consultation between the two countries during crisis and conflict.

The nuclear dimension of any conflict will be unique, and how the United States responds will depend on the president and the circumstances (including the concerns of allies), regardless of preexisting plans. South Korean officials should appreciate this when they request ever-more detailed briefings of US nuclear plans that the Department of Defense does not provide even, for example, to its NATO allies. Tabletop exercises examining how the two sides could react after nuclear use are foundational, as are exercises conducted by US nuclear forces with potential South Korean conventional support.

Visits to South Korean ports by US nuclear submarines and overflights by US strategic bombers may not fully address the underlying security dilemma for South Korea, which is whether the United States would be willing to run the risk of North Korean nuclear retaliation against a homeland that is becoming increasingly vulnerable to Pyongyang’s long-range missiles. The United States today is protected against North Korean ICBMs due to the US national missile defense system, which should put South Koreans at ease. But the future of US homeland defense must share space in future NCG agendas along with nuclear and integrated strategic deterrence more broadly.

—Robert M. Soofer is a senior fellow in the Forward Defense practice of the Atlantic Council’s Scowcroft Center for Strategy and Security, where he leads its Nuclear Strategy Project.

The NCG was a success, even if it didn’t address all of South Korea’s security concerns

The inaugural NCG meeting was a success, highlighting substantial developments in combined efforts to thicken the United States’ nuclear umbrella. First of all, the meeting afforded a visible reaffirmation of the United States’ commitment to provide a full range of US capabilities, including nuclear. Along with reaffirmed words of commitment in the joint readout to “a swift, overwhelming, and decisive response” against “any nuclear attack by North Korea,” the United States and South Korea succeeded in coordinating the first port call of a US nuclear submarine in four decades. 

The NCG meeting was also successful in conveying the seriousness to both the South Korean and US governments in the implementation of the new bilateral consultations. Upgrading the first meeting to be held at deputy-level, South Korean President Yoon Suk Yeol also made a brief appearance at the beginning of the meeting. Reifying the Washington Declaration, the first NCG meeting laid out concrete steps, including the development of security and information sharing protocols, nuclear consultation and communication processes for contingencies, and the development of joint planning, operations, exercises, simulations, trainings, and investment activities, particularly on the execution of South Korea’s conventional support to the United States’ nuclear operations. 

Lastly, the NCG meeting reasserted South Korea’s commitment in nonproliferation. As Kim Tae-hyo, Seoul’s principal deputy national security adviser, stated during the joint press briefing, “There is no need for South Korea to consider separate nuclear armament.”

What the first NCG meeting achieved may not fully address South Korea’s security concerns. Disappointments and criticisms can be swift and easy. Yet, an important caveat here is that the Washington Declaration and implementation of the NCG rest on the conviction of the “importance, necessity, and benefit” of enduring maintenance of the United States’ nuclear umbrella. The implementation of the NCG and strengthening of the United States’ nuclear umbrella have succeeded in taking South Korea’s nuclear path again off the table. The combined efforts derive not from naïveté about an impermeable nuclear umbrella, but from realistic assessments on the risks, if not infeasibility, of South Korea’s nuclear path. 

—Bee Yun Jo is a nonresident senior fellow in the Indo-Pacific Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security and an associate research fellow in the Defense Strategy Division at the Center for Security and Strategy at the Korea Institute for Defense Analyses.

The US and South Korea doubled down on ending the Kim regime if it uses nuclear weapons

A US soldier’s crossing into North Korea and subsequent detainment significantly complicates matters for the US-South Korea alliance and a Korean Peninsula that is experiencing a precarious ratcheting up of tensions. The soldier’s crossing comes amid South Korean and US efforts to strengthen deterrence through its new NCG, and it follows North Korea’s most recent launching of an ICBM. As this situation unfolds, the US-South Korea alliance will have to face the delicate balancing act of strengthening deterrence and assuaging tensions while also hoping to renew dialogue. Notably, despite the NCG and the deployment of the USS Kentucky nuclear submarine being planned for months, media coverage tied the events to North Korea’s missile launch rather than tying alliance actions to the evolution of Pyongyang’s capabilities. Thus, alliance actions pose the risk of being interpreted as retaliatory and escalatory if not properly communicated.

What was also notable about the NCG readout was the alliance’s doubling down on the threat to end the Kim regime in the event of any North Korea nuclear use. This would have to mean that the alliance intends to possibly further escalate a conflict even in the event of North Korean low-yield nuclear use. By making this threat, the alliance restricts its freedom of maneuver to de-escalate a conflict. 

While the US-South Korea alliance at this time likely intends to make good on that threat, it is questionable whether this promise will hold for subsequent US and South Korean administrations. Polarization in both US and South Korean politics make for a questionable trajectory as both countries have pivotal elections in 2024. South Korea’s legislative election in April 2024 has the potential to significantly derail Yoon’s ability to further his foreign policy approach toward North Korea and strengthen the alliance. If the left-leaning Democratic Party of Korea were to, for instance, gain a supermajority (as they did in 2020), then it’s likely that the party will move to thwart Yoon’s approach to North Korea for the remainder of his one-term presidency.

Likewise, the outcome of the US presidential election is far from certain. The election has the potential of leading to another Trump administration or an administration with similar views about alliances. Notably, there has been diminishing support among US Republicans for NATO over the course of Russia’s invasion of Ukraine. This phenomenon will likely further international concerns surrounding the endurance of other US alliance commitments, particularly amid potential conflict escalation scenarios. 

But in the near term, we are likely to see an increasingly recalcitrant North Korea amid US-South Korean efforts to strengthen the alliance. Ahead of the seventieth anniversary of the Korean War armistice on July 27, a robust US-South Korea military exercise schedule, and the 2024 elections in South Korea and the United States, and with the complication of a US citizen now detained in North Korea, Pyongyang is unlikely to be swayed to change course without substantial concessions on the US-South Korea side. Both Seoul and Washington will likely vehemently oppose any such concessions ahead of their elections.

—Jessica Taylor is a nonresident fellow in the Indo-Pacific Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security. Taylor has served in the US Department of Defense in both military and civil service capacities for nearly twenty years.

Would the US trade Los Angeles for Seoul? South Koreans want to know.

The Washington Declaration, which reaffirmed the strength of the US nuclear umbrella covering South Korea, was further reinforced this week with strong signals in the form of the NCG and a rare and highly visible port visit by a US nuclear submarine to South Korea. While these moves were welcome, they did not represent a significant shift in US policy. Rather, they were a more concrete and visible manifestation of existing US extended deterrence policy and related US-South Korea strategic stability consultations. They were aimed as much at building confidence among the South Korean public in the US nuclear deterrent—and ameliorating domestic pressure within South Korea to “go nuclear”—as at deterring North Korean aggression.

With the growth of the North Korean nuclear weapons program, now comprising enough fissile material for an estimated forty-five-to-fifty-five nuclear weapons and an expanding arsenal of missiles, North Korean capability to hold US cities at risk is increasing and the credibility of the US strategic deterrent is concomitantly being corroded. French President Charles de Gaulle famously asked US President John F. Kennedy whether the United States would trade New York for Paris. Similarly, Yoon and the South Korean public must be questioning whether the United States would trade Los Angeles for Seoul. Exercises in confidence building are useful but insufficient to resolve such doubts.

Moreover, deterring a North Korean attack is critical but not the only issue. North Korea’s capacity to sell nuclear materials, missiles, components, or even nuclear weapons poses a grave proliferation threat. Also, as the North Korean nuclear threat continues to grow, so will the pressure on regional countries, including South Korea, to go nuclear themselves. While the Washington Declaration and connected developments are a useful step, they are no substitute for a fundamental review of existing US strategy to actively contain North Korea in the face of the shifting strategic balance of forces on the Korean Peninsula.

—Thomas Cynkin is a nonresident senior fellow in the Indo-Pacific Security Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security and the practice lead, Japan and Northeast Asia, of the Transnational Strategy Group, a global consulting firm operating at the nexus of policy and business.

Watch what impact the NCG will have on Japan

The inaugural NCG meeting focused much on confirming the details of how the group will operate, including the formation of workstreams to make the United States and South Korea more effective in their deterrence and response readiness against the threat posed by North Korea. The meeting was also packaged well to express the United States’ strong bilateral commitment to extended deterrence, timed with the port call by the USS Kentucky to Busan. 

Indeed, there is still much to see regarding the actual effects produced going forward, which pivots on how the United States and South Korea operationalize and execute the workstreams to prove that the NCG is essential, effective, and mutually beneficial. Moreover, there are also questions concerning the group’s sustainability considering the delicate domestic politics—particularly in South Korea, where the strategic debates and security dilemmas are still real. Should the NCG prove to be merely symbolic, this could very well boost the arguments for indigenous nuclear armament in South Korean. 

Another key area to watch going forward will be the impact the NCG has on Japan. While the NCG has to focus on making the bilateral framework effective, the continuously growing nuclear threats in the region and any proven success of the NCG will underscore the need to expand the group to a trilateral framework, or at the very least to establish a separate US-Japan NCG.

—Ryo Hinata-Yamaguchi is a nonresident senior fellow in the Indo-Pacific Security Initiative, an assistant professor at the University of Tokyo, and a research fellow at Pacific Forum.

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In the June 2023 Issue of Longitude, Forward Defense Nonresident Senior Fellow Marco Tantardini published an article on the complexity of recovering manned spacecraft from orbit and landing them on other bodies in the solar system.

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Marco Tantardini

Nonresident Senior Fellow

Forward Defense Scowcroft Center for Strategy and Security

Italy Space

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

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But that wasn’t the case this week. The NATO Summit in Lithuania will be remembered both for the public fireworks over Ukraine’s aspirations for Alliance membership and outcomes that included a breakthrough on Swedish membership, the most detailed and robust defense plans since the Cold War, and unprecedented Group of Seven (G7) defense commitments to Kyiv.

Let’s start with the fireworks, unusual in a consensus-driven Alliance that values decorum and discretion, and end with the historic outcomes.

Tensions began simmering long before the summit among Biden administration officials and other NATO allies—with Ukraine lobbing arguments from the outside—over just how far to go in committing the Alliance to a time-linked invitation and roadmap for Ukraine’s membership.

For the Biden administration, it was a matter of geopolitical prudence to oppose any fixed timeline for an invitation for fear it would draw NATO, and hence the United States, into a direct conflict with Russia. With one eye on the 2024 US presidential election and the other on Russian President Vladimir Putin’s nuclear capabilities, why take the risk, particularly as full Ukrainian membership wasn’t likely to come before the war ended anyway?

For Ukraine’s more impatient supporters—particularly, but not exclusively, those geographically closer to the Russian threat—it was a matter of strategic imperative and moral obligation to draft language that provided more clarity on the pathway and potential timing of a NATO membership invitation than Washington considered acceptable. Several of those supporters had previously been occupied and repressed by Moscow, so they understand the value of NATO security guarantees.

Even if membership itself wouldn’t come for some time, they wanted to demonstrate maximum common cause for a people who miraculously and at enormous human cost are countering Russia’s war and revanchist ambitions.

The behind-the-scenes simmer boiled over when Ukrainian President Volodymyr Zelenskyy, apparently having read a draft of the summit communiqué about to be released, threw a Twitter bomb into the negotiating room.

What he objected to was text at the end of paragraph eleven, which read: “We will be in a position to extend an invitation to Ukraine to join the Alliance when allies agree and conditions are met.”

Zelenskyy shot back before the draft could be released:

“It’s unprecedented and absurd when time frame is not set neither for the invitation nor for Ukraine’s membership. While at the same time vague wording about ‘conditions’ is added even for inviting Ukraine. It seems there is no readiness neither to invite Ukraine to NATO nor to make it a member of the Alliance. This means that a window of opportunity is being left to bargain Ukraine’s membership in NATO in negotiations with Russia. And for Russia, this means motivation to continue its terror. Uncertainty is weakness. And I will openly discuss this at the summit.”

Before long, word spread in Vilnius that at least one ally had “broken silence,” which in NATO-speak means that during an agreed period after the communiqué has been finalized and before it is publicly released, any ally may come back with an objection and reopen negotiations.

Though it’s unclear what transpired next, officials involved in the negotiations described scenes during the summit in which US President Joe Biden and National Security Advisor Jake Sullivan stood over the document and hand-drafted changes. In the end, the US stance on Ukrainian membership proved immovable, even resisting attempts by at least one other ally to at the very least state that it was NATO’s intention to explore ways to invite Ukraine to join the Alliance as soon as the seventy-fifth-anniversary summit in Washington next July.

Given all that, there was more than a little buzz when Biden, in his fiery speech in Vilnius—in which he hailed the “unbroken” Ukrainian people—neglected to mention or encourage their NATO  membership aspirations. 

Even after NATO made the communiqué public, tensions still simmered.

At the NATO Public Forum, (a side event for the summit that the Atlantic Council co-hosted), Daria Kaleniuk, a Ukrainian anti-corruption activist, provocatively asked Sullivan how to explain to her young son, who is sleeping in their corridor due to air raids, that Biden isn’t ready to accept Ukraine into NATO. She suggested it might be “because he is afraid of Russia, afraid of Russia losing, afraid Ukraine winning,” or even suggested, “because there are back-channel negotiations with Russia” that ostensibly had Ukraine’s NATO hopes as a bargaining chip.

Sullivan was warm but firm to his questioner, acknowledging that the world stands in “awe” at the way Ukrainians have made sacrifices with “hell raining down from the skies” around them. At the same time, he scolded Kaleniuk for making “insinuations” that were “unfounded and unjustified” and asked that those insinuations “get checked at the door, so that we can talk to one another in goodwill and good faith.”

Beyond that, Sullivan added, “I think the American people do deserve a degree of gratitude” from both the US government and the rest of the world “for their willingness to step up” to provide such plentiful military assistance to Ukraine.

With tensions high, British Defense Minister Ben Wallace hit a similar theme, “providing a slight word of caution” that Ukraine should express more appreciation to its supporters.

When asked by reporters for his response to Wallace, Zelenskyy replied, “he can write to me about how he wants to be thanked.”

Were it not for the fireworks, the world’s focus would have been more singularly on the summit’s results.

Turkish President Recep Tayyip Erdoğan dropped his objections to Sweden’s membership, opening the way for it to join the Alliance. That leaves Putin facing a bigger and more unified NATO, strengthening defense in the Baltic states and the High North.

Real progress also came through a pledge by G7 countries (all in NATO except Japan), although it is not binding, to provide Ukraine “enduring” support—which each country will determine individually—including more defense equipment, increased intelligence sharing, and expanded training, dramatically reducing the likelihood of eroding resolve.

There was plenty more in the NATO Summit communiqué on defense plans, strengthened commitments to defense investment, and deeper global partnerships, particularly with leaders on hand from Australia, New Zealand, Japan, and South Korea; there was also robust language on China and warnings not to provide lethal support to its Russian friends for their Ukraine war.   

By summit’s end, and by the convening of the renamed and reconstituted NATO-Ukraine Council, tempers had calmed some and diplomacy had intervened on the Ukraine issue, though some bad blood will likely linger.

Zelenskyy went home not with a NATO invitation but with family photo-like pictures alongside NATO leaders, as mentioned in my Inflection Points column last week, and a dramatically different tone than his earlier missive, as shown in a video he tweeted from his train ride home to Kyiv:

“We are returning home with a good result for our country and, very importantly, for our warriors… For the first time since independence, we have formed a security foundation for Ukraine on its way to NATO. These are concrete security guarantees that are confirmed by the top seven democracies in the world. Never before have we had such a security foundation, and this is the level of the G7… Very importantly, during these two days of the [NATO] Summit, we have put to rest any doubts and ambiguities about whether Ukraine will be in NATO. It will! For the first time, not only do all the allies agree on this, but a significant majority in the alliance is vigorously pushing for it.”

At a closing session for the NATO Public Forum, I asked Lithuanian Foreign Minister Gabrielius Landsbergis how history would remember the Vilnius summit.

“Strategically, we won,” he said. “We committed ourselves to Ukrainian membership in NATO.” Unlike the 2008 commitment at the Bucharest NATO Summit that had no follow up, Landsbergis said the Alliance and Ukraine this time won’t waste another day, because of the urgency that Putin’s war had placed on everyone.

The Vilnius summit “was not the last stop,” he said. “We have to see it as a bridge. And the next stop is Washington. So, we have a full year. Lots to do…. Washington can actually be even more historic than Vilnius.”

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter @FredKempe.

THE WEEK’S TOP READS

#1 NATO’s promises to Ukraine mark real progress
ECONOMIST

The Economist reports that although NATO allies could have done more at this week’s summit in Vilnius, they dealt a number of blows to Putin that went far beyond Ukraine.

“Putin’s first defeat was over a different expansion of NATO,” the Economist writes. “Turkey’s president, Recep Tayyip Erdoğan, said he is dropping his objections to Sweden’s membership, enabling it to follow its Nordic neighbor, Finland, into the alliance. That will strengthen the Baltic states and the High North, and tie up more of Putin’s resources should he attempt mischief against NATO anywhere along its frontier.”

Further, with increased military assistance from G7 countries, it will become harder for Putin to maintain his resolve. “The G7 members promise that this will be an ‘enduring’ commitment, and that each country will, individually, craft its own security guarantees for Ukraine that will give it a ‘sustainable force capable of defending Ukraine now and deterring Russian aggression in the future.’… This matters because it helps disabuse Putin and his elites of the belief that Western resolve will crumble if only Russia clings on.”

Although delaying Ukraine’s NATO membership process until after the war will likely give Russia incentive to prolong the war, the Economist argues, the additional military assistance should prevent that from happening. “That is where the summit made real progress.” Read more →

#2 The ‘Israel Model’ Won’t Work for Ukraine
Eliot A. Cohen | ATLANTIC

In this important Atlantic piece, Eliot Cohen argues that the “Israel model”—in which the West would arm Ukraine to the teeth to guarantee its ability to defeat any credible military threat—is a poor policy choice based on flawed reasoning.

Cohen writes that the main difference between 1973 Israel and 2023 Ukraine is that Israel had a military edge over its neighbors, which Ukraine currently lacks over Russia. “Israel staged bombing raids against targets deep in Syria and Egypt, including their capitals, from the 1960s forward, and unlike the Ukrainian drones flying to Moscow, these were not mere symbolic strikes. The Six Day War, in 1967, was an overwhelming Israeli victory, which involved the annihilation of its neighbors’ air forces and the advance of Israeli armor and infantry across the de facto 1949 border. The 1973 war similarly ended with Israeli forces within artillery range of Damascus and on the verge of destroying half the Egyptian force that had crossed the Suez Canal.”

Most provocatively, Cohen writes about the difference between an Israel with a nuclear arsenal and a Ukraine that gave up its nuclear weapons in 1994 in a deal under which Moscow promised to safeguard its sovereignty and security. “Unless, of course,” Cohen warns in his conclusion, “[Biden] prefers to be the father of the Ukrainian atom bomb.” Read more →

#3 Russia’s Nuclear Option Hangs Over Ukraine and NATO
Robbie Gramer | FOREIGN POLICY

To gain an understanding of how fears of nuclear conflict played into this week’s decision, read Robbie Gramer in Foreign Policy.

“The nuclear question is an existential one for the alliance,” he writes, “one that’s driven Washington’s calculations on what military aid to send to Ukraine and when, and it has also influenced the debate on when and how to allow Ukraine to join the military alliance as a full-fledged member.”

According to Gramer, US and allied officials are divided over the validity of Russian threats. “Some US and other NATO defense officials believe there could be an increased risk of Russia launching a limited nuclear strike with a low-yield tactical nuclear weapon to stave off a major battlefield defeat if its forces look to be on the verge of a rout, or if Ukraine appears poised to capture Crimea and large swaths of occupied territory in southern and eastern Ukraine. Others say that Russian President Vladimir Putin’s nuclear saber-rattling won’t go further than that, and bowing to such threats will only embolden Russia to use such ‘nuclear blackmail’ in the future.”

“At the same time, Ukrainian and Western officials also fear that Russia could mount an attack on Ukraine’s Zaporizhzhia nuclear power plant to attempt to trigger a major radiological event, irrespective of whether it launches a nuclear strike—though it’s unclear how successful those efforts would be.” Read more →

#4 Biden Pledges Long-Term Backing for Ukraine, but a U.S. Election Looms
Zolan Kanno-Youngs | NEW YORK TIMES

For insight into the role of US domestic politics on the NATO summit and Biden’s decision making, look no further than Zolan Kanno-Youngs’s reporting in the New York Times.

“Despite Biden’s repeated promises of staying by Ukraine’s side in its war against Russia, questions about the shelf life of support among American people and lawmakers hung over the summit of Western allies,” Kanno-Youngs writes. “Even as the US president was giving a long-term commitment, a group of far-right Republican lawmakers in Washington was pushing legislation that would scale back aid to Ukraine, exposing fractures in the Republican Party and raising doubts about its commitment should it capture the White House next year.”

According to Kanno-Youngs, to sway domestic public opinion to favor providing aid to Ukraine, Biden has framed the war as an existential battle between democracy and autocracy. In Vilnius, Biden was determined to address the doubts about continued US support for Ukraine. “We will not waver,” Biden said. “I mean that. Our commitment to Ukraine will not weaken.” Read more →

#5 Should Ukraine Negotiate with Russia?
Dmytro Natalukha; Alina Polyakova and Daniel Fried; Angela Stent; Samuel Charap | FOREIGN AFFAIRS

In dialogue with Samuel Charap, who previously urged the use of diplomacy as a tool to end the war with Ukraine, Dmytro Natalukha, Alina Polyakova and Daniel Fried (an Atlantic Council distinguished fellow), and Angela Stent argue that negotiations with Russia are bound to fail. Read this multifaceted analysis to understand the pros and cons of negotiation with Russia.

Natalukha claimed that the only way to secure Ukraine’s future is to remove Putin from power. “If the goal is to prevent Russia from threatening democracies around the world, allowing it to reach an armistice with Ukraine won’t do much good,” he writes. “Ukraine and its allies must aim to make Russia less anti-Western. Regardless of what happens at the negotiating table, therefore, Putin cannot remain in power.”

Polyakova and Fried believe that although negotiation will most likely happen, the battlefield is Ukraine’s best position from which to win the war: “A military stalemate is indeed possible. And at some point, negotiations with Russia will be needed to end this war. But Ukraine should start negotiating only when it is in the strongest possible position; it should not be rushed into talks when Russia shows no interest in any settlement terms other than Ukraine’s surrender. Starting negotiations now would mean accepting Putin’s maximalist terms. If Russia suffers further setbacks on the battlefield, however, talks could proceed from a better starting place.”

Polyakova and Fried continue, “The most important point, which Ukraine’s allies agree on, is that Ukraine must define the right moment for negotiations. That may or may not be when all of Ukraine’s territory is liberated. The key is for Ukraine to maintain flexibility in its decisions about its territory and the path toward a just peace.” Read more →

Atlantic Council top reads

New Atlanticist Jul 11, 2023

Experts react: What NATO’s Vilnius summit means for Ukraine and the Alliance’s future

By Atlantic Council experts

Atlantic Council experts decode the summit’s implications for Ukraine’s membership, NATO’s approach to China, and more.

Belarus Central Europe

UkraineAlert Jul 11, 2023

NATO summit leaves Ukrainians frustrated

By Peter Dickinson

The 2023 NATO summit failed to deliver on hopes for a clear commitment on future Ukrainian membership, leaving many in Ukraine deeply frustrated by the apparent lack of urgency among the country’s allies, writes Peter Dickinson.

Conflict Corruption

New Atlanticist Jul 10, 2023

Experts react: Erdogan just agreed to support Sweden’s NATO bid. What does that mean for Turkey, Sweden, and the Alliance?

By Atlantic Council experts

Atlantic Council experts weigh in on what’s behind this dramatic and consequential turnabout from Erdoğan and what to expect next.

Europe & Eurasia European Union

The post Dispatch from Vilnius: Inside a NATO Summit of high drama on Ukraine—and historic opportunity appeared first on Atlantic Council.

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The post Graham quoted in Nikkei on US-China trade tensions appeared first on Atlantic Council.

The war in Ukraine exposed bluntly once more the appalling state of European defense capabilities—as seen in former Yugoslav republics in the late 1990s—and how Europe still depends on the United States to fight a war on its own continent.

Under US President Joe Biden, Washington has demonstrated its indispensability to NATO and European security at the very moment of the Russian invasion of Ukraine. But the present situation is unsustainable.

To stay safe against Russian and other aggression in the future, Europe will need a convincing conventional and nuclear deterrent of its own, and Germany will be key. The invasion of February 24, 2022 opened many eyes, but the biggest awakening took place in Germany.

Moscow’s assault on a European neighbor caused an epiphany in Berlin’s decades-long, complacent foreign and energy policy, as well as in its free-riding security and defense posture under Washington’s nuclear and NATO’s conventional umbrella. Chancellor Olaf Scholz understood the urgency for his country as he declared in his famous speech a Zeitenwende (time for change) for Germany’s foreign, security, defense, and energy policy, which was well received in Europe and the United States. Scholz pledged a one hundred billion euro special fund to rebuild the German armed forces that had decayed under the sixteen-year-long chancellorship of his predecessor, Angela Merkel. Berlin’s selfish post-1989 mantra—essentially “make peace without spending money for weapons”—became history almost overnight.

Today Germany is one of Ukraine’s biggest weapons providers after the United States. It is about to increase its defense budget of fifty-one billion euros to fifty-three billion euros. But Berlin needs to understand that the moment of truth has arrived for the Euro-Atlantic community of democracies.

After the US presidential election next year—no matter who makes it into the White House—Europe will need its own capabilities to defend European territory and borders from an outside aggressor. If Donald Trump returns to the White House or another Republican president takes office, we could see a shrinking of defense support for NATO, as the US military may concentrate its forces toward Asia and the Indo-Pacific.

Former US Secretary of Defense Jim Mattis admitted during his confirmation hearing in 2017 that the US military is not strong enough to meet the challenges it faces around the globe. Or in the words of Elbridge A. Colby, former deputy assistant secretary of defense, “if we have to leave Europe exposed, so be it… Asia is more important than Europe.”

Therefore, to make Europe safe for peace and democracy in the future, NATO needs to strengthen its conventional and nuclear pillars. Russia’s aggression today against Ukraine and tomorrow perhaps against Poland or the Baltic states makes the Europeanization of NATO imperative. In the words of former US Secretary of State Henry Kissinger: “Europe has to play a special role in American thinking… But I could understand in a modified arrangement that Europe could play a more important role in some areas. I am not offended by autonomy in my definition of it.”

For the past twenty years, US presidents from both the Democratic and Republican parties have been asking European allies to take burden-sharing seriously. Here are four ways to start: 

1. It is imperative to strengthen the competitiveness and innovativeness of Europe’s military technological and industrial complex and to harmonize its procurement base. Buying off-the-shelf US equipment can go hand-in-hand with buying European equipment—and this should apply to all NATO members.
2. Not only must NATO forces be interoperable—allowing them to use each other’s platforms seamlessly while fighting alongside each other—but this should extend to potential future NATO members like Ukraine, Moldova, and Georgia. 
3. For the United Kingdom, France, and Germany, a permanent increase of their defense spending to beyond the NATO target of 2 percent of gross domestic product should be seen as an obligation. Emerging from the Vilnius summit, where a new push is under way to get all allies beyond 2 percent, it is the responsibility of the biggest European economies to upgrade their conventional forces in order to protect European soil—when Washington might be too busy in Asia.
4. Europe needs a credible nuclear deterrent of its own, under NATO command. Only a trilateral British, French, and German nuclear umbrella, combined with a US umbrella, all under the command and control of the Supreme Allied Commander Europe (SACEUR) will be a credible deterrent for Russia. This would require that France and Germany find a solution for equipping their joint Future Combat Air System—a new generation of advanced fighter jets—and the German F-35 dual capable aircraft with French nuclear weapons. Germany would not have its own nuclear weapons, so this arrangement would not violate the Nuclear Non-Proliferation Treaty. The NATO command structure must be tailored in such a way that Europe can fight a conflict in which neither Americans nor Canadians may wish to get involved, while taking advantage of NATO commands and systems. To this end the deputy SACEUR has to be European, and a headquarters-based Combined Joint Task Force must serve as his or her operational command.

Today it is clear that the main threat to European security does not come from Russia’s conventional forces, but from its tactical nuclear weapons and its sophisticated hybrid warfare. For Germany to be a full and equally strong part of a new European pillar of NATO, it needs to break the ultimate taboo and accept that a wider shared European nuclear deterrence should now be part of Berlin’s Zeitenwende defense thinking.

Of course, an outcry will arise: A stronger nuclear role for Germany will sound unthinkable to many. But so was Russia’s full-scale invasion and war in Europe only last year.

There have been strategic debates in Bonn since the 1950s about whether the Article 5 joint defense pact would really be implemented by Washington in case of an attack—whether a US president would sacrifice New York for Berlin or New Orleans for Munich. Today 62 percent of Germans are in favor of spending more money to modernize the Bundeswehr properly so that it can defend its country. Meanwhile, 47 percent of Germans agree with their government’s heavy support of the Ukrainian military—with another 16 percent wanting it to go further.

This, then, is the moment to start a debate in Berlin, Paris, and London about a trilateral French, British, and German nuclear European Defense Initiative, and the responsibility of those three powers to protect Europe if Article 5 is invoked in a worst-case-scenario.

Adm. Jacques Lanxade was joint chief of staff of the French Armed Forces and served as a defense advisor to French President Francois Mitterrand.

Denis MacShane is a former UK minister of Europe and a former UK delegate to the Parliamentary Assembly of NATO.

Margarita Mathiopoulos is a defense expert and professor emerita of US foreign policy and international security at Potsdam University. She also served as a foreign policy advisor to the former chairman of the German Free Democratic Party, Guido Westerwelle.

Gen. Klaus Naumann served as chairman of the military committee of NATO and joint chief of staff of the German Armed Forces. 

A German language version of this article first appeared in Handelsblatt. It is printed here with the authors’ and publisher’s permission.

The post Europe needs a nuclear deterrent of its own appeared first on Atlantic Council.

It’s a fast track with a slow start. NATO leaders meeting in Vilnius today released their summit communiqué, in which they said that Ukraine no longer needs to complete a membership action plan to join the Alliance—but that an invitation would only be extended “when allies agree and conditions are met.” In the meantime, the allies pledged to work closely with Kyiv through a newly established NATO-Ukraine Council. With Ukrainian President Volodymyr Zelenskyy’s biggest request—a timeline for membership—unfulfilled, have allies truly bolstered Ukraine’s security as it battles against Russia’s full-scale invasion? What else did the Alliance agree to regarding Russia and Ukraine? Our experts, who are all at the center of the action in Vilnius, decode the communiqué.

• John E. Herbst (@JohnEdHerbst): Senior director of the Atlantic Council’s Eurasia Center and former US ambassador to Ukraine
• Rachel Rizzo (@RachelRizzo): Nonresident senior fellow at the Europe Center
• Christopher Skaluba: Director of the Scowcroft Center’s Transatlantic Security Initiative and former principal director for European and NATO policy at the US Defense Department

Roadmap or roadblock?

• John tells us that the communiqué’s conditional language and lack of timeline amounts to “not much movement beyond the 2008 Bucharest NATO Summit language noting that Ukraine would eventually be a member.”
• That’s remarkable given that the 2008 language, which also encompassed prospective Georgian membership, “has been derided for years for placing both Georgia and Ukraine in the worst strategic position possible,” Rachel observes, with multiple Russian invasions of both countries occurring in the intervening years. “The problem with vague language like this is that it kicks the can down the road.”
• “Inside the geeky NATO universe, the upgrading of the NATO-Ukraine Commission to Council status and the removal of formal membership action plan requirements for Ukraine are significant developments,” Chris adds. “But neither packs a political punch or will be viewed as real progress on the membership question.”
• There was also no mention in the communiqué of security guarantees for Ukraine “that were broadly promised in the run-up to the summit,” Chris notes. “The combination of these things makes for an underwhelming package for Ukraine, though some small hope remains for better outcomes at tomorrow’s inaugural NATO-Ukraine Council meeting.”

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DC drama

• John relays that the communiqué’s release was delayed due to the “clear disagreement” between the United States and Germany on one side, and Nordic, Eastern European, and some Western European allies on the other with regard to Ukraine’s membership. Both sides had to bend a bit to get to the final consensus language. “The end result was not quite inspiring,” he says.
• But inspiration could always strike: The Alliance will celebrate its seventy-fifth anniversary next year with a Washington summit, which offers US President Joe Biden “a chance to establish a legacy as an outstanding national security president,” John argues. To make that happen, he adds, Biden will need to “provide Ukraine all the weapons it needs to defeat the Kremlin on the battlefield” and “move beyond caution to hasten the anchoring of Ukraine in NATO.”
• Rachel fears more disappointment ahead, whether at the Washington summit or ten years from now, when “NATO allies will come face to face with the undeniable truth that all allies might not ever be on the same page regarding Ukraine’s NATO membership. That’s a tough pill for many to swallow, but it might just be reality.” 

Defensible moves

• John welcomed the communiqué’s labeling of Russia as “the most significant and direct threat” to the Alliance. “This is an important reminder that US and NATO support for Ukraine is not philanthropy, but the smart way to defend our vital interests,” he explains.
• Chris points out that on the positive side, the Vilnius gathering will be remembered as another “enlargement summit” because of Monday’s deal with Turkey paving the way for Sweden’s accession.
• Flying under the radar, the allies also agreed to adopt “some four thousand pages of classified regional plans for the defense of NATO territory,” Chris says. This move “completes a shift, started in 2014 after Russia’s invasion of Crimea, to a deterrence-by-denial strategy absent since the waning days of the Cold War. Heady stuff.”

The post The NATO Summit’s underwhelming support for Ukraine appeared first on Atlantic Council.

Below, our experts decode all the goings-on in Vilnius—and what they mean for Kyiv’s path to NATO membership, the war in Ukraine, Sweden’s forthcoming accession, the Alliance’s growing focus on China, and more.

Click to jump to an expert analysis:

Reactions from Wednesday, July 12

John Herbst: A step forward for Ukraine’s security, but not a large one

Anca Agachi: A mixed bag, but with signs of quiet progress

Daniel Fried: The G7 Joint Statement is no Article 5, but it’s a start

Hans Binnendijk: Vilnius was a bridge to next year’s NATO summit in Washington

Phillip Cornell: Energy issues took a backseat in the Vilnius communiqué, but loom large in NATO’s future

Reactions from Tuesday, July 11

John Herbst: An uninspiring result for Ukraine

Christopher Skaluba: ‘Ambiguous’ ‘head-scratching and disappointing’ language about Ukraine’s NATO membership 

Daniel Fried: Allies make clear Ukraine is firmly in the transatlantic family 

Shelby Magid: Calling out the ‘most significant and direct threat’—and its accomplice

Rich Outzen: A clear-eyed snapshot that meets the geopolitical moment

Andrew D’Anieri: The NATO-Ukraine Council is a net positive step, but also the ‘bare minimum’

Rachel Rizzo: Summit statement shows continued disagreement about Ukraine ‘at the highest levels’ of NATO

David O. Shullman: The communiqué confirms NATO’s growing attention to Indo-Pacific security

Ian Brzezinski: The Biden administration was ‘largely alone’ in blocking Ukraine’s roadmap to membership

A step forward for Ukraine’s security, but not a large one

There is significant overlap among the members of the G7, NATO, and the European Union (EU). Four of the G7 nations are in the EU and six are in NATO. It is therefore no surprise that the general approach of the three organizations to Moscow’s war on Ukraine share similar characteristics. All three organizations have actively supported Ukraine since Moscow’s aggression began in February of 2014, and much more so when it intensified in February of 2022. All assert Ukraine’s right to enjoy the peace and stability that should be provided by the liberal international order. With the United States in the lead in NATO and the G7, both organizations have provided significant support to Ukraine, ensuring that Russian President Vladimir Putin could not achieve his goal of establishing effective political control in the country.  

At the same time, again with the United States’ decisive influence, the G7, like NATO, has avoided steps that might seem overly provocative to Moscow—a clear call for Ukraine’s victory against Moscow’s aggression or decisive steps that would lead to a faster Ukrainian victory. So the best way to look at the Joint Declaration of Support for Ukraine issued by the G7 on July 12 in conjunction with the NATO Summit in Vilnius is as a mostly US-influenced two-step. 

The NATO Summit produced an uninspiring communiqué on the Ukraine-NATO relationship that moved only slightly beyond the language of the 2008 Bucharest NATO Summit. The G7 Declaration was timed to the NATO Summit because the question of Ukraine joining NATO is linked with the issue of security guarantees. Both are meant to address the difficult question of how an independent Ukraine can live in peace and security alongside a hostile Russia. So it is no surprise that the G7 statement is a step forward toward enhancing Ukraine’s security but not a very large one. 

The declaration affirmatively states Ukraine’s right to choose its own course, join the West, and be free from intimidation and aggression. But it does not offer collective G7 action that might provide greater protection against future Kremlin provocations; instead, it encourages bilateral arrangements between Ukraine and individual G7 states. It places emphasis on the provision of weapons to Ukraine to make it a less appetizing target for a predatory Kremlin. This is a reasonable concept, but less effective than an actual guarantee by the G7 countries to respond forcefully to future Kremlin aggression. Yet even this step is undermined by the fact that all the G7 countries—with the possible exceptions of the United Kingdom and, perhaps now, France—have been reluctant to send Ukraine the more advanced weapons it needs to deliver that decisive blow to Russian forces on its territory.

Russian commentators have dismissed the NATO communiqué as a disappointment for Kyiv, but expressed some dissatisfaction with the G7 Declaration. Their real ire, though, is aimed at Paris, after the French decision to send SCALP long-range missiles to Ukraine. This underscores France’s differences with Washington, which is still unwilling to send Army Tactical Missile Systems (ATACMS). French President Emmanuel Macron’s boldness is welcome, but no substitute for strong US leadership.

—John Herbst is senior director of the Atlantic Council’s Eurasia Center. He served as US ambassador to Ukraine from 2003 to 2006.

A mixed bag, but with signs of quiet progress

Overall, the Vilnius summit stuck the landing, and to continue the metaphor, the gymnastic feat was about as tough as it gets. This was indeed a summit of unity, as US President Joe Biden had hoped, and the breakthrough regarding Sweden’s NATO accession especially contributed to that sense. The Alliance also successfully positioned itself as a global actor that understands that the security environment has fundamentally changed, and the European and Indo-Pacific theaters are inextricably linked. The attendance of the Asia-Pacific 4 (Australia, Japan, South Korea, and New Zealand) and language in the communiqué elevating the role of partners is crucial in this regard.

However, the summit’s results were mixed on a range of other issues. Despite high hopes and a strong moral argument, Ukraine was not offered the clear path and timeline it was hoping for to join the Alliance, even as its future in the Euro-Atlantic family was reconfirmed. This outcome, while not surprising, was also likely the best achievable outcome at the moment given Allied differences. This hints at a tough road for NATO in making the ambitious progress necessary by 2024, especially if Ukrainian battlefield advances slow down. Eastern flank reinforcements to brigade-level will only happen “where and when required,” and the language on China was modest in advancing proposals for action, as it was more intent on defining the challenge Beijing poses. The Alliance generally make the most important progress quietly, and here is where I saw encouraging signs: the focus on resilience and securing critical infrastructure; important mentions of Allied enablement and sustainment; and cooperation with the private sector and defense industry to deblock defense supplies.

While kicking the can down the road offers some time, Allies need to start to work with aplomb now to deliver. If anything, the NATO Summit in Washington in 2024 will be an even higher order to rise to—morally and strategically.

—Anca Agachi is an associate director and resident fellow for Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security.

The G7 Joint Statement is no Article 5, but it’s a start

The G7 Joint Statement on Ukraine is out. It’s no Article 5 security guarantee. It’s a framework for negotiations of bilateral and G7 arrangements with Ukraine to provide military and economic assistance, as well as unspecified security commitments for that country. It includes a promise of consultations with Ukraine in case of a future Russian armed attack that could generate military and other forms of support. For its part, Ukraine commits in the statement to continue its democratic and rule of law transformation, as well as its military reforms. Notably, the statement makes clear that it is no substitute for NATO membership but is intended to help Ukraine while it pursues that goal.

Cynics can make a meal of the statement. It provides little beyond what G7 countries are already doing. But there is another way to look at it. The big strategic question that NATO, the G7, and the United States have faced is whether Ukraine is part of the transatlantic and European family and its institutions or whether it is part of a Kremlin sphere of domination. The Kremlin claims Ukraine as its own.There are many in Europe and the United States who tacitly (or overtly) agree and would cut a dirty deal with Moscow to that end.

Happily, that’s not where NATO and the G7 have come out. The NATO communiqué’s language on Ukraine could have been stronger and the G7 statement is no security guarantee. But they both rest on the premise that Ukraine is part of the European and transatlantic family. The details of how and when have yet to be worked out. The goal is clear: NATO membership for Ukraine. The G7 statement can serve as scaffolding for Ukraine while it works to get there. 

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

Vilnius was a bridge to next year’s NATO summit in Washington

The NATO Summit in Vilnius was a success. But its success was limited, and it will be seen more as a bridging mechanism between last year’s Madrid summit and next year’s Washington summit. At Madrid, the allies agreed on the nature of the new threats and challenges emanating from both Russia and China. Madrid’s new Strategic Concept refocused the Alliance. 

Vilnius was to be an implementation summit. And it was. It recorded progress in multiple areas, from enhanced deterrence to hybrid war to climate change. But it stopped short on several key issues like Ukraine’s membership, NATO’s role in the Indo-Pacific, and managing the nuclear weapons threat posed by Russia and, increasingly, China.

The Vilnius summit took place in the midst of Europe’s most destructive war in nearly eight decades and a US effort to rebalance its relationship with China. This resulted in a degree of caution. Unity formed around lowest common denominator solutions. During the coming year between Vilnius and Washington, the bridge created this week will hopefully be strengthened enough to bear the weight that the Alliance will need to carry next year.

The most successful element of the Vilnius summit was enhancing NATO deterrence along its front line with Russia, from the High North to the Mediterranean Sea. With Finland in and Sweden soon to be in, there is a solid line of defense against Russian aggression. There is no clearer evidence of Russia’s strategic failure. NATO’s New Force Model, agreed upon last year, will provide clarity for nations with regard to their specific wartime responsibilities and incentives to meet NATO’s 2 percent of gross domestic product defense spending floor. NATO’s forward presence in eight front line states needs further strengthening to include a continuous brigade-level presence in each. And the readiness and mobility initiatives need further attention.

The greatest disappointment at Vilnius was the inability to provide a more concrete path for Ukrainian membership after the war ends. But cautious steps were taken. The NATO-Ukraine Commission became a Council, giving Ukraine a stronger voice in NATO political affairs. The Council will be used to plan for future Ukrainian membership, which was again solemnly committed to “when allies agree and conditions are met.” This shortfall for Kyiv was somewhat offset by the G7 joint declaration of support for Ukraine, which pledges additional long-term security commitments and arrangements. Hopefully by the Washington summit, that path can be paved with more concrete.

 —Hans Binnendijk is a distinguished fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security.

Energy issues took a backseat in Vilnius communiqué, but loom large in NATO’s future

While the debate over membership (delayed for Ukraine, confirmed for Sweden) dominated the last-minute negotiations over the NATO Summit communiqué, the opening bulk of the document itself is rightly dedicated to reaffirming the traditional and newly relevant core tenets of NATO’s existence—collective defense, nuclear deterrence, and the production and logistics to achieve them. But about two-thirds of the way down, the communiqué turns to how the Euro-Atlantic security environment has shifted. 

The war in Ukraine has reaffirmed that “emerging security challenges” (in NATO parlance) have arrived, from the weaponization of energy to the widespread “digitalization” of warfare and the importance of resilience. 

Indeed, energy security and climate change are gaining renewed importance for the Alliance. Climate security issues are a personal priority of the secretary general, and a changing energy economy means that the pipeline politics of yesterday will look simple compared to the complex security implications of integrated power systems, critical digital infrastructure, supply chains for key inputs to transition, and the like. And while NATO wades into the tech innovation space with its own acceleration fund (DIANA), it has yet to grasp the power of military procurement for demonstrating, scaling, and standardizing technologies that will be key to mitigating emissions in the civilian space while also boosting military effectiveness. Meanwhile the energy transition itself will be a messy process, with pockets of volatility and economic mismatches that could directly impact political stability, popular support for a sustainable transition, and strategic relations.

The Vilnius summit is a turning point for many reasons, but perhaps the most fundamental for NATO as an institution is its shift from an internally focused bureaucracy with declining budgets fighting to justify its existence in the post-Cold War world, to one compelled to adopt a growth and ambition mentality. Where before it was simpler to ring-fence NATO’s military mission, concerns about climate change and strategic competition are imposing policy-driven global economic realignments. To fulfill its ambitions for leadership in that new environment, NATO needs the competence and reach to provide important security-related input to key decisions about infrastructure investment and managing new technology—and it needs to be convinced of its own relevance in those spaces.

—Phillip Cornell is a principal at Economist Impact and a nonresident senior fellow at the Atlantic Council Global Energy Center.

An uninspiring result for Ukraine

Talk about the eleventh hour! The NATO Summit communiqué was finally released at approximately 6:40 p.m. in Vilnius, rather late for a summit document. There was a good reason for this: clear disagreement between a large number of East European, Nordic, and some Western European allies on the one side and the United States and Germany on the other about how forthcoming the Alliance should be about Ukraine’s eventual membership in NATO. While the ad hoc coalition wanted clarity in hastening Ukraine’s membership, Washington and, to a lesser extent, Berlin were cautious. Given the weight Washington enjoys in NATO deliberations, this meant that the much larger number of allies could not get their preference. But given the importance of NATO unity, this meant that the United States and Germany had to move beyond their original position. 

The end result was not quite inspiring. The communiqué notes that Ukraine no longer needs to meet a Membership Action Plan, and the NATO-Ukraine Commission will become a NATO Ukraine Council: small steps in the right direction. On the crucial membership issue, the communiqué states, “the Alliance will support Ukraine in making these reforms on its path towards future membership. We will be in a position to extend an invitation to Ukraine to join the Alliance when Allies agree and conditions are met.” This is not much movement beyond the 2008 Bucharest NATO Summit language noting that Ukraine would eventually be a member.  

It was no surprise that a few hours before the communiqué appeared, Ukrainian President Volodymyr Zelenskyy tweeted his dissatisfaction: “It’s unprecedented and absurd when [a] time frame is not set neither for the invitation nor for Ukraine’s membership. While at the same time vague wording about ‘conditions’ is added even for inviting Ukraine.” This is somewhat sharp, but perhaps understandable from a man whose country is facing an aggression designed to destroy “Ukrainianness.”

While this denouement does not add luster to the Vilnius summit, there are other developments that make this a historic occasion. The main thing, of course, is the admission of Finland and Sweden to the Alliance. This greatly strengthens NATO security in the north. But also important is NATO finally recognizing  that  “the Russian Federation is the most significant and direct threat to Allies’ security and to peace and stability in the Euro-Atlantic area.” This is an important reminder that US and NATO support for Ukraine is not philanthropy, but the smart way to defend our vital interests. The communiqué also directly addresses the Belarus problem: “Belarus’ support has been instrumental as it continues to provide its territory and infrastructure to allow Russian forces to attack Ukraine and sustain Russia’s aggression. In particular Belarus, but also Iran, must end their complicity with Russia and return to compliance with international law.”  

These two items portend a further strengthening of NATO policy against the Kremlin threat and in support of Ukraine. Vilnius also foreshadows what is to come in NATO dynamics and policy. The seventy-fifth anniversary of the Alliance will be celebrated at the NATO Summit next year in Washington DC. That event will give US President Joe Biden a chance to establish a legacy as an outstanding national security president. For that to occur, he will need to listen closely to the United States’ newly active East European allies and 1) provide Ukraine all the weapons it needs to defeat the Kremlin on the battlefield and 2) move beyond caution to hasten the anchoring of Ukraine in NATO.

—John Herbst is senior director of the Atlantic Council’s Eurasia Center. He served as US ambassador to Ukraine from 2003 to 2006.

‘Ambiguous’ ‘head-scratching and disappointing’ language about Ukraine’s NATO membership 

The Vilnius summit is likely to be viewed as a landmark summit for two things that happened and two things that didn’t.

What did happen: The pending agreement by Turkey to ratify Sweden’s membership application will soon add a thirty-second ally to NATO’s ranks, making Vilnius, like Madrid before it, an enlargement summit. That every littoral Baltic Sea state, besides Russia, will be a member of the Alliance is a significant development for NATO’s defense of its northeastern flank. To that end, the adoption of some four thousand pages of classified regional plans for defense of NATO territory completes a shift, started in 2014 after Russia’s invasion of Crimea, to a deterrence-by-denial strategy absent since the waning days of the Cold War.

Missing from the Vilnius communiqué, however, is any clear pathway for Ukraine’s membership. Inside the geeky NATO universe, the upgrading of the NATO-Ukraine Commission to “Council” status and the removal of formal membership action plan requirements for Ukraine are significant developments. But neither packs a political punch, nor will either move be viewed as real progress on the membership question. In fact, communiqué language stating “we will be in a position to extend an invitation to Ukraine to join the Alliance when allies agree and conditions are met” is as ambiguous as the infamous Bucharest statement from 2008 promising that Ukraine “will become” a member of NATO. It is a head-scratching and disappointing formulation. Moreover, the bilateral security guarantees that were broadly promised in the runup to the summit were missing from the final statement. The combination of these things makes for an underwhelming package for Ukraine, though some small hope remains for better outcomes at tomorrow’s inaugural NATO-Ukraine Council meeting.

—Christopher Skaluba is the director of the Scowcroft Center’s Transatlantic Security Initiative and former principal director for European and NATO policy at the US Defense Department.

Allies make clear Ukraine is firmly in the transatlantic family 

It might have and should have been stronger. Nevertheless, the NATO communiqué language on Ukraine’s accession to NATO puts Ukraine within, and not outside, the transatlantic family. The “when” and “how” of Ukraine’s accession to NATO have yet to be worked out but, critically, the Vilnius summit has decided the “whether” of Ukraine’s NATO membership in the affirmative–something that the 2008 Bucharest summit did only at a high level of generality. “We will be in a position to extend an invitation to Ukraine to join the Alliance when allies agree and conditions are met” is the key sentence from today’s communiqué. It’s weakened by the gratuitous qualifier “we will be in a position to” rather than a straightforward “we will extend an invitation.” Still, this offer—any offer—of an invitation to Ukraine is a step forward, and a big one compared to where the United States and most NATO member governments were even a few months ago.

Less noticed (and less debated) was the communiqué text that makes clear, without weakening qualifiers, that “we do not and will never recognize Russia’s illegal and illegitimate annexations, including Crimea.” That language, though it reaffirms long-held positions, helps kill the temptation by some to push Ukraine into surrendering its territory in exchange for a dubious “peace” on Putin’s terms.

While NATO has now set out the goal—Ukraine in the Alliance—much depends on continuing to provide robust military support to Ukraine to help it fight back, and win, on the battlefield. Paragraph twelve of the communiqué notes that allies at the summit agreed on a “substantial package of expanded political and practical support” for Ukraine. It doesn’t provide details, but hopefully they will be announced soon, either by NATO or separately by allies.

Zelenskyy and a number of NATO allies have pushed hard (and pushed the Biden administration) to get the most from this summit. They were right to do so. Now they need to consolidate their gains and prepare next steps, including for next year’s NATO Summit in Washington DC.

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

Calling out the ‘most significant and direct threat’—and its accomplice

The Vilnius summit communiqué rightly places the Russian Federation as the most significant and direct threat to allies’ security, peace, and stability in the Euro-Atlantic area due to Moscow’s illegal war of aggression in Ukraine, terrorism, war crimes, and horrific violations of international law and norms.

Just as Russia deserves to be so centrally acknowledged for its role as the critical threat to Euro-Atlantic security, Belarus deserves to be right beside it. Any disregard of the role Belarus plays as a threat to regional security and an accomplice to the unprovoked war in Ukraine would be a mistake. NATO smartly recognized the threat from Belarus, condemning Belarus’s instrumental support to the Russian war effort by allowing its territory and infrastructure to be used by Russian forces for attacks into Ukraine.

While the communiqué notes Belarus’s complicity in this aggression, it’s critical to remember these crimes are committed and abetted by the illegitimate regime of Alyaksandr Lukashenka. The dictator, desperately clinging to power, has driven Belarus deeper into the Kremlin’s clutches. NATO’s firm declaration of concern for the situation in Belarus is in part due to Lukashenka deepening the military integration between Russia and Belarus, potentially allowing the deployment of “so-called private military companies” to Belarus (the Wagner Group), as well as (perhaps too mildly put) “malign activities” without respect to human rights, fundamental freedoms, and international law; the Alliance’s declarations are an important signal and sign of hope that Belarus will not be forgotten in the international agenda.

While it is good to see the declaration about threats within Belarus itself, what will surely frustrate many in the democratic forces (along with their supporters), is that there is no acknowledgement that these actions are taken by an illegitimate regime, nor mention of the democratic forces rallying against these actions, against the war, and against any deployment of Russian nuclear weapons and nuclear-capable systems on Belarusian territory.

While the communiqué’s comments on Belarus could have been stronger, there is hope NATO leaders and experts in Vilnius have listened in on conversations featuring the democratically elected leader of Belarus and Lukashenka’s rival in the widely disputed 2020 election, Sviatlana Tsikhanouskaya, who has been boldly speaking in Vilnius in side-events calling for commitments to Belarus and reminding the world that the Lukashenka regime does not represent the Belarusian people.

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

A clear-eyed snapshot that meets the geopolitical moment

The communiqué presents a clear-eyed snapshot of the Alliance in an era of great power rivalry and strategic competition. Russia receives thorough and excoriating attention as the shatterer of peace and a continuing threat. China is called out for challenging the norms, interests, and security of the Alliance and its members. New and prospective members in the room or at the doorstep (Finland, Sweden, and on a farther horizon, Ukraine) were appropriately hailed, as were Asian partners Japan, Australia, New Zealand, and South Korea. NATO member Turkey will be pleased by paragraphs four and five, which appreciate Turkish support to Sweden’s accession process and mention Ankara’s preferred language on terrorism as a threat “in all its forms and manifestations” to the Alliance. Hard power, conventional deterrence, and readiness are key focal points, though emerging and nontraditional threats are treated as well. Surprisingly, energy security makes an appearance only in paragraph sixty-eight. All in all, though, the document shows energy, focus, and seriousness appropriate to the geopolitical moment.

—Rich Outzen is a nonresident senior fellow at the Atlantic Council IN TURKEY.

The NATO-Ukraine Council is a net positive step, but also the ‘bare minimum’

Much of the conversation immediately ahead of the NATO summit in Vilnius focused on whether the allies would take concrete steps toward Ukraine’s membership in the Alliance. On Sunday, Biden dumped cold water on Ukraine imminently joining NATO, but whispers in expert circles in Washington suggested that an intermediate initiative toward membership might make a splash at Vilnius. In fact, the communiqué itself caused barely a ripple: a new NATO-Ukraine Council that will formalize consultations between Brussels and Kyiv on Ukraine’s “aspirations for membership in NATO.”

A NATO-Ukraine Council is certainly a net positive step toward Ukrainian accession, but the fact that this was the centerpiece of the communiqué suggests it was the bare minimum step upon which allies could agree. The Alliance should have gone further and instead established a defense and deterrence partnership to provide Ukraine lethal aid and training (the renewed Comprehensive Assistance Package will help Ukraine become more interoperable with NATO, but provisions only five hundred million euros for nonlethal aid).

The signers also left open the question of when Ukraine will join the Alliance, writing only that Ukraine will be invited “when allies agree and conditions are met.” This ambiguity may help prevent Russia from blocking specific preconditions to Ukraine’s accession, but it could also create further indignation in Ukraine and in the Baltics if allies continue to disagree on whether Ukraine is “ready” for NATO. 

Pressure will grow on the White House and Western European capitals to elucidate their conditions for Ukraine’s membership, at least in private channels, as Kyiv no doubt campaigns for an invitation at the 2024 NATO summit in Washington DC. 

—Andrew D’Anieri is assistant director at the Atlantic Council’s Eurasia Center.

Summit statement shows continued disagreement about Ukraine ‘at the highest levels’ of NATO

For many, the July 11 communiqué was along the lines of what was expected coming out of the NATO Summit in Vilnius. For others, hope was high that NATO allies would rally around Ukraine and show some clear steps not just in terms of whether the country will eventually join NATO, but exactly how and exactly when. NATO allies didn’t (and couldn’t) go that far, which shows continued disagreement at the highest levels as to Ukraine’s future relationship with the military alliance.

But it’s not all bad news—NATO allies were able to reaffirm their statements in the 2008 communiqué that Ukraine’s future is, indeed, in NATO. The problem with vague language like this is that it kicks the can down the road. The communiqué language basically says that Ukraine can join when all allies agree and when conditions are met. That leaves a lot of room for interpretation. My sense is that in the future—whether it’s in a year at NATO’s seventy-fifth anniversary summit in Washington, or five years from now, or ten—NATO allies will come face to face with the undeniable truth that all allies might not ever be on the same page regarding Ukraine’s NATO membership. That’s a tough pill for many to swallow, but it might just be reality. 

—Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center.

The communiqué confirms NATO’s growing attention to Indo-Pacific security

While the communiqué naturally reflects NATO’s laser focus on the war in Ukraine and the proximate threat from Russia, it also confirms the Alliance’s renewed strength and growing attention to China and the broader Indo-Pacific region.  

Much attention will understandably be paid to the communiqué’s hedging on Ukraine’s eventual NATO membership. But for China, this week’s summit underscores that the war unleashed by its friends in Moscow has single handedly revitalized NATO, which Beijing only recently had viewed (happily) as sinking into irrelevance. This development throws a large wrench into China’s plans to dismantle the US-led alliance network, carve out a sphere of influence in the Indo-Pacific, and transform the rules-based global order.

The document reiterates language in last year’s Strategic Concept on China’s threat to NATO’s “interests, security and values;” “malicious” hybrid and cyber operations; disinformation; and efforts to control key tech sectors, critical minerals, and supply chains. The communiqué also builds on last year’s warnings about China’s “deepening strategic partnership” with Russia to call on Beijing to abstain from all forms of support for Russia’s war against Ukraine—particularly the provision of any lethal aid. 

The call for China to condemn Russia and adhere to the principles of the United Nations Charter—paired with a clear refusal to recognize Russia’s illegal annexations—throws cold water on any hopes that Beijing would be welcomed to facilitate peace negotiations based on Putin’s terms.  

Beijing will be pleased that the document does not include a reference to the opening of a proposed NATO office in Japan, reflecting a lack of consensus on NATO’s role in Asia. But language on the importance of the Indo-Pacific to security in the Euro-Atlantic and specific praise for the contributions of the four Indo-Pacific countries whose leaders are present in Vilnius—Japan, South Korea, Australia, and New Zealand—reflect NATO’s growing recognition that the regions’ fortunes are linked. NATO cannot ignore the threat of war over Taiwan and, as NATO Secretary General Jens Stoltenberg recently put it, “China is watching to see the price Russia pays, or the reward it receives, for its aggression.” 

—David O. Shullman is senior director of the Global China Hub at the Atlantic Council and former US deputy national intelligence officer for East Asia on the National Intelligence Council.

The Biden administration was ‘largely alone’ in blocking Ukraine’s roadmap to membership

NATO fell short of placing Ukraine onto a clear track to Alliance membership, but that cause for membership gained unambiguous momentum at the Vilnius summit. The assertion in the summit communiqué that “Ukraine’s future is in NATO” frustratingly provides no more clarity than the 2008 Bucharest declaration in which NATO first declared Ukraine “will become” a member of NATO. While the Alliance dropped the requirement for Ukraine to jump through the hoops of a membership action plan (MAP)—as was done for the fast-tracked accession of Finland and Sweden—the communiqué states that Ukraine must implement “additional democratic and security sector reforms that are required” which infers an unnecessary de jure MAP.

What we must not overlook or underestimate is the fact that allies brought to the Vilnius summit unprecedented support for Ukraine’s membership aspirations. The warmth with which Zelenskyy was greeted demonstrated how Ukraine is regarded as part of the transtatlantic community. While full allied consensus—a requirement in NATO decision-making—was not achieved, the Biden administration found itself largely alone blocking efforts to provide Ukraine that roadmap to NATO. Even Turkey’s President Recep Tayyip Erdogan asserted that “without a doubt, Ukraine deserves to be in NATO.”  

The key now is to ensure that Ukraine defeats Russia’s invasion quickly and decisively, and to build on the expanded and significant allied support behind Kyiv’s membership aspirations, leveraging the fact that Ukraine today meets the requirements. These are mutually reinforcing goals. Their achievement will make Europe more secure and NATO more powerful. The progress made in Vilnius should make us all the more determined to secure Ukraine’s accession to NATO at the Alliance’s 2024 Washington summit.

—Ian Brzezinski is a senior fellow at the Atlantic Council and a former US deputy assistant secretary of defense for Europe and NATO policy.

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Key to these international aspirations is the US domestic agenda. Expanding access to critical minerals and increasing manufacturing capacity is essential for meeting the Biden administration’s decarbonization targets. Through legislation like the CHIPS and Science Act, the Bipartisan Infrastructure Law, and the Inflation Reduction Act (IRA), Biden has committed to increase domestic mining, processing, and manufacturing operations to boost the US middle class and build economic resilience. Federal policies have created powerful incentives for manufacturers, such as Tesla, Schneider Electric, General Motors, and Ford, to establish manufacturing facilities in North America.

City leaders have taken advantage of recent legislation to deliver economic growth to their communities. The IRA’s incentives for investments in clean energy are prompting the federal government to work closely with US cities to make manufacturing investments that can increase US energy security, reduce emissions, and support domestic manufacturing. Since the signing of the law, companies have  announced 31 new battery manufacturing projects, 96 gigawatts of new clean power to add to the grid, and $210 billion of investments in the electric vehicle (EV) industry, bringing jobs and growth to US cities.

The role of mayors in the clean energy transition

The growing diplomatic power of mayors was on display at the first-ever Cities Summit of the Americas held in Denver in April 2023. The summit fostered conversations on bridging national-level support and community-led action to build robust clean energy supply chains. In Denver, mayors exchanged best practices in taking advantage of recent legislation and establishing clean energy industries. Mayor Tim Kelly of Chattanooga, Tennessee, highlighted workforce development as a central pillar of Chattanooga’s growth in low-carbon industries. Mayor Luis Colosio of Monterrey, Mexico, outlined the importance of overcoming political and regulatory obstacles to usher in major regional projects, like his city’s new Tesla Gigafactory. He also emphasized the need to incorporate community input in municipal investment strategies. 

The summit signaled the administration’s new efforts recognizing cities and city-level decisionmakers as key actors for making progress toward US decarbonization and climate objectives and strengthening ties with like-minded partners across the Western hemisphere. At the summit, the US Department of State also launched a new Cities Forward initiative that aims to strengthen mayoral partnerships by matching US, Latin American, and Caribbean cities to address urban sustainability challenges. Latin America and the Caribbean have abundant mineral resources, and are important allies in the United States’ efforts to establish new clean energy supply chains for products like batteries, solar panels, and EVs. These new initiatives tap into mayors’ dual ability to connect with local constituents and forge international partnerships based on common challenges.

Strengthening partnerships with Latin America and the Caribbean

Regional mayors and officials in Latin America and the Caribbean are crucial partners for ensuring social license to operate given their unique understanding of community concerns and challenges. The region accounts for 35 percent of global production of lithium, 40 percent of copper, and 10 percent of nickel. These resources will play a crucial role in the Western hemisphere’s transition toward renewable energy and electrification and ultimately contributes to global climate objectives.

However, increased mining in Latin America could instigate regional discontent and threaten hemispheric relations if voices of local leaders are not included. In Peru, community backlash against the Chinese-owned Las Bambas copper mine halted production for four hundred days, costing the company $9.5 million per day. In Argentina, protests against a new local mining law led to its swift repeal by a provincial legislature.  Local officials have the convening power to bring communities together to solicit buy-in and leverage opportunities within energy transition supply chains. Peer-to-peer exchanges between mayors like those at the Cities Summit and investment projects such as the Cities Forward initiative can mitigate these challenges by expanding opportunities for cities to reap the benefits of major mining and manufacturing projects.

While individual cities and towns are already stepping up to the plate, national governments need to provide assistance to help cities establish industries across the Americas. Municipalities need workforce development programs to meet the demand from eager investors, standards in environmental, social, and governance (ESG) to attract investment, and resource management to improve their absorptive capacity to accept new projects at scale. By providing greater coordination and resource sharing from both the bottom up and top down, the United States can make progress toward empowering cities and towns to play a role in the clean energy supply chain while benefiting from the industry’s economic growth and opportunities.

Establish technology standards with consultation from local governments 

National policies can be adapted to better suit the needs of local government, but that only happens if local leaders have a seat at the table. The US Government National Standards Strategy for Critical and Emerging Technology released last May calls for new standards to define the development of renewable energy technology, yet includes no mention of perspectives from local governments. The American National Standards Institute (ANSI) should include stakeholders from mayoral and statewide offices to help shape ESG standards for the mining, manufacturing, and producing of critical minerals to ensure that future regulations are strong but not onerous. At an international level, local officials from mining communities should be included in ongoing discussions to set sustainable mining standards in the Americas alongside national governments and the mining industry.   

Establish regional workforce development programs and streamline visa processes

For cities to attract investment and deliver economic benefits for local communities, a trained workforce is required. Technological advancement and increased automation reduce the number of people needed on the assembly line but increases the demand for a highly skilled workforce. For example, US semiconductor companies, buoyed by the CHIPS and Science Act, will have 300,000 unfilled vacancies for skilled engineers by 2030. Beginning with the North America Leaders Summit, the three heads of state should collaborate on establishing North American workforce training programs and streamlined visa processes to create a stronger workforce across the region.

To further promote regional training and information sharing, the Unit for City and State Diplomacy at the US Department of State should organize mayoral convenings on the sidelines of major energy conferences across the region. The Caribbean Renewable Energy Forum in Miami, International Renewable Energy Agency’s Investment Forum in Latin America, and Energy Transition North America present opportunities for mayors to hear directly about investment opportunities and share strategies for meeting industry standards.

Leverage existing subnational networks to communicate USG funding opportunities 

Trusted city networks can magnify the impact of national-level initiatives. In 2022, the US Department of Energy (DOE) announced $39 million in funding for universities, national laboratories, and private sector-led projects to increase domestic supply of critical minerals. The Bipartisan Infrastructure Law appropriated over $62 billion to DOE to support a range of domestic clean energy projects, including grants targeted at local governments. By utilizing already established subnational networks like C40 Cities and The United States Conference of Mayors, the DOE, along with other US agencies, can better disseminate programs and resources available to empower city-level efforts to leverage investments and funding opportunities to power the low-carbon transition.   

From local to global: Strengthening clean energy supply chains

While the United States continues to establish national and international policies to build new clean energy supply chains, cities and towns are implementing national objectives in real time. Across the hemisphere, city councils mediate tensions between communities and mining companies, subnational departments of labor enroll students in training programs, and mayors devise standards to raise the federal ESG benchmark. Local leaders will continue to play a fundamental role in driving both the standards and implementation of projects that will shape a low-carbon energy future. These efforts have been on full display during the Biden administration’s Investing in America tour. 

Maia Sparkman is an assistant director at the Atlantic Council Global Energy Center

Willow Fortunoff is a former assistant director at the Atlantic Council Adrienne Arsht Latin America Center and Fulbright Research Fellow

Meet the authors

Staff

Maia Sparkman

Assistant Director

Global Energy Center

Africa Climate Change & Climate Action

Former staff

Willow Fortunoff

Adrienne Arsht Latin America Center

Americas Caribbean

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“Women and girls in the Caribbean face unique challenges that prevent them from reaching equal footing in society,” said Valentina Sader, AALAC associate director and leader of the center’s gender-related work. “These include lack of access to critical resources to rebuild after natural disasters and barriers to political representation.”

Studies suggest that elected or appointed women represent less than half of all political offices in the Caribbean, and that 46 percent of women in the region experience violence at least once in their lifetime.

“Solutions to the region’s major challenges require the talent, skills, and ideas of the whole population, including women and girls. Curbing gender-based violence, incentivizing financial inclusion, and strengthening women’s political participation are fundamental to the health and well-being of our hemisphere, including the Caribbean, now and for generations to come,” said Jason Marczak, AALAC senior director.

AALAC will leverage its global and regional networks and its uniquely positioned Caribbean Initiative to raise awareness and foster dialogue on the challenges facing women and girls in the Caribbean. Specifically, the project will cover:

1. Peace, security, and gender-based violence
2. Democracy and political representation
3. Economic recovery and empowerment
4. Climate and climate financing

“In the same way that the Atlantic Council has been able to strengthen relationships between civil society organizations and policymakers in the United States and across Latin America, I feel confident that the Caribbean will greatly benefit from this proven capacity,” said UN Women Multi-Country Office – Caribbean Representative Tonni Brodber.

AALAC will work with UN Women to hold discussions and consultations with in-region individuals and organizations, multilateral groups, private sector representatives, and financial institutions. A key objective will be to facilitate a deeper understanding of social norms around gender in the Caribbean, build momentum and secure buy-in from relevant stakeholders across sectors and regions, and generate concrete policy recommendations with a gender-based approach for the Caribbean.

For questions, please contact press@atlanticcouncil.org.

ABOUT THE ADRIENNE ARSHT LATIN AMERICA CENTER
The Atlantic Council’s nonpartisan Adrienne Arsht Latin America Center (AALAC) broadens understanding of regional transformations while demonstrating why Latin America and the Caribbean matter for the world. The center focuses on pressing political, economic, and social issues that will define the region’s trajectory, proposing constructive, results-oriented solutions to inform public sector, business, and multilateral action based on a shared vision for a more prosperous, inclusive, and sustainable future.

Its Caribbean Initiative began programming in February 2021 to raise awareness about key Caribbean Community (CARICOM) priorities with US and global stakeholders while deepening US engagement with the region around shared interests. The Initiative is a platform for US and Caribbean stakeholders to offer new and innovative insights to advance a closer US-Caribbean partnership and the overall prosperity, stability, and well-being of the region.

ABOUT UN WOMEN
UN Women is the UN organization dedicated to gender equality and the empowerment of women. A global champion for women and girls, UN Women was established to accelerate progress on meeting their needs worldwide. For more information visit https://caribbean.unwomen.org/en

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The questions surrounding the June 23-24 events—which, were it not for the nuclear warheads and the casualties, would easily merit the qualification of vaudevillian—have multiplied. One is particularly relevant: What are the consequences for the war in Ukraine? More specifically, how does this plot twist affect Europe’s security? 

If one imagines matryoshka dolls (Russian stacking dolls) as a symbol of Russian politics, the Wagner organization has existed because of—and for—Russian President Vladimir Putin. It depended—with all the ambiguity the term implies in the context of the whims of an all-powerful tsar and the personalistic nature of power—on three institutions also apparently controlled by the president: the Russian armed forces, its military intelligence (GRU), and the Federal Security Service (FSB). Notably, the intervention of these institutions in the rebellion—if any—was unclear. 

The structure built by Putin has become a snake pit. Perhaps a “house of cards” is a more fitting term. Having previously refrained from sanctioning Yevgeniy Prigozhin, the ruthless leader of the Wagner paramilitary group, Putin spoke following the mutiny of punishing his enemies, even if such efforts are complicated by Wagner’s penetration into the Russian elite. The first arrest related to these consequences (still unconfirmed) appears to be that of Russian General Sergey Surovikin. 

Prigozhin had been engaged in a power struggle with the military leadership for some time. Specifically, his attacks have targeted Russian Minister of Defense Sergei Shoigu and Chief of the General Staff Valery Gerasimov. The confrontation was exacerbated after last February’s invasion by the increasing relevance that the head mercenary and his followers have gained. Their relative effectiveness compared to the regular Russian army—which collapsed in the early onslaught of the war—brought Wagner into the spotlight inside and outside of Russia. In addition to its military actions, the group’s cruelty went viral on social media, as did its sermons in the courtyards of the prisons Wagner forces toured, recruiting convicted criminals of all kinds.

The mercenary leader’s strong connection with the great leader—a connection forged during the murky stage of the president’s public debut in Saint Petersburg in the 1990s—seemed to give Prigozhin a blank check. He first emerged on the scene as “Putin’s chef,” a nickname earned from managing the catering service of someone well acquainted with the dangers at the table, himself being a master in the use of poison as a political weapon. 

Before the insurrection, the outspoken warrior had been making accusations of all kinds of irregularities, misconduct, and mistreatment against his two enemies: that they had claimed credit for Wagner’s victory in Bakhmut, that men were dying so they could “get fat in their mahogany offices,” and that they had denied his fighters necessary ammunition and support. And, most importantly, that they had deceived Putin about the progress of the military campaign. 

The speech that kicked off the mutiny goes even further. No one had dared to question Putin’s justification of the invasion based on a victim mentality incessantly fed to the Russian people. The few in Russia who dared to dissent, such as Vladimir Kara-Murza, immediately found themselves behind bars. 

Thus, Prigozhin’s words should be considered inflammatory: a qualified member of the establishment dared to openly and boldly denounce the falsehood of “the story that there was insane aggression on the part of Ukraine, and they were going to attack [Russia] together with the entire NATO bloc.” Careful not to mention the president by name, he stated that, contrary to Kremlin messaging, the war served “not to demilitarize and de-Nazify Ukraine,” but rather “it was launched for completely different reasons.” He implied that the disaster was orchestrated by high-ranking military officials (driven by economic greed and vanity), in combination with “some oligarchs.”

Putin’s response was not long in coming. In his televised address on June 24, he labeled the uprising as “a stab in the back of [the] country and [the] people.” His references to the Russian Empire—a frequent topic of his outdated musings—were to be expected, but his implicit identification with the ill-fated Tsar Nicholas II was surprising. 

He equated the situation triggered by Prigozhin to the prelude of the upheaval of 1917, which led to the collapse of the system. Was he seeking, in his association with the tragic figure, a symbolic reincarnation of the tsar—in his case, having made the right decisions to avoid falling into the black hole of violence that characterized those years when “Russians killed Russians, brothers killed brothers”? It was a diatribe made with his citizens in mind, who retain a collective memory of that terrible period and who found their livelihoods crushed during the 1990s following the dissolution of the Soviet Union. 

During the uprising, the lack of response was salient, both from the siloviki (the economic and political elite) and the common people. There was no notable support of—or clear opposition to—Putin, who exploits the fact that people cling to the status quo out of fear of the unknown. 

Prigozhin has nonetheless proven to be a torpedo aimed at Putin’s narrative. He punctured the myth of a war of necessity, of an inevitable war for historical justice. He undermined Putin’s explanation of an existential struggle against US aggression disguised as NATO. Furthermore, the turmoil has shattered the thesis that the Euro-Atlantic community must not humiliate Putin for fear of provoking him, with the unpredictable consequences regarding the use of nuclear weapons that doing so would entail. This thesis has justified the countries’ stinginess in sending to Ukraine certain equipment classified as offensive and the West’s delay in accepting stark realities, such as the urgent need for full operational readiness in the air. 

The Euro-Atlantic community must move away from the habit of delaying decisions based on speculation about the consequences of its actions for third parties. It needs to look beyond the pipe dream of an immediate peace negotiation based on the stalemate on the front or a Kremlin-asserted “right” to subjugated areas. NATO allies’ opportunity to demonstrate determination when facing Russia will come soon—on July 11 in Vilnius at the NATO Summit. 

Ana Palacio is a former minister of foreign affairs of Spain (2002-2004) and former senior vice president and general counsel of the World Bank Group. She is also a member of the Atlantic Council’s Board of Directors.

A version of this article originally appeared in El Mundo. It has been translated from Spanish by the staff of Palacio y Asociados and is reprinted here with the author’s and publisher’s permission.

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“The summit has only one essential outcome,” Doug Lute, a former US ambassador to NATO and member of the Atlantic Council’s board of directors, told me.  “Whatever the agreements on supporting Ukraine, this year it is essential that Zelenskyy be in the photo, capturing vividly that NATO has his back and reminding the world that Russia has no such support.”  

Beyond that, if the Ukrainian leader is photographed standing among the thirty-one NATO heads of state, Zelenskyy more than likely got enough of what he needed to make the trip to Lithuania. When I met with him recently in Kyiv, as part of an Atlantic Council delegation, he said anything short of security guarantees and a clear roadmap to NATO membership for Ukraine would be seen as a betrayal of Ukrainians’ sacrifice.

If Zelenskyy doesn’t come to Vilnius, allied leaders will have missed a crucial opportunity to signal to Ukrainians and the world their unflinching commitment to defeating Russian leader Vladimir Putin’s criminal war and revanchist designs in Europe—at a crucible moment in the five-hundred-day-old war.

Zelenskyy was in Turkey on Saturday as part of a pre-summit European tour, shoring up support from Turkish President Recep Tayyip Erdoğan, who is still withholding his support for Sweden’s membership in NATO. Regarding Kyiv, however, Erdoğan said: “There is no doubt that Ukraine deserves NATO membership.”

Though much still could change before the summit opens on Tuesday, Central European alliance members say that the Biden administration has led the recalcitrance to a stronger, time-linked roadmap to NATO membership for Ukraine.

One Central European senior official, who asked that his name and that of his country not be named, compared the tone coming from the White House to that of Jacques Chirac in 2003, when the French president lectured Central Europeans who were supporting the United States on Iraq that they had “missed a good opportunity to shut up.”

What’s on the table for Ukraine thus far in Vilnius is, among other measures, the renaming of a NATO consultative group to give it more weight, security assurances similar to those the United States has with Israel, and the removal of the bureaucracy of a membership action plan (MAP)—though US National Security Advisor Jake Sullivan said on Friday that Ukraine “needs to take additional reforms,” hinting that it will still face a MAP-like process. Zelenskyy told us in Kyiv that such moves would be insufficient given his country’s service to democracies everywhere.

To be sure, the Biden administration deserves high praise for its handling of Russia’s war thus far, starting with its early leaking of intelligence predicting the invasion so that Ukraine and Europe were forewarned (not to mention China). Without concerted US military and financial support, Ukraine likely would have failed.

 At the same time, if Ukrainians had received the weaponry and equipment they wanted faster and in greater quantities, thousands of Ukrainians would still be alive and the battlefield gains would have been greater.    

Softening the potential blow of a disappointing summit outcome for Ukraine, the Biden administration cleared the way this week to provide Ukrainians with the cluster munitions they have long sought, prompting Zelenskyy to praise Biden’s “decisive steps.”

A form of air-dropped or ground-launched explosives that release smaller submunitions, cluster munitions have been widely used by Russia but are outlawed by many allies, though not by the United States. With Ukraine running low on 155 mm artillery shells, which are in low supply globally, cluster munitions are the fastest, most plentiful way to flush out dug-in Russian positions that are blocking the Ukrainian counteroffensive.

The Biden administration’s green light for cluster munitions has followed a pattern: The White House at first blocks the provision of certain weapons, from High Mobility Artillery Rocket Systems (HIMARS) and Abrams tanks to Patriot air defenses, only to agree to their provision months later. The administration’s go-slow approach to Ukraine’s NATO membership aspirations reflects that caution, born of a desire to defend Ukraine without provoking greater Russian escalation, including tactical nuclear weapons use.

All NATO summits have to balance the longer-term needs of the Alliance with immediate demands. However, officials from non-US NATO member countries who I spoke to last week said there are several reasons why Ukraine’s immediate needs should take on greater priority:

1. Mercenary leader Yevgeniy Prigozhin’s short-lived rebellion in June underscored both the fissures in Russia’s leadership and the low morale and discipline of its military. It’s thus an ideal time to double down on support for Ukraine, recognizing that only significant ground gains can force useful negotiations.
2. Despite the economic and military cost of supporting Ukraine, the costs will grow exponentially if Putin prevails, and the threats go beyond Ukraine. One Biden administration official told me that the geopolitical importance of Ukraine to Washington is far greater than either Afghanistan or Iraq ever was, yet Ukraine can stop Russia at far lower cost and without risking American or other allied soldiers.
3. To argue that NATO membership for Ukraine can only come after the war ends and Russia leaves Ukrainian territory only provides Moscow an incentive to continue the war. Holding back due to concern about Russian nukes rewards Putin’s nuclear blackmail—and will encourage other unsavory leaders to acquire nukes as well.
4. Much is said about why Ukraine needs NATO, but not enough is said about why the Alliance needs Ukraine, now one of the strongest and most battle-hardened militaries in the world. The lesson of NATO in Central and Eastern Europe is that it brings stability to its neighbors and more peaceful and secure relations with Russia. The countries that Russia invaded—Georgia and Ukraine—were gray zones outside any military alliance. “Gray zones are green lights” for Putin, argues former US ambassador to NATO Kurt Volker.
5. Putin thus far has been wrong to count on Ukrainian failure and Western fatigue, but the dangers will grow in 2024 when the United States and much of Europe face elections. Bold decisions that can be made in 2023 will be much more difficult to achieve next year. Ukraine’s biggest threat might be the election year of 2024, and not just in the United States.

“We don’t any longer have the luxury of time,” one senior European official told me. “We certainly don’t have the luxury of getting it wrong. The stakes are too large—they are generational and go far beyond NATO’s borders.”   

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter @FredKempe.

THE WEEK’S TOP READS

#1 The war in Ukraine shows how technology is changing the battlefield
ECONOMIST

The Economist breaks down the lessons of the Ukraine war and what they mean for the future of warfare. Read the whole report to gain a deep and nuanced understanding of the implications for future military planning.

“[T]he paradox of the war,” the Economist writes, “is that mass and technology are intimately bound together. Even the artillery war shows this. Weeks before the invasion, America sent Ukraine Excalibur shells. Inside each was a small, rugged chip that could receive GPS signals from America’s constellation of navigation satellites. Whereas Russia often relied on barrages over a wide area, Ukrainian gunners could be more precise.”

This, the Economist argues, portends a shift towards the defensive, analogous to the late nineteenth century. “Precision warfare can counter some advantages of mass: Ukraine was outnumbered 12 to one north of Kyiv. It can also complement mass. Software-based targeting saves around 15-30% in shells, according to sources familiar with the data. But what precision cannot do, says Michael Kofman of the Centre for Naval Analyses (CNA), a think-tank, is substitute for mass.” Read more →

#2 Ukraine wants and expects an invitation to join NATO. Allies are not sure.
David L Stern, Emily Rauhala, and Isabelle Khurshudyan | WASHINGTON POST

For an understanding of what Ukraine seeks at the upcoming NATO summit in Vilnius, what might happen, and what the Ukrainians are worried about, read this excellent piece of reporting from David Stern, Emily Rauhala, and Isabelle Khurshudyan in the Washington Post.

“With or without membership,” they write, “Ukrainian officials are looking for security commitments by Western nations ‘without delay and as soon as possible,’ which would potentially encourage Moscow to withdraw its forces. Many analysts say Russian President Vladimir Putin is counting on Ukraine’s Western supporters to grow exhausted and halt the expensive flow of weapons and economic aid they have been sending to Kyiv. Such security guarantees could also serve to deter Russia from any major acts of aggression in the future. ‘I am sure that if the regime in the Kremlin does not change in the coming years, even after our victory, there will be — in their heads — a desire for revenge,’ [Ukrainian Defense Minister Oleksii] Reznikov said.” Read more →

#3 Putin’s Real Security Crisis
Andrei Soldatov and Irina Borogan | FOREIGN AFFAIRS

For another angle on the implications of Prigozhin’s failed coup, read this smart analysis of the failure of the Russian security services during the coup and Putin’s apparent non-response to that failure.

“Then, as Wagner forces made their move,” Soldatov and Borogan write, “both the FSB and Russia’s National Guard, the main body assigned to maintain internal security and suppress unrest in Russia, failed as rapid response forces. The National Guard made every effort to avoid a direct confrontation with Wagner; for its part, the FSB—which also has several elite special forces groups—did not appear to take any action at all. Instead, the most powerful security agency in the country issued a press release calling on Wagner’s rank and file to stay out of the uprising and to go arrest Prigozhin—on their own.”

And yet, they note, no one has yet been punished.

“This lack of repercussions for the security services is particularly startling in view of the FSB’s performance in the crisis. When Prigozhin captured the headquarters of the Southern Military District—where he spoke to [Deputy Minister of Defense Yunus-Bek] Yevkurov and [First Deputy Head of the GRU Vladimir] Alekseyev—it looked almost like a hostage taking of several of Russia’s top military commanders. Yet according to sources in the FSB, in response to the arrival of Wagner forces, the FSB agents in Rostov-on-Don simply barricaded themselves in their local headquarters… While a column of Wagner mercenaries marched toward Moscow, taking down helicopters and shooting into the houses of civilians on the way, these brave generals failed to show up—not at the scene or in front of the public at all.” Read more →

#4 Multilateral Man Is More Powerful Than Putin Realized
Anne Applebaum | THE ATLANTIC

In this must-read profile of NATO Secretary General Jens Stoltenberg, Anne Applebaum makes a powerful case for why Stoltenberg’s brand of quiet multilateral leadership will ensure Ukraine’s long-term integration into Europe from behind the scenes.

“[A]lthough historians will argue about whether NATO countries could have done more to deter Russia, they did much more to help Ukraine than Putin expected once the war began. Putin not only underestimated Ukraine; he also underestimated Multilateral Men—the officials who, like Jens Stoltenberg and his counterparts at the European Union, helped the White House put together the military, political, and diplomatic response. Putin believed his own propaganda, the same propaganda used by the transatlantic far right: Democracies are weak, autocrats are strong, and people who use polite, diplomatic language won’t defend themselves. This turned out to be wrong. “‘Democracies have proven much more resilient, much stronger than our adversaries believe,’ Stoltenberg said. And autocracies are more fragile: ‘As we’ve just seen, authoritarian systems can just, suddenly, break down.’” Read more →

#5 Evan Gershkovich, Detained for 100 Days
WALL STREET JOURNAL

As a former Wall Street Journal reporter and longtime advocate for press freedom, I remain determined to do what’s possible to end the Russian imprisonment of WSJ reporter Evan Gershkovich, which is now at one hundred days and counting. I urge Inflection Points readers to follow the WSJ’s guide on what you can do to support Evan and his family.

Writes Emma Tucker, the WSJ’s editor-in-chief, “In the days since Evan was arrested we have been inspired by the support that you, our readers, have provided. It has helped us to keep Evan’s plight at the top of the news agenda. As we reflect on this difficult milestone, we encourage you to continue sharing Evan’s reporting and the latest updates on his situation. Journalism is not a crime, and we will not rest until Evan is released.”

Amen. Read more →

Atlantic Council top reads

New Atlanticist Jul 5, 2023

Here’s the ‘concrete’ path for Ukraine to join NATO

By Franklin D. Kramer, Hans Binnendijk, Christopher Skaluba

The upcoming NATO summit in Vilnius should establish a High Level Group to design a roadmap for Ukraine’s fast-track membership.

Conflict Crisis Management

New Atlanticist Jul 6, 2023

Ukraine needs NATO membership, not an ‘Israel model’

By Ian Brzezinski

Granting NATO membership to Ukraine is critical to ensuring it wins the war against Russia quickly and decisively.

Israel NATO

New Atlanticist Jul 6, 2023

Four scenarios for Russia’s future after the Wagner Group mutiny

By Jeffrey Cimmino

What will be the long-term aftermath of Russia’s Wagner mutiny? Here are four possible paths for Russia’s future the West should consider.

Belarus Crisis Management

The post Dispatch from Vilnius: Will Zelenskyy show at the summit? It depends on whether Biden listens to frontline NATO allies. appeared first on Atlantic Council.

Already, cities around the world are facing intense heat waves. Several European and Southeast Asian countries broke records for their hottest temperatures. The southern United States has been hit by a long-lasting heat dome; parts of India have sweltered under 47°C (116°F) heat; and areas of North Africa reached temperatures of 50°C (122°F) this year.

The worse news? This summer will likely get even hotter. 

As the urgency of this issue becomes impossible to ignore, many local governments are taking action to build heat resilience. At the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock), we work closely with cities around the world to protect the people most exposed to the dangerous impacts of climate-driven extreme heat. Here are four examples.

Seville: Naming heat waves is changing the way people understand extreme heat

Seville, Spain, has been leading the charge on naming extreme heat events. So far, Seville has experienced two named heat waves: Zoe in July 2022 and Yago in June 2023. 

Seville has named heat waves through a naming and categorization system called proMETEO. This system, piloted by Arsht-Rock in collaboration with the University of Seville and Seville City Council, monitors the weather forecast and categorizes heat waves into three tiers ranging from least (Category One) to most severe (Category Three). 

Seville is in its second year of naming and categorizing heat waves. In addition to better protecting Seville’s residents, this project is creating important social dialogue on the harmful impacts of extreme heat, and it is serving as a model for other cities to pilot similar initiatives.

Miami: The world’s first Chief Heat Officer is tackling heat head-on

Miami, where temperatures routinely hit the high 90s, was the first city in the world to appoint a Chief Heat Officer (CHO). CHOs are officials supported by Arsht-Rock’s Extreme Heat Resilience Alliance who are responsible for unifying their city governments’ responses to extreme heat. 

Miami’s CHO, Jane Gilbert, has more than thirty years of experience working in climate resilience. She has worked closely with Miami-Dade County Mayor Daniella Levine Cava to launch the Miami-Dade County Extreme Heat Action Plan, which outlines nineteen key actions to protect people from extreme heat, including cooling schools and expanding access to shade and water.

In her role as CHO, Gilbert has implemented extensive heat season campaigns to raise awareness on the dangers of extreme heat. She also manages mobile Community Resilience Pods, which empower people to prepare for climate stressors through educational storytelling. 

Freetown: Outdoor market shade covers are providing relief for more than 2,300 women

In Sierra Leone’s capital, extreme heat is devastating for outdoor and informal workers, who spend long hours laboring in extreme temperatures. Many of these workers are women and girls, who face disproportionate health and social impacts from extreme heat.

Arsht-Rock has been working with Eugenia Kargbo, Freetown’s CHO, and a network of partners to address this. Through the Freetown Market Shade Cover project, Arsht-Rock installed shade covers over three outdoor markets, expanding the daily window for safe and comfortable shopping in hot conditions. 

The Market Shade Cover project has given more than 2,300 market women better working conditions and economic opportunities. By minimizing the health impacts, food spoilage, and financial losses resulting from extreme heat, this intervention has benefitted entire communities dependent on the market women. 

Santiago: New partnerships are protecting the most heat-vulnerable workers 

Even though Chile’s capital has a cool and temperate climate, Santiago has been scorched by extreme temperatures in recent years. Local authorities are taking a wide range of approaches to build heat resilience, from advocating for workers’ protection policies to providing air-conditioned ambulances to more than twenty-five communities. 

Santiago’s CHO, Cristina Huidobro Tornvall, partnered with the Chilean Security Association (ACHS), an entity representing more than one million Chilean workers, to promote heat safety measures among outdoor workers. Together, they are educating employers on how to recognize and respond to the dangers of extreme heat. 

The partnership’s goal is for employers to institute practices to protect their workers and provide health coverage for workers injured on the job. To this end, ACHS is planning to monitor how often workers seek medical care for exposure to extreme heat, which will help inform worker protection policies.

Cities are a crucial part of the solution

Severe heat can arrive with little or no warning. However, there are several steps cities can take in advance to prepare for extreme heat events.

• Cities can conduct baseline heat risk assessments to understand which communities and parts of the city are most vulnerable to extreme heat.

• Cities can create heat action plans that identify strategies and responsible actors in advance of extreme heat events.

• Cities can implement educational campaigns in advance of heat seasons to build public awareness of the dangers of extreme heat.

Arsht-Rock’s Heat Action Platform brings together diverse case studies of these solutions with guidance on how to plan for, finance, and implement projects into one comprehensive platform. The platform is designed to be a step-by-step guide for those starting out their heat resilience planning, as well as a reference guide and implementation resource for cities already well into the heat-planning process.

Local leaders are positioned to take these ideas and run with them. Cities have an urgent responsibility to respond to climate change. Billions of people are already living with the impacts of extreme heat, and even more will become more vulnerable as the world continues to urbanize. We already have the solutions, knowledge, and resources needed to protect people from heat—now, we just have to take action.

Kashvi Ajitsaria is a project associate at the Adrienne Arsht-Rockefeller Foundation Resilience Center.

The post How four cities are building resilience to extreme heat appeared first on Atlantic Council.

On Wednesday, Swedish Prime Minister Ulf Kristersson met with US President Joe Biden in Washington DC, followed by a meeting between Swedish, Finnish, and Turkish foreign ministers in Brussels on Thursday. The central message: Sweden is ready to become an ally—immediately.

For several months, Turkish President Recep Tayyip Erdoğan has kept Sweden and NATO allies on the edge of their seats over Swedish extraditions of individuals connected to the Kurdistan Workers Party (PKK). Stockholm and Ankara have been at an impasse, trading arguments over due process and terrorist threats. Enflaming the whole process has been a series of Quran burnings, something which Kristersson has said is legal, but not respectful.

Just like at the NATO Summit in Madrid last year, Erdogan has placed himself in the role of kingmaker. All allies except Turkey and Hungary have ratified Sweden’s membership, and Hungary is widely considered to be following Turkey’s lead.

In the symbolically important meeting with Kristersson this week, Biden sent a clear signal to Ankara: The United States is committed to welcoming Sweden into NATO as soon as possible. Kristersson reiterated that Swedish membership would contribute to the security of the Alliance as a whole. “No country knows this better than the United States,” he said. 

The trilateral meeting in Brussels showed, however, that Turkey is still not on board. Swedish NATO membership is “within reach,” Stoltenberg said. He added that everyone is working toward a positive outcome in Vilnius and leaders will meet again on Monday, one day before the start of the summit.

Potentially paving the way for a successful outcome is this week’s conviction by a Swedish court of a PKK member for the crime of terror financing, the first use of the country’s new anti-terror laws that entered into force in June. The four-and-a-half-year sentence followed by a possible extradition is exactly the type of implementation Turkey has wanted to see from Sweden. Moreover, former Foreign Minister Ann Linde admitted this week that Sweden had not taken the threat posed by the PKK seriously enough in the past. Swedish police are now prioritizing the issue and deeper cooperation with Turkish authorities on combatting terrorism is expected to continue. Public opinion is also shifting, with a majority now in favor of banning the burning of religious texts. Hate speech laws, though not part of the trilateral memorandum, are additionally under review. All the while, rumors continue to swirl of the US Congress ending its roadblock on F-16 fighter jet sales to Turkey, a prospect that could help push the process across the finish line. 

At stake in Vilnius is not only the security of Sweden and the Alliance as a whole, but NATO’s open-door credibility. With twenty-nine allies already having ratified Sweden’s membership, failure to fully admit Sweden undermines unity within the Alliance and makes NATO look weak and fragmented. As Stoltenberg correctly pointed out on Thursday, only Russian President Vladimir Putin and the PKK profit from continued delay. 

Anna Wieslander is director for Northern Europe at the Atlantic Council and head of its Northern Europe office in Stockholm. She is a former official at the Swedish Defence Ministry and Swedish Parliament.

Eric Adamson is project manager at the Northern Europe office.

The post Will eleventh-hour diplomacy get Sweden into NATO by the Vilnius summit? appeared first on Atlantic Council.

Security

Russian missile strike in Lviv kills ten civilians, injures dozens

Tracking narratives

New narrative accuses US and Ukraine of planning false flag attack on Zaporizhzhia nuclear power plant

Media policy

Former employees share details about Prigozhin’s media group and troll farms

Kremlin-owned RT offers jobs to former employees of Prigozhin’s troll factory

Russian missile strike in Lviv kills ten civilians, injures dozens

At least ten people were killed and thirty-seven injured in Russia’s July 6 attack on Lviv, in western Ukraine. Regional Governor Maksym Kozytskyy said that a Russian missile struck a residential building in the city, destroying more than fifty apartments. 

Meanwhile, Russian forces continue to launch offensive actions in Donetsk and Luhansk oblasts. Ukrainian forces reported thirty-eight combat engagements against Russian troops near Novoselivske, Novohryhorivka, Berkhivka, Bohdanivka, Bakhmut, Avdiivka, and Marinka. In the direction of Lyman, Russian forces shelled Nevske, Bilohorivka, Torske, Verkhnokamyanske, and Rozdolivka in Donetsk. Russian aviation conducted an airstrike in Bilohorivka. Russia also attacked villages in Zaporizhzhia and Kherson oblasts, including Levadne, Olhivske, Malynivka, Huliaipole, and Bilohirka. On July 6, Russian troops shelled Chervonohryhorivka and Nikopol, damaging civilian infrastructure.  

On July 5, reports from Russian military bloggers suggested that Ukrainian forces had advanced southwest of Berkhivka, west of Yahidne, and southwest of Bakhmut. The Ukrainian army said it conducted offensive operations south and north of Bakhmut and is moving on Bakhmut’s southern flank. The Russian Ministry of Defense claimed that the Ukrainian army conducted offensive operations near Lyman, Bakhmut, along the Avdiivka front, on the border between Zaporizhzhia and Donetsk, and in western Zaporizhzhia. 

The Ukrainian army appears to have launched a coordinated attack on Russian army logistical and communications hubs. On July 4, Ukrainian forces reportedly struck an ammunition depot in occupied Makiivka, Donetsk. Russian sources claimed without evidence that Ukraine had struck a hospital. Former Russian army commander Igor Strelkov, also known as Igor Girkin, said the attack demonstrates how Ukraine regularly launches missile strikes against Russian rear targets. Other unconfirmed reports from July 5 indicate Ukraine may have struck Russian positions near Debaltseve. Russian sources claimed that Ukrainian forces hit Russian positions near Yakymivka in the Melitopol area and attempted to strike Berdyansk in the Zaporizhzhia region.

—Ruslan Trad, resident fellow for security research, Sofia, Bulgaria

New narrative accuses US and Ukraine of planning false flag attack on Zaporizhzhia nuclear power plant

Ahead of next week’s NATO Summit in Vilnius, Lithuania, allegations that the United States and Ukraine will launch a false flag operation on the Zaporizhzhia nuclear power plant are spreading on various platforms, including Twitter, 4chan, and Instagram. The allegations seemingly aim to create panic and, in the event of a future attack on the plant, establish a narrative the West and Ukraine are to blame. 

On July 3, a post appeared on 4chan from an anonymous user who introduced himself as a US Marine Corps veteran now working for the government in electronic espionage. The user claimed that the Ukrainian and US governments are working together to bomb the Zaporizhzhia power plant. According to the conspiracy theory, after the false flag operation, the United States will be able to use “nuclear warheads” against Russia. At the time of writing, the post had been deleted from 4chan. However, similar posts remain on the platform.

However, the false flag claims did not originate on 4chan. Russian Twitter accounts posted similar claims building the false flag narrative. After the 4chan post, the claim circulated again on Twitter.  

A similar narrative was also shared by Renat Karchaa, an adviser to Rosenergoatom, a subsidiary of the Russian state nuclear agency Rosatom. Karchaa claimed on Russian state television channel Russia-24 that on the night of July 5, the Ukrainian army would attempt an attack on the Zaporizhzhia plant. Without evidence, he accused the United States and the West of planning a false flag incident to damage Russia’s reputation. The claims were further amplified by Russian state media outlets.  

The allegations escalated on social media after July 4, when Ukrainian President Volodymyr Zelenskyy repeated Ukraine’s concerns about the status of the nuclear power plant. In an address, Zelenskyy restated that Russia plans to attack the plant and that Russian troops have placed explosive-like objects on the building’s roof. In June, Ukrainian military intelligence made similar claims when it reported that the plant’s cooling pond had been mined by Russian troops.  

On July 5, the International Atomic Energy Agency (IAEA) said that it was aware of reports that mines and other explosives had been placed around the plant. The IAEA said their experts inspected parts of the facility and did not observe any visible indications of mines or explosives. IAEA Director General Rafael Mariano Grossi added, “The IAEA experts requested additional access that is necessary to confirm the absence of mines or explosives at the site.” On July 7, the IAEA announced that Russia had granted its experts further access, “without – so far – observing any visible indications of mines or explosives.”  

—Sayyara Mammadova, research assistant, Warsaw, Poland

Former employees share details about Prigozhin’s media group and troll farms

Several independent Russian media outlets published stories this week interviewing former employees of Yevgeny Prigozhin’s Patriot Media Group, which dissolved on June 30.  

In a video published on Telegram, Yevgeny Zubarev, director of Patriot Media Group’s RIA FAN, said the goal was to “work against the opposition, such as Alexei Navalny and others who wanted to destroy our country.” Zubarev confirmed key details previously reported by independent Russian journalists at Novaya Gazeta in 2013 and the now-Kremlin-controlled RBC in 2017 about the existence of paid commentators and the creation of Prigozhin-affiliated media outlets. Zubarev added that, after Russian President Vladimir Putin’s 2018 re-election, the group hired “foreign affairs observers.” The timing corresponds with attempts by Prigozhin’s Internet Research Agency to meddle in the 2020 US presidential election. 

Further, independent Russian media outlets Sever.Realii, Bumaga, and Novaya Gazeta interviewed former employees of Prigozhin’s media group. Speaking on the condition of anonymity, the former employees confirmed that Prigozhin’s “troll factory” and “media factory” conducted coordinated information attacks on opposition leaders, published fabricated or purchased news “exclusives,” praised Putin, and deliberately ignored particular individuals who criticized Wagner Group. Bumaga and Sever.Realii described a smear campaign against Saint Petersburg Governor Alexander Beglov. In 2019, Prigozhin’s media group supported and promoted Beglov, but in 2021, Prigozhin reportedly launched a smear campaign, as Beglov allegedly prevented him from developing a waste collection business in the city. Novaya Gazeta’s report also provided evidence that Prigozhin’s troll farm activities extended beyond Russia, with employees portraying skinheads and fascists in the Baltic region, specifically in Lithuania. 

In recent years, additional revelations about Prigozhin’s media group have come to light. For example, Bumaga reported that prospective hires had to pass a “lie detector test” in which “security service specialists” asked candidates about their attitudes toward the opposition and Alexei Navalny in particular. Once hired, employees were closely surveilled. One former employee Bumaga interviewed characterized the atmosphere as being in a “closed military company.” Both Bumaga and Novaya Gazeta’s interviewees said that most of the employees did not believe in the mission. In one example, an employee left after refusing to launch a smear campaign against Ivan Golunov, a journalist at the independent news outlet Meduza who was detained in 2019 under false pretenses. Bumaga, citing an unnamed former employee, also reported that at one point an employee had hacked the system, erased a database, and fled to Poland. The same interviewee claimed they employed two Telegram administrators who also administered pro-Ukraine channels.

—Nika Aleksejeva, resident fellow, Riga, Latvia

Kremlin-owned RT offers jobs to former employees of Prigozhin’s troll factory

RT Editor-in-Chief Margarita Simonyan offered to hire employees of Yevgeny Prigozhin’s Patriot Media Group, which reportedly housed his troll factories. In the latest episode of the program Keosayan Daily, Simonyan praised the work of “Wagner’s media empire.” She said their work “was super professional” and that anyone left without a job can join “them,” referring to Russian propaganda outlets. She added, “We know you as professional colleagues of ours.” 

The fate of Patriot’s former employees is being actively discussed in Russia. According to Russian outlet Novie Izverstia, Pavel Gusev, editor-in-chief of the pro-Kremlin outlet MK.ru, volunteered to help find jobs for former employees of Patriot. In addition, the chairman of the Saint Petersburg branch of the Union of Journalists of Russia stated that the union would contact the heads of media outlets to help find opportunities for dismissed employees and would provide additional informational support.

—Eto Buziashvili, research associate, Tbilisi, Georgia

The post Russian War Report: Russian conspiracy alleges false flag at Zaporizhzhia nuclear plant appeared first on Atlantic Council.

The run-up to the July 11-12 summit in Lithuania has revealed both continuity and chaos: Continuity in that NATO Secretary General Jens Stoltenberg will now stay on in his role for another year, after he had earlier said he would step down in the coming weeks; chaos in the fascinating but incomplete coup d’état in Russia. But at this juncture of history—with war raging in Ukraine, uncertainty complicating relations with China, and shifting internal political landscapes in some member states—the Alliance has more work to do to ensure that the international rules-based order remains relevant and potent. 

Ukraine’s desire for a firm commitment on joining NATO is likely to hover over the summit. The secretary general and other national leaders have expressed reservations about taking any groundbreaking action on the issue, tempering the expectations of Ukrainians and their most vocal supporters. Yet there is still time to formulate consensus language that goes beyond the empty narrative of the 2008 Bucharest Summit, which only said that Ukraine would become a member at some point.

Assessing the threat picture

Defense spending is a perennial focus at these summits. Since the Alliance’s founding seventy-four years ago, the issue of Europe’s underspending on defense and security has haunted the halls of NATO. While the current ambition to set 2 percent of gross domestic product as a floor is a step in the right direction, success remains far-fetched: Only seven of the then thirty allies met the guideline in 2022 (before Finland’s accession). At the same time, success is very real in strengthening the cyber pledge and the official launch of the NATO Innovation Fund, the first-of-its-kind one billion euro multi-sovereign venture capital fund. Good things can happen in Vilnius.

The question is, will those good things include welcoming Sweden to the Alliance? The puzzle of the Turkish hayir, or no, on Sweden’s accession initially seemed like a misunderstanding, later evolved into a national election issue, and now, unfortunately, has become an example of allied disunity. The same goes for Hungary’s unacceptable drag of the ratification. Yes, allies argue all the time, and NATO offers a forum to align on all the important issues. Democracies know how to deal with these disagreements without compromising members’ security. Without Sweden, NATO is weaker, the Baltic Sea is less secure, and Turkey and Hingary, too, will be less secure.

Taking a step back and looking at the threat picture—and at the elevated volatility due to Russia’s brutal war against Ukraine—one cannot help but ask: What do allies need to do to ensure that NATO remains relevant in deterring aggression against the Alliance and beyond? Are NATO members sufficiently protecting its most vulnerable members and its vast geographic boundary to the east? Does “tripwire” deterrence still work? Can deterrence succeed without proper defense? 

Last year, NATO leaders in Madrid made huge promises to be specified and agreed in due course—kicking the can down the road?—on strengthening the eastern perimeter with more troops and better readiness. In other words, the initial enhanced Forward Presence (eFP) battalions no longer seem to suffice for effective deterrence on the eastern flank. The same goes for reinforcements, which had been signaled as up to 300,000 troops (and now 400,000 troops), yet whose deployment requires both logistical support and prepositioned equipment and armaments for their deterrent role. All of the above is to be underscored by NATO’s new defense plans, which are in the works.

A speed-and-scale mindset

To make deterrence and defense credible, NATO must make key decisions to act at relevant speed and scale. “Tripwire” deterrence is, hopefully, outmoded thinking—and the realization that defense is a key element of deterrence is slowly setting in. To be fair, it took three years for NATO to set up its eFP in the form of multinational forces in Estonia, Latvia, Lithuania, and Poland. Can the Alliance be taken seriously if it continues to build its defense at this pace? 

The same goes for scale. Will the “brigade-per-country” principle become obsolete in a year or two? A piecemeal approach to defense yields great public relations benefits, many pats on the back, and self-congratulatory speeches. But at the end of day, when an adversary moves further, allies are left scrambling precisely because they underdelivered. 

Speed and scale call for more allied troops in place, more prepositioned equipment and ammunition, and swift reinforcement—plus the autonomy of NATO’s supreme allied commander. Essentially, it is a resource question, yet it is affected by how urgently the Western public views the existential threat. If the military and economic support the West has provided to Ukraine so far is a gauge of its threat perception, then there is something to be proud of. Yet much more could have probably been done and faster. 

The test in Vilnius will be this: Can leaders adopt a speed-and-scale mindset for a stronger deterrence?

Giedrimas Jeglinskas is a nonresident senior fellow at the Transatlantic Security Initiative in the Atlantic Council’s Scowcroft Center for Strategy and Security. He previously served as the assistant secretary general for executive management at NATO and as the deputy minister of defense of Lithuania in charge of capability development, defense acquisition, industry, and technology partnerships.

The post The view from Vilnius: NATO needs speed and scale to ensure deterrence  appeared first on Atlantic Council.

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• Key terminology
• The navy’s approach to strategy development and force planning
• The sources of the problem
• Problem definition
• Key issues shaping problem solution
• Recommendations
• First recommendation: Establish a new assistant secretary of the navy
• Second recommendation: stand-up the navy strategy cell
• Third recommendation: Stand-up the force planning directorate
• Resourcing the recommendations
• Conclusion
• About the author

Key terminology

This paper uses five key terms. The first two, force design and force development, are precise US Navy terms that are not interchangeable.

Force design is the innovation and the determination of future Navy ships, aircraft, and weapon systems, along with a warfighting concept for a twenty-year and beyond timeframe. Force development is the adaptation and modernization of Navy in-service ships, aircraft, and weapon systems, along with a warfighting concept within a two-to-seven-year timeframe. The difference between these two official Navy terms may seem arcane: force design is all about the future force, and force development is all about the current force. However, both address Navy requirements based on an appraisal of US security needs, and then choose naval capabilities (along with a warfighting concept) to meet those requirements within fiscal limitations.

The following terms are also important for the reader’s comprehension.

• Force planning is the more commonly understood term—used in place of force design and force development—and is used across Congress, defense media, academia, and industry. While force planning is not an official Navy term, the term is used in this paper to encompass both force development and force design.
• Force structure is used by the Congress to mean the number and types of combat units the Navy can generate and sustain, as well as to represent the Navy’s combat capability.
• Budget is an informal and shortened expression to encapsulate all Navy activities in the Defense Department’s Planning, Programming, Budgeting, and Execution (PPBE) system, especially the programming activity.

The navy’s approach to strategy development and force planning

The US Navy’s approach to strategy development and force planning in 2023 is not working. Strategy development is on life support and force planning uses an incremental approach of buying marginally better and more expensive versions of the same platforms the Navy has relied upon for decades. In effect, it is producing the Navy’s force structure one ship class at a time, without reference to an overall Navy strategy and force plan to field an integrated, aligned, and synchronized “Navy fighting machine.”¹ Moreover, this approach is delivering an unaffordable fleet over too long a procurement time. Proposals for developing new capabilities are viewed as threats to in-service platforms and programs, thereby blocking innovation.

Congress, defense media, defense analysts, the Defense Department, and independent US government agencies have all found fault with the US Navy’s strategy development and force planning. Most notably, Congress has expressed its dissatisfaction.

In December 2017, Congress mandated a Navy with 355 crewed ships, a goal based on the Navy’s 2016 Force Structure Assessment (FSA) and, in February 2020, Representative Joe Courtney (D-CT) complained to then Secretary of Defense Mark T. Esper about, “the lack of a shipbuilding plan and the [Donald] Trump administration not delivering a strategy to build a 355-ship Navy.”² In December 2021, Congress mandated the Navy to submit the Battle Force Ship Assessment and Requirement Report on its force structure plans for the near, middle, and far terms to meet the combatant commanders’ requirements using Defense Department-approved scenarios.³ However, Congress reacted with little enthusiasm for the Navy’s thirty-year shipbuilding plan for fiscal year 2023 (FY2023), despite its being the first such report from the Navy to Congress in more than three years, and was similarly unimpressed by the following year’s iteration. This has led Congress to mandate the establishment of an independent National Commission on the Future of the Navy in December 2022 to determine the size and force mix of the fleet by mid-2025.⁴

This litany of events—particularly the unprecedented direction for the Navy to submit the Battle Force Ship Assessment and Requirement Report, the establishment of an independent National Commission on the Future of the Navy, and the assignment to the commandant of the Marine Corps of sole responsibility to develop amphibious warfare ships requirements—indicates Congress’ displeasure with Navy force planning. Moreover, the inability of the Department of Defense (DoD) and Navy leaders to consistently state how many ships the Navy needs to meet its requirements may be a driving factor in Congress’ decision to legislate these unprecedented mandates. During the first seven months of 2022, DoD leaders suggested five different targets for the objective size of the Navy—316, 327, 367, 373, and five hundred.⁵ In addition, the use of three options in both the FY2023 and FY2024 thirty-year shipbuilding plan—rather than a single projection—handicaps congressional understanding of the Joe Biden administration’s goals concerning the future size and composition of the Navy, and assessing the Navy’s proposed FY2024 shipbuilding budget, five-year shipbuilding plan, and thirty-year shipbuilding plan. Moreover, to follow its mantra of providing best military advice to civilian leadership, the Navy must have a preferred option for what it needs to get the job done, and, most importantly, must assess the risk to the United States if it does not get the resources it needs (see Table 2).

As Dr. Scott Mobley pointed out in his November 2022 Proceedings essay, the Navy largely focuses on programming and budget to develop the means for strategy while “devaluing the strategic underpinnings for rationalizing and justifying those means.”⁶

Navy force planning uses a piecemeal approach—“buying at the margin [fewer, but] better [and more expensive] versions of the same [type] of platforms [the Navy] has relied upon for decades”—that is delivering an unaffordable fleet over too long a procurement time.⁷ Navy force planning almost always occurs in a resource-constrained environment imposing a zero-sum approach, in which proposals for new capabilities are frequently viewed as threats to in-service platforms, thereby blocking innovation. At the end of the day, the Navy’s new platforms, weapons, and systems are quite similar to what is already in the fleet.

The preponderance of the Office of the Chief of Naval Operations (OPNAV) platform and capability staffs each focus on a single platform or capability. No one looks at all the platforms and capabilities as an integrated, collective whole. No single staff entity ensures all these individual platform and capability staffs are integrated by a well-articulated, comprehensive strategy and warfighting concept to achieve the required strategy-force match.

The Navy cannot create a lasting OPNAV organizational structure to ensure its strategy drives its force planning and its budget in that order. OPNAV cannot conduct its business “with strategic intent” at all times in its key processes. Because it operates within the Defense Department’s mandated five-year Future Years Defense Program and is focused on the budget, OPNAV tends to concentrate on numerous process-centric products, which, coupled with cascading short-term urgent projects, frequently sees its strategic guidance displaced, or even lost, in the sausage making.

The continuing need to reconcile the interface between the Navy’s strategy with its mid-range to long-range forecasts, and between the Navy’s budget and its short-term timelines and all-consuming fiscal pressures, has eluded OPNAV. Numerous OPNAV reorganizations since the early 1980s underscore this observation. As a 2010 Center for Naval Analyses study highlighted: “successive CNOs have sought to make [OPNAV] responsive to their needs—chief among which is usually construction of a balanced and integrated program and budget.”⁸ They failed and, as a result, the Navy continues to address its force requirements incrementally, which frustrates innovation, alarms Congress, and delivers fewer, more expensive, and almost always bigger platforms. The various uncrewed surface vessels and aircraft may break the bigger-is-better paradigm, yet they are arriving too slowly.

The sources of the problem

The causes of the Navy’s problem with its approach to strategy development and force planning are numerous and diverse.

Divergent CNO proclivities prevent strategic consistency

Effective force planning suffers from insufficient strategic consistency between chiefs of naval operations (CNOs). The historical record suggests these service chiefs seem to believe they must differentiate themselves from their predecessors, with their own distinct, separate strategy—or what is typically a strategic, aspirational plan rather than a strategy with ends, ways, and means. As Dr. Peter Haynes explained in his book, Toward a New Maritime Strategy:

Assuredly, senior Navy leaders would agree that, regardless of who is the CNO, the Navy has enduring institutional objectives and the benefits of consistency would be enormous for strategy development and force planning. There would be: assured continuity of strategic direction over the fielding of major platforms and weapons systems; no requirement for an incoming CNO to craft a “new” Navy strategic direction from whole cloth; unity of effort on the Navy’s way ahead based on organizational agreement hammered out at four-star updates; a consistent Navy message for strategic communications; and reduction in false starts and nonproductive efforts (see Table 1).

The service needs each CNO to build upon what has gone on before so that the Navy can benefit from continuous unity of effort over time. The service also needs a consistent planning process, and not a completely new version to accompany the incoming CNO’s new strategy. The challenge is to sustain consensus in a planning and acquisition process that runs a decade or more, and is instigated by a CNO who typically serves a four-year tenure.

OPNAV’s budget process dominates strategy and force planning

OPNAV remains focused on the budget as its overarching and defining process, believing strategy can be generated during the budget process. This narrow focus constrains the development of long-range strategies and plans to address transcendent challenges and opportunities. There is an irreconcilable difference between the needs of the budget process and the strategy-development process.

In a 2021 interview, a former deputy director of the Integration of Capabilities and Resources Directorate (OPNAV N8), Irv Blickstein, provided an explanation of why the budget process dominates. First, it is impossible to follow literally the linear prescript of strategy, requirements, and budget. If a strategy is unaffordable, then capability trade-offs must be made. The budgeteers knew that just opining about strategy would not carry the day for funding. Instead, the Navy needed analysis to show the effectiveness of its programs and the validity of its arguments. As deputy programmer in OPNAV in the early 1980s, Blickstein noted:

In June 2015, the Naval Postgraduate School published a report on strategy’s role to drive the Navy’s budget process. The report’s principal findings stated that the “Navy has failed to ensure that strategy and policy priorities drive [budget] development and execution.” Specifically, within OPNAV, the budget process “eclipses strategy” and “is substituted for, and is often equated to, strategy.”¹¹ The report noted that the Integration of Capabilities and Resources Directorate, a directorate that acts essentially as OPNAV’s Chief Financial Officer, “wields most of the intra-bureaucratic authority and power when it comes to the making and implementation of strategy” and that the Operations, Plans, and Strategy Directorate (OPNAV N3/N5), with its strategy staff, does not “play meaningful role in strategy development and execution.” During his tenure as CNO (2015–2019), Admiral John Richardson attempted to change this attitude. His efforts did not succeed.

Currently, there are significant alignment issues among the budget process, strategy development, and long-range planning processes. The budget process focuses on a five-year period and emphasizes the application of quantitative analysis, which is effective for near-term resource decisions. However, with no clear-cut beginning or end to its annual cycle, the budget process dominates all OPNAV planning activities and “tends simply to encourage the continuation of programs already under way” and discourage “the development of fresh new alternatives.”¹² The Navy needs to avoid defaulting to budget execution to develop its strategy. All strategies are shaped and informed by available resources, but the budget should serve the strategy—not the other way around.

Currently,the responsibility to manage the Navy’s force-planning ecosystem is dispersed throughout OPNAV. The Warfighting Development Directorate (OPNAV N7) addresses force design. The Integration of Capabilities and Resources Directorate (OPNAV N8) addresses the quantitative means to support force design and development, and the Warfighting Requirements and Capabilities Directorate (OPNAV N9) addresses force development and force design. The CNO’s Commanders Action Group provides the terms of reference—strategic guidance—for force design and force development. The Naval Warfare Development Center produces warfighting concepts, such as the current Distributed Maritime Operations (See Figure 1).

Each of these responsibilities must occur, but they are uncoordinated. No directorate integrates these force-planning efforts along with the ongoing production of new ships, aircraft, and weapons to produce a unified Navy fighting machine. As a result, decisions about production of new forces and modernization of in-service forces directly shape decisions about determining future platforms and capabilities, and vice versa. This interrelationship among force development, force design, and the production of new platforms and capabilities demands alignment, integration, and synchronization into a comprehensive process—not as individual platforms and capabilities—along with a shared understanding of the future security environment and a common warfighting concept to deter and defeat future adversaries in specific time periods.

Furthermore, this dispersion of force-planning responsibility has harmful consequences. In February 2022, OPNAV sponsored a workshop, titled the Force Design Sprint, to assess the Navy’s force-design posture. At the conclusion, a senior N7 leader informed the author that the workshop determined, “everyone in OPNAV was in charge [of force design], but no one was in charge.” It was an astonishing discovery for a military service to declare no one in OPNAV actually held responsibility for force design, with its focus on future ships, aircraft, and weapon systems, along with warfighting concepts for the twenty-plus-year time horizon.

Insufficient strategic guidance misdirects force planning

The Navy lacks sufficient and coherent guidance to ensure strategy shapes its budget and warfighting concepts. It has no classified strategy to facilitate an unambiguous expression of its ends, ways, and means. It has no codified assessment of both the current and future security environments to provide baseline understandings of them and set conditions for effective concept-driven, threat-informed capability development. Another missing document is a warfighting concept for the 2040s timeframe. The result is that, in 2023, specialized N9 staffs are planning the next-generation platforms without the benefit of a common set of capstone strategic guidance. (See Figure 1a)

Navy platform communities distort force planning

Internecine warfare by the Navy’s three platform communities (its surface, aviation, and submarine communities) severely unbalances the Navy as a whole. Expected in theory to rise above their individual platform advocacy and warfare concerns, the communities are all too susceptible to pressures and rivalries from the others. Each warfare community produces an unclassified strategic guidance document with little regard for how the other communities interact and cooperate to generate a unified Navy fighting machine.

Problem definition

In response to this criticism, CNO Admiral Michael Gilday reassigned force-design responsibilities to N7 and focused its efforts on 2045, as outlined in the CNO’s 2022 Navigation Plan.¹³ However, the Navy has largely already decided upon a 2045 force design and, moreover, the Navy is full speed ahead on its implementation. The year 2045 is only about twenty years away, well within the service life for the ongoing production of new ships, aircraft, and weapon systems. CNO Gilday has approved the Navy’s future direction for its next generation of platforms and capabilities, which N9 has developed with the priority order of acquisition as the next-generation aircraft first, the next-generation destroyer second, and the next-generation attack submarine third.¹⁴ This prioritization seems to cement the aircraft carriers as the Navy’s warfighting center of gravity, rather than precision weapons launched from a variety of air, surface, and subsurface platforms.

The long-term problem confronting Navy strategy development and force planning is larger than reassigning force-design responsibility to N7. The Navy needs to address the problem of how it conducts and organizes for strategy development and force planning in toto, not as disparate processes. Based on this paper’s assessment of the Navy’s strategy development and force planning posture, the Navy faces a three-part problem.¹⁵

• Part one: How does the Navy produce “a force structure, now and in the future, of the right size and the right composition (force mix) to achieve the nation’s security goals, in light of the security environment and resource constraints” and avoid a strategy-force mismatch?¹⁶
• Part two: How does the Navy ensure its strategy—based upon codified current and future assessments of the security environments, along with associated warfighting concepts—drives force-planning decisions in its budget process, and not have those decisions made by default?
• Part three: How does the Navy ensure its force-planning activities include revision of existing warfighting concepts and development of new ones that fully integrate all platforms to produce a single, lethal Navy fighting machine?

Key issues shaping problem solution

Several key issues significantly influence the formulation of recommendations to improve Navy strategy development and force planning.

Organizing OPNAV for effective strategy development

Given the enduring nature of developing, maintaining, updating, and iterating capstone strategic guidance, a dedicated strategy staff (to include responsibility for long-range planning) must have continuity and longevity. Because this guidance is so central to the Navy’s future, their production cannot be an on-again-off-again process. The key is for the CNO to select its director and have confidence in its staff. Once a strategy staff is up and running, the Navy needs to keep it in place. If the CNO is unhappy with its product, he or she should certainly bring in their own selectee to run the show, but the organization itself needs to retain its role, rather than being shoved aside and replaced with a new, favorite staff group.

Avoiding a federated organization to conduct force planning

OPNAV is using a federated organizational construct, which is problematic for conducting force planning. This construct attempts to achieve simultaneously decentralization of responsibilities and unity of effort. It supposedly unites, under a central entity, diverse responsibilities along with distinctive, associated processes, but with the responsibilities still controlled by different and independent entities. It is aspirational and relies on goodwill to meet mission in lieu of a hierarchical structure with authorities to make hard decisions and not focus on achieving consensus. Given the importance of successful force planning to the Navy, the organizing model to follow is a dedicated entity reporting directly to the CNO, such as the Navy Strategic Systems Programs and Naval Nuclear Propulsion, which, respectively, have cradle-to-grave responsibility for sea-launched nuclear-deterrent capabilities and for the Navy’s nuclear propulsion. The Navy needs to borrow a page from these two organizational successes and establish a dedicated, single entity responsible for all matters pertaining to force planning. The CNO’s force-planning responsibilities are so vast in scope, so complex, and so critical, that the Navy cannot disaggregate them across the OPNAV staff or employ a federated construct. It needs to establish a dedicated entity reporting directly to the CNO.

Providing CNO’s direct oversight of force planning and strategy

Only the CNO and the vice chief of naval operations (VCNO), with the authority vested in their offices, can ensure OPNAV maintains a strategic focus. They alone can focus the staff to keep the Navy’s strategic direction front and center, to drive force planning and the budget. The vice admirals who are the deputy chiefs of naval operations leading the seven major functional directorates cannot do it individually; they are challenged enough to meet the urgent demands of the budget process and the press of their daily business.

Understanding defense-analysis limitations to support force planning

Quantifiable defense analysis makes a strong contribution to force planning, especially in the near and middle terms, by understanding trade-offs among platforms and weapons systems. Defense analysis—operations research, campaign analysis, and systems analysis—has restricted relevancy to force planning with its long-range focus of twenty or more years into the future. Defense-analysis methods require certainty of data before they can productively yield reliable certainty in answers. The Navy’s current force-structure assessment methodology, which uses these quantifiable defense analysis tools, will be hard pressed to generate useful data about the long term. Its processes require data for modeling that are simply unavailable twenty years from now—hence, the need for a strong component of risk analysis, wargames, red teams, and alternative-futures work.

Incorporating net assessment capability to support force planning

Force planning requires long-range comparative assessment of trends, key competitions, risks, opportunities, and future prospects of Navy capability. Net assessment provides this comparison of red-blue interaction, using qualitative and quantitative factors across alternative future scenarios. The Navy cannot predict the future with certainty. However, net assessments generate a spectrum of needed capabilities for the Navy to draw upon. The Navy needs this capability because its reliance on campaign analysis, systems analysis, and operations research is grossly unbalanced. The Navy needs to conduct force planning based upon an assessment of the future security environment, and then use tools such as strategic wargames, emulations, expert-panel reports, and net assessment to build a strategy and a warfighting concept, and derive required capabilities. Once that is done, the quantifiable tools can refine the types and number of capabilities.

Clarifying N7 and N9’s force-planning roles

Force planning encompasses force design (i.e., the future fleet) and force development (i.e., the current fleet). CNO Gilday reassigned force-design responsibility from N9 to N7 in July 2022. In reality, N9 will likely continue to conduct force-design responsibility as it determinines the next generation of platforms for operational employment in the 2040s. Given all the approved and funded N9 force-design activity to plan the 2040s Navy, N7’s force planning responsibilities are far from clear.

Incorporating the secretary of the Navy into force planning

Secretary of the Navy Carlos Del Toro has signaled caution and unease with Navy force planning, and wants a realistic approach to understand the total cost and impact of the next-generation destroyer, attack submarine, and crewed/uncrewed aircraft. He wants to test new technologies for these platforms before any production. Given the Navy’s uneven track record in planning and delivering surface ships, along with the issue of affordability to fund an immense recapitalization, his caution is warranted.

Evaluating new technologies and concepts for force planning

The Navy is replacing in-service platforms with newer, follow-on versions, with the exception of uncrewed platforms. This is significant because strong platform attachment may be preventing the Navy from embracing new technologies and warfighting concepts. More importantly, such a possible attitude may prevent the Navy from understanding the changing character of war at sea. For example, because of the convergence of technologies, by 2045 the air and surface domains might become so significantly transparent that, in the competition between the “finder” and the “hider,” the finder might well dominate. If this is correct, surface ships and even aircraft will be increasingly vulnerable to continuous enemy tracking, targeting, and long-range attacks, thereby ending their role—or, at a minimum, severely limiting it—as the principal means of conventional naval power projection. Such an outcome has enormous consequences for the design of a 2045 Navy fleet.

Communicating Navy force-structure requirements

Given the December 2022 establishment of the National Commission on the Future of the Navy and the new reporting requirement for a Battle Force Ship Assessment and Requirement Report in December 2021, the Navy’s strategic-communications capability appears to have had little effect in countering the criticism of its force-planning efforts. The Navy’s strategic communications require an adjustment.

Recommendations

The overarching intent of these recommendations is to link OPNAV’s strategy, analysis, and budget processes. This is a challenge, as the work among the budgeteers, analysts, planners, and strategists is so different. Producing a budget is incremental work that “involves a great deal of analysis and negotiation, over and over again, year after year” and requires “orthodox bureaucratic labor.” Conversely, producing a strategy or a warfighting concept demands “unorthodox leaps of thought—of drawing exceptional inferences from exercises, war games, technology, intelligence, and events.”¹⁷

Historically, with a few notable exceptions, effectively linking these two groups has eluded OPNAV. Consequently, the recommendations address eliminating this gap by consolidating force-planning functions under the direct and strategic oversight of the CNO and VCNO to ensure the linkage between these two groups is maintained. In effect, force planning becomes OPNAV’s center of gravity, with the production of the budget in support.

The logic behind these recommendations is straightforward. The recommendations are governed by an overarching objective to ensure that the Navy’s strategy and policy priorities drive its force planning and budget, not the other way around. The Navy needs to build its forces and capabilities to implement the CNO’s recommended strategy. Force planning begins with that strategy, but the force-planning staff does not create that strategy; the origins of that strategy reside in the CNO’s personal domain, drawing upon higher-level guidance such as the National Defense Strategy. Using the CNO’s strategy, the force-planning staff determines the naval tasks required, and the problems and impediments—such as geography and the adversary’s capabilities—in the current and future security environment that must be surmounted. This activity, in turn, drives the development of warfighting concepts, which leads to the discovery of required naval forces and capabilities and their associated attributes (i.e., operational requirements). Finally, force planning calculates the number and mix of forces and capabilities required to achieve the strategy.¹⁸ The following recommendations make this logic a reality.

The eleven primary documents written by the proposed Navy Strategy Cell and the Force Planning Directorate would not be carved in stone and immutable like the Ten Commandants. In the final analysis, they would be the CNO’s documents. Vitally, they would be developed through the active participation of the Navy’s four-star leadership to identify the biggest challenges to the service’s continued relevancy and contribution to national security, and to devise a coherent approach to overcoming them, which the Navy senior leaders would hammer out and support. The purpose of this effort is to define how the Navy will move forward over successive five-year increments of the budget-planning process, with its senior leaders sharing and agreeing to a common approach. It is all about institutionalizing a force-planning process that can endure over decades from first inception to acquisition to initial operational employment, all managed by relatively short-tenured senior leaders.

Obviously, as the threat, budget, technology, and higher-level policy change, the CNO would update these documents on an annual basis, such as the process the Navy employed in the 1930s with at least nineteen major iterations to its War Plan Orange, and in the 1980s with several successive versions of the Maritime Strategy. Full participation of serving four-star and selected three-star admirals in this process will be vital, because, without question, one of these flag officers will become the next or subsequent CNO. If this participation does not occur, the probability for false starts and radical course changes will greatly increase as CNOs change.

First recommendation: Establish a new Assistant Secretary of the Navy

The secretary of the Navy should establish an assistant secretary of the Navy for strategy, concepts, and capabilities (ASN/SC&C) to assist the uniformed Navy (See Figure 2). The standing up of this position would deliver that assistance without needing another management layer. Instead, it offers enormous, impactful benefits by providing the secretary of the Navy the means to ensure:

• Alignment of both Navy and Marine Corps resources, activities, and capabilities with the strategic military objectives and force planning goals of the National Defense Strategy and National Military Strategy;
• Synchronization of Navy and Marine Corps force planning by integrating their efforts at the service-chief level, as well as at developmental level between the Navy’s Naval Warfighting Development Center and the Marine Corps’ Warfighting Laboratory;¹⁹
• The establishment of a strategy-focused counterpart to the assistant secretary of the Navy for research, development, and acquisition (ASN/RDA), and a vital interface with the assistant secretary of defense for strategy, plans and capabilities (ASD/SPC);²⁰
• The development of a single Navy Department strategy, vis à vis the three separate strategies of the department, Navy, and Marine Corps;
• Reform of Navy force-planning activities, reinvigoration of Navy strategic expertise, and the promotion of a strategy-centric culture in both the secretariat and OPNAV; and²¹
• A resolution of protracted issues and problems bedeviling Navy strategy development and force planning.

The final benefit has immense implications, and requires elaboration. The number of issues and problems confronting Navy strategy development and force planning seem almost enduring, foster significant congressional concern, and underscore the compelling need for great secretariat and OPNAV integration. On its own, the Navy has been unable to solve, correct, or mitigate these issues and challenges. Examples of such issues and problems that substantiate the services of a new assistant secretary are as follows.

Increasing affordability of platform

In June 2021, then acting Secretary of the Navy Thomas Harker signed a memo addressing Navy funding priorities in its fiscal year 2023 planning cycle to match fiscal guidance from the Office of the Secretary of Defense.

However, it was not until January 2023 that the Navy explicitly admitted that it could not afford all three major acquisition programs simultaneously, when the Navy announced that the order of acquisition as first is Next Generations Air Dominance (NGADS), then Next-Generation Guided-Missile Destroyer program (DDG(X)), and finally the Next-Generation Attack Submarine program (SSN(X)).²³

Navy platforms keep getting bigger and more expensive

Strong platform attachment may be preventing the Navy from embracing new technologies and concepts, and consequently replacing in-service platforms with newer, follow-on versions. Navy force planning uses an incremental approach—“buying at the margin [fewer, but] better [and more expensive] versions of the same [type] of platforms [the Navy] has relied upon for decades”—that is delivering an unaffordable fleet over too long a procurement time.²⁴

Proposals for new capabilities can be viewed as threats to in-service platforms, thereby blocking innovation. Quite often, the Navy’s new platforms, weapons, and systems are quite familiar to what is already in the fleet. The DDG(X) is the large surface-combatant replacement for the Arleigh Burke (DDG-51) class Aegis destroyers, currently still being procured by the Navy. A November 2022 Congressional Budget Office report on the Navy’s FY-2023 thirty-year shipbuilding plan states, “the Navy has indicated that the initial [DDG(X)] design prescribes a displacement of 13,500 tons,” about 39 percent greater than the 9,700-ton Flight III DDG-51 design.²⁵ There are media reports that actual displacement may be closer to fifteen thousand tons, which would make them comparable to a World War II heavy cruiser.

Technological developments are changing the character of warfare.

The principal means of conventional naval power projection are transforming, and this has enormous consequences for the design of a 2045 Navy fleet. According to US strategist Andrew F. Krepinevich, Jr., a disruptive shift is occurring from “precision-warfare regimes” to an emerging one based on “a new military revolution” incorporating “artificial intelligence, additive manufacturing, synthetic biology, and quantum computing, as well as military-driven technologies, including directed energy and hypersonic weapons.”²⁶ Krepinevich cautions that, too often, the US military gets the cart before the horse by fielding capabilities based on new technologies and not addressing “how these new capabilities would maintain their effectiveness” as a technological revolution matured, as was the case with the Navy’s next-generation cruiser.²⁷ Unfortunately, as of May 2023, such strategic-planning documents do not exist for the US Navy.

Ineffective strategic communications

The Navy’s poor strategic-communications practices are exemplified by its annual, unclassified thirty-year shipbuilding plan.²⁸ The plan fulfilled its purpose, but it was devoid of even a summary of a rigorous, unclassified, analytical rationale to make the case for a larger, more lethal Navy. With that, political leadership could understand the Navy’s defense role and support its claims upon the nation’s resources. It was a missed opportunity to strategically communicate the Navy’s case for resources to one of the Navy’s most important audiences.²⁹ The Navy does not know how to communicate its force requirements consistently. The best construct for Navy strategic communications is to use platforms. Right now, the Navy is using platform attributes—such as “Ensure Delivery,” which conjures images of Domino’s Pizza or Amazon delivery services—to communicate its requirements to Congress and the American people. Aircraft and ship types are not abstract; they are real things that people can easily visualize when they hear their names—submarine, destroyer, aircraft carrier, and jet fighter, among others.

An a-strategic Navy culture

Strategy is not an institutional Navy value; the service values operational and technocratic expertise above all. Indeed, one telling example illustrates this attitude. Unlike the five other armed services, the Navy does not formally board its selectees to attend the war colleges as students; in effect, the Navy assigns whoever is available. The Navy largely focuses on programming and budget to develop the means for strategy, while “devaluing the strategic underpinnings for rationalizing and justifying those means.³⁰ Regrettably, the Navy has become, “a technocracy—a technologically centered bureaucracy,” with the CNO and OPNAV staff acting as the “Navy’s lead programmers and budgeters, incentivizing a career system that rewarded officers who acquired the technical skills needed for these roles,” but not incentivizing a career path for strategists.³¹

A prescient 1984 US Naval Institute Proceedings essay encapsulated the Navy’s astrategic culture: “The finest personal accolade an officer can receive is, ‘He’s a great operator.’”³² However, the essay identified a major shortcoming these “great operators” have: they experience, “great difficulty comprehending or even identifying—long-term problems” and are, “convinced that only short-term problems are real, and that continued solutions to each in turn will eliminate or indefinitely postpone the distant ones.”³³ As a consequence of this attitude, the Navy cannot determine a lasting OPNAV organizational structure to ensure its strategy drives its force planning and its budget, in that order. On its own, the Navy cannot sustain its strategy enterprise over the long haul. Underscoring this assessment is the current lack of capstone strategic and force-planning guidance. The Navy does not have:

• A classified version of a combined “2020 Advantage at Sea” and “2022 Navigation Plan” to facilitate a clear and unambiguous expression of Navy ends, ways, and means along with such topics as strategic assumptions, risk, capacity, concepts, and threats;
• A classified assessment of the current and future security environments to provide baseline understandings of operating environments, setting conditions for effective concept-driven, threat-informed capability development;
• A classified warfighting concept for the 2040s timeframe;
• A classified red-blue net assessment at the strategic level;
• A classified description of a red-blue war; and
• A classified Navy long-range plan.

Competition among the Navy platform communities

The internecine warfare between the Navy’s three platform communities (the surface, aviation, and submarine communities) can severely unbalance the Navy as a whole. For example, the aviation tribe focuses on strike from the air; the submarine tribe on strike from the subsurface; the surface tribe on strike from the surface; and the amphibious tribe on strike across the beach. All the while, it is unclear if anyone is asking two fundamental questions: “What are we trying to do? And how can we accomplish this in a far more effective way than we can at present?”³⁴ Invariably, there is a competition among tribes for manpower and funding, resulting in disagreements over strategy and the allocation of resources. Reaching consensus among them has always been difficult, and remains a fundamental service chief responsibility.

As defense secretary, Mark T. Esper rejected the Navy’s force plans.

Esper wanted more attack submarines and a mix of light aircraft carriers (large-deck amphibious ships with F-35B aircraft) for more operational choices and affordability.³⁶ He did not want a plan bounded by past warfighting constructs and irrelevant to a future fight with China.³⁷ Because the naval-warfare tribes could not give him what he wanted, he directed Deputy Secretary of Defense David Norquist in the spring of 2020 to lead a new force-structure assessment study to maintain naval dominance.

Each warfare community produces an unclassified strategic guidance document—the aviation community has Navy Aviation Vision 2030–2035, the submarine community Commander’s Intent 4.0, and the surface community has Surface Warfare: The Competitive Edge. Each document, for the most part, encompasses community strategy, planning, policy, and vision topics about operations, capabilities, and personnel. There is little in each document about how that community interacts and cooperates with the other two to generate a unified Navy fighting machine. The lack of stated cooperation among the aviation, surface, and submarine-warfare communities in these documents is palpable. The three communities act like a true team of rivals whose intra-service actions have contributed substantively to the establishment of the National Commission on the Future of the Navy.

To resolve these and other such issues and problems challenges, the secretary of the Navy’s role in strategy development and force planning needs to be strengthened by the services of this new assistant secretary.

Second recommendation: Stand up the Navy strategy cell

The CNO should repurpose his Commander’s Action Group as the Navy Strategy Cell to produce the Navy’s capstone strategic guidance and to monitor its implementation by this one, central, and empowered staff entity reporting directly to the CNO (See Figure 2).

All CNOs understand that their most important responsibility as a service chief is to identify the biggest challenges to the Navy’s continued relevancy and contribution to national security, and to devise a coherent approach to overcoming them. This fundamental role serves as the basis for this recommendation. A 2010 Center for Naval Analyses report bluntly stated that developing and implementing such guidance “for the Navy is the CNO’s number 1 job.”³⁸ Indeed, from what many senior OPNAV veterans have privately communicated to the author, if this responsibility is not “totally owned by CNO,” OPNAV has no strategic focus. They believe the CNO most important responsibility is identifying the biggest challenges to the Navy’s continued relevancy and contribution to national security, and devising a coherent approach to overcoming them.

Already working directly for the CNO, the Commander’s Action Group produces strategic documents such as the annual posture statements, congressional testimony, keynote speeches, and the 2022 Navigation Plan. Building upon this foundation, the proposed Navy Strategy Cell would be uniquely positioned to describe preferred outcomes for the whole Navy. OPNAV’s seven directorates, on the other hand, tend to focus on the outcomes of individual supporting programs. With expansion, empowerment, and augmentation, the Navy Strategy Cell would:

• Enable the CNO to break away from the budget and programming processes that dominate so much of OPNAV’s time and thinking, and increase his or her focus on realistic and effective strategies and concepts for fighting at and from the sea;
• Strengthen the CNO’s ability to align and coordinate the activities of Navy organizations; communicate with a single Navy voice to external and internal audiences; and assess Navy policies, budgets, plans, and programs, and the resultant allocation of scarce resources; and
• Ensure capstone strategic documents reflect a consistent and aligned set of principles, concepts, and tenets regarding the Navy’s fundamental role in implementing national policy, as well as the CNO’s direction.

This recommendation mirrors what most corporate chief executive officers do, which is to make their capstone strategy functions a direct report to the chief executive officer. Consequently, this is no longer a lead role for N3/N5. Every CNO requires the direct support of a staff to provide a coherent, contemporary, authoritative body of Navy strategic thinking—comprehensive in scope—that they can use to help conceptualize, develop, coordinate, maintain, communicate, refine, and assess their thinking. The CNO needs to be optimally assisted and supported by a small, dedicated strategy staff, which is a corporate best practice. The production of capstone strategic guidance and other strategic documents requires a close relationship and physical proximity to the CNO, with no interlocutors. It is a one-on-one relationship between the CNO and, in effect, their “chief strategist” residing in the Navy Strategy Cell. The one-on-one relationship is needed to:

• Implement explicit CNO guidance, not guidance altered by OPNAV directorate agendas;
• Provide unfiltered advice, especially alternative views to CNO; and
• Do it quickly and with a minimum of interference from others.

Capstone strategic guidance describes how CNO intends to overcome “the biggest challenges to the Navy’s continued relevancy and contribution to national security”³⁹ across different timeframes and security environments. These documents require significant CNO involvement, visibility, and signature. They provide overarching direction to the service for planning, programming, and budgeting future forces, force planning, and operational employment, and convey fundamental principles about the application of naval power to achieve national policy goals. They drive all subordinate force-planning efforts and connect the Navy’s annual budget submissions and investment plans with the Navy’s key priorities. These documents are truly primus inter pares. They are consequential and substantive, must be derived from national and joint policy and strategy, and reflect a comprehensive, global view informed by the Navy’s current and future capabilities. The Navy Strategy Cell would draft for the CNO’s signature classified and unclassified versions of these four documents that comprise the Navy’s capstone strategic guidance (i.e., its “crown jewels”).

• Assessments of Current and Future Security Environments (classified and unclassified versions do not currently exist).
• The Navy Strategy (classified version does not currently exist).
• Navy Long-Range Plan (classified and unclassified versions do not currently exist).
• CNO’s Annual Budget Guidance (classified).

Third recommendation: Stand up the force-planning directorate

The CNO should consolidate all OPNAV force-planning responsibilities into a new Force-Planning Directorate under a vice admiral reporting to the VCNO and disestablish N7 (See Figure 2).

The unprecedented wakeup call from Congress, when it established an independent National Commission on the Future of the Navy, is sufficient reason to consolidate Navy force-planning efforts under one roof and reform them.

The Navy’s current federated organizational construct to force planning is ineffective. It is unclear in 2023 what OPNAV staff element acts as the central entity to coordinate all OPNAV force-planning efforts conducted by decentralized and independent staff elements. The functions of force planning are expansive, complex, and critical, as Congress just reminded the Navy. In recognition of the weakness of the federated approach, the Navy should follow its own successful examples of non-federated entities reporting directly to the CNO—the Strategic Systems Programs and Naval Nuclear Propulsion—and consolidate all matters pertaining to force planning into a new and dedicated single entity.

This single, dedicated Force-Planning Directorate would have the authority, staffing, and analytical means, to align, integrate, and synchronize the force-planning efforts into a comprehensive whole-of-Navy strategic plan. The relationship among force development and force design, as well their connection to the production of new ships, aircraft, and weapons systems, demands alignment, integration, and synchronization into a comprehensive force-planning blueprint.

This Force-Planning Directorate would have the authority, personnel, and analytical means to align, integrate, and synchronize all force-planning efforts to produce a Navy fighting machine. The new directorate would assess and integrate the future operational environment, emerging threats, and technologies to develop and deliver concepts, requirements, and future force designs, and support delivery of modernization solutions. Most importantly, it would position the Navy for the future by setting strategic direction, integrating the Navy’s future force-modernization enterprise, aligning resources to priorities, and maintaining accountability for modernization solutions.

The budget dominates all OPNAV activities. The only way to guarantee the budget supports and serves the needs of Navy strategy and force planning is to ensure the CNO or VCNO has direct oversight via a dedicated senior leader who has no other writ. The director of the new Force-Planning Directorate should report to the CNO via the VCNO. A Force-Planning Directorate addressing force design with its long-range time horizons and long-range results will not survive in an environment dominated by short-term results unless OPNAV clearly understands that the Force-Planning Directorate is working directly for the CNO, and that the OPNAV directorates have a supporting relationship to this new staff. As the Navy historical record documents, anything less than a direct report will repeat OPNAV’s past mistakes and failed attempts.

The Force-Planning Directorate would draft for the CNO’s signature classified and unclassified version of these seven documents.

• Warfighting concepts (current and future): Classified and unclassified versions do not exist for the 2045 timeframe. A classified version for the current timeframe exists (i.e., distributed maritime operations), but not an unclassified version. The Naval Warfare Development Center would support the development of these service-level concepts.
• Red-blue net assessment: Classified and unclassified versions do not currently exist.
• Description of a red-blue war (current and future): Classified and unclassified versions do not currently exist.
• Force Structure Assessment: Unclassified versions do not currently exist. The June 2023 Battle Force Ship Assessment and Requirement Report will provide a classified version.
• Navy force planning blueprint (current and future): Classified and unclassified versions do not currently exist.
• Thirty-year shipbuilding plan: An unclassified version exists.
• Battle force ship assessment and requirement report: A classified version exists. The June 2023 version of this report could potentially serve as a classified Force Structure Assessment.

The Warfighting Concepts would establish a baseline understanding to set conditions for effective concept-driven, threat-informed force planning, in order to produce a Navy Force Planning Blueprint. It would be based on a common understanding of the current and future security environments and a shared articulation of how the Navy fights as a whole, and not merely as a collection of individual classes of platforms. It would be the Navy’s comprehensive plan—not a strategy—to integrate, align, and synchronize all its force-planning efforts, including the efforts of force development and force planning along with the ongoing production of new ships, aircraft, and weapons systems to produce the Navy fighting machine (i.e., a unified combination of air, surface, and subsurface Navy lethality). Figure 2a depicts the consolidated production of the Navy’s eleven key strategic guidance documents from numerous OPNAV organizational elements to just two.

Establishment of this new Force-Planning Directorate topples the budget process as OPNAV’s dominant process. Force planning would become OPNAV’s center of gravity, with the budget in support, and no longer the other way around. It turns over the proverbial apple cart, with force planning reporting directly to the CNO and leading a strategic-centric staff dialogue, as opposed to a budget-centric dialogue. This reversal will generate strong resistance from N8 and N9 in particular. Because the Force Planning Directorate will be the primus inter pares, and as the other OPNAV directorates are all headed by a vice admiral, the new Force-Planning Directorate must likewise be headed by a vice admiral or else be doomed to failure.

This new Force-Planning Directorate requires the capability to conduct Navy net assessments for strategic analysis of red-blue interactions for informed and realistic plans. Net assessments (along with defense analysis) are diagnostic means, whereas force planning is a prescriptive means. The two belong together; if not, dysfunction will continue to hamstring efforts. This capability does not currently exist in OPNAV, and would require new personnel resources.

Resourcing the recommendations

The resources to make these recommendations real are readily available; it is just a matter of resetting priorities. The Navy is under heavy congressional fire for its strategy-development and force-planning efforts. Correcting this situation for the long term is surely one of the Navy’s highest priorities.

Given these circumstances, can the Navy say, for example, that the large number of officers assigned to the front office of its three-star leaders is more important than staffing its capability for strategy development and force planning? Again, it is a matter of priorities. If staffing these front offices is more important than retrieving control of force planning from the National Commission on the Future of the Navy, then so be it. It is simply a matter of priorities, and making the tough choices that many leaders say they like to do. Here is another opportunity.

For the reasons presented in this paper, leadership of the Navy Strategy Cell and Force-Planning Directorate requires senior flag officers. Disestablishing the N7 directorate would provide the vice admiral billet to lead the Force-Planning Directorate and a rear admiral billet to head the Navy Strategy Cell. The majority of N7’s functions can return to OPNAV N3/N5 and a portion of N7’s functions can relocate to staff the Navy Strategy Cell and the Force-Planning Directorate.

While there are no perfect organizational frameworks, there are organizational frameworks that better align a greater number of common functions, as outlined in these recommendations. A strategy office reporting to the corporate chief executive officer—in the Navy’s case, the CNO—is a proven practice, and a direct-report senior leader responsible for all Navy force planning is no different than having the Naval Nuclear Propulsion and Nuclear Weapons Program/Strategic Systems Programs as direct reports.

The emphasis of the proposals in this white paper is on strategy-development and force-planning reinvigoration and reasonable consolidation of similar functions, given the centrality of Navy strategy and force planning to all other OPNAV responsibilities. Force planning, if done properly with strategy in the lead and with its capstone strategic-guidance documents, will generate enormous benefits.

Conclusion

Congress has lost patience and confidence in the Navy. There is no way to sugarcoat this action. It is nothing less than a strong condemnation of the Navy’s approach to strategy development and force planning. When US Representative Rob Wittman (R-VA) in December 2022 penned his scathing commentary in Defense News, he was on target in stating, “if the Navy refuses to learn lessons from this year, it will be doomed to repeat them.”⁴⁰

The warning signs have been evident for years. However, much like the Navy’s Bureau of Ordnance’s stubborn, twenty-one-month resistance in World War II to correct three major defects of the Mark 14 torpedo, the Navy since the end of the Cold War has neglected its strategy enterprise and resisted effective force planning.⁴¹ It has repeatedly failed to understand and act on the mismatch between OPNAV’s robust organization for building the budget and its ineffective organization for developing and implementing Navy strategy.

The Navy needs to think and act like it did in the 1920s and 1930s, when it prepared to confront the Imperial Japanese Navy. The US Navy’s strategy, future security environment, and warfighting concept were all reflected in nineteen iterations to its War Plan Orange and updates to the Rainbow series of war plans. The Naval War College focused its curriculum and wargames throughout the 1930s on defeating the Imperial Japanese Navy, and almost every Navy flag officer was a war-college graduate. While far from perfect, the Navy of the past shared a common view of what a war with Imperial Japan entailed and clearly understood logistics were a top-tier priority for warfare across the vast distances of the Pacific. Likewise, in 2023, the Navy needs the same level of focus and preparation as its predecessor, and the proposed Navy Strategy Cell and Force Planning Directorate will help ensure it is ready for whatever lies ahead.

The author would like to be more of an optimist than a realist, but the Navy continues to allow mistakes to go uncorrected decade after decade. It is, like Winston Churchill stated, a “long dismal catalogue of the fruitlessness of experience and the confirmed unteachability of mankind.”⁴² It is foolish to believe that the Navy will change on its own to conduct more effective strategy development and force planning.⁴³ The only way the Navy will change is for Congress to direct it, or else the Navy will continue with its flawed ways.

About the author

Bruce Stubbs

As a member of the Senior Executive Service for the Department of the Navy, Bruce Stubbs served on the Chief of Naval Operations (OPNAV) staff from June 2011 to September 2022 as the Director of Strategy and Strategic Concepts (OPNAV N7), the Director of Strategy (OPNAV N3/5), and the Deputy Director of Strategy and Policy (OPNAV N3/5). Prior to those assignments, he served on the Secretary of the Navy’s immediate staff from June 2008 to May 2011 with responsibility for the coordination and implementation of Maritime Domain Awareness programs, policies, and related issues across the Defense Department.

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

Learn more

The post Building a navy fighting machine appeared first on Atlantic Council.

The USMCA has certainly been successful in increasing the volume of Mexico’s trade with the United States and Canada. According to the US Census Bureau, in April 2023, the United States imported more goods from Mexico than from any other country; in 2022, Mexico-US trade was almost 27 percent higher than in 2019, and Mexico-Canada trade grew 21.8 percent in these same years. Between 2020 and 2023, Mexico received fifty billion dollars in US and ten billion dollars in Canadian investments.

This increase in trade and investment flows is explained not only by the USMCA’s implementation, but also by the Biden administration’s decision to diversify supply chains, relocate production to North America, and “de-risk” from China. By seeking to reduce the vulnerability of supply chains in North America, the integration facilitated by the USMCA acquired greater relevance for companies, workers, governments, and societies.

Even though the agreement has spurred dynamism in trade and investment, its implementation has not gone without serious challenges and confrontations, which Mexico will need to address before the 2026 joint review. These include differences in the way the three countries have chosen to comply with the USMCA, heightened scrutiny on labor and environmental issues, and incomplete implementation of the agreement’s provisions.

Unsettled disputes

First, Mexico has faced difficulties on both sides of the USMCA’s dispute settlement mechanism, established in Chapter 31. Mexico’s use of this mechanism signals that it considers the agreement an effective instrument to defend its commercial and investment interests. Together with Canada, Mexico requested the establishment of a panel to settle its differences with the United States regarding the interpretation of the methodology to determine the regional value content of essential auto parts in cars manufactured in North America. The panel ruled in favor of Mexico, but there seems to be no interest in enforcing the ruling.

Mexico has also been the target of Chapter 31. Both the United States and Canada requested consultations regarding Mexico’s energy policy in July 2022 and restrictions on trade in genetically modified corn in June 2023. While both consultation processes could still lead to requests for the establishment of panels, the parties have been in conversation regarding the substance of their concerns.

Chapter 31 is of great value to the private sector in North America because it offers a legal tool to solve differences. The USMCA offers a dispute settlement mechanism that works, unlike the World Trade Organization Dispute Settlement Body, which is paralyzed. The USMCA’s panel reports are binding, and panel decisions are not affected by domestic political pressures.

However, it is the three governments’ responsibility to comply with the panels’ decisions, even if they are unfavorable, and to make sure that rulings are fully enforced. Not doing so undermines the value of the USMCA dispute settlement mechanism and the agreement itself.

High standards, heightened scrutiny

Second, Mexico has been subject to scrutiny on labor and environmental matters, reflecting US and Canadian national priorities and their need to respond to political pressure from their own domestic constituencies. Regarding labor, under the Rapid Response Labor Mechanism, the United States has initiated eleven cases against Mexico, and Canada has initiated one. Mexico’s labor authority has sought to address the concerns raised in each case, avoiding sanctions and prohibitions on exports.

On environmental matters, Mexico has faced questioning from its partners regarding compliance with its environmental legislation and its USMCA obligations. For example, in February 2022, the United States requested consultations with Mexico on the protection of the vaquita porpoise, which is associated with totoaba illegal fishing. In May 2023, the US Fish and Wildlife Service determined that Mexico has not done enough to prevent the illegal trafficking of totoaba, so later this month, US President Joe Biden could decide to impose an embargo on the trade of wildlife products from Mexico, in line with Mexico’s Convention on International Trade in Endangered Species of Wild Fauna and Flora obligations, which are also recognized in the USMCA. In labor and environmental affairs, the United States and Canada have used and may continue to use the USMCA mechanisms to pressure Mexico to comply with its obligations, since these issues are key to their own domestic political agendas.

Unfinished business

Third, Mexico has yet to fully implement several USMCA provisions. These include the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules Framework, established in Chapter 19, which is already overdue. In addition, Mexico will have to become a signatory to the 1991 agreement of the International Union for the Protection of New Varieties of Plants as provided in Chapter 20. Likewise, the USMCA has a built-in agenda of future negotiations, such as the inclusion at the sub-federal level of provisions on state-owned companies and designated monopolies (Chapter 22), which should have been concluded in June 2023. Mexico needs to make sure that these provisions are enforced according to its USMCA commitments, since this will align its regulations and policies with those of its North American partners.

At the halfway point between USMCA’s entry into force and its first joint review, Mexico has seen a substantial increase in its trade and investment flows, which are key engines for its economic growth. However, Mexico still faces serious challenges in the full implementation of its commitments and in making sure that the United States also complies with a panel report favorable to Mexico. It is in Mexico’s interest to fully comply with the agreement while also requesting compliance from the United States, since that will provide certainty and predictability to investors in the region. This will facilitate the agreement’s extension at the six-year review in 2026 and will allow Mexico to promote opportunities for North American productive integration and the relocation of supply chains.

Luz María de la Mora is a nonresident senior fellow with the Atlantic Council’s Adrienne Arsht Latin America Center, where she supports the Center’s Mexico work. From December 2018 to October 2022, she served as undersecretary of foreign trade in the Mexican Secretariat of Economy, during which she helped implement the USMCA.

The post A midterm report card for Mexico’s USMCA progress appeared first on Atlantic Council.

To accelerate US industrial decarbonization, policymakers should start with the lowest hanging fruit, such as electrification or cleaning hydrogen for existing use cases, and then expand to more difficult areas. Greening the electricity sector would sharply curtail emissions from electricity-intensive industries, while switching to clean hydrogen in refineries will likely accelerate hydrogen’s relevance for other promising but unproven use cases, such as in steelmaking. By targeting “easier” challenges, policymakers can achieve decarbonization gains as quickly as possible.

The most effective paths to accelerate industrial decarbonization will require permitting reform and pursuing a comprehensive understanding of clean energy deployment, including in transmission. While the United States has enhanced fiscal support for clean energy development, policymakers across the country at all levels of government should reduce permitting review times and ensure that projects are not stuck in regulatory limbo indefinitely. The United States should also research methods of decarbonization, including nuclear energy development, and wires-vs-pipeline transportation costs for green hydrogen. To limit the consequences of climate change, the United States must urgently advance a suite of efforts to guarantee the domestic and international industrial emissions reductions the world needs.

Staff

Joseph Webster

Senior Fellow

Global Energy Center

Central Asia China

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

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What’s behind the EU’s push to regulate AI? What will the legislation require of companies who develop AI systems? With the trialogues underway, what are some of the key issues that will dominate interinstitutional negotiations? How did the introduction of ChatGPT change the way the European Parliament was looking at regulating AI? And what’s the relationship between regulation and innovation when it comes to AI technologies?  

On this episode of #AtlanticDebrief, Fran Burwell sits down with Brando Benifei MEP, co-rapporteur of the EU’s AI Act, to discuss what the EU hopes to achieve with its legislative proposal.  

You can watch #AtlanticDebrief on YouTube and as a podcast.

Fellow

Frances Burwell

Distinguished Fellow

Europe Center

Central Europe Digital Policy

Europe Center

Providing expertise and building communities to promote transatlantic leadership and a strong Europe in turbulent times.

The Europe Center promotes the transatlantic leadership and strategies required to ensure a strong Europe.

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The post #AtlanticDebrief – What’s the significance of the EU’s AI Act? | A Debrief with Brando Benifei MEP appeared first on Atlantic Council.

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On July 2, 2023 Nonresident Senior Fellow Dexter Tiff Roberts was quoted in a South China Morning Post article on a proposal by Chinese officials to update its Trademark Law in an attempt to improve intellectual property protection to better appeal to foreign investors amid its slowing economy.

Fellow

Dexter Tiff Roberts

Nonresident Senior Fellow

Global China Hub Indo-Pacific Security Initiative

China Chinese

The post Roberts quoted in South China Morning Post appeared first on Atlantic Council.

Watch the full event

Public Event Wed, June 28, 2023 • 3:00 pm ET

USAID Administrator Samantha Power on advancing LGBTQI+ inclusive development

AN #ACFRONTPAGE EVENT – A conversation on the United States’ efforts to advance global LGBTQI+ human rights and USAID’s commitment to global inclusion.

Human Rights Resilience & Society

The passage of Uganda’s law criminalizing LGTBQI+ identity is only one recent example of efforts to turn the global human-rights agenda “on its head,” said Samantha Power, administrator of the US Agency for International Development (USAID). And “it’s not just happening in Uganda,” she warned.

Power spoke at a Pride Month special edition of Atlantic Council Front Page on Wednesday, where she discussed USAID’s role in advancing LGBTQI+ inclusive development globally.

She addressed some of the agency’s most difficult challenges when it comes to achieving its inclusive development goals, including anti-LGBTQI+ discrimination—legal or otherwise—that prevents vulnerable communities from receiving needed services. “Even where there’s not a law,” Power said, discrimination is “a deterrent” that often stops people from accessing care and assistance.

Power also discussed USAID’s efforts to promote the development of a more inclusive postwar Ukraine. “Ukraine’s work to liberalize and build checks and balances and build in human-rights protections”—including for LGBTQI+ rights—“has accelerated,” she said.

She also argued for prioritizing LGBTQI+ human rights on the global stage. If the United States “[goes] quiet,” she said, “I think we would really shortchange what is distinguishing about American foreign policy.”

Power also previewed a new USAID policy promoting LGBTQI+ inclusive development, which she said would be the “first-of-its-kind.”

Below are more highlights from the discussion on USAID’s efforts to advance LGBTQI+ human rights and inclusive development, moderated by Washington Post and MSNBC journalist Jonathan Capehart.

Steps back—and leaps forward

• Uganda’s recently passed Anti-Homosexuality Act “would set back not only the health of LGBTQI+ communities,” but the health of all Ugandans, Power said. The Biden administration has publicly criticized the bill, joining leaders in thirty-one other countries in condemning the Ugandan law.
• Power explained that USAID works with local actors when determining how to best oppose discriminatory laws. “It’s the communities that are going to be affected by these laws that provide cues to us on how vocal to be” against anti-LGBTQI+ legislation, the USAID administrator said. Otherwise, the United States could risk becoming the center of attention and “potentially triggering nationalism and other forces.” Such a backlash, Power said, is “just what people who would seek to repress or terrorize vulnerable communities would like to see happen.”
• Despite challenges and setbacks in some countries, there are nevertheless signs that international LGBTQI+ human-rights norms are gaining ground, Power explained: Same-sex marriage legalization, as was recently accomplished in Estonia, as well as the decriminalization of same-sex relations in countries such as Barbados and Singapore indicate that “these principles are getting traction,” she said.

Inclusive reconstruction in Ukraine

• Power explained that Ukraine has made progress on LGBTQI+ rights since the start of Russia’s full-scale invasion; she said it is “remarkable that a country that’s fighting for its life and its people” has also managed to extend LGBTQI+ protections through legislative measures, regulations, and judicial vetting.
• Power argued that Ukraine’s mission to “[integrate] into Europe,” will encourage the Ukrainian legal and social ecosystems to increase their support for LGBTQI+ communities. “The criteria that Ukraine is going to need to meet, the roadmap and so forth, is going to entail much stronger protections than have existed in the past,” she said.
• The commitment to inclusive postwar reconstruction in Ukraine is in line with the Ukrainian peoples’ motivation for resisting Russian aggression, Power argued. “Part of what Ukraine is fighting for and part of what Russia is trying to squelch is liberalization, is [a] broad understanding of who human rights protections apply to,” she said.

The role of LGBTQI+ human rights in US foreign policy

• Prioritizing LGBTQI+ human rights is consistent with the United States’ economic development and foreign policy interests, Power said. “It is in our interest to fight repression,” she said. “It is in our foreign-policy interest to stand up for our values.”
• Power argued that the United States’ human-rights commitments obligate it to advocate LGBTQI+ rights in its foreign policy, leaving no room for neutrality on the issue, Power said. “Imagine the counterfactual,” she said. A US foreign policy that did not promote LGBTQI+ rights would “legitimate some of the [anti-LGBTQI+] rhetoric and actions and legal measures that are being put forward,” she said.
• Power pushed back on the criticism that promoting global LGBTQI+ human rights abroad interferes with other countries’ affairs. She said that the United States hears such complaints about interference often from Russia—even as it invades Ukraine—as well as from countries that sell surveillance technology and spread disinformation beyond their borders. “The noninterference claim is usually made in a selective way,” she said.

Daniel Hojnacki is an assistant editor of editorial at the Atlantic Council.

Watch the full event

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In the past twelve months, Vice President Kamala Harris launched the US-Caribbean Partnership to Address the Climate Crisis 2030, welcomed leaders to Washington, and met in person with leaders in The Bahamas. This has helped build goodwill in the region. But US visits and diplomatic engagement have yet to yield many results. Simply put, if Blinken arrives in the Caribbean with little to announce, frustration is likely to brew. 

Blinken’s visit must start an action-oriented agenda for the region. He should focus on two key areas of cooperation. First, the United States should work with multilateral development banks (MDBs) to provide access to low-cost and low-interest financing to high- and middle-income Caribbean countries. Second, Washington should provide requisite tools to local private sector businesses so they can play a larger role in the region’s own development.  

For the United States, the consequences of insufficient action so far are evident. Given the enormity of the challenges facing the Caribbean, the region’s leaders are seeking solutions to their problems elsewhere. Barbadian Prime Minister Mia Mottley has taken to the global stage to overhaul MDB financing, Guyana is welcoming investment in its oil sector from all corners of the world, and Trinidad and Tobago is increasing engagement with Venezuela over shared gas reserves. Other Caribbean leaders see African countries, India, and China as attractive partners that can provide financing, investment, and aid. 

This does not mean that US presence in the region will evaporate. The Caribbean’s proximity to the United States, strong trade relations, and a large US-based diaspora ties the partners together. But US government officials must realize that the United States will no longer be the only actor with which Caribbean leaders will engage. Therefore, if the United States wants to remain relevant in the region, now is the moment to deliver real solutions to the challenges facing its Caribbean neighbors.

A plan to amplify financial instruments

The first step should be working with MDBs, such as the World Bank and the Inter-American Development Bank, to amplify new financial instruments to support access to concessional financing for Caribbean countries. Most Caribbean countries are classified as high- or middle-income, which means that they are not able to access low-cost and low-interest financing from MDBs to fund needed infrastructure or social programs in times of crisis. Part of this work is ongoing, with the World Bank recently announcing a debt pause on loan repayments for developing countries hit by natural disasters. 

However, the pause only applies to new loans, not existing ones. Given the specific vulnerabilities of Caribbean countries, which extend beyond just the effects of climate change–induced events, the United States should work with MDBs to create a specific carve-out for small island development states such as the CARICOM countries. Hurricanes and other natural disasters pose significant risks to the Caribbean. But due to the small size and openness of their economies, so do other external events, such as pandemics, the volatility of commodity prices, and disruptions in supply chains. These external risks should be accounted for as well, because if another COVID-19 pandemic occurred today, Caribbean countries would still be on the hook for loan repayments. 

Charging up the private sector

The United States should also work closer with local businesses to embolden the Caribbean private sector. Big infrastructure projects in the Caribbean, such as roads, bridges, and new buildings, are mostly led by governments. The private sector is often left out, as local banks provide only limited financing or loans with high interest rates. This creates a vast asymmetry between government and private sector resources, with governments scoring political points from new infrastructure projects, while the skills, expertise, and capital that bring these projects to fruition result in little benefit for local companies. Foreign companies, therefore, reap the benefits, with returns on projects benefitting external actors rather than populations in the Caribbean, including the business community. This creates a dependency on the state to provide jobs, resources, and skills to citizens, meaning that the distribution of these resources is tied to the government of the day. 

To address this, the United States should create a US-Caribbean Public Private Partnership program that incubates small businesses in the region. The objective should be to train small businesses and transfer skills and technologies to local companies so that they can scale to a level where they are competitive in bidding rounds for upcoming projects. This is all the more important in the construction and energy sectors, as new climate-resilient infrastructure and energy systems are needed in the Caribbean now and going forward. The benefits would be twofold. First, a stronger and more robust private sector should strengthen and stabilize the region’s financial sector, making Caribbean countries less susceptible to volatility in global markets. Second, the larger the private sector, the more jobs will be available to citizens. This should stimulate domestic growth and create more diverse job opportunities outside of public service and the tourism industry—two sectors highly vulnerable to climate change and growing debt-to-gross-domestic-product ratios. 

It is a consequential moment for the Caribbean—its challenges grow worse each day. To survive the next few decades, it needs the support of its partners, including the United States. High-level visits alone will not suffice. To capitalize on the goodwill the United States has built in the Caribbean, Blinken’s trip should mark the beginning of an active policy toward the region. Working with MDBs and supporting private sector growth would be a giant step forward.  

Wazim Mowla is the associate director of the Caribbean Initiative at the Atlantic Council’s Adrienne Arsht Latin America Center.

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Security

Military camps for Wagner reportedly under construction in Belarus

Tracking narratives

Pro-Kremlin sources spreading disinformation to justify missile strike in Kramatorsk

Kremlin blames Colombian victims for the injuries they sustained in the Kramatorsk attack

Media policy

Prigozhin’s online assets reportedly blocked in Russia

International Response

Questions abound over the future of Wagner contracts and Prigozhin-linked businesses in Africa

Analysis: With Wagner mutiny, Russia’s loses plausible deniability about its involvement in Africa

Investigation sheds light on how Putin’s childhood friends allegedly evade sanctions

Military camps for Wagner reportedly under construction in Belarus

Russian independent outlet Verstka reported on the construction of camps for Wagner forces near Asipovichi, Mogilev Oblast, located in Belarus approximately two hundred kilometers from the Ukraine border. According to Verstka’s local forestry source, the area will cover 2.4 hectares (5.9 acres) and accommodate eight thousand Wagner fighters. The source also claimed that there will be additional camps constructed. Family members of Wagner fighters also confirmed to Verstka that they were deploying to Belarus. 

Radio Svaboda, the Belarusian-language edition of Radio Liberty, reviewed satellite imagery from Planet Labs that suggested signs of expansion at the Unit 61732 military camp adjacent to the village of Tsel, twenty kilometers northwest of Asipovichi. The outlet interviewed Ukrainian military analyst Oleg Zhdanov, who suggested it was “too early to tell” as to whether the military camp’s expansion is specifically for Wagner forces. “Very little time has passed to start building a camp specifically for the Wagnerites—it’s unreal,” Zhdanov told Radio Svaboda.

On June 27, in his first speech after the Wagner mutiny, Russian President Vladimir Putin reaffirmed the deal that ended the rebellion on June 24 in which Yevgeniy Prigozhin would relocate to Belarus. Putin praised those Wagner fighters who did not participate in the revolt and said they could sign a contract with the Russian Ministry of Defense of other services. He added that other mercenaries who do not want to join could go either home or follow Prigozhin to Belarus.

—Eto Buziashvili, research associate, Tbilisi, Georgia

Pro-Kremlin sources spreading disinformation to justify missile strike in Kramatorsk

Pro-Kremlin sources denied Russia targeted civilians when a missile struck a crowded pizza restaurant in Kramatorsk, killing at least twelve civilians and injuring more than fifty others. According to this narrative, RIA Pizza was actually a military base hosting US and Ukrainian soldiers. To support the claims, pictures taken after the strike were published on Telegram and Twitter.

To support the claim that soldiers of 101st Airborne Division were located at the pizza “military base,” pro-Kremlin sources circulated grisly footage of the attack aftermath recorded by freelance journalist Arnaud De Decker. The clip shows a man wearing a morale patch of a US flag with the words “Always Be Ready: 5.11 Tactical.” 5.11 Tactical is a military apparel company that sells branded merchandise, including morale patches, worn to offer support to various causes and slogans but not used official unit patches. Various types of 5.11 Tactical’s “Always Be Ready” patches are readily available for purchase online.

Similarly, another post from Aleksandr Simonov’s Telegram channel that a man wearing an 101^st Airborne t-shirt was a member of the US Army division. These t-shirts are also readily available from online retailers.

—Sayyara Mammadova, research assistant, Warsaw, Poland

Kremlin blames Colombian victims for the injuries they sustained in the Kramatorsk attack

In addition to pro-Kremlin accusations that the Kramatorsk attack targeted a base housing US Army soldiers, Kremlin influencers also targeted citizens of Colombia, three of whom were injured in the attack, for being at the site of the incident. Colombian President Gustavo Petro said the attack targeted “three defenseless Colombian civilians” in violation of the protocols of war and called for the Colombian Foreign Ministry to submit a note of diplomatic protest to Russia. While the Kremlin acknowledged launching the attack, it insisted the assault struck military personnel rather than civilians.

The three Colombian citizens injured in the attack include acclaimed Colombian writer Hector Abad Faciolince; Sergio Jaramillo Caro, who previously led Colombia’s peace negotiations with FARC rebels; and Ukrainian-based journalist Catalina Gomez. According to the New York Times, Abad and Jaramillo were in Kramatorsk “collecting material” in support of their initiative, ¡Aguanta Ucrania! (“Hang On Ukraine!”), which seeks to garner support for Ukraine in Latin America.

Following the attack, Colombian influencers and officials criticized the attack through media outlets and social media accounts in Spanish. Danilo Rueda, Colombia’s current high commissioner for peace, issued a statement expressing support for the victims without mentioning Russia, while the Ministry of Foreign Affairs expressed its “strongest condemnation of the unacceptable attack by Russian forces on a civilian target.” 

Gomez, who was injured in the attack, broadcast a video for France 24 from the site of the explosion. Meanwhile, Abad and Jaramillo conducted interviews with Colombian media outlets such as El Tiempo in which they described the incident.

Actualidad RT, a Russian media outlets with enormous reach in the Spanish-speaking world, insisted that the victims of the attack were mercenaries and instructors of NATO and Ukraine rather than civilians. Actualidad RT quoted statements from Igor Konashenkov, spokesperson for the Russian Ministry of Defense,  and Kremlin spokesperson Dmitri Peskov, who said the attack struck “military targets” and that “Russia does not attack civilian infrastructure.” Actualidad RT promoted its claims via Twitter and Facebook multiple times on June 28.

Colombian radio station WRadio interviewed Kremlin foreign policy spokesperson Maria Zakharova on the morning of June 28. Zakharova stated that the restaurant was a Russian military target and called for an investigation into Victoria Amelina, a Ukrainian writer who was gravely injured while purportedly hosting the Colombians at the restaurant, claiming without evidence that Amelina had prior knowledge that the restaurant was a military target. Zakharova reiterated this statement after a WRadio journalist asked her to confirm the accusation. In contrast, Abad stated that it was Gomez who suggested they visit the restaurant, and that she apologized for doing so after the attack.

The Russian embassy in Colombia amplified Zakharova’s narrative later that same afternoon and evening. On Twitter, the embassy insisted that the city was “an operational and logistical-military hub, not a suitable place to enjoy Ukrainian cuisine dishes.” It also seemed to celebrate that the “reckless trip [of the Colombians] did not turn into an irreparable tragedy.”

—Daniel Suárez Pérez, research associate, Bogota, Colombia

Prigozhin’s online assets reportedly blocked in Russia

Over the course of the thirty-six-hour Wagner mutiny, the Kremlin attempted to limit information about Yevgeniy Prigozin on Russian social media and search engines, eventually blocking websites affiliated with Prigozhin. On June 24, the Telegram channel of Russian state-owned propaganda outlet RT reported that several Prigozhin-controlled media outlets including RIA FAN, People’s News, and Patriot Media Group were no longer accessible in parts of Russia. RT added that the reason for their disappearance was unknown. Similar reports appeared in Mediazona and several Telegram channels. 

The DFRLab used the Internet censorship measurement platform OONI to verify the claim and check the accessibility of RIA FAN within Russia. OONI detected signs that riafan.ru was blocked in the country. 

On June 29, independent Russian outlet The Bell claimed the Kremlin was searching for a new owner for Patriot Media Group, which includes media assets associated with Prigozhin. The following day, multiple Russian outlets reported that Prigozhin had dissolved Patriot Media Group.

—Eto Buziashvili, research associate, Tbilisi, Georgia

Questions abound over the future of Wagner contracts and Prigozhin-linked businesses in Africa

For years, Wagner has acted as Russia’s primary form of influence in Africa—spreading disinformation and propaganda, securing military contracts, and exporting natural resources to support Putin’s war effort. Following Prigozhin’s attempted mutiny, the future of Wagner’s operations on the continent has come into question. While it is highly unlikely the Kremlin would willingly abandon its influence in Africa, if Wagner is retired or its troops absorbed into the Ministry of Defense, it is uncertain who would maintain the group’s operations on the continent.

Russian Foreign Minister Sergei Lavrov confirmed that Russia’s work in Africa will continue. In a TV interview with Russia Today, Lavrov said, “In addition to relations with this PMC the governments of CAR and Mali have official contacts with our leadership. At their request, several hundred soldiers are working in CAR as instructors.”

A top advisor to Central African Republic President Faustin-Archange Touadéra appeared unconcerned about the weekend’s events. Speaking of Wagner’s military instructors, Fidèle Gouandjika said, “If Moscow decides to withdraw them and send us the Beethovens or the Mozarts rather than Wagners, we will have them.” In a statement released to its Telegram channel, the Officer’s Union for International Security—a US-sanctioned Wagner front company operating in CAR—claimed CAR’s defense minister had apologized for Gouandjika’s remarks. It quoted Defense Minister Claude Rameaux Bireau as saying, “The people of the CAR are grateful to the Russian instructors of Wagner, ask any Central African on the streets of Bangui or in the village of the CAR—he will confirm my words.”

In Mali, where Wagner forces have taken over responsibility for pushing back jihadists after the departure of French forces, the online outlet Mali Actu reported that the situation could dramatically impact Mali. “This situation raises major concerns about the security, stability and sovereignty of Mali, as well as the impact on the local population and counter-terrorism efforts,” it wrote.

—Tessa Knight, research associate, London, United Kingdom

Analysis: With Wagner mutiny, Russia loses plausible deniability about its involvement in Africa

While Wagner’s future in Africa remains uncertain, it is important to consider that the Wagner Group not just a paramilitary force. It is also a conglomerate of companies active in different sectors, from mining and logistics to political warfare and moviemaking, able to travel the spectrum between private entrepreneurism to state proxy. This flexibility has previously allowed Moscow to deploy Wagner to act as a force multiplier in Africa while simultaneously denying Russia’s direct presence on the continent. In Africa, Russia has used Wagner multiple times as part of a strategy to help authoritarian leaders stay in power and gain a pro-Russian military presence on the ground, all while maintaining plausible deniability. Until now, the positive outcomes of this strategy have far exceeded the costs for the Kremlin, as Russia has built a strong network of African influence with relatively little effort, securing concessions in strategic extractive industries, and expanding military-to-military relations on the continent.

However, this principle of plausible deniability, which made Wagner so successful and so useful for Moscow as an extension of its foreign policy and influence, is now damaged. As previously noted, Russian Foreign Minister Sergei Lavrov, as well as Putin, publicly confirmed direct links between Wagner and the Russian state apparatus.

Africa is intimately linked to Wagner: In the wake of Wagner’s involvement in Syria, Africa became the scene of the group’s expansion. Engaging in Sudan, the Central African Republic, Libya, Mozambique, Madagascar, and Mali, Wagner employed an opportunistic strategy of supplying security while taking concessions to mine natural resources. While its forces were in most cases invited to stabilize fragile states, its actions actively invited further instability, creating more opportunities and a greater demand signal for its services, ultimately granting renewing opportunities to Moscow to reinforce its footprint in the continent.

While denying direct links to Wagner’s actions in Africa might have become more difficult for the Kremlin, Russia is unlikely to waste the network of influence built by the group in recent years. Instead, Moscow will likely continue to deploy hybrid tools such as Wagner, although organized in different shapes and forms, so Russia can continue displacing Western influence, exploiting natural resources, and evading sanctions through dozens of front companies.

—Mattia Caniglia, associate director, Brussels, Belgium

Investigation sheds light on how Putin’s childhood friends allegedly evade sanctions

On June 20, the Organized Crime and Corruption reporting project (OCCRP) published a series of investigations titled “The Rotenberg Files” that shed light on the business dealings and alleged sanctions evasion attempts of Boris and Arkady Rotenberg, close friends of Russian President Vladimir Putin. The report is based on fifty thousand leaked emails and documents, examined by journalists from seventeen outlets. The OCCRP said the leak came from a source who worked for the brothers at a Russian management firm. The OCCRP investigation was conducted in partnership with the Times of London, Le Monde, and Forbes, among others.

Boris and Arkady Rotenberg are childhood friends of Putin. The billionaire brothers faced Western sanctions amid Russia’s 2014 annexation of Crimea, but their lavish lifestyles do not appear to have been impacted. 

According to the OCCRP, the leaked documents demonstrate how the Rotenberg brothers allegedly used Western lawyers, bankers, corporate service providers, and proxies to evade sanctions. 

One of the report’s findings also alleges the brothers maintain business links to Prince Michael of Kent, a cousin of the late Queen Elizabeth II who was previously accused by the Sunday Times and Channel 4 of profiting off close access to the Kremlin. According to the latest investigation, “Prince Michael distanced himself from earlier ties to the Putin regime in the wake of the 2022 invasion of Ukraine. But leaked emails and corporate records show he co-owns a company with two Russian businessmen who helped billionaire oligarch and Putin ally Boris Rotenberg dodge Western sanctions.” 

Another investigation from the Rotenberg files reported that Putin’s eldest daughter regularly visited a holiday property financed by Arkady Rotenberg in an exclusive Austrian skiing destination. Documents reviewed by the OCCRP suggest that the house was purchased by a Cypriot company in 2013 with a loan from a bank then owned by Arkady, using funds invested by another company he owned. Other records suggested that the former romantic partner of Putin’s daughter is connected to the company that owns the Austrian property. Residents claim to have seen Putin himself at the Kitzbühel residence, though this has not been confirmed. 

The Rotenberg brothers and Prince Michael declined to comment to the OCCRP investigative consortium.

—Ani Mejlumyan, research assistant, Yerevan, Armenia

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The United States has reshaped how it uses military and economic tools to compete with China, Russia, and other adversaries. The United States is increasingly adept at deploying military assets, as well as a range of financial sanctions or trade deals, to weaken China or Russia’s position and advance its own. Yet, the United States has not calibrated all statecraft tools for this competition. This includes how and where it uses foreign aid.

For more than fifty years, foreign aid has been a core form of US engagement in the developing world. To advance its interests, the United States has provided loans, technical assistance, and direct budget support to developing nations to promote economic growth and more representative forms of governance.

A fully developed strategy for using foreign aid across all sectors—economic, education, security assistance, and democracy support—can provide critical reinforcement to the military and economic pillars of strategic competition. To be sure, the United States has reorganized parts of its bureaucracy and launched new initiatives to enhance how it uses foreign aid to compete with China. The US Department of State recently launched a new Office of China Coordination, informally known as China House, to coordinate China policy. The Biden administration announced a flagship Group of Seven Plus (G7+) initiative for the advancement of strategic, values-driven, and high-standard infrastructure and investment in low- and middle-income countries. Congress initiated foreign-aid funds dedicated to countering Chinese malign influence in foreign political systems.¹ New embassies in Vanuatu, the Solomon Islands, and Tonga, among other potential locations, are welcome developments that will provide the sustained presence necessary to engage governments and push back against Beijing’s influence, as well as help identify ways to use foreign aid to compete.

These changes are necessary, but far from sufficient to maximize the impact of foreign aid to compete with China and Russia. The power of foreign aid as a tool of US influence is not lost on its adversaries. The most prevalent example is China’s Belt and Road Initiative (BRI), through which the People’s Republic of China (PRC) has spent hundreds of billions of dollars for years to expand its influence in developing nations. Recently, China has increased BRI spending and shifted from its original focus on infrastructure megaprojects to the less capital-intensive, but still impactful, fields of governance (e.g., training elected officials in Beijing’s governance model); funding for academic departments to promote pro-Chinese narratives; green-energy projects; and funding for pro-China media outlets.² Under the BRI umbrella, China uses foreign aid in these and other sectors to promote policies and politicians favorable to PRC interests. The United States is, therefore, compelled to play a game of catchup.

Fully harnessing the potential of US foreign aid in this struggle requires fundamental reforms to the congressional processes involved in overseeing aid allocations and earmarks; reforms to bureaucratic agencies tasked with spending foreign aid; improvements to US modes for delivering this assistance; and a narrowing of scope to areas most critical for advancing US interests. Needed reforms include the following.

• Realign spending to focus on allies and countries strategically important to US competition with China and Russia, including reconsidering assistance mechanisms based solely on income level, with an aim of investing in allies and partners that advance US interests.
• Make delivering for allies and shoring up democracy core pillars guiding how the United States uses foreign aid to compete with China and Russia. Investments in strong democratic institutions—such as political parties, independent legislators, independent media, and civil society—will yield dividends in countering foreign authoritarian influence.
• Invest to empower pro-democracy elements in backsliding or authoritarian countries. The United States must respond asymmetrically in countries with pervasive authoritarian capture, using foreign assistance in ways that empower individuals and institutions to expose and put pressure on the regime elements that perpetuate corruption and enable foreign influence.
• Congress should pass legislation (the Non-Kinetic Competition Act) requiring the executive to submit multiyear plans outlining the US approach—harnessing all nonmilitary statecraft tools, including foreign aid—to competing with China in select priority countries.
• Focus on geography and interests, rather than sectors, to ensure maximum flexibility, strategies rooted in country-specific needs, and longer-term planning.
• Increase spending to expand partner-nation resilience to Beijing and Moscow coercion and cooptation. Strong democratic institutions increase a country’s ability to detect, prevent, and mitigate Chinese Communist Party (CCP) influence operations. Priorities should include support for independent media, parliamentary diplomacy, and educational and technical exchanges, all of which have proven effective at building democratic resilience to foreign authoritarian influence.
• Empower the State Department’s Office of Foreign Assistance Resources to fulfill its mandate of aligning foreign aid with policy goals and maximizing impact. Enabling the Department of State to take the lead on foreign policy and control aid allocations will ensure that aid is appropriately leveraged to advance specific foreign policy objectives.
• Lengthen the time horizon for US foreign-aid programs and objectives from a single year to ten. Democracy, rights, and governance programming—as well as initiatives in other sectors germane to competition—requires longer-term investment to develop strong and resilient institutions, political parties, and processes. US agencies and implementing partners need longer project times to maximize impact.
• Limit branding waivers. The United States benefits from populations and governments knowing who provides aid, and its marketing needs to reflect as much.
• Focus on advancing interests, rather than “localization” targets. The US Agency for International Development (USAID) and State Department should pursue partnership approaches best positioned to achieve US interests in the target country. In most, if not all, cases, this will involve working through international nongovernmental organizations (NGOs) that collaborate with and, as needed, build the capacity of local partners.

With the aim of encouraging the United States to more strategically use foreign assistance to advance its policy objectives, this paper outlines why the threat posed by China and Russia requires more than a kinetic solution, and why and how foreign aid is essential to winning this competition; the current US approach to foreign assistance—where it spends, on what, and via which bureaucratic mechanisms—and its strengths and shortcomings; historical lessons from using US foreign aid for strategic competition, principally during the Cold War, that are applicable today; and recommendations for reforming the US foreign-aid infrastructure, regulations, and approach to better position the United States to compete.

I. The authoritarian threat has no purely military solution

China and Russia are often portrayed as purely military threats that warrant entirely kinetic solutions. To be sure, US military deterrence through a strong Army, Navy, and Air Force—with nuclear capabilities as a foundation—will remain essential to strategic competition. Kinetic options are necessary, but not sufficient. Competition with China and Russia is playing out not only in the sea lanes of the Indo-Pacific or Ukraine’s battlefields, but in the halls of parliaments in developing nations, in efforts to influence the post-conflict political systems of war-torn countries, and at the United Nations (UN), where both China and Russia endeavor to reshape the liberal world order.

China’s primary threat to the United States is undoubtedly a military one. It is amassing weapons sufficient to invade Taiwan, and has expanded its blue-water navy with an eye toward rivaling, if not supplanting, US capabilities. Yet, the PRC is also using political and economic tools to expand its influence in developing states at the expense of US objectives.

The CCP is increasingly using economic leverage and elite capture to exert political influence, deploying information operations, party-to-party ties, and, in some cases, export of its authoritarian governance model to create favorable conditions in other countries that enable the PRC to advance its local and global interests. This includes extracting natural resources critical to its domestic production and economic growth, expanding military basing essential to Chinese military deterrence and expanded control, and coopting politicians who serve these ends and can be counted on to vote with China at the UN on issues ranging from criticism of human-rights violations in Xinjiang to the future of the International Telecommunications Union and global internet governance. Together, these tactics are corroding democratic governance and popularizing authoritarian governance in countries the world over.

The BRI has been the crown jewel in the CCP’s global influence campaign. Nearly one hundred and fifty countries from every region of the world have signed on to the BRI, presenting a significant opportunity for the PRC to exert economic and political influence on a regional and global scale.³ According to research conducted by the International Republican Institute looking at PRC influence across country contexts, “growing trade, financial, and business ties are the foundation of the PRC’s efforts to build influence in other countries’ politics.”⁴ The CCP strategically deploys economic dependence, leverage, and coercion, in addition to elite capture, to develop pro-PRC constituencies in partner countries and advance pro-PRC policies. Thus, the BRI fits into the CCP’s broader efforts to create a world safe for the party and its interests, which Chinese leader Xi  Jinping proposes achieving via three initiatives that collectively articulate the CCP’s vision for the globe, titled the Global Development Initiative, the Global Security Initiative, and the Global Civilization Initiative.⁵

The Global Development Initiative (GDI) seeks to expand the BRI to advance “people-centered” development, China’s catchphrase for its model of development that prioritizes economic advancement at the expense of human rights. The GDI—and PRC promotion of it—is explicit in its rejection of “Western” definitions of development, which incorporate human rights as a core tenet.⁶ China has been rallying countries to join the GDI, with vague promises of PRC support to help them achieve their Sustainable Development Goals for 2030, with a focus on poverty and hunger alleviation and increased access to clean energy. The PRC has established a group of “Friends of the Global Development Initiative” at the UN, which counts some sixty members.⁷ The Global Security Initiative (GSI) is the CCP’s vision for building a new global “security architecture” rooted in the CCP’s definition—and model—of security and stability.⁸ With aims to increase CCP influence at the UN through increased funding and diplomatic engagement, the expansion of PRC training programs to military and police, and an expanded role serving as an arbiter in international conflicts, the GSI signals China’s intent to return to its self-avowed rightful place at “the center for the world stage.”⁹ Without naming the United States and Europe, the CCP through GSI makes clear that it seeks to provide an alternative model of alliances or “circle of friends” to counter US interests, with a particular focus on the developing world in Africa, Southeast Asia, the Middle East, Latin America, and the Pacific islands.¹⁰

The Global Civilization Initiative (GCI) is the PRC’s new framework for promoting its governance model globally, building on the foundational work of the International Liaison Department supporting political parties around the world. Whereas such party-to-party exchanges once sought to build the legitimacy of the CCP, they are now focused on advertising the value of the PRC’s system of governance more generally. The GCI formalizes this recent trend, emphasizing the need for respect for a plurality of governance models. Speaking at the World Political Parties’ Conference, organized by the CCP in March 2023, General Secretary Xi Jinping extolled the PRC’s model of “a better social system,” noting that China’s experience has broken the myth that “modernization=Westernization.”¹¹ Implicit in the GCI, with its calls for understanding “different civilizations’ understanding of values” and models, is an attempt to popularize the CCP’s model of governance and help it realize its vision of a revised global order with a CCP-led China as the central node of globalization and global governance in the decades to come.

Collectively, these three initiatives are part of China’s overall strategy to promote authoritarian solutions to the mounting challenges facing developing democracies. They have the potential to undermine the principles of liberal democracy that buttress the extant rules-based world order. For many developing countries, PRC investment and trade are an economic necessity. They are, however, never free of conditions, despite PRC claims to the contrary. Whether the terms mandate that PRC-financed infrastructure be awarded to PRC-based companies, eschew existing environmental standards, or subvert transparency and accountability disclosure terms on the contractual arrangements, PRC entities’ business and negotiating practices often have adverse effects on the recipient countries’ finances and political systems.¹²

From a security standpoint, China’s promotion of the concept of “indivisible security,” used to justify Russia’s invasion of Ukraine, and its “aims to reshape norms of international security to be favorable to China and other authoritarian regimes while delegitimizing traditional military alliances,” as the US-China Economic and Security Review Commission has noted, are deeply worrying.¹³ Moreover, its proclivity to export repression beyond its borders poses a serious threat to developed and developing nations alike.

China has utilized “public security” as an entry point for establishing overseas police stations in fifty-three countries around the world, providing an entry point for PRC law enforcement to engage in transnational repression and crack down on dissent and political expression among the Chinese diaspora.¹⁴ In countries with large diaspora populations, the CCP has also relied upon triads, or crime syndicates, to intimidate its critics and further its objectives at the local level. Moreover, politically, China’s promotion of its authoritarian governance model undermines good governance globally, fueling democratic backsliding and legitimizing the rise of authoritarian actors from El Salvador to Belarus.

All of this has the potential to undermine US interests on everything from internet governance to human rights, while undermining US global leadership. These tactics have dire consequences for the United States, yet the United States cannot effectively address them with purely military or trade/sanctions solutions. Military responses, whether ship deployments or arms transfers, do not help strengthen the institutions and civil society needed for countries to be resilient to PRC influence operations, or to build an alliance of democracies to counter a growing autocratic threat.

Like China, Russia poses a threat to US interests that cannot be countered with armaments or economic tools alone. Russia is squarely focused on winning its illegal war with Ukraine. Even so, we can expect Vladimir Putin’s regime will continue using a range of non-kinetic means to advance its interests in Europe, Latin America, Africa, and Asia. The Kremlin’s principal goal is to foster instability and undermine alliances that counter its influence regionally and globally. It deploys a mix of political, economic, and military tactics to divide and rule.¹⁵

In the political arena, the Kremlin directly interferes in other countries’ political and electoral processes. Russia tries to influence the political playing field to be more amenable to its interests, and to inject the Kremlin’s point of view into the political discourse. The Kremlin and its affiliated entities provide financial and other incentives to political parties and politicians willing to represent and advance favorable policies in national parliaments or international institutions. Such support can include legal and illicit campaign contributions, often made by organizations set up by Russia’s agents of influence, individuals linked to Russia and Russian businesses, or Russian organizations directly. According to a recent report by the US State Department, Russia has covertly given at least $300 million to officials and politicians in more than two dozen countries since 2014, with plans to transfer more.¹⁶

Russia also targets electoral processes. Russian hackers have been accused of interfering in many elections and electoral campaigns around the world. In the 2018 presidential election in Mexico, they were reportedly involved in the spread of false information aimed at discrediting candidates to stir up divisions and polarization among voters.¹⁷ Russia similarly deploys cyberattacks, internet trolling, social media campaigns, and intrusions into state voter-registration systems to undermine political and electoral processes and create confusion as people head to the polls.¹⁸

Economically, the Kremlin employs strategic corruption to coopt elites and create pro-Kremlin proxies in media, politics, and business to push its agenda. This strategy aims to influence debates, gain support, and shape legislation in the Kremlin’s favor. This tactic is particularly effective in countries with favorable views of Russia. It helps galvanize public support and weakens alliances that conflict with the Kremlin’s interests. The Organized Crime and Corruption Reporting Project (OCCRP), a group of investigative journalists, recently revealed an expansive Kremlin operation to bribe politicians and businesspeople in Europe.¹⁹ The International Agency for Current Policy, an informal group connected to Moscow, is behind the bribes, arranged payments, and all-expenses-paid trips to luxury resorts for numerous European politicians and investors to encourage pro-Russian political and economic actions.

Militarily, the Kremlin is deploying proxy forces like the Wagner Group to support authoritarian governments or provoke low-scale conflict across Africa, including in Mali and the Central African Republic.²⁰ Wagner Group security deployments across the continent have been at the forefront of Russian efforts to influence African politics, and have been accompanied by disinformation campaigns to advance Russia’s political and security influence.²¹ The Wagner Group has also led Kremlin efforts to develop a pro-Russia infrastructure across Africa. This infrastructure includes the Internet Research Agency troll farm to conduct disinformation campaigns, captured antidemocratic political elites, coopted companies that exploit Africa’s natural resources, and front companies posing as nongovernmental organizations.

Russia’s influence efforts around the world are supported by wide-scale propaganda and disinformation campaigns to delegitimize independent, expert journalism—and the very concept of truth—in the eyes of consumers, exploit fissures in democratic societies and exacerbate polarization in conflicted ones, undermine support for democracy and the West, and advance pro-Kremlin narratives and policies. One approach Moscow deploys are Russian-funded media outlets like RT and Sputnik. RT, formerly Russia Today, is part of a state-sponsored propaganda corporation that masquerades as a legitimate, Western-looking news and opinion-making outlet that produces content in seven languages.²² With almost $400 million coming from Russian state subsidies in 2022 alone, the company has hired Western journalists to mislead its viewers, and to make its false content seem credible to legitimate media outlets around the world. Another tactic Russia uses is fake media outlets and social media accounts to dilute legitimate media reporting and inject messaging that serves Russia’s strategic objectives. Social media have been a particularly powerful tool for Russia, whose agents have been creating tailored content to influence the beliefs of groups of voters and sway them away from anti-Russia political forces. 

The contours of this challenge—from Beijing and Moscow—make clear that military and economic tools are not enough for the United States to compete and win. Kinetic efforts cannot bolster partner countries against the malign influence of the CCP and Kremlin and the associated cooptation of elites. Military tools, either security assistance or indirect effects of deterrence, cannot shape the politics and development trajectories of partner countries so that they take forms more favorable to the prosperity of their own people and US interests.

Economic-statecraft tools are more amenable to these ends—and complementary to foreign aid—but still not sufficient. Trade deals can increase US economic competitiveness vis-à-vis China by bolstering the US industrial base through opening markets to US citizens and businesses. The United States can use trade deals as an incentive for potential allies to align with US interests over those of the PRC or Kremlin and to help countries reduce their economic dependence on China and Russia. The United States can use economic sanctions to punish countries or individuals for a range of behaviors—from repressing their citizens, as in Belarus, to invading Ukraine, as with Russia—with the aim of stopping said targets from continuing these actions. Moreover, the United States can use economic measures to build a collective economic defense against economic coercion, and to deter PRC and Kremlin economic aggression.

Foreign aid is a necessary complement to kinetic and economic tools. It cannot single-handedly address all challenges listed above, but can help lead to changes—like making a country’s governance systems more resilient to foreign interference—that benefit the United States at the expense of its rivals.

II. US foreign aid: Effective tool, dated toolbox

The United States has utilized foreign assistance to advance its geopolitical interests since the end of World War II, and introduced the Marshall Plan to secure Europe’s (and Japan’s) social and economic foundations in the face of Soviet expansionism and restive communist factions.²³ The United States continued to use foreign aid as part of its strategy of containment over the next four decades, providing valuable lessons for advancing US interests in a new age of competition.

Foreign aid (interchangeably referred to as “foreign assistance”) consists of money, technical assistance, or commodities the United States provides to another country to advance a common objective. US foreign assistance can be organized into three overarching categories based on intent of spending: economic and development assistance that addresses political, economic, and development needs; humanitarian assistance that supports disaster relief and emergency operations to alleviate suffering and save lives; and security assistance, which strengthens the capacity of the military and law enforcement in other countries.²⁴

Across these three categories, foreign-aid-funded initiatives can include training rural farmers in more sustainable harvesting techniques, helping construct roadways linking peripheral towns to urban centers, or deploying specialists to advise government ministries on economic or political reform options.

The throughline connecting the three foreign-aid types—and the variation therein—is that US taxpayer dollars spent to fund these initiatives help lead to changes in the target country that benefit US interests. For instance, spending to increase the capacity and independence of government institutions can enhance transparency and provide more favorable investment conditions for US companies.

Yet, the United States spends less than 1 percent of its discretionary budget on foreign assistance, which for fiscal year (FY) 2022 amounted to$52.76 billion.²⁵ Comparatively speaking, this is a small portion of the federal budget. For the sake of contrast, it is 7 percent of the military’s FY22 $777.7-billion budget, and is nearly the exact amount the Department of Defense paid for fewer than one hundred new aircraft in FY22.²⁶

Illustrating the overall downward trend in foreign-aid spending, the United States spends roughly 50 percent less on foreign aid today, as a portion of gross domestic product (GDP), than it did during Ronald Reagan’s presidency. The similarities in the challenges the United States faced in the 1980s and today—and the disparity in resources it is marshalling to address those threats—is stark.

The United States allocates foreign aid through several departments and agencies, with the main entities being USAID and the Department of State. President John F. Kennedy established USAID in 1961 to lead the implementation of US foreign aid. Through the 1970s, USAID provided emergency food assistance that helped avert famines and helped newly independent countries establish basic governing structures. In the 1980s, USAID assistance guided economic reforms across Latin America and other regions around the world, helping stabilize economies in the face of currency and debt crises. After the Soviet Union’s fall, USAID helped new countries transition from autocracies to nascent democracies. From 2000 onward, USAID has played a central role in combatting HIV/AIDS, addressing violent extremism in fragile states, and solidifying democratic gains from the immediate post-Cold War era. In 2004, the United States expanded the agencies responsible for allocating foreign aid by establishing the Millennium Challenge Corporation (MCC) and, in 2019, the International Development Finance Corporation (DFC).²⁷ These changes that foreign aid helped enable or cause have, directly or indirectly, benefited US security and economic prosperity.

What the United States has gained in scope and scale through this range of foreign-aid entities, it has lost in not having them unified by a common directive and mission for spending. The George W. Bush administration worked to address this drift by disbanding USAID policy offices, and transferred those associated oversight and policy responsibilities to a new Office of Foreign Assistance Resources at the Department of State. This change aimed to further align foreign-aid spending with foreign policymaking, which is the State Department’s purview (USAID, per a 1988 law, reports to the secretary of state). Despite this change, the United States continues to struggle with developing comprehensive strategies for issues and countries—and harnessing all elements of US foreign assistance (in tandem with other statecraft tools, like diplomacy and economic engagement) toward a common end. Some feel USAID operates too independently, and its spending is insufficiently aligned with US foreign policy objectives.

Why foreign aid is critical to strategic competition

A solid base of rigorous research shows that foreign aid is effective across a range of sectors in contributing to changes in recipient countries that favor the United States and advantage it in its competition with China, Russia, and other rivals.

Foreign aid can lead to three primary types of impact that are beneficial to strategic competition: economic development that opens markets to US businesses, which increases US economic competitiveness with China and Russia; stronger governance and political institutions, which can serve as a robust check on Russian and Chinese attempts to undermine or coopt allies or potential partners; and more favorable views of the United States by a government and/or its people, which the United States can then leverage for cooperation on mutually beneficial interests or against China and Russia.

Foreign aid supports US economic competitiveness by helping develop new economies for US businesses and trade. It does so by promoting a country’s overall development, as well as sound, transparent regulation.²⁸ Foreign assistance increases economic potential within a state, especially when developing basic industry, improving basic infrastructure, or rebuilding an area after conflict. Today, for example, eleven of the United States’ top fifteen trade partners are previous recipients of foreign aid. Access to overseas markets matters for people at home; roughly one in five US jobs is linked to international trade, and one in three US manufacturing jobs is linked to exporting US products overseas. When considering investments overseas, US businesses need predictable regulations managed by independent institutions, which, collectively, minimize risk of loss of capital. By fostering foreign markets for US goods and businesses, foreign aid can help bolster the United States’ industrial base.

Foreign aid also helps strengthen governance and democracy in countries around the world. A study of US foreign assistance focused on “democracy promotion” programs from 1990 to 2003 found that democracy assistance had “clear and consistent impacts” on overall democratization—as well as civil society, judicial and electoral processes, and media independence.²⁹ Despite a global democratic recession from 2012 to 2022, eight countries that were autocracies actually bounced back and are now democracies in 2023—with international democracy support and protection being an important factor in securing these gains.³⁰ The benefits of these changes, enabled by foreign aid, are clear. The world is safer and more secure with more—not fewer—democracies. Democracies do not launch wars against other democracies, are more reliable allies to the United States, and are far less prone to intrastate civil conflict.³¹ By strengthening independent institutions and civil-society oversight, foreign aid can help make countries more resilient to interference from foreign rivals like China and Russia. Robust institutions and vibrant civil society make it difficult for China and Russia to exert influence and coopt elites.

Finally, foreign aid can help improve citizens’ and governments’ views of the United States, often at the expense of its principal rivals. The long-term aspect is important here. Chinese and Russian foreign-assistance programs tend to favor physical projects that advance their economic interests and solidify partnerships with authoritarian actors.³² Populations, genuinely appreciative and benefiting from such investments, look favorably upon these efforts in the short term. Over time, there is growing evidence that these projects eventually begin to erode local support for Beijing and Moscow.³³ In the case of China, this is partially due to shoddy construction work, a feeling of Chinese neocolonialism and loss of sovereignty, and discomfort with authoritarian moves by parties in power. While there is much reporting on China’s BRI and Russia’s recent use of Wagner Group mercenaries in Africa, both countries’ programs lack transparency—increasingly alienating potential local partners as long-term consequences become more apparent.³⁴

By contrast, US foreign-assistance spending is transparent, involves clear conditions guiding where and how funds are to be used, and favors working with local partners to identify real needs and inform project design and implementation.³⁵ Well-implemented, effective, and large-scale initiatives focused on addressing pressing needs of populations—like the President’s Emergency Plan for AIDS Relief (PEPFAR)—solve problems for local populations and generate positive perceptions of the aid provider, the United States. Several studies find that US investments in PEPFAR foreign assistance (as one example) are strongly associated with improved perceptions of the United States across the globe.³⁶ A potent mix of project transparency, exposure to US government institutional practices and customs, and an earnest desire to help recipient countries prosper underpins US foreign aid’s impact and success.³⁷

III. Looking back to chart a path forward: Lessons from the Cold War

Today’s threat landscape is not analogous to the Cold War for several reasons: China and the United States are far more intertwined economically than the United States and Soviet Union; technological advances have minimized geographical advantages; and states and citizens are more connected, with a magnitude of information access that was unthinkable in the immediate post-World War II era.

Despite these differences, the period in which the United States was grappling with a seemingly mighty Soviet Union and today’s competition with China share some similarities. Today, like then, the United States faces an array of threats across military, social, economic, and political domains from a formidable power that kinetic tools alone cannot address; as a result, the United States is looking to harness all statecraft tools to its advantage. Three key lessons from how the United States used foreign aid during the Cold War can help inform how it uses this non-kinetic tool for strategic competition today.

To maximize foreign aid’s impact, strategic patience is essential. Foreign aid can produce meaningful outcomes, but changes can take years to occur.³⁸ It took a decade for the Marshall Plan and associated US foreign assistance to transform Western European nations into the staunch democratic-minded, market-oriented partners that they are today. While US foreign aid that began in 1948 helped prevent socialist uprisings across Europe, NATO integration and rearmament took the 1950s to accomplish.³⁹ The European Economic Community only truly began to develop in the 1960s.⁴⁰ And the dismantling of European colonial empires and the move toward the US view of the liberal order took until the 1970s to be fully realized.⁴¹

Beyond Europe, US foreign assistance to African and Latin American governments highlights how approaching regions with a longer-term perspective and approach provides opportunities to augment engagement when conditions become more favorable.⁴² Throughout the 1960s and 1970s, US work in both regions haphazardly shifted between supporting anticommunist militarism, encouraging economic liberalization and development, and improving living conditions.⁴³ Moreover, post-colonial struggles in Africa and regional interference from the Cubans and Soviets in Latin America limited the overall effectiveness of US foreign-assistance programs until the 1980s.⁴⁴ Previous US engagement then allowed it to become a preferred partner as the Soviet Union began to withdraw from the “third world” and the global financial order introduced new requirements for integration and development.⁴⁵

Just as foreign assistance takes time to generate outcomes, assistance strategies should have flexibility to adapt to changes in the country or region over the lifetime of a given initiative. Identifying an end state, and methodically working toward it over the course of years or decades, allows second- and third-order effects of investments to occur.

Second, policymakers need to be realistic about what foreign aid can achieve—and avoid overpromising and under-delivering. More often than not, success has been achieved when US policymakers used foreign assistance to secure practical and realistic outcomes. While often criticized for partnering with autocrats over the course of the Cold War, the United States’ incremental investments slowly eroded the Soviet Union’s theory of victory and allowed the United States to encourage democratic progress over time.⁴⁶ US foreign assistance supported strategic aims that ultimately led to a more peaceful, prosperous, and representative world.

A final lesson is that foreign assistance works best when it is part of a broader whole-of-government strategy.⁴⁷ When the United States synchronizes foreign-aid interventions, these efforts tend to build on each other to promote long-term cultural change and alignment with US interests and policy.⁴⁸ Some clear examples of whole-of-government success are Western Europe, Colombia, South Korea, and Chile.⁴⁹ Each of these examples shares a US assistance approach and series of programs that combined security guarantees with cooperation and reform programs; economic-development packages that paired investment monies with revitalization of key industries; social initiatives intended to soften cultural cleavages while improving social determinants of health; and incentives for local governments to improve their capacity, resiliency, and responsiveness. When foreign-assistance efforts remained siloed between agencies, efforts fell short and minimized impact of taxpayer dollars.

IV. Recommendations: Maximizing US foreign aid to compete

The United States has the infrastructure and expertise to re-elevate foreign aid as a tool of statecraft and use it to help compete with China, Russia, and other adversaries. Doing so will require making changes to where the United States spends foreign assistance and on what, and reforming structures within the US government that dictate how said funds are allocated. These changes are based on lessons from the past, as well as a sober assessment of today’s threat landscape and the need to position the United States for today’s challenges.

1. Where the United States allocates foreign aid and on what

The United States should realign spending to focus on allies and countries strategically important to competition with China and Russia. Foreign aid can help lead to changes in countries that advantage the United States in that competition (e.g., by making a country’s political system more resilient to Chinese or Russian influence), as well as address other pressing challenges (e.g., by addressing causes of migration in Central America to curb flows of people into the United States). Foreign aid can also be used to help US allies or countries of strategic importance in ways that maintain or cement extant alignment of interests (e.g., via infrastructure development that benefits the government in power) or help move a country that is on the fence between cooperating with China and the United States (e.g., Pacific islands).

The current approach to, and regulations governing, allocating foreign aid is not set up to enable the United States to use funds in ways that directly and efficiently advance US interests. It forces the United States to center spending in many aid sectors on predominantly low-income countries (where the perceived greatest development needs are) and disincentivizes spending on middle-income nations (with some plans in place to phase out spending in middle-income states), disregarding how important these nations, despite their income level, might be to the United States.

The Trump administration explored realigning how the United States uses foreign assistance of all stripes—from economic aid to health assistance—to make competing with China the primary objective. This realignment did not gain traction. However, the review elements that called for revisiting stipulations to spend based on a country’s income level—and instead center decisions around a country’s importance to the United States—are welcome and worth revisiting.

The United States should make delivering for allies and shoring up democracy core pillars guiding how it uses foreign aid to compete with China and Russia. The United States has rightfully increased funding for infrastructure projects in developing nations—along and through multilateral forums—to offer an alternative to China’s BRI. These projects, from highways to hospitals, help the United States compete with China because they buy goodwill with recipient governments and—given the transparent way in which they are managed—provide important investment to support countries’ development needs. But they only address one part of the China challenge, and do not address the root causes enabling Chinese interference and influence—weak governance and political institutions.

Strong democratic institutions are the most reliable form of defense against Russian, Chinese, and other external efforts to shape a country’s domestic politics to the benefit of the external actor. Political parties channel citizens’ views into policy and law. Independent legislatures and capable executives craft and enforce legislation that makes markets favorable to foreign (and US) investment, and inhibit the type of opaque deals favored by the PRC. Independent media play a crucial role in identifying and exposing harmful authoritarian influence, while civil-society organizations (CSOs) work to push governments to take corrective action. Across borders, a diverse group of activists, media figures, religious leaders, researchers, and policymakers is collaborating to confront the challenge of foreign authoritarian influence, forming a strong and growing network of likeminded individuals committed to building democratic resilience worldwide. This network is using innovative methods to uncover and bring attention to the harmful influence of authoritarian actors, such as the PRC and Kremlin. They are devising advocacy and policy solutions tailored to the individual needs of local communities, with the goal of promoting lasting change and ensuring accountability from domestic and foreign authoritarian actors. They need US support.

Invest to empower pro-democracy elements in backsliding or authoritarian countries. In democratically backsliding or authoritarian countries, the scope and scale of elite capture by the PRC or the Kremlin—and conditions on US foreign assistance over human-rights concerns and corruption—limit the potential for political change to build democratic resilience to foreign authoritarian influence. In such contexts, it is extremely challenging to compete symmetrically with the PRC or the Kremlin, which do not impose conditions related to human rights or democracy, and routinely end up worsening both. The United States must respond asymmetrically, using foreign assistance in ways that empower individuals and institutions to expose and put pressure on the regime elements that perpetuate corruption and enable foreign influence. Ongoing investments in media, civil society, and small “d” democratic political parties and opposition movements can sustain important pro-democracy elements to effectively push back against authoritarian influence, in closed and closing countries.

2. Congressional action

Given its constitutional role of oversight and resource appropriation, Congress has an important role to play in ensuring the United States maximizes use and impact of foreign aid in its competition with China and Russia.

Congress should pass legislation (the Non-Kinetic Competition Act) requiring the executive to submit multiyear plans outlining the US approach—harnessing all nonmilitary statecraft tools, including foreign aid—to compete with China in select priority countries. Absent congressional requirements or oversight, it is unclear if the executive branch will be able to swiftly make the needed changes outlined above to where and how the United States spends aid, including ensuring whether it is part of a broader strategy for each country. To accelerate these efforts, Congress could pass legislation requiring the executive to deliver plans for select priority countries, outlining how it intends to use all aspects of US power and resources—including foreign aid, linked to diplomacy—to compete with China. The strategies should include a clearly defined goal, as well as a theory of the case. The legislation could be modeled on the Global Fragility Act (GFA), which requires the executive to deliver a strategy for preventing violent conflict and promoting stability globally, and ten-year plans for achieving these aims in select priority countries. Unlike the GFA, however, the legislation proposed here need not require the executive to publicly release plans, given the sensitive nature of the content.

Focus on geography and interests, rather than sectors. US foreign aid is largely organized around sectors (e.g., health, education) and driven by congressional earmarks. This makes it exceedingly difficult for the United States to craft geography-specific strategies (e.g., for sub-Saharan Africa) with a single source of foreign aid as an available resource. Ideally, the United States would craft a competition strategy for a given region that clearly identifies an end state, theory of the case, and associated inputs required to realize it (kinetic and non-kinetic, including foreign aid). Instead, the current system predetermines (via earmarks) how the United States spends a significant portion of foreign aid (with some exceptions), forcing planners to use aid in suboptimal ways that seldom advance country-specific strategies.

Congress, considering its increased attention to position the United States to prevail against China, should review extant earmarks, do away with as many as feasible, help the executive conduct longer-term planning, and provide greater flexibility in using foreign aid to compete. The legislation cited below could help set parameters and ensure funds are spent on the highest priorities.

Increase spending to expand partner-nation resilience to Beijing and Moscow coercion and cooptation. Strong democratic institutions increase a country’s ability to detect, prevent, and mitigate CCP influence operations, but must be coupled with other work focused squarely on detecting, preventing, and countering CCP and Kremlin interference—whether attempts by the PRC to train political parties in Kenya on the China “model” or direct Kremlin funding to political parties to influence electoral outcomes and ensure pro-Kremlin voices are voted into office. Foreign assistance in this category can fund a range of programming, from technical assistance to countries negotiating BRI deals to support for independent media in countries vulnerable to foreign influence. Priorities should include the following types of democracy, rights, and governance programming, which have proven effective in building democratic resilience to foreign authoritarian influence.

• Supporting independent media: Supporting independent journalism can be a powerful tool in countering the influence of the PRC and Kremlin in the Global South. It is a wise investment of limited US resources to empower well-trained journalists in vulnerable countries, who can provide free and unbiased reporting to expose the impact of foreign authoritarian influence. Every dollar spent in this direction can make a significant difference.
• Legislative dialogues: In legislatures throughout the world, a growing number of elected officials are committed to democratic resilience. From engaging with partners like Taiwan and Ukraine to exposing concerns around the domestic impacts of deepened political and economic engagement with China and Russia, these officials have been successful in advocating for measures to counteract foreign influence and building global democratic unity to confront it. Facilitating and supporting such dialogues, by both the US Congress and parliaments globally, is a critical and effective means to counter PRC and Kremlin influence.
• People-to-people exchanges: China is making a significant investment in people-to-people exchanges, sponsoring fellowships, scholarships, and exchanges to showcase the China model across the Global South. This soft-power initiative is an area in which the United States has a strategic advantage; it just needs to leverage it. The exchange programs sponsored by the Department of State’s Bureau of Educational and Cultural Affairs are an effective mechanism for engaging youth, students, educators, artists, athletes, and rising leaders to promote US interests—and democracy. More than 99 percent of participants in the bureau’s Sports Visitors exchange program come away expressing positive views of the United States, while its exchange programs have brought almost seven hundred officials who would go on to run their countries’ governments to the United States. However, only forty thousand international participants engage in such programming annually, given the bureau’s $777.5-million annual budget for exchanges. By comparison, in 2018, the PRC provided scholarships to sixty-three thousand students to study in China, a figure that doesn’t include party-to-party exchanges run by the International Liaison Department or journalist and parliamentary exchanges. Additional investment in this area would be a cost-effective win-win.

The United States spends a paltry amount combatting Russian and Chinese malign influence around the world, despite this being the foremost challenge of the time. The United States spends less than $325 million a year countering Chinese influence and $300 million countering Russian influence via foreign aid. In fact, the $625 million the United State spends annually on this threat from China and Russia is less than the Defense Department spends on printing each year.⁵⁰

US policymakers argue that prevailing against China is a national imperative, but have only appropriately resourced its kinetic toolkit. Foreign-aid spending focused on this aim needs to increase fourfold, to $1 billion annually. It should center on countries already exposed to CCP and Kremlin interference, at the cusp of such interventions, or likely to experience them moving forward.

3. Intra-US government structural changes

Several changes to intra-US government processes and structure would help better align foreign-aid spending with core national security interests and increase its impact in the competition with China and Russia.

Empower the State Department’s Office of Foreign Assistance Resources to fulfill its mandate of aligning foreign aid with policy goals and maximizing impact. US foreign-aid spending should directly align with, and advance, US interests in priority states, competing with China and Russia chief among them. This means enabling the Department of State to take the lead on foreign policy and control aid allocations in a way that concretely advances specific foreign policy objectives, rather than a development goal that might be tangentially related to US interests. The secretary of state should empower the Office of Foreign Assistance Resources to truly lead on foreign-aid coordination and alignment, deputizing its director to ensure aid spending aligns with policy goals. The USAID administrator should continue reporting to the secretary. The United States needs to maximize the impact of foreign aid for immediate political wins and incorporate foreign aid into longer-term planning.

Lengthen the time horizon for US foreign-aid programs and objectives from a single year to ten. The United States used foreign aid to significant effect during the Cold War. Flexibility in what and how to spend, as well as the time horizon on which success was measured (noting the struggle with the Soviet Union was the central objective) were extremely important. In the last 15–20 years, and in line with shorter-term goals (e.g., health), the time horizon for gauging success has shortened to 1–2 years. This is counterproductive. Democracy, rights, and governance programming—as well as initiatives in other sectors germane to competition—requires longer-term investment to develop strong and resilient institutions, political parties, and processes. US agencies and implementing partners need longer project times to maximize impact.

Limit branding waivers. Projects or initiatives funded by US foreign aid typically are branded as “from the American people,” and include the funding agency’s logo (e.g., that of USAID) to enable attribution for the work to the United States. Yet, the United States often allows organizations implementing foreign-aid projects to forego this branding requirement—thereby granting a waiver—on security or other grounds. For example, an NGO offering training to local farmers in an area contested by militias known to have anti-American views might request a waiver citing potential risk to personnel from said armed groups. Similar exceptions are granted for construction or other projects in areas perceived to be contested or at risk. Meanwhile, there are hospitals, schools, trainings, and so on in the same areas with “from China” branding readily visible. The United States benefits from populations and governments knowing who provides aid, and its marketing needs to reflect as much. The United States should only issue waivers when said branding could pose harm to implementers or beneficiaries, or when it is counterproductive to achieving results.

Focus on advancing interests, rather than “localization” targets. Under current Administrator Samantha Power’s leadership, USAID has articulated a commitment to the localization of US foreign assistance. This includes, but is not limited to, channeling a greater portion of US foreign assistance to local partners and taking additional steps to ensure US-funded projects build sustainable capacity of these local organizations. The United States has considered requiring international nongovernmental organizations that receive the “primary” grant from USAID to allocate a set percentage—up to 20 percent—to go directly to local partners. The rationale for this change, which the Barack Obama administration shared, is that US foreign assistance should help build local capacity to address needs. The intent is noble, but this arguably detracts from US foreign assistance achieving its actual and main intent—advancing US interests.

Rather than set aside an arbitrary amount of foreign aid for channeling to local NGOs, USAID and the State Department should pursue partnership approaches best positioned to achieve US interests in the target country. In most, if not all, cases, this will involve working through international NGOs that collaborate with—and, as needed, build the capacity of—local partners. Foreign aid should focus on building capacity and localizing aid, insofar as doing so advances US interests.

Conclusion

The United States’ overall approach to statecraft—how it forms strategy and uses tools to execute that strategy—has not caught up to the state of the world today. The current approach too often places bureaucratic prerogatives above policy priorities. The United States needs to be on high alert, shaping all aspects of government work toward its competition with China.

Patrick Quirk, PhD, is vice president for strategy, innovation, and impact at the International Republican Institute (IRI) and nonresident senior fellow in the Atlantic Council’s Scowcroft Center for Strategy and Security.

Caitlin Dearing Scott is the director for countering foreign authoritarian influence at the International Republican Institute.

The authors would like to thank Owen Myers for his research assistance.

The Scowcroft Center for Strategy and Security works to develop sustainable, nonpartisan strategies to address the most important security challenges facing the United States and the world.

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• Defining artificial intelligence
• How artificial intelligence works
• Machine learning
• Deep learning
• Global competition and controversies
• Dangers, myths, and misconceptions

Despite an abundance of books, articles, and news reports about artificial intelligence (AI) as an existential threat to life and livelihoods, the technology is not a grave menace to humanity in the near term. Undeniably, the comments of deep learning pioneer Geoffrey Hinton, who resigned from Google, are concerning. “I have suddenly switched my views on whether these things are going to be more intelligent than us. I think they’re very close to it now and they will be much more intelligent than us in the future. How do we survive that?” Hinton said in a recent interview. Hinton fears that AI may come to intentionally or inadvertently exert control over humanity, a hypothetical scenario known as an “AI takeover.” He is also worried about the potential spread of AI-generated misinformation or the possibility that an oppressive leader may attempt to use AI to create lethal autonomous weapons systems (LAWS). But AI programs have no agency to act on their own. Generative AI language models currently operate only within the controlled environments of computer systems and networks, and their capabilities are constrained by training datasets and human uses.

The generative transformer architecture that is powering the current wave of artificial intelligence may reshape many areas of daily life. OpenAI CEO Sam Altman has been making a global tour to engage with legislators, policymakers, and industry leaders about his company’s pathbreaking Generative Pre-trained Transformer (GPT) series of large language models (LLMs). While acknowledging that AI could inflict damage on the world economy, disrupt labor markets, and transform global affairs in unforeseen ways, he emphasizes that responsible use and regulatory transparency will allow the technology to make positive contributions to education, creativity and entrepreneurship, and workplace productivity.

At present, however, Altman’s generative AI is most useful in improving natural language processing and machine translation. Generative transformers are flexible and scalable models that outperform recurrent neural networks—which made voice-activated assistants on smartphones possible—in certain tasks, such as capturing relationships between different words within long documents and answering questions about them. Examples include GPT, BERT, T5, and LaMDA. They do not on their own possess independent capabilities associated with artificial general intelligence or superintelligence, and it is unlikely that a truly versatile human-like cognitive AI will become a reality before 2050. Even an ultrasmart AI program may never bootstrap itself into consciousness. And there is almost zero chance that—as in the Roko’s Basilisk thought experiment—a spiteful and malicious AI will emerge that rewards those humans who assist it and punishes any who dare attempt to stop it. As Sam Altman puts it “GPT4 is a tool not a creature.”

What is certain is that AI tools and methods will be crucial for confronting a slew of slow-motion catastrophes unfolding across the world. COVID-19 has claimed almost seven million lives worldwide, and based on excess mortality likely many more. Strife, stress, and conflict endangers democracies on both sides of the Atlantic. Unschooling and remote work movements mingle with cultural and political divisions and societal disruptions. Climate change brings extremes in heat, drought, and wildfires along with melting ice caps and sea level rise. 

Machine learning (ML) is able to tackle these issues head-on. Admittedly, it has a long way to go before it’s a feasible tool for pandemic control, but AI is attaining good performance in the diagnosis, evaluation, and prognosis of infected individuals; predictions of pandemic spread; and COVID-19 drug discovery as well as vaccine development. Responsible applications of AI are strengthening communities and empowering democracies. Over the past few years, this technology played a particularly powerful role in knitting humanity together virtually amidst the spread of disease, snarled traffic, scarce fuel, and the high cost of living. AI-enabled technologies are also monitoring the world’s climate, agriculture, and economies, as well as providing solutions to feed and clothe the world without further damaging the environment. They can facilitate many paths to sustainable planet-wide development. Green AI technologies representative of the convergence of social innovation and technological change include ecobots, biodiversity and ecosystem services, and renewable energy solutions. 

Nonetheless, humanity is living in uncertain, complex, and ambiguous times. But as Sun Tzu explained in The Art of War, in the midst of chaos, there is also opportunity. It is not surprising that the current generation has invented AI and social media-fueled empathy scorecards intended to replace or supplement credit scores, prescription video games and other “calmtainments,” and AI-assisted chatbot therapists (Woebot and Wysa). AI is being brought to bear against the labor squeeze and workers’ demands for higher wages, supply chain disruptions and volatilities in manufacturing, and the omnipresent threats of wars of occupation. 

Defining artificial intelligence

The ultimate goal of AI is to emulate human-like thinking or perform tasks that normally require human activity. John McCarthy, Marvin Minsky, Nathaniel Rochester, and Claude Shannon, in their original proposal to bring together mathematicians, cyberneticists, and information processing innovators for a formative 1956 summer research workshop on AI at Dartmouth College, contended that “every aspect of learning or any other feature of intelligence can be so precisely described that a machine can be made to simulate it.” AI can be subdivided in several different ways, but the major branches are usually described as artificial narrow intelligence (ANI), artificial general intelligence (AGI), and artificial superintelligence (ASI). 

ANI is the branch where the overwhelming majority of AI-inclined developers work. ANI thereby represents the state of the art in AI. It is a category that includes all useful applications of AI to specific problems such as calculating risks and reducing errors, handling repetitive or boring tasks, making informed recommendations or decisions quickly, or automating job duties that are difficult or dangerous. ANI developers are rarely concerned about whether their AI systems are capable of true cognition, awareness, metacognition, or affectivity. Instead, they are content to regard them as models for understanding intelligent behavior and building useful tools. Common areas of activity in ANI are speech recognition, natural language processing, chatbots, search engines, recommender systems, digital assistants, computer vision, image recognition, and machine translation. Every sort of machine intelligence encountered in daily life is limited to specific tasks and knowledge domains that are not readily translated into other tasks or domains irrespective of how sophisticated they are.

On the other hand, AGI and ASI have as their shared goal the achievement of a complete or comprehensive range of human intelligence capabilities, including perhaps even consciousness. In AGI and ASI, the model is the mind; the map is the territory. Should the goal be reached, some researchers believe ASI will surpass human intelligence, with cognitive capacities well beyond those of the smartest people and in a wide variety of domains. An ASI’s “mind” would not just be different in degree from the human one; it would be different in kind. Indeed, some researchers assume that any potential candidate for ASI would require a self-modifying property. Many people, including, most famously, Bill Gates, Stephen Hawking, and Elon Musk, have spoken out about AGI/ASI safety and control. Stuart Russell and Peter Norvig, authors of the leading textbook on AI, note that “[a]lmost any technology has the potential to cause harm in the wrong hands, but with AI and robotics, we have the new problem that the wrong hands might belong to the technology itself.” Others have been more sanguine. Neuroscientist Anthony Zador and computer scientist Yann LeCun, for example, suggest that there is no reason why a machine would develop a self-preservation instinct or evolve into a dangerous competitor. 

How artificial intelligence works

The typical AI developer writes code—sometimes employing the assistance of context-aware intelligent code-completion software like IntelliSense or Copilot. At the core of all AI systems written today are intelligent agents. The classical approach to AI is in the form of sense-think-act: agents perceive their environment using sensors, consider choices and make decisions, and react using effectors. They may be physical (robots) or virtual (software) and are often both. Agents now have all sorts of different abilities, goals, preferences, knowledge representations, and memories of past experiences. Humans themselves are considered very complex intelligent agents by AI developers, albeit biological ones. This is why it is sometimes said that the “holy grail” of AI is to understand man as a machine.

Agents are ubiquitous in everyday life. Siri, Cortana, and the Google Assistant are agents, as are tabletop smart home appliances like Amazon Echo, Google Home, Samsung Bixby, Xiaomi Xiao Ai, and Apple HomePod. Agents are also embedded in many autonomous and semiautonomous robotic devices like the Roomba vacuum cleaner, Tesla driver-assistance system, and General Atomics Gray Eagle Extended Range unmanned aerial military drone. Large, pretrained language models are the foundation of the latest—potentially disruptive and transformative—conversational agents like Google Bard, Jasper Chat, OpenAI’s ChatGPT, and Microsoft’s Bing chatbot.

Practitioners of symbolic AI, a dominant early approach to simulating humanlike cognition, compared the brain to a sophisticated computer program. From the mid-1950s and continuing into the 1980s, computer scientists created general and specific problem solver programs. Software developers also created general inference engines upon which specialized rule bases could be applied interchangeably. These so-called expert systems consisted of heuristics or rules of thumb developed from direct interviews with experts and professionals (e.g., physicians, lawyers, mechanics, and chemists). Heuristic programming assumed as a given that an expert is a specialist. 

Expert knowledge, however, is rarely fixed. Indeed, it is regularly updated through new discoveries and experience. Heuristic systems struggle to keep up with all but the most predictable definitions and structured reasoning methods. AI researchers describe this as the “knowledge acquisition bottleneck.” Training an AI program to serve as a clinical decision support system, for example, is only feasible if there is a reasonably efficient way to keep up with an exponentially growing reservoir of medical knowledge and know-how. Often, the domain expert and the programmer find it difficult to maintain their systems and keep them current.

Knowledge engineers argue among themselves about whether the right approach is to carefully simulate the reasoning abilities of experts in models of human information processes or rather to discover entirely new methods for weighing evidence that can only be accomplished using computers. Ironically, as expert system prototypes proliferated, they became more specialized, limited in scope, and fragmentary. The history of expert systems has proven that machines, like humans, perform better in specialized domains. Exceptional general-purpose thinking is rare among machines, and perhaps also among human beings.

Expert systems gave way to directly mining the data of extremely large numbers of cases. Data mining requires figuring out how to represent knowledge and extract useful patterns through automatic or semiautomatic analyses so that they might be used effectively. Data mining techniques include cluster analysis, anomaly detection, and association rule mining. This movement away from the primacy of experts has been likened to the demise of the Greek Oracle of Delphi.

By the 1990s, connectionist approaches featuring artificial neural networks (ANNs) eclipsed symbolic AI in popularity. The metaphor for the connectionist approach to AI is the brain as a collection of billions of neurons that both wire and fire together. The application of neural networks to AI also dates to the 1950s but had fallen out of favor until resuscitated by Hinton, the cognitive psychologist who recently left Google, and others who described a new procedure called “backpropagation” for training multilayered neural networks. The connectionist approach became even more exciting as advances in computing hardware and schemes for handling large volumes of structured, semi-structured, and unstructured data (“big data”) made it possible to improve the efficacy of neural networks.

Machine learning

ML today is a subset of AI which relies on both the symbolic and neural network approaches. The synthesis of neuro-symbolic AI and development of hybrid architectures is relatively new. Computer scientists use ML and data analytics to train algorithms and neural networks with statistical methods to discern patterns, make classifications, predict outcomes, and uncover significant insights from available masses of information. In ML, models of learning are used to dexterously organize the capabilities of intelligent agents as they improve themselves using data extracted from online systems or the environment. ML is divided into roughly three categories—supervised, unsupervised, and reinforcement learning.

In supervised learning, labeled data are used to train algorithms. The computer is “taught” to recognize general rules using “training data” (labeled inputs and desired outputs). Supervised learning algorithms may engage in active learning to label new data points with desired outputs, classification to organize data into relevant categories, regression analysis to investigate relationships between independent features or variables and dependent variables or outcomes, or similarity learning, where the goal is to measure the resemblance or relatedness between things. 

In unsupervised learning, the algorithm discovers structure, features, and insights from unlabeled data. Unsupervised learning is helpful where common properties of the dataset are unknown or poorly understood. Additionally, unsupervised learning is helpful in solving clustering and association-type problems. Clustering algorithms group data based on similarities and differences. Marketing companies often use clustering and demographic segmentation of customers to identify and group households that are similar to one another in wealth, buying behavior, or lifestyle. These clusters are given names like Married Sophisticates, Penny Pinchers, Skyboxes and Suburbs, Summit Estates, Shotguns and Pickup Trucks, Rolling Stones, Single City Struggles, Aging Upscale, and Timeless Elders. Association algorithms find interesting relationships between variables. Association rule learning can be useful in market-based analyses of customer purchases, allowing retailers to recognize relationships between items that customers frequently buy together and predict the likelihood of purchases of an item based on the occurrence of other items in an individual transaction.

A computer performs reinforcement learning when it learns through interaction with the environment and feedback to achieve a predefined goal or maximize a reward. In reinforcement learning, the AI improves by first making mistakes. Reinforcement learning has applications in teaching self-driving cars to avoid obstacles and stay on the road, training AI non-player characters in video games, and instructing caregiver robots on how to grasp common household objects.

Deep learning

Deep learning is a type of ML that depends primarily on ANNs and training data. The neural networks train by imitating the natural neural interconnectivity of the brain using layers of nodes and connections. These nodes are composed of various inputs and weights, a given threshold, and an output value. When the output value surpasses the predefined threshold, it “fires” like a biological neuron, activating the node and passing data along to the next layer of the network. AlexNet, one of the pioneering technologies in the field of computer vision, was designed by Hinton and his students. This deep learning tool used to analyze visual imagery is composed of eight layers—five convolutional layers, two hidden layers, and one output layer. AlexNet was trained on graphics processing units (GPUs). It outperformed all other challengers in the 2012 ImageNet Large Scale Visual Recognition Challenge. Deep neural networks and platforms are employed in many contexts today; they promote cybersecurity (Deep Instinct), predict criminal recidivism (COMPAS Core), make early diagnoses in oncology (Behold.ai), teach next-gen driverless cars (Tesla, Waymo, Nvidia), and boost the creativity of artists (DALL-E, Stable Diffusion) and writers (GPT-4, Charisma). Generative transformer models are a prime example of deep learning, and they are revolutionary in their ability to quickly find relationships and capture context across large datasets.

Computational creativity is one subfield of AI that has been dramatically reshaped by deep learning. Computational creativity applications attempt to generate original ideas and artifacts. These “generative AI” applications are transforming our understanding of machines as helpmates to humans and altering bedrock conceptions of novelty. Is the goal to replicate human storytelling or to create new media for storytelling? Can an AI agent create a real emotional connection with a person? Can a machine have an original thought or imagination? How would an AI program recognize that something is imaginary? In a world of computational creativity, some common tropes and normative modes of seeing, hearing, and knowing may have to be unlearned. 

All sorts of possibilities are being explored with generative AI. The annual National Novel Generation Month (NaNoGenMo) contest is the brainchild of computer programmer and internet artist Darius Kazemi. NaNoGenMo is the artificial spiritual twin of the National Novel Writing Month (NaNoWriMo), a nonprofit organization that encourages human authors to find their voices by banging out drafts of fifty-thousand-word novels in November. Programmers following Kazemi’s rules instead write code that generates fifty thousand words of machine-made fiction. NaNoGenMo provides a standard corpus of public domain lists and texts for rapid prototyping, but participants use all sorts of public domain writings to train their AIs. In the NaNoGenMo submission The Seeker, the intelligent agent is at once algorithm, agent, protagonist, and narrator. The Seeker reads differently each time because the code randomly shuffles in a new selection from its corpus to parse, deconstruct, and reconstruct. 

Today, humans and artificial intelligences have joined forces to tell prize-worthy stories like The Day a Computer Writes a Novel, which passed the first round of screening for the Hoshi Shinichi Literary Award in Japan, and 1 the Road published by Jean Boîte Éditions. The author of 1 the Road, Ross Goodwin, was a speechwriter in the Obama administration. Goodwin trained a Long Short-Term Memory Recurrent Neural Network (LSTM-RNN) with three different sets of texts (science fiction, poetry, and “bleak” writings) totaling sixty million words. 1 the Road is particularly interesting because the AI’s input is supplemented using sensors—a video camera, microphone, GPS device, and clock timer—exposed to the sights and sounds of a road trip from New York to New Orleans. Typically, large language models are trained on massive amounts of textual data and can be tens of gigabytes—even petabytes—in size. Researchers are concerned about running low on this kind of data to train models, which means that accessing data from other sources such as audio dialogue, images, spreadsheets and databases, and video clips will become increasingly important.

In this networked world exposure to content is constant. Generative AI promises to exponentially increase the amount created annually. Generative AI applications today are spiritedly responding to an apparent “creativity crisis” among human beings as measured by a thirty-year decline in scores on the Torrance Tests of Creative Thinking, a prominent test for human creativity. Generative AI has manufactured all sorts of objects, discoveries, and/or performances. However, some examples of computer-aided creativity are quite old. One precedent is Alan Turing’s imitation game. Another is the general problem solver of AI pioneers Herbert Simon, Allen Newell, and John Clifford Shaw. 

In 1958, Simon and Newell wrote that “within ten years a digital computer will write music that will be accepted by critics as possessing considerable aesthetic value.” This prediction has now been fulfilled by the subfield of generative music and algorithmic composition. One of the most famous examples is David Cope’s Experiments in Musical Intelligence (“Emmy”). Emmy is an algorithmic composer capable of analyzing existing musical compositions, rearranging and recombining them, and ultimately inventing new works that are indistinguishable from those of Johann Sebastian Bach, Frédéric Chopin, and Wolfgang Amadeus Mozart. Shimon at Georgia Tech University is a marimba-playing improvisational jazz-bot musician. DeepMusic.AI, OpenAI’s MuseNet, and the Magenta Music Transformer are all online tools for creating music with deep learning and generative AI. Recently, two programmers have been trying to make music infringement lawsuits obsolete by securing copyright to every combination of eight quarter notes in the C major scale using tones generated with the Musical Instrument Digital Interface (MIDI) standard electronic music protocol. And, similar to NaNoGenMo, a song contest has sprung up that is exclusively for artificially generated music. The first AI “Eurovision Song Contest” winner, the Australian group Uncanny Valley, sampled kookaburra bird calls and koala grunting noises. Additionally, there are AI painters, Dungeons & Dragons dungeon masters, journalists, filmmakers, dancers, stunt performers, and theater players. 

Global competition and controversies

A number of countries have established national strategies, initiatives, and funding mechanisms to promote AI innovation and adoption. Former US President Donald J. Trump established the American AI Initiative by signing an executive order in 2019. The order did not allocate any direct federal funding, but it highlighted the significance of employing AI in a responsible manner and taking action to respond to significant investments made by other nations. In 2020, the US Congress passed the National AI Initiative Act. The National AI Initiative (NAII) establishes a coordinated program that spans the federal government. It is aimed at expediting AI research and development (R&D) to strengthen the country’s economic growth and national security. The act provides almost $6.5 billion in funding over five years for R&D, education, and standards related to AI. The National Science Foundation, the Department of Energy, the Department of Commerce, the National Aeronautics and Space Administration, and the Department of Defense will jointly oversee a nationwide network of interdisciplinary AI research institutes.

The US government’s efforts are partially motivated by China’s substantial investments in AI technology. The New Generation Artificial Intelligence Development Plan, announced in 2017, is the Chinese government’s national strategy for AI R&D. China hopes to overtake the United States by 2030 and establish the country as a global leader in the production of AI technology and talent. The major port city of Tianjin in northern China has declared its intention to establish reserves totaling ¥100 billion (equivalent to $15.7 billion) to bolster the AI industry, as well as a separate ¥10 billion fund to advance intelligent manufacturing. China passed a national law aimed at addressing ethical and regulatory concerns related to AI in 2021. In April 2023, the Cyberspace Administration of China issued regulations mandating that content generated by AI must align with the fundamental principles of socialism.

The Russian Federation also has a National AI Development Strategy designed to bolster investment in AI research, education, and industrial development. Somewhat surprisingly, the 2019 Russian AI strategic decree does not mention national defense, though it does emphasize the importance of AI for economic development and healthcare. The decree also does not mention budget, deadlines, or enforcement mechanisms. Due to the recent military conflicts in Libya, Syria, Nagorno-Karabakh, and Ukraine, it is anticipated that Russia will allocate significant resources toward developing AI systems for unmanned aerial drones, counter-drone technologies, and AI-powered surveillance systems. 

Significant and unheralded projects are also underway in Africa. The African Union has unveiled an Artificial Intelligence Continental Strategy for Africa, which is intended to facilitate the participation of stakeholders, initiate capacity-building efforts, and fortify regulatory frameworks for AI technology and data management. Artificial Intelligence for Development in Africa (AI4D) is a four-year initiative launched in 2020 by Canada’s International Development Research Centre and Sweden’s International Development Cooperation Agency. The objective of AI4D is to team up with Africa’s government and scientific communities to encourage AI research, innovation, and talent. The ultimate aim is to elevate the standard of living for people in Africa and beyond. African nations are particularly concerned with issues of machine bias and ethics and wary of patterns of manipulation and abuse in the form of automated imperialism, algorithmic colonialism, and digital extractivism. 

Canada, Australia, Japan, South Korea, Germany, France, and the United Kingdom also have significant national strategies to address challenges posed by a future empowered by AI. Many of these nations are worried about the likelihood of global competition in AI leading to an arms race or authoritarianism fueled by information technologies. Entrepreneurs, politicians, and engineers warn of an impending “AI Cold War.” An AI arms race to create near-autonomous weapons systems is in full swing, despite being a topic of controversy. The banning of these so-called killer robots may not even be practical. Governments around the world have developed a number of other controversial applications of AI, such as image recognition and mass surveillance, predictive policing, deepfakes and misinformation campaigns, and social credit scoring.

Dangers, myths, and misconceptions

AI can be destructive even when used as an instrument for creative discovery. One of the dangers of unleashing computational creativity tools is being submerged by a culture of automation that dampens individual creative expression and dialogue with human audiences, participants, and partners. In 2022, an AI-generated artwork took first place in a fine arts competition at the Colorado State Fair, which outraged many. Only months later, an internationally acclaimed photography competition—the Sony World Photography Awards—was won by an image generated using AI. Getty Images and established art communities are refusing to accept AI-generated masterpieces. But in general, AI is valuable because it empowers humanity with tools that extend bodies and minds and mitigates risks and perilous circumstances.

Deep learning pioneer and serial entrepreneur Andrew Ng has said that worrying about AI is like worrying about overpopulation on Mars. Artificial agents will not need to be excused or incarcerated for crimes and misdemeanors that upon analysis and reflection can be traced to human error, indifference, or greed. Whole brain emulation, artificial consciousness, technological singularity, and AI apocalypse are all well over the horizon. The threats that remain are still significant. The chief near-term dangers of AI technology are pervasive and more subtle. They include risks such as over-optimization, weaponization, deception and distraction, complexification, moral and practical deskilling, amplification of competition and conflict, job losses due to automation, and harms to human uniqueness, privacy, and accountability.

What lies behind the hype and fear of AI is a fundamental misunderstanding of current objectives, as well as severe shortsightedness. Most AI is meant to supplement human intelligence, not replace it. AI is intelligence augmentation until—and only if—humanity commits and finds ways to entirely remove human beings from the loop as creators, controllers, and decisionmakers. “Exiting the loop” will prove difficult: Humans are extraordinarily skilled at handling ambiguous situations, such as intuiting the emotional state of other drivers on the road. AI will not become human-like merely because humans anthropomorphize it either. An AI program does not try to learn (although it can improve through reinforcement learning methods); it plucks statistical patterns and distributions from training data using pipelines, algorithms, and parameters unglamorously selected behind the scenes by programmers. ANNs are not reasoning the way brains do, and adversarial ML involves no clashing of titans. Thinking about the past, present, and future of AI is imperative. When IBM said that the Jeopardy!-winning Watson AI would also revolutionize medicine, it in effect denied a century of hard-won gains in health informatics R&D (and has yet to achieve its lofty promises). It is not possible to simply wave our hands and say that quantum computing, DNA data storage, and neuromorphic chips will pave the way for an AI-infused next industrial revolution. Real progress in AI comes much more slowly, albeit with occasional surprising leaps forward, and ultimately depends on the real wants and needs of human beings.

Philip L. Frana is an associate professor in the Interdisciplinary Liberal Studies and Independent Scholars programs at James Madison University. His scholarly interests focus on the social and cultural aspects of robotics, automation, and information technology.

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The new NIE lays out three pathways through 2030 for how North Korean leader Kim Jong Un’s strategy could evolve as his nuclear weapons capabilities improve. The NIE concludes that the by far most likely pathway is for Kim to leverage his nuclear capability for “coercion, potentially including non-nuclear lethal attacks, aimed at advancing the North’s goals.” It also delineates two additional low-likelihood pathways: North Korea could employ an offensive strategy to dominate the Korean Peninsula through the use of force, or it could turn to a defensive strategy, in which nuclear weapons are used solely as a deterrent. According to the estimate, Kim is most likely to continue pursuing coercion because he will be “confident that his growing nuclear capabilities will deter any unacceptable retaliation or consequences” but that he would not actually attack with them unless he “believes his regime is in peril.”

As a former National Intelligence Officer for North Korea who led the development of NIEs, I see this document as monumental in my particular niche, but some additional context is needed to understand why. Since the 1950s, NIEs have been the US intelligence community’s most authoritative written judgments on national security issues, developed through a collaborative process led by the Office of the Director of National Intelligence’s National Intelligence Council (NIC) and its predecessor organizations. This new NIE is a tantalizing glimpse of the US intelligence community’s larger strategic intelligence picture on North Korea, even as it necessarily represents only the tip of the iceberg of a much longer classified document.

What is perhaps most remarkable about the latest NIE is that it highlights very recent key intelligence community judgments about North Korea. This is a major and unusual step, given that this practice was largely halted after the declassification of key judgments in the 2007 NIE on Iran’s nuclear program caused a number of public controversies. It also marks a change from how the intelligence community has generally approached public assessments of North Korea. Though US intelligence leaders have openly described North Korea as a “hard target,” they have generally been guarded in their assessments of Pyongyang’s capabilities and how they know what they know. With a few exceptions (many of them during the “fire and fury” period of 2017) most of the intelligence community’s publicly released assessments have been small portions of the larger Annual Threat Assessment provided to Congress. 

Given this history, and the fact that the NIE does not address the possibility that North Korea will give up its nuclear weapons, it could have been withheld on the unfair grounds that it could be interpreted as an implicit rebuttal to the longstanding US policy of negotiating the denuclearization of North Korea. It is therefore a testament to the sincerity of Director of National Intelligence Avril Haines’s commitment to transparency that this NIE was released. 

Even with its notable and welcome transparency, however, it does not give a full picture of the strategic North Korea nuclear challenge. There are (at least) three areas that are worth adding to the discussion.

First, China. The NIE’s analysis related to Beijing is guarded and subtle, particularly compared to how much intelligence leaders openly focus on the threat. While Washington publicly and loudly grapples with the premise that the United States and the People’s Republic of China (PRC) will likely be in a heightened state of military confrontation or outright war over Taiwan before 2030, these key judgments do not explicitly address the possibility, much less explore the massive implications this has for Korea. The declassified NIE does warn, among other factors, that an offensive strategy would “become more likely” if Kim believed he could “maintain China’s support” or “if [Kim] concluded that [an] international crisis presented a last chance to accomplish revisionist goals.” As current National Intelligence Officer Sydney Seiler acknowledged to me last week, the need to consider North Korea’s potential to escalate during a Taiwan crisis is a “no brainer.” That the key judgments omit this subject is neither surprising nor troubling to me as a former NIO. I know how hard it is to keep this document’s scope manageable and the challenges of considering hypotheticals piled upon hypotheticals. However, readers should keep in mind that the risk of North Korea using its nuclear weapons, or taking the offensive in general, could be much greater in the event of a US-PRC conflict.

Second, South Korea. Specifically, it is important to recognize Seoul’s potential to field its own nuclear arms. If Kim pursues a strategy of coercion, as the NIE judges he most likely will, and “may be willing to take greater conventional military risks, believing that nuclear weapons will deter an unacceptably strong US or South Korean response,” the value of South Korean nuclear capability to counter such threats would fuel the already-strong South Korean public sentiment for the country to acquire nuclear weapons. It would, however, be impolitic to warn that April’s Washington Declaration, wherein South Korean President Yoon Suk Yeol pledged to forgo nuclear weapons, may not last beyond the end of his constitutional single term in 2027. The window between a decision for nuclear weapons and operational capability would be a logical time for a preventive attack, a concrete example of the general “now or never crisis” the NIE cites as a driver for an offensive.  

Third, military and policy prescriptions. These are outside the remit of the NIC and violate intelligence analysis tradecraft standards, so it makes sense that they are not included in the NIE. However, several logical strategic-level policy and military recommendations could be derived from this estimate’s judgments. At least three come to mind immediately:

• First, the United States should not politically recognize North Korea as a de facto or de jure legitimately nuclear-armed state in the hope that this would lead it to be a defensively focused “responsible” power, given how unlikely this is to happen. 
• Second, the United States and South Korea should ensure that their primary efforts in deterrence of North Korea are focused on the most likely threat. US and allied efforts at deterrence should not be content with just deterring an “all-out” military offensive or nuclear strikes. They should also counter as much as possible the sort of incremental creeping coercive escalation that could either fatally undermine the security of South Korea and the US position in the region over time or could spin out of control into an escalating conflict. 
• Third, the United States and South Korea should recognize that, though it is not the most likely scenario, they must be prepared to fight a nuclear war with North Korea. Washington and Seoul must contend with the unpleasant reality that there is a plausible set of conditions, particularly in the context of a hypothetical US-PRC war or a South Korean decision for nuclear arms, that could lead North Korea to undertake an offensive use of nuclear weapons. 

Though this NIE is neither the first nor the last word on the implications of North Korea’s growing nuclear capabilities, it is a huge step forward for public and classified policy debates. The NIE provides the intellectual foundation to prepare for a long struggle with an increasingly well-armed and coercive North Korea, instead of abandoning the principle of denuclearizing North Korea in a vain attempt to secure peace or embarking on the reckless path of embracing preventive war in fear that Kim will strike first. The NIE demarcates the field in which the United States and its allies must be prepared to play a high-stakes game—a contest in which the PRC’s aggression and South Korea’s own nuclear weapons could have game-changing consequences.

Markus Garlauskas served as the national intelligence officer for North Korea, leading the US intelligence community’s strategic analysis of North Korea from 2014 to 2020. He is the director of the Indo-Pacific Security Initiative at the Scowcroft Center for Strategy and Security of the Atlantic Council, and tweets at @Mister_G_2.

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Sandra Torres, a well-known but polarizing figure in her third bid for the presidency, and Bernardo Arevalo, a congressman, first-time presidential hopeful, and former diplomat with a strong anti-graft message, have advanced to the second round, which will be held on August 20. The low voter turnout of 60 percent and high percentage of null votes—four times as high as in the last elections, making up nearly a quarter of all votes—reflect a prevailing sense of apathy among Guatemalan voters and an erosion of confidence in an electoral process that, to date, has been marred by seemingly arbitrary court decisions on candidates’ eligibility to run. For this cycle, political parties brought a record number of legal actions against each other, with at least three presidential candidates and other candidates for congress barred from running.

Nonetheless, Guatemala’s runoff election to replace term-limited Alejandro Giammattei will have far-reaching implications, both for the region and beyond. For one, Guatemala’s next president will be less ideologically conservative than the last three administrations in Central America’s most populous country. The emergence of more left-leaning governments is in line with trends from other recent elections in the region (Honduras, Chile, Colombia, and Brazil, for example).

The next president’s decision to align with China or maintain relations with Taiwan will reverberate beyond Guatemala’s borders. The outcome could determine whether the Biden administration has a reliable partner for its strategy in Central America—which is designed to help quell the surge of migrants on the US-Mexico border and to combat graft and corruption. And the economic challenges facing the country, including poverty, inequality, and fiscal deficits will require comprehensive policy measures and hard reforms from whoever takes office in 2024. That’s a tall order when considering the two candidates for the August runoff.

Geopolitical implications

Guatemala is host to one of the last two Taiwanese embassies in Central America (the other is in Belize), and one of only seven in Latin America and the Caribbean. The outcome of the runoff election has the potential to tip the region’s balance toward China once and for all, thus shaping the future trajectory of not just Guatemala but also the broader interests of the United States and the rest of the Western Hemisphere. China has been calling on Guatemala to make the “right choice” and has overtly increased its footprint in the region in the last few months—first through Honduras’ decision to break off ties with Taiwan in March and then with reports of late-stage talks for the establishment of a Chinese military training facility in Cuba. Despite this, leading candidate Torres has vowed to maintain diplomatic ties with Taiwan. Arevalo’s position is less clear. He has stated that Guatemala’s sovereignty and interests are most important and that there is no reason to “jump trains.” After all, China is Guatemala’s second-biggest commercial partner, behind the United States.

Closer to home, the runoff election results may determine the extent to which the next Guatemalan government is willing to collaborate with the United States to address matters such as irregular migration, corruption, and transnational crime. As a political insider whose party has been embroiled in several corruption investigations, Torres is seen as unlikely to take strong measures against suspected corruption within the party system. On the other hand, Arevalo is known as the anti-corruption congressman. His party—Movimiento Semilla—is all but a symbol of the 2015 “Guatemalan Spring,” which resulted in the resignation and arrest of then-president Otto Perez Molina. Arevalo announced on Monday that if he were to win the election, he would convene former judges and prosecutors to create a national anti-corruption advisory group. With increasingly unreliable allies across the region, the Biden-Harris administration’s ability to carry out its strategy toward Central America hinges upon the election of a trustworthy and dependable leader in Guatemala.

Economic implications

Guatemala is the largest economy in Central America, but with some of the highest rates of poverty and inequality in the region, as well as the lowest rate of tax collection in Latin America. While Torres would likely continue with a more conservative economic agenda focused on macroeconomic stability, market-oriented reforms, attraction of foreign investment, and fiscal discipline, less is known about Arevalo’s plan. The next president will also have to deal with a growing fiscal deficit and continued social demands. The president will need to work with a split Congress to pass budgets—the country failed to do so in 2020 and 2021, when protestors set the Capitol on fire—to support the population’s needs and continue to improve the country’s basic infrastructure. To address the low rates of tax revenue in relation to the size of the economy, the next administration will also have to undertake important reforms on the fiscal front.  

Should Torres win in August, she would likely pursue a robust social domestic agenda—she’s already promised bags of basic food items for the most vulnerable and cuts in taxes on basic foods. Meanwhile, Arevalo has floated the idea of a public hospital for cancer treatment and a state-owned enterprise that would create a network of pharmacies with medicines at “fair prices.” But his economic plan, which will need some refinement over the next six weeks, depends on the creation of “jobs, jobs, jobs”—the lack of which is a main driver of migration in Guatemala. Arevalo has laid out plans to bring Guatemala’s citizens into the formal economy while vowing to eradicate poverty and boost quality education. With increasingly few resources to finance the robust social programs these center-left candidates are proposing, breaking ties with Taiwan in favor of China could just make economic sense. This would be especially attractive if a landmark infrastructure project accompanied the announcement. For example, Costa Rica received a national stadium in 2011. More recently, El Salvador received a stadium and a library in 2019, and, following President Xiomara Castro’s announcement of breaking diplomatic ties with Taiwan this year, Honduras received a pledge for Chinese investment in a major hydroelectric dam project.

Guatemala’s voters will likely be most concerned with their pocketbooks when they head to the ballot box in August. Urban centers want a leader who will work to root out corruption—which could give Arevalo an edge. But their choice will reverberate far beyond the country’s borders and could reshape the geopolitical map in the hemisphere.  

María Fernanda Bozmoski is the deputy director of programs at the Adrienne Arsht Latin America Center.

Eva Lardizábal is an assistant director at the Adrienne Arsht Latin America Center.

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This is the 5th installment of the Unlocking Economic Development in Latin America and the Caribbean report, which explores five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Meaningfully advancing the green agenda

The private sector identified the green agenda as a major opportunity, with more than half of survey respondents flagging “addressing climate change” as a top sustainable development and business priority to drive full economic recovery from COVID-19.¹ While climate action is critical on a global level, companies recognize that it is particularly pressing in LAC.

LAC is the world’s most economically unequal region and the second-most disaster-prone region in the world, highly vulnerable to climate consequences.² This vulnerability threatens to further entrench inequality and undermine the wellbeing of people and communities. Every year, between one hundred and fifty thousand and two million people in LAC are pushed into poverty or extreme poverty because of natural disasters, while as many as seventeen million people could migrate across LAC by 2050 due to climate change.³ Climate change also threatens food security, which can heavily impact rural communities.⁴ It will generate economic costs of up to $100 billion annually by 2050, which undercut growth and limit the ability of businesses to operate, prosper, and thrive.⁵

Recommendations for the private sector

Advancing the green agenda is not only imperative as a means of addressing the threat of climate change, but also as a means of unlocking massive business opportunities with the potential to drive private-sector-led economic recovery and growth in LAC. In particular, private firms have an important role to play by creating green jobs, promoting the circular economy, and partaking in green finance.

1. Creating green jobs: Firms can help create green jobs by adopting sustainable practices, seizing business opportunities in emerging green sectors, and providing upskilling, reskilling, and other support for workers displaced by the green transition.
2. Promoting the circular economy: Firms can help drive a transition to a circular-economy model by financing circular-economy efforts, supporting multistakeholder initiatives, and adopting and promoting sustainable business practices.
3. Partaking in green finance: The financial sector can help foster a green-finance ecosystem in the region by tightening environmental, social, and governance (ESG) requirements, aligning investments with green objectives, and nurturing green[1]bond markets in LAC.

About the author

Staff

Pepe Zhang

Senior Fellow

Adrienne Arsht Latin America Center

China Coronavirus

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• Executive summary
• Introduction
• Overview of key opportunities
• Conclusion
• Annex
• Interviews

Executive summary

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Introduction

Latin America and the Caribbean stand at a pivotal moment. Hard hit by the pandemic in 2020, the region managed an impressive rebound in 2021 on the back of successful vaccination campaigns and historically intensive fiscal support.¹ However, new uncertainties began to emerge by late 2021. LAC’s growth slowed to 3.5 percent in 2022, and is expected to further weaken to 1.7 percent in 2023.²

Inflationary pressures, rate hikes in both LAC and advanced economies, spillovers of the war in Ukraine, tightening fiscal positions, and still-high debt levels have dampened the regional macro-outlook.³ In addition, countries face structural micro-level vulnerabilities—such as rigid and informal labor markets and low productivity—which made LAC the slowest-growing region globally from 2014–2019 and the region worst affected economically by COVID in 2020.⁴

The above challenges—coupled with a lingering pandemic, a global food crisis and energy crunch, and the effects of climate events—are testing public finances and institutions. Much is at stake as governments seek to better serve the needs of their economies and societies. From sustaining the ongoing recovery against short-term headwinds to boosting inclusive, productive, and sustainable development in the long term, governments cannot, and should not, do it alone.  

In this context, the Atlantic Council’s Adrienne Arsht Latin America Center (AALAC) has partnered with the Inter-American Development Bank (IDB) to highlight the critical role of the private sector in supporting growth and improving lives in LAC. By working directly with IDB’s robust network of multinational private-sector partners through surveys and interviews, AALAC identifies and spotlights five opportunities whereby the private sector can drive economic prosperity, sustainable development, and social progress in LAC. 

1. Enhancing market size, scalability, and regional integration. The private sector can strengthen the hard and soft infrastructures supporting the region’s economies, while drawing them closer together through trade, regulatory, and other integration. 
2. Accelerating digitalization and innovation. The private sector can improve infrastructure, foster skills, and promote adoption to help the region transform its digital potential into development gains. 
3. Improving state governance, institutional capacity, and transparency. Technological, governance, and other cooperation between the public and private sectors can enhance institutional capacity, integrity, government-service delivery, and regulatory quality in LAC.  
4. Addressing multidimensional inequality. Private-sector actions to reduce gender inequality, level the playing field between SMEs and large firms, narrow the urban-rural divide, and prepare for global shocks will enable a more prosperous, inclusive economy for LAC. 
5. Meaningfully advancing the green agenda. Private firms can help advance the green agenda by working to create green jobs, taking measures to promote a transition to a circular-economy model, and partaking in green finance.  

In each opportunity area, the report provides recommendations private firms should consider to maximize their own roles in the region’s recovery and continued development, as well as by working through partnerships with the public sector. To inspire ways forward, such recommendations are accompanied by concrete, actionable examples of successful private-sector leadership and partnerships. 

Where applicable, the report also introduces relevant, complementary policy recommendations for the public sector by drawing primarily on research of the Americas Business Dialogue (ABD), a private-sector initiative facilitated by the IDB. ABD leverages the insights of more than four hundred companies to develop, disseminate, and support the implementation of sound public-policy recommendations. 

Partnerships at the IDB
The report is the product of a close collaboration between the Atlantic Council and the IDB. The IDB is the leading source of development financing for Latin America and the Caribbean, with a long track record of working in partnerships with the public, private, nonprofit, philanthropic, and academic sectors. Through its Office of Outreach and Partnerships (ORP), created in 2008, the IDB has managed to cultivate a robust network of partners, including private-sector firms dedicated to supporting the region’s development in partnership with the bank. The Atlantic Council engaged more than one hundred of these firms as part of the report-building process.

The IDB works with its private-sector partners in many ways, focusing largely on: capturing financing from partners to complement its operations in the region; mobilizing pro-bono knowledge, innovation, and technological solutions from partners that can generate impact in the region, in line with its institutional strategy; and engaging in knowledge sharing, dialogue, networking, and other activities through high-level partnership platforms. To date, the IDB Group has mobilized close to $52 billion from 500+ partners from the private, public and philanthropic sectors, including $5.91 billion in 2022.

Special feature: Private-sector perception of LAC
In addition to identifying the five opportunities of private-sector-led growth in LAC, this report provides a helpful snapshot of business attitudes toward the region, through a series of surveys and interviews conducted in May and July 2022 (see methodology in Annex A). Survey respondents—private-sector partners of the IDB—are predominantly multinational companies and represent fifteen sectors. Seventy-nine percent of these companies operate in two or more LAC countries and 65 percent employ more than four hundred people in the region. The survey yields two salient insights.

The first of these insights is that business leaders perceive the region through a spectrum of optimistic and pessimistic lenses. In brief, survey respondents are almost exactly split on whether the overall business and investment environments in LAC have improved over the last decade. The optimists, which make up 49 percent of respondents, consider the environments to be friendlier or much friendlier than in the past, whereas the pessimists (the other 51 percent) see stagnation or even deterioration in these conditions (Figure 1). Interestingly, the two groups are not defined by discernible differences in terms of the industries or subregions in which they operate, or in the demography of the respondent.



The optimism-versus-pessimism dichotomy reflects more than just two contrasting views of the region’s past trajectory. Rather, dissecting survey responses by optimists and pessimists reveals their respective underlying perspectives on LAC’s strengths and weaknesses—and, implicitly, their disagreements and surprising agreements. For example, while optimists are more hopeful about, and place greater emphasis on, LAC’s digital and innovation potential than the pessimists, optimists fully concur with pessimists that governance and institutions are top challenges facing LAC.

Comparisons like this—see numerous “additional survey insight” boxes throughout the report—add more nuance to the analysis, as well as the resulting, forward-looking recommendations. Although perceptions are hard to change, progress in the five opportunity areas outlined below will be key to tipping the balance of optimism and pessimism in LAC’s favor. This is important because perceptions guide decision-making: perceived risks and weaknesses can undercut investment, while a shift toward more optimistic views of the region can do the opposite.

Second, the survey displays a more favorable perception of LAC than common wisdom or an “international observer” might suggest. On one hand, reputable international assessments of business friendliness and competitiveness— conducted by organizations such as the Economist Intelligence Unit, the World Economic Forum, and the Institute for Management Development—tend to place LAC in the bottom half of all countries.⁵ On the other hand, our survey respondents—including the pessimists—see LAC as slightly more attractive than the global average (see Figures 2 and 3 below). ⁶ Despite the potential positive bias of our multinational survey respondents toward LAC, it offers hope that they suggest—in a global context—that LAC may have more to offer than meets the eye.

To further explore such varied perceptions of LAC, the report compares LAC to other regions through objective metrics, where applicable. More importantly, an obvious takeaway is that, going forward, the region needs to lower its “barriers to entry” and make its opportunities more accessible to everyone, whether knowledgeable observers or those who do not necessarily possess a deep understanding of local conditions. Effective and constructive public-private collaboration and dialogues, including those undertaken in preparation for this report, will be indispensable to rallying international optimism and attention in specific countries, and in the region in general.

Overview of key opportunities

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Meaningfully advancing the green agenda

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Conclusion

When asked to identify the main social impact of their companies, survey respondents cited myriad promising areas. Unsurprisingly, the most commonly cited was economic growth and job creation (72 percent), as shown in Figure 11 a few pages ago. But LAC needs companies to consider their contributions far beyond output and employment, especially with the region confronting a number of additional short-term uncertainties and structural socioeconomic obstacles. As evidenced by concrete examples throughout the report, many firms have undertaken commendable efforts and rethinking in this regard. But more can be done. Going forward, the private sector would do well to step up as a leader—and a partner for the public sector—in boosting development, equity, resilience, and sustainability in LAC. This report explored how the private sector can rise to this challenge in a systematic and actionable way, through sixteen recommendations across five concrete opportunities (summarized below). Additionally, it explained why doing so also benefits firms, for those less convinced of the cause (or less optimistic about the region). This is particularly critical to further galvanizing private sector interests at a time when pandemic-induced scarring and other ongoing economic headwinds have eroded corporate revenues and suppressed cumulative investment in certain sectors.⁷ Even with fewer resources available, however, companies can make an impact through well-designed day-to-day operations, strategies, special programs, and partnerships. Finally, the private sector cannot, and should not, do it alone. The report highlighted success stories and the overall importance of multistakeholder partnerships (public-private, private-multilateral, private-civil society, etc.), as a way to complement private-sector actions and amplify developmental impact. On that note, this conclusion section offers some final thoughts and additional insights on how to stimulate public-private partnerships in particular, as well as the critical role of the multilateral sector to advance partnerships and private-sector-led development.

Special feature: Maximizing the potential of public-private cooperation
In addition to the private-sector opportunities and recommendations summarized above, the report showcased scores of successful partnerships with the private sector that helped magnify developmental impact. As governments pursue and expand these partnerships, a central question remains: how to ensure these partnerships are successful. The answer varies greatly depending on the nature of the collaboration (e.g., co-financing an infrastructure project versus developing vocational training with private-sector expertise). Nevertheless, insights from our survey shed light on this. See Figure 12 below.

Firms most commonly cited the two following factors as necessary for successful collaboration with the public sector: regulatory, procedural, and legal clarity (70 percent), and integrity and trustworthiness (70 percent). The next tier of requirements was related to the attributes of specific collaborations themselves: economic viability (60 percent), skilled counterparts (56 percent), and effective negotiation (54 percent).



Here again, interesting differences appeared between our survey’s optimists and pessimists. The latter—who showed greater skepticism of government institutions—are more likely to prioritize regulatory and legal frameworks and engage with trustworthy and honest counterparts. Optimists, meanwhile, focused more on the specifics of a given collaboration (in particular, economic viability). See Figure 13 below.

Ultimately, as with all relationships, successful public-private cooperation in pursuit of recovery and sustainable development in the region will depend on a shared vision for success, a clear sense of what each partner brings to the table, trust and communication, transparency and honesty, and a shared belief in the unique potential of multistakeholder partnerships to improve lives in the region.

Special feature: The role of the multilateral sector

Multilateral actors have a critical role to play in these partnerships. Indeed, many interviewees, including Telefonica, pointed to the multilateral institutions as key partners that can help private actors unlock their full potential to support the region’s development.

First, multilateral entities bring profound sectorial, country, and development expertise to partnerships. This knowledge helps ensure partnerships are designed in line with country and sector needs, that they respond to the realities on the ground, and that they are soundly implemented and carefully monitored to maximize impact.

Second, multilaterals are trusted partners of governments, civil-society actors, and private firms, and therefore can serve as a bridge connecting these diverse actors. This is particularly relevant in LAC, where trust in the public and private sectors is low, and where mistrust is a significant obstacle to development.⁸ As an honest broker, multilaterals can unlock progress and prosperity by convening and building trust among public, private, and civil-society actors, and by opening the hearts and minds of local partners and beneficiaries to the ways in which private-sector partnerships can improve the region’s environmental, social, and economic wellbeing. A salient example here is IDB’s leadership in convening public-private dialogue, through platforms like the Americas Business Dialogue, on diverse topics of strategic development importance. These dialogues have effectively fostered public-private-multilateral ties in the region and involved nontraditional stakeholders, such as MNCs, in the region’s development journey.

Third, multilaterals can play a supporting role to empower partnerships with the private sector, even without being directly involved in the partnerships themselves. For example, they can partner with governments to provide anchor investments or de-risking facilities that may crowd in the private sector. Their support of private-sector operations with a meaningful development impact creates significant demonstration effects for other private firms to follow. Their commitment to fostering domestic private-sector development lays the groundwork for private firms to thrive, generating opportunities for future partnerships.

Such financial and technical assistance is particularly important in today’s uncertain economic and political context. On one hand, multilaterals are well positioned to act as countercyclical lenders during credit crunches and other crises. On the other hand, the multilaterals’ focus on the long-term growth and competitiveness agenda helps induce similar behavior in the public and private sectors, which helps overcome certain short-termism (for example, caused by elections, protests, or political polarization) potentially counterproductive to ultimate development goals.

Finally, multilaterals are also well placed to extract and disseminate the lessons generated from partnerships and use them to inform future partnerships and public policymaking—an essential component and objective of this collaborative report between AALAC and IDB. Moreover, their robust government ties, network of stakeholders, and in-country presence facilitates the exchange and cross-pollination of know-how across different geographies and industries. Like MNCs, many multilaterals have extensive coverage and memberships across LAC. The IDB, for example, has physical presence across twenty-six countries in the region.

Annex

Interviews

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Two major issues are constraining US offshore wind deployment: challenges in securing permits and cost inflation. Regulatory uncertainty and a slow approval process are slowing the United States’ deployment of offshore wind. Project developers stress that there are not enough regulatory personnel to quickly approve projects. Meanwhile, projects are also constrained by rising installation costs which are largely macroeconomic in nature. The sector is not immune to broader inflationary forces and rising interest rates, while trade policy and steel tariffs are also raising costs. Still, there are also industry-specific cost pressures, including limited port and vessel infrastructure and skilled labor shortages.

These are, to some extent, growing pains for a rapidly developing industry. How fast the US offshore wind market matures will depend in part on whether the country quickly learns from others who have more developed offshore wind sectors.  

A complex regulatory web

Over the past few years, the Biden administration has taken renewed leadership in the energy transition, rolling out measures intended to advance offshore wind in the United States. In March 2021, the administration set a target to deploy 30 gigawatts (GW) of offshore wind by 2030, and the Inflation Reduction Act (IRA) incudes federal tax credits that support the deployment of offshore wind in the country.

Yet, these newfound commitments do little to address the bottlenecks that result from the environmental permitting process in the United States. Nor do they provide clarity on the federal regulatory process.

Since 2009, the US Bureau of Ocean Energy Management (BOEM) has been responsible for lease sales and the coordination of permitting activity for US offshore wind projects. However, the US Bureau of Safety and Environmental Enforcement (BSEE) remains responsible for offshore wind safety and environmental enforcement and compliance, while other agencies have environmental authority over permitting processes related to protected species and other filings under the National Environmental Policy Act (NEPA). This lack of federal coordination can result in delays issuing Environmental Impact Statements—federal documents that assess the impact that a project might have on the surrounding environment—preventing the deployment of these projects.

Similarly, connecting offshore wind power to the onshore electricity grid remains a work in progress in the United States, and will require significant infrastructure development. The environmental impact of expanding transmission infrastructure is largely unknown and will be subject to its own regulatory process.

Learning from Europe

Europe, in contrast, is a mature offshore market, boasting approximately 255GW of installed wind capacity. Europe is also developing a meshed grid, which will comprise clusters of offshore wind farms that are connected to multiple energy grids across the continent to allow for a more coordinated deployment of offshore wind power infrastructure. This success has been made possible by a clearly defined permitting process.

Germany, for instance, has a one-stop permitting approach, where a single government authority coordinates the entire process. This government agency, the BSH, handles all approval methods, including strategic environmental assessments. Germany also has a fixed permitting timeline, which requires specific permitting requirements to be completed on a predetermined schedule, providing additional clarity. These standardized procedures allow for a more streamlined permitting process.

The United Kingdom, Europe’s offshore wind leader, is moving toward an overall strategic—rather than site-specific—approach. This would allow offshore wind developers to offset their environmental impacts on a larger scale, granting developers access to larger infrastructure projects that can encourage large-scale renewable energy usage while avoiding detailed environmental assessments on a site-specific basis. This change aims to cut down the offshore permitting process from four years to one.

The US BOEM has recognized the need for more clarity and efficiency in the US regulatory processes and has taken steps to mitigate existing permitting bottlenecks. BOEM has proposed a Notice of Intent checklist for Environmental Impact Statements, a document that details the review process for any proposed offshore wind development project. This checklist would act as a resource to keep the process on track and avoid delays in NEPA reviews. This is a good start; although challenges remain, the United States has recognized the current obstacles impeding offshore wind deployment and is taking steps to mitigate them.

Cost inflation and deployment

Offshore wind has some unique advantages when compared to other renewables. It is the only variable baseload power generation technology, meaning it has a high utilization rate nearly on par with gas-fired combined cycle power plants. Offshore wind also enjoys relatively low hourly variability, especially when compared to solar photovoltaic systems.

Yet, offshore wind has still suffered from some of the problems plaguing other renewables—and the broader economy. Offshore wind costs have risen due to rising interest rates, higher labor expenses, and increased prices for steel, copper, and other relevant materials. Steel accounts for approximately 90 percent of the materials used for an offshore wind farm, and iron and steel prices remain well above pre-pandemic levels, although they have declined from record highs.

The offshore wind sector is also hurting from specific challenges. Steel prices in the United States are still subject to uncertainty stemming from Russia’s invasion of Ukraine removing supply from world markets, including Ukrainian manufacturing facilities. Moreover, Trump-era steel tariffs have not been fully lifted, and there is a chance that some of the tariffs that have been removed could return later in the year if the legislation’s October deadline to strike a US-EU deal is not met. Increased tariffs would hit offshore wind projects hard, dealing a further blow to the industry. 

Limited port and vessel infrastructure also continues to constrain projects, while some segments of the supply chain, such as wind turbine installation vessels and skilled labo, could become part of a tug-of-war between US and European projects. Already, several offshore wind projects along the US East Coast are seeking to renegotiate contracts because of these headwinds. Renegotiation attempts have faced legal challenges from state regulators, including in Massachusetts.

On the positive side, procurement contracts, which are critical for offshore wind development, have provided credible and durable long-term demand signals, enhancing certainty for suppliers. The IRA has also incentivized manufacturers to invest in steel, blade, tower, and nacelle capacity, while regional transmission planning has been funded through the bill.

The way forward  

To address the bottlenecks in issuing permits, the United States should learn from German and British offshore wind strategies by housing permitting authorities within a single agency and staffing regulatory bodies appropriately to enable large-scale, strategic approval processes. While these reforms may not be possible to implement at the national level, US states should consider adopting them to enable rapid deployment of offshore wind capacity.

Cost inflation remains a problem for US offshore wind. Steel prices remain elevated, there are a limited number of available service vessels, and transmission challenges will loom larger as projects move closer to deployment. However, in addition to the IRA, procurement contracts from states have helped incentivize project development. Ultimately, US offshore wind will require strong federal and state support if the ambitious targets to generate 30GW by 2030 are to be met.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center. Elina Carpen is a program assistant at the Atlantic Council Global Energy Center. This article reflects their own personal opinions.

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Joseph Webster

Senior Fellow

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Central Asia China

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Elina Carpen

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This is the 4th installment of the Unlocking Economic Development in Latin America and the Caribbean report, which explores five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Addressing multidimensional inequality

A fourth private-sector-led opportunity for accelerating socioeconomic development in LAC is tackling one of the region’s most long-standing issues: inequality. Inequality in LAC is multidimensional in that it affects a wide range of issues and population groups based on gender (recommendation 1 below), geography (recommendation 3 below), socioeconomic status, occupational sector, age, ethnicity, digital access, healthcare, and other factors.¹ Tackling these multidimensional and often interrelated inequalities can improve economic wellbeing. For example, evidence suggests that reducing gender inequality alone—in terms of lifetime earnings losses—could boost regional GDP by at least 8 percent.² Since these and other inequalities are often interconnected, mitigating them will often require a holistic approach.

Recommendations for the private sector

Tapping into the financing, expertise, and technological capabilities of private firms will be crucial to mitigating multidimensional inequality in LAC. Practical training, mentoring, capacity building, supply-chain integration, and other programs help bring new talent into the region’s workforce, expand business operations, and increase productivity in LAC. This will particularly benefit underprivileged groups such as women, SMEs, and rural populations, making LAC’s growth more inclusive and resilient against future shocks.

1. Addressing gender-based inequality: Companies must empower female professional advancements, e.g., by addressing constraints arising from caregiving and unpaid domestic work, or by providing skills, entrepreneurial, or other training for women.
2. Empowering SMEs: Larger firms can shore up SME competitiveness by facilitating access to financing, supply-chain integration, and capability-building opportunities.
3. Tackling place-based inequality: Public-private collaboration and investment can make rural areas more accessible to basic services (like water and Internet) and more economically productive, thus reducing the rural-urban divide.
4. Preparing for shocks: Employer-led relief initiatives not only serve to cushion the impact of financial, climate, and other shocks on the lives and livelihoods of employees, but fortify societal cohesion and broader economic resilience.

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In the June 2023 Issue of Longitude, Forward Defense Nonresident Senior Fellow Marco Tantardini published an article on the state of the space industry work force. He noted that the average age of many employees of aerospace companies is rising closer to retirement and that there is competition from other sectors for qualified engineers.

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Defense Journal by Atlantic Council IN TURKEY (DJ): You spent a lot of time working with the Turkish military at the tactical, operational, strategic, and political-military levels. What stands out as the key to success when working with this unique ally?

Gen. (ret.) Wesley K. Clark: Clarity of mission. Clarity of requirements. Clarity of the rules. This was actually the critical element in relationships with the Turkish military and at the higher levels. Don’t be slippery, don’t be vague, don’t leave the details undiscussed. Think it through. Lay it out. It’s a very engineering-centric approach. Not, let’s say, a soft science approach to military affairs. I think it was a very effective approach, and we were effective when we understood and worked in the same spirit.

DJ: A bit reminiscent of the Prussian approach to planning, perhaps? No nonsense?

Clark: It’s no nonsense, and it’s no backsliding on a commitment once given. So, we always understood that, you know. When you are working with Turkey, if you get the agreement they will follow through. You must also follow through. You will not be given the opportunity to back away from commitments, and this is the key with Turkey. Know what you’re doing, what you’re ultimately going after. Lay it out clearly, work it out in detail, and when you shake hands on it, it’s as good as gold.

DJ: Is it easier to work with the Turks on a multilateral and alliance basis than bilaterally?

Clark: The Turkish approach is consistent—this is the way the Turks are. Work is consistent both in an alliance and bilaterally. But the differences have been in the circumstances, the environment, the exogenous issues. Turkey has always been very sensitive about its internal security, going back to the creation really of modern Turkey. Some of the key concerns and issues go back to the founding by Mustafa Kemal Atatürk.  Concern over the Aegean is one. We were trying to resolve cross tell [military information exchange between organizations at the same operational level] when I was a young major, then again when I came back eighteen years later.

We were working with different generations of equipment and personnel, but it was the same set of issues more or less. Turkish leadership has always been proud, nationalistic, cognizant of their heritage, and also the unique geography and position of their country.

DJ: Washington as a policy community in the post-Cold War period shifted from operating within formal alliance structures to more ad hoc or issue-based coalitions. Alliances can be cumbersome and bureaucratically challenging, but there is a payoff in terms of trust and institutional commitment. Turkey is a prime case of an ally that becomes more difficult the further afield we get from formal understandings. Has Washington lost the muscle memory, or the patience, for such alliances?

Clark: I think the Biden administration is getting very high marks for consultation. But, unfortunately, there’s a legacy that they picked up from the previous administration.

And, as you know, NATO was prepared to invoke Article 5 in support of the United States after 9/11, and the United States chose to primarily to work through a coalition of the willing rather than through NATO. We didn’t want to mess with this messy political stuff.

The policy decision was taken to work more unilaterally under the Bush administration. This was driven by [then US Defense] Secretary [Donald H.] Rumsfeld, rather than [then US] Secretary [of State Colin L.] Powell. [Rumsfeld] was a dominant leader who didn’t want to worry too much about the diplomatic niceties that were required. He wanted people who would follow easily rather than having to work out an agreement. That was his operating style, and I think that style is what drove serious problems in our relationship with Turkey, such as our inability to bring the 4^th Infantry Division through Turkey in 2003. It was astonishing—astonishingly ineptly managed by the United States and this has had consequences that have lasted for a long time.

DJ: This goes back perhaps to the issue of stating the end-state commitments up front. Ankara was pretty clear on their concerns over economic losses and destabilization in northern Iraq.  This was portrayed in the US press as haggling or “bargaining at the souk,” but perhaps it had more to do with the engineering mentality you referred to earlier, and their prior experiences with regional instability.

Clark: This was a real problem we faced with the end of the Cold War, the problem of regional instability. Of course, we were focused on the Balkans, and in the Balkans, Turkey did a wonderful job with us. But at the same time, we were dealing with the legacy of the Gulf War and the problem of Operation Provide Comfort, where we depended greatly on the Turks and operated out of the base at İncirlik.  Yet we were pursuing policies which promoted an independent Kurdistan, which was a threat to Turkey. So, you have to give the Turks credit for being able to handle an ambiguous and ambivalent situation. They were, at the time, happy to have the United States’ support, and we had overlapping interests. They certainly wanted to protect the Muslim community in the Balkans, as we did. I think they did more than they were ever given credit for officially in this, but at the same time they were very patient in putting up with the United States’ need to hem in Saddam [Hussein in Iraq].

During my time as NATO commander, we flew repetitive missions out of Turkey under Operation Northern Watch. We overflew Iraq, and in 1998 we began responding to radar lock-on with kinetic fire. Turkey was very accommodating with that. If you look at the balance of the relationship, they’ve been long-term excellent partners for the United States.

DJ: Turkey has developed impressive defense industrial relationships, operational reach, and power projection capabilities beyond its own border areas. It’s engaged in Africa, Central and South Asia, the Caucasus, and the Gulf as well as the Balkans. Is this a threat or an opportunity for the West?

Clark: I think it’s a great opportunity. It’s based on something fundamental that’s changed in Turkey, which is the development of Turkey’s home-grown engineering and higher education.

In the 1950s, when we first had our relationship with Turkey through NATO, and we were brought together as allies in Korea, Turkey was a much different place. It always had a cadre of good engineers and tools, but it was more isolated.

Turkish engineering today is working throughout the world. They were very effective in supporting us in Afghanistan. They’re working in the Middle East. They’re working in Africa. It’s a tremendous opportunity for the West to work with Turkish engineering in general, not just the military.

DJ: Lastly, what’s your fondest memory of the Turks or Turkey?

Clark: Great restaurants in Istanbul and having three kinds of lamb in the same meal, looking up and out at the beautiful architecture.  I love looking at the city whenever I fly to or through Istanbul, and watching all the ships going through the Bosporus. You get a sense of the wonderful civilization, the dynamism, the economic development. The place is a testament to Turkish entrepreneurship and character, and I feel so blessed to have seen some of this in my lifetime.

General (Retired) Wesley K. Clark is a former NATO Supreme Allied Commander Europe (SACEUR) who now serves as Chairman and CEO of Wesley K. Clark and Associates. He is a board director at the Atlantic Council and a member of the Defense Journal’s honorary advisory board.

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Defense Journal by Atlantic Council IN TURKEY (DJ): You worked with the Turkish military a fair amount, interacting at both operational and political-military levels. What lessons did you learn about the Turks, the bilateral relationship, what works and what doesn’t work within it?

Gen. (ret.) Philip M. Breedlove: My career was bookended in a way by Turkey. Early in my career, I found myself at İncirlik [Air Base] a lot. During that time, I made a lot of very close associations and acquaintances. I got to know a lot of the Turkish leadership down there personally. I found them to be good, faithful, understanding partners.

When I came back as the three-star numbered Air Force commander [Third Air Force], İncirlik was home to one of my wings. I would conduct regular visits, and when our talks focused on the mission at hand in İncirlik, we had willing, wonderful partners. Yet we were starting to run into some of the difficulties associated with not being able to operate out of Turkey during Operation Iraqi Freedom. Then, of course, I was chosen to be SACEUR [Supreme Allied Commander Europe]. We were starting to see the front end of Washington’s friction with [Turkish] President [Recep Tayyip] Erdoğan, though I still found on the personal level that my interaction with Turkish peers was very good. Turkey had undergone a change of political philosophy in a few years, more clearly challenging the principle of Western alignment.

I found that as I related to the ambassadors and civilian officials, they were less warm than the officers perhaps, but they were very professional. Turkish statesmen are very professional; inside of that word is a lot of things [smiling]. They were insistent…really good at presenting their side of the story, and [had] an amazing sense of historical recall. They were adept at leading off conversations with historical precedents and anecdotes. They were professional and, yes, difficult.

DJ: What did you find to be the key challenges in dealing with allies within NATO, especially Turkey?

Breedlove: The first thing for [the United States] to remember in dealing with an ally, in this case Turkey, is that in an alliance it is a peer-peer relationship. We need Turkey geopolitically; the physics, the geography, the place that Turkey finds itself—we need them onside. We need them just like they need us; this is not a lopsided relationship. Their control of the Dardanelles and of access to the Black Sea—these are very important things, and even though we have drawn down our forces a bit at İncirlik, it remains an incredibly important airfield for anything you need to do in the Middle East. So, we have to start from that—geography and a peer relationship.

What causes the complications in working from that basis? Well you’ve got politics on both sides. In Turkey, you’ve got the politics of Erdoğan, very different from what preceded it. In the United States, all too often we take what should be bipartisan geopolitical and geostrategic issues and subject them to the priorities of domestic politics. We allow petty politics to dominate the geostrategic narrative. Recently, we’ve seen a bipartisan body formed in Congress to watch and attend to China policy and issues, to build effort across the aisle for something that works. Perhaps we need something like that for Turkey.

DJ: Domestic concerns in both countries impact the framing and conduct of bilateral relations. This is perhaps natural, but creates challenges for “relationship managers”—diplomats, military, bureaucrats, and others. Given your experience as one of the managers, how did you account for the role of domestic factors in foreign policy decisions?

Breedlove: In Turkey, before the [2016] coup attempt, the military had a different relationship with the government than after. The military was respected, but not only protected the people from external enemies, but from internal disorder as well. The attempted coup represented a major dislocation in civil-military relations, and prompted a redefinition and restructuring. Things have changed, and the United States needs to understand that—it won’t go back to a situation where the Turkish military drives the bilateral relationship. [We] also need to understand that some, but not all, problems go away if there is political change. We’ve had our own presidents who prompted allies to say, “If it weren’t for that guy, things would be great.” All governments have their challenging times, and we are certainly going through one of those now.

DJ: Turkey has developed important power projection capabilities in recent years and has demonstrated those in Libya, Syria, the Caucasus, and is engaged in Central and South Asia, the Balkans, Africa. This is a relatively new phenomenon. Do Turkey’s Western allies view this as a threat or an opportunity?

Breedlove: The question is one of coherent strategic action with allies. If growth of capabilities is accompanied by NATO solidarity and consultation with allies, the allies cheer. Whereas if capability growth is perceived as being driven by narrow or parochial interests, even partisan interests, many see it as destabilizing or nefarious. Taking the long view, Turkey was an ally before and will be an ally after the current period of tension within the Alliance, and we want Turkey to play that role as a capable and formidable partner. We’ll have to navigate through the present period, but again, allies of the United States have occasionally had to navigate difficult periods with our political leaders, too.

DJ: In an era of great-power competition, what are the keys to better alignment and cooperation between the United States and Turkey? Where are the opportunities?

Breedlove: This is a tough one. I suppose I understand portions of what Turkey is doing: they want to sell kit [military gear], they want to exercise influence abroad. Yet it still interests me that Ankara takes the stance it does with Russia. When you look north from Turkey and see what Russia is doing—immoral, inhumane, illegal military action in Ukraine—one would think that there would be a different approach to Russia. It would be easy to say just embrace our values and morals, but that card doesn’t play so well. The geostrategic security piece, looking at Russia’s destabilizing actions in the Black Sea and elsewhere on Turkey’s periphery, that’s where we have opportunity and work to do.

DJ: Several years ago, an argument was made in the State Department that Turkey had options with Russia, and if Washington insisted on pursuing regional policies in Turkey’s near neighborhood that contradicted Turkish interests, especially regarding the PKK [the anti-Turkish Kurdistan Workers’ Party] and YPG [PKK-affiliated People’s Defense Units], we would see Turkish cooperation with Russia. Not out of perfidy, but out of “naked practicality.” There were few takers for that argument at the time because there were few people that believed Turkey had the leverage and agility to do so.

Breedlove: I believed it. I was fairly vocal during that period of time. [US Defense Secretary] Lloyd Austin and I were peers at the time, commanders of the two combatant commands. I still count him as a friend; we agreed on about 90 percent of our views on strategy, but YPG was not one of those things. I argued more than once that we were aligning with a group for an immediate purpose that would ultimately cause us major problems over decades and generations with Turkey. This is another one of those occasions when I think politicians played an unhealthy role in deciding how to move forward, because it was all about how to win a war, and not win the peace afterwards.

DJ: Defense was traditionally the heart of US-Turkey bilateral relations: defense industry, military cooperation, regional cooperation. These have attenuated in recent years, and other sources of traction—bilateral trade, tourism, people-to-people contact—have not taken their place, lagging Europe, Russia, and other partners.

Breedlove: Yes, in military terms the contact has decreased. This is also a problem in the United States in terms of how the military relates to other Americans: fewer people serve, the military becomes sort of a family business for some and mysterious for others. A smaller military and less overseas basing have affected relations with Turkey.

Lack of people-to-people contact is one of the biggest problems we have. In my generation we had very close contact with our peers in the Turkish military, we maintained those relationships, and we were able to keep in touch and deepen mutual awareness and understanding over time. The reduced contact is not producing the same types of contacts and friendships at present—the informal relationships. The granular contact that we used to have at the middle rank and senior rank levels, joint exercises and training especially, we’ve lost it. That would be a place to start rebuilding.

The second place is the politicization of defense industrial products. The F35, the F16, and other defense sales all went south too quickly and without due concern for long-term effects. On the Turkish side, they messaged us hard that they wanted Patriots, but we couldn’t find our way to mutually acceptable terms until they had already concluded negotiations with Russia on the S-400, which set off an unfortunate chain of events. If the US side had shown a little more flexibility on meeting Turkish terms—similar to what was offered in the end but after decisions were made—and realizing that every deal is a new negotiation…if we had approached that differently, we might be in a very different place. Turkish industries are amazing and were going to be a big part of building F35s for countries all around the world.

Lack of close personal contacts, decreasing cooperation, and deficits of trust are all mutually reinforcing.

General (Retired) Philip M. Breedlove is a former NATO Supreme Allied Commander Europe (SACEUR). He is a board director at the Atlantic Council.

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A rift opens up

The war in Syria has grown into a major wedge between the United States and Turkey. Many Turks believe that Washington wants to erect a PKK-aligned state in Syria, and many in Washington believe Turkey has been insufficiently focused on eradicating Sunni extremism. Yet it was not always so; once upon a time there was a sense of shared purpose. National leaders from both countries demanded Assad’s ouster at the outset of the war. Turkish President Recep Tayyip Erdoğan pledged Turkish support should the United States impose a no-fly zone and saw general overlap on Syria with then US president Barack Obama.

Obama came to view the war as more about the IS than Assad, his support to the Syrian opposition evaporated and the war became overwhelmingly a matter of counterterrorism policy. The United States and Turkey each demurred from new military commitments while urging the other to take the lead. Between the fall of Mosul to the IS in 2014 and the fall of Aleppo to Assad in 2016, the United States exited the war against Assad and refocused on the war against the IS; this removed the common, if tenuous, shared political logic.

Unwilling to commit large US forces to Syria and disappointed in hopes that Turkey might, Obama in 2014 struck a bargain of “naked practicality” to support the PKK-aligned YPG. While the move was billed as “temporary, transactional, tactical,” its open-ended nature constituted a “ticking time bomb” by disregarding Turkish concerns over empowering PKK networks. Over time, some in Washington came to think that a rebranded YPG might be able to create an autonomous Kurdish region on the cheap, analogous to the Kurdish region in Iraq and useful as a long-term platform for US forces. The YPG seemed to offer what had eluded Washington for a generation: effective counterterrorism without the need for state building or a political theory of success.

A multiaxial proxy game

It became clear after 2014 that the YPG’s ambitions extended beyond the defense of Kurdish-majority areas right up to security and political control over northern Syria and a key role in shaping the political future of Syria. This comported with the broader PKK project of carving self-ruled regions out in Syria, Turkey, and elsewhere under a common ideological banner. Because the US “by-with-through” operational approach abjured strategic control over the YPG while arming and equipping it, the United States became a de facto sponsor of that project.     

The Euphrates River became a proverbial Rubicon in 2016 when YPG forces crossed it and remained in control of Arab-majority areas, despite US assurances of withdrawal. This proved to be a watershed moment for Ankara, as the Turks adopted an increasingly militarized approach to strengthening the anti-Assad opposition and rolling back YPG gains. A series of Turkish military operations in Syria eviscerated the YPG’s ambitions for autonomy, leaving them much-reduced territory and growing dependence on Damascus. Yet they retained a singular strategic asset—massive US military aid and a free hand in local and regional politics.

Northern Syria has become a region of intricate balances and overlapping conflicts. The Turkish-supported Syrian National Army (SNA) and the US-supported Syrian Democratic Forces (SDF, the core of which is the YPG) skirmish and spar uneasily while Ankara contemplates further action against the YPG.  The SDF works with Assad’s forces in some places, claiming official status under Assad, while the United States provides its salaries and logistical support. Turkish and Russian forces conduct joint patrols in sensitive areas. Iran-backed militias target US bases in the east, while YPG and Iran-backed militias confront the SNA in northern Aleppo.

Meanwhile, SDF forces appear increasingly enmeshed in the struggle for control of the neighboring Kurdistan Region of Iraq (KRI). The YPG’s parent organization, the PKK, has come into open conflict with the Kurdistan Democratic Party (KDP), which the United States and Turkey support, while parlaying the weakening of the Patriotic Union of Kurdistan (PUK) into greater control of Iraq’s border with Iran. Meanwhile, highly trained elite counter-terror units (YAT) from the SDF have been operating in PUK-controlled Iraqi territory using PUK helicopters, likely with the knowledge of US forces. Even as Iran instrumentalizes the PKK to undermine the KDP, the PKK appears to be instrumentalizing the SDF to support its drive to supplant the KDP.  The US war against the IS has morphed into something else—a multiaxial proxy game with no clear end game and multiplying side effects—and the biggest beneficiary may be Iran, in Syria as well as Iraq.

A narrowing path

Turkish commitment to prevent a PKK-aligned entity from ruling northern Syria or northern Iraq has been amply demonstrated. Washington, too, seems committed to keeping troops in Syria, less for a clear political goal than to prevent any other power from filling in when they leave. The modus vivendi of simply staying in Syria but out of one another’s way satisfies no one (not even the YPG). Are there ways to find convergence between the respective national policies, other than one or both parties exiting Syria and leaving it to Assad and the Iranians?

One theoretical path would be the YPG and its political wing, the Democratic Union Party (PYD), renouncing the broader PKK movement and its armed campaigns against Turkey. This could result in the movement being seen as authentically Syrian, and cooperating with the Syrian opposition in negotiations to end the war. Yet YPG fighters consider themselves inextricably linked to the PKK and its ideology, rendering distinctions more cosmetic than substantive. Further, the US interest in sustained use of the YPG as a counter-IS force requires continued arming and training that by definition poses a threat to Damascus, Ankara, and other Syrians, making reconciliation unlikely. The PKK uses the YPG as connective tissue to the Assad regime, and PKK-appointed commissars or “kadros” in Syria ensure that key decisions taken by the YPG or PYD comply with the political line set by the PKK’s senior leaders. The United States lacks the means, or the will, to reform the PKK control mechanism to placate Ankara or promote power sharing with other Syrians.

Former US Syrian envoy James Jeffrey argued that a reasonable compromise for Ankara and Washington lies in physical separation between Turkish-backed groups and the SDF, with consistent efforts to address specific Turkish sensitivities. Yet how long can the United States keep nine hundred troops on Syrian soil while they are subject to increasing attacks from Iranian proxies and there is no discernible end state? Other observers have argued that the time has come to negotiate with Moscow and Damascus a US withdrawal that returns nominal control to Assad but maintains SDF control in fact. It is hard to conceive of a more blatant repudiation of US values than to reward, and trust, Assad as guarantor of what follows.

The path forward

One obstacle to the United States simply declaring victory and leaving is al-Hol and prison camps like it. These camps hold tens of thousands of IS members, supporters, and relatives, and the SDF guards them; US withdrawal would likely lead to their release. In a sense, the United States is prisoner to the prisoners; with fewer IS targets in SDF-controlled areas, preventing a new wave of IS attacks by keeping IS members in prison has become a key measure of “enduring defeat.” The assumption of this contingent form of stability that outside actors—Turkey, Iran, Russia, or Damascus—will refrain in perpetuity from disrupting it appears tenuous.

US forces will depart Syria in the coming years, and the YPG and its political wing lack the resources and legitimacy to maintain control of majority-Arab northeast Syria on their own. A reasonable political strategy for the United States must recognize that protecting US geopolitical and humanitarian interests, as well as effective counterterrorism, in the long run rest more on cooperation with Ankara and Erbil than on propping up the YPG. A soft landing of sorts for those that fought the IS with the United States should be part of the strategy but can only be achieved if Ankara and Erbil receive assurances that the massive US military subsidies and political license granted the movement will be removed, forcing it into compromises with them, rather than with the United States’ enemies in Tehran and Damascus.

In short, the United States might signal an off-ramp from the YPG to Ankara and Erbil while incentivizing authentically Syrian components of the YPG and PYD to seek peace and political cooperation with the Syrian opposition—and with the KDP. Ironically, the best protection for US interests in Syria may rest in building down the power of its current proxy in a deliberate and transparent manner and negotiating a new relationship between it and our other friends in the region. This is no mean task but offers much-needed clarity to all sides. The alternatives of propping up an unsustainable status quo or matchmaking between the YPG and Assad, whatever their other results, will perpetuate the deep Syria rift in US-Turkish relations.

Rich Outzen is a geopolitical consultant and nonresident senior fellow at the Atlantic Council IN TURKEY with thirty-two years of government service both in uniform and as a civilian. Follow him on Twitter @RichOutzen.

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As I reflect on these questions, I am reminded of the late 1940s and early 1950s, a time when Turkish-US relations were at their peak. During this period, close to fifteen thousand Turkish Armed Forces personnel participated in the Korean War, demonstrating Turkey’s commitment to its alliance with the United States. The sacrifices were significant: 721 Turkish soldiers were killed and 2,147 wounded in the war. In February 1952, a little over a year before an armistice brought an end to the war, Turkey became a member of NATO. Many refer to Turkey’s participation in the Korean War as the “cost” of joining the Alliance.

In addition to the deepening political and economic relations between Turkey and the United States during that era, the two countries were also engaged in robust military cooperation, particularly in aviation. Admittedly, there were times when the political environment was fraught with tension. Some prominent examples include the 1962 Cuban Missile Crisis, crises involving Cyprus in 1964 and 1974, the 1975-78 US arms embargo on Turkey, and the 2003 US-led invasion of Iraq, which caused a strain in the friendly atmosphere, even interrupting it. Nevertheless, through prudent diplomacy, mindful of ever-changing realities and alliance interests, sagacious minds prevailed. Relations were eventually restored, and strategic-level contacts were established in both civilian and military spheres.

Ties between Turkey and the United States, already strained over the 2016 coup attempt and US criticism on ties between Turkey and Russia, fell further in 2019 over the war in Syria and Turkey’s purchase of a Russian missile system.

Impact of the war in Syria

Turkey has borne some of the burden of the consequences of the war in Syria since its start in 2011. According to the United Nations, Turkey hosts some 3.6 million registered Syrian refugees. The large number of refugees has not only shifted the demographics in the border region, it has also added a crippling economic burden. Turkey has also faced cross-border terrorist attacks by Kurdish terrorist groups.

As a consequence of US policy miscalculations, northern Syria has become even more unstable with the presence of terrorist groups such as the Islamic State and the Syrian Kurdish Democratic Union Party (PYD) and its military wing, the People’s Protection Units (YPG), an offshoot of the Kurdistan Workers’ Party (PKK), which the United States and the European Union (EU) consider to be a foreign terrorist organization.

Despite requests from Turkey, neither the United States nor the EU consider the PYD and YPG to be terrorist organizations. The United States first started providing support to the YPG and PYD in 2014 to assist them in their fight against the Islamic State in Syria. While the threat posed by the Islamic State in the region has effectively disappeared, the United States maintains its support to the PYD and YPG, which have been key partners of the US-led Global Coalition to Defeat ISIS. The PYD and YPG also serve as the backbone of the coalition-created Syrian Democratic Forces (SDF). Despite Turkey providing Interpol and other senior US officials detailed allegations of terrorist acts by the PYD and YPG, aid to the terrorist organizations has not ceased, rather it has increased.

This support has caused significant harm to bilateral relations between the United States and Turkey. Early 2023 visits by the US Chairman of the Joint Chiefs of Staff and US Central Command (CENTCOM) commander to the region, although described as troop visits, have also contributed to rising tensions between the two countries. Ankara views these activities as part of an attempt by the United States to establish a satellite Kurdish statelet in eastern Syria, similar to what was tried in northern Iraq.

Missile defense

In 2013, NATO responded to Turkey’s request for ballistic missile defense by temporarily deploying systems such as the Patriot and SAMP-T from five allied countries to the region on a rotational basis with command and control located in Allied Air Command at Ramstein Air Base in Germany.

However, following Turkey’s 2018-19 operation against the YPG and PYD in northern Syria to safeguard its own security, the systems provided by the allied countries, with the exception of the Patriot system from Spain, were withdrawn. Despite ongoing discussions during bilateral meetings between the Turkish Ministry of National Defense and the Chief of General Staff at NATO headquarters, the allied countries that had previously deployed their systems declined to redeploy them citing various reasons.

In 2018, Turkey launched an effort to manufacture its own long-range regional air defense system called Siper. The war in Syria added a sense of urgency to this mission and a thorough review of alternatives, including the Patriot Advanced Capability-3 (PAC-3) system, was conducted at the request of the Air Force Command. The United States declined to meet the terms of a Turkish request for the Patriots. A 2018 attempt by Turkey to buy the SAMP-T from a Franco-Italian consortium also ground to a halt due to French objections. Turkey eventually opted to procure the S-400 system from Russia despite US opposition to the deal.

The procurement of the Russian S-400 system, coupled with US support to the YPG and PYD in Syria, proved to be the breaking point in the already strained US-Turkey relations.

As the Turkish military representative to NATO in Brussels at that time, I personally experienced not only the reactions of my US counterparts but also the questions and concerns raised by other representatives about the procurement of the S-400 system. Naturally, each country viewed the issue from their own perspective, which was closely tied to their respective policies and interests. However, recurring concerns centered on the compatibility of the Russian S-400 system with NATO’s integrated air defense system and the difficulty of safeguarding the intellectual property and sensitive information pertaining to the F-35 aircraft. Furthermore, there were frequent inquiries about why Turkey chose to procure such a system from Russia, a country that ranked as the top threat in NATO assessments since 2014.

Turkey faces a backlash

Following the S-400 purchase, the US Department of Defense removed Turkey from the F-35 program in 2019. And in 2020, the United States imposed sanctions on Turkey’s Presidency of Defense Industries (SSB) pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA).

Turkey had been a joint producer of the F-35 program, having signed a memorandum of understanding with the US government on January 26, 2007. Turkey had also paid for and completed the first package of pilot and ground personnel training. The justification for its removal was based on the claim that the use of the S-400 in the same environment as the F-35 could potentially lead to the theft of high-tech aircraft system information.

As a result of Turkey’s removal from the F-35 program, six F-35A aircraft that were produced for Turkey were confiscated and stored in hangars, and the personnel in training were sent back home. Negotiations are still ongoing regarding the repayment of the $1.25 billion that Turkey had previously paid for the program.

Turkey’s removal from the F-35 program led to a need to review the force structure of the Turkish Air Force, as relations between the Turkey and the United States became strained. It was decided to extend the lifespan of the F-4 aircraft that were originally planned to be phased out. Additionally, Turkey decided to acquire forty F-16V aircraft from the United States to meet its urgent air combat needs. The procurement by Turkey of seventy-nine modernization kits to boost the capabilities of its existing F-16 aircraft was also discussed.

A turning point?

Based on recent statements and evaluations made by Turkey and the United States, there appears to be a relatively positive atmosphere in administration circles. US President Joe Biden, who has not been very receptive to improving bilateral relations, has been supportive of Turkey’s request to procure aircraft and modernization kits. This support was especially visible in face-to-face meetings at the level of heads of state, such as the 2019 NATO summit and the Group of Twenty meeting in Rome in 2021. Yet, some members of the US Congress are dragging their feet regarding the implementation of these procurements.

It must be noted that even if the deal is approved today, delivery would take between three to five years in the best-case scenario. Nevertheless, reaching common ground can still be considered significant progress.

Rethinking the fate of the S-400 system, which was delivered in 2019, is of critical importance to resolving issues between Turkey and the United States. Regarding the S-400 systems that were stored in depots following some tests, I believe that a solution can be found involving either the frameworks proposed since then or by simply keeping the systems in storage.

A recent statement by Haluk Görgün, CEO of the Turkish defense firm Aselsan Elektronik Sanayi, is noteworthy. Görgün said that “with the development of UMBHSS-SIPER, we no longer need the S-300/S-400s.” Until the Siper system fully matures, though, SAMP-T might be a medium-term solution as well.

Removal of this obstacle may encourage members of Congress who are against Turkey to reconsider their positions on the supply of F-16Vs and modernization kits. With the establishment of such a positive climate, it is possible that Turkey could revive interest in its return to the F-35 program.

If Turkey can procure forty F-16V aircraft and modernization kits in sufficient numbers, it can easily embrace the motto “Leader in Its Region, Effective in Its Continent” that was popular in the early 2000s. A possible future return to the F-35 program might also lead to the reutilization of production capabilities that the Turkish defense industry lost after Turkey was removed from the program, the establishment of regional engine depot maintenance capability for domestic and allied use, and provide experience relevant to further development of the Turkish National Combat Aircraft (MMU).

Given Turkey’s formidable air force; its strategic location in a region with key transportation, energy, and hydrocarbon resources; and improving relations with Israel, the United States can again view it as a reliable and strong strategic ally. With the right mindset, Turkish and US state authorities can still turn back time.

The way ahead

The resolution of issues related to the S-400, PYD, and YPG is key to mending relations between Turkey and the United States. Ideally, this must be followed by the approval of the sale of F-16Vs, the lifting of CAATSA sanctions, and a return to the F-35 program.

Addressing Turkey’s security concerns is a prerequisite for successful and sustainable cooperation between strategic partners in the Middle East. This would allow for stability to be achieved in Syria, curtail the activities of foreign actors operating in the region, and encourage Syrian refugees currently residing in Turkey to return to Syria. Combined, these developments would drastically reduce the threats to Turkey’s security. In addition, it would have positive implications for peace and stability in the Eastern Mediterranean region, and it may also allow for the safe transport of natural gas extracted in the region to Europe via Turkey.

The United States, which has always prioritized Israel’s security in its Middle East policy, should also consider Turkey’s positive contributions to regional stability in the process of normalizing relations.

A partnership with Turkey is crucial for balancing China’s increasing economic and military strength in the Asia-Pacific region, especially as Russia’s position in the world has diminished as a consequence of its ongoing war in Ukraine. Turkey is located at a critical crossroads of the Middle East and the Caucasus. In the long run, Turkey’s strategic ties to Central Asia will also be an important asset for NATO. Hence, the United States must accept the importance of Turkey to NATO’s policy in these regions as an undeniable reality.

The Turkish-US relationship has had its bad days in the past. However, consultations resulted in the recognition of the significance of this strategic partnership, leading to a resumption of political and military relations. Now, similarly, I am hopeful that the US approach toward the support it provides to the PYD and YPG can be resolved in good faith alongside the S-400 issue.

Despite some members of Congress attempting to impose restrictions on Turkey similar to the 1975 arms embargo, I believe that the Biden administration will soon approve the supply of F-16V aircraft and the modernization package. This could potentially create a favorable atmosphere for Turkey’s return to the F-35 program as well, thereby removing obstacles to the development of bilateral political relations and a strengthened Turkish-US strategic partnership.

Turkish Air Force Lt. Gen. (ret.) Nihat Kökmen served as Turkey’s military representative to NATO from 2017 to 2019. Between 2001 and 2004, he served as the air plans officer at the Supreme Headquarters Allied Powers Europe. He currently serves as Executive and Supervisory Board member at the Centre for Economics and Foreign Policy Studies (EDAM).

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Table of contents

Executive summary

I. Introduction

II. The role of economic statecraft in a Taiwan crisis

Goals of economic countermeasures

Current economic statecraft tools

Tools in a future crisis

III. Sanctions scenarios and their costs

Economic countermeasures aimed at China’s financial system

Economic countermeasures aimed at individuals and entities associated with CCP and PLA leadership

Economic countermeasures aimed at China’s industrial sectors

IV. Practical challenges in sanctions development

Conclusions and recommendations

Executive summary

In recent months, growing tensions in the Taiwan Strait as well as the rapid and coordinated Group of Seven (G7) economic response to Russia’s invasion of Ukraine have raised questions—in G7 capitals and in Beijing alike—over whether similar measures could be imposed on China in a Taiwan crisis. This report examines the range of plausible economic countermeasures on the table for G7 leaders in the event of a major escalation in the Taiwan Strait short of war. The study explores potential economic impacts of such measures on China, the G7, and other countries around the world, as well as coordination challenges in a crisis.

The key findings of this paper:

1. In the case of a major crisis, the G7 would likely implement sanctions and other economic countermeasures targeting China across at least three main channels: China’s financial sector; individuals and entities associated with China’s political and military leadership; and Chinese industrial sectors linked to the military. Past sanctions programs aimed at Russia and other economies revealed a broad toolkit that G7 countries could bring to bear on China in the event of a Taiwan crisis. Some of these tools are already being used to target Chinese officials and industries, though at a very limited scale.
2. Large-scale sanctions on China would entail massive global costs. As the world’s second-biggest economy—ten times the size of Russia—and the world’s largest trader, China has deep global economic ties that make full-scale sanctions highly costly for all parties. In a maximalist scenario involving sanctions on the largest institutions in China’s banking system, we estimate that at least $3 trillion in trade and financial flows, not including foreign reserve assets, would be put at immediate risk of disruption. This is nearly equivalent to the gross domestic product of the United Kingdom in 2022. Impacts of this scale make them politically difficult outside of an invasion of Taiwan or wartime scenario.
3. G7 responses would likely seek to reduce the collateral damage of a sanctions package by targeting Chinese industries and entities that rely heavily and asymmetrically on G7 inputs, markets, or technologies. Targeted sanctions would still have substantial impacts on China as well as sanctioning countries, their partners, and financial markets. Our study shows economic countermeasures aimed at China’s aerospace industry, for example, could directly affect at least $2.2 billion in G7 exports to China, and disrupt the supply of inputs to the G7’s own aerospace industries. Should China impose retaliatory measures, another $33 billion in G7 exports of aircrafts and parts could be impacted.
4. Achieving coordination among sanctioning countries in a Taiwan crisis presents a unique challenge. While policymakers have begun discussing the potential for economic countermeasures in a Taiwan crisis, consultations are still in the early stages. Coordination is key to successful sanctions programs, but high costs and uncertainty about Beijing’s ultimate intentions will make stakeholder alignment a challenge. Finding alignment with Taiwan in particular on the use of economic countermeasures will be central to any successful effort. G7 differences on Taiwan’s legal status may also prove a hurdle when seeking rapid alignment on sanctions.
5. Deterrence through economic statecraft cannot do the job alone. Economic countermeasures are complementary to, rather than a replacement for, military and diplomatic tools to maintain peace and stability in the Taiwan Strait. Overreliance on economic countermeasures or overconfidence in their short-term impact could lead to policy missteps. Such tools also run the risk of becoming gradually less effective over time as China scales up alternative currency and financial settlement systems.

I. Introduction

For decades, Taiwan’s deepening economic ties with China and the rest of the world have helped maintain peace and stability in the Taiwan Strait. Mutual trade and investment have spurred rapid economic growth and—at least until recently— appeared to diminish the likelihood of military conflict.

The long-standing guardrails around the China-Taiwan status quo have weakened. Intensifying US-China geopolitical tensions, China’s increased use of military and economic tools to put pressure on Taiwan, Beijing’s draconian handling of Hong Kong, and evolving Taiwanese perspectives on their national identity and relationship with the mainland have all contributed to rising tensions. Taiwan’s presidential elections set for early 2024 increase the risk of escalation, as do both a rancorous US debate on China and political anxiety in Beijing in the face of a deteriorating economic outlook.

As concerns grow, so does awareness of the global economic stakes of a Taiwan crisis. Prior Rhodium Group research estimates that more than $2 trillion of global economic activity would be at risk of direct disruption from a blockade of Taiwan annually.¹ This is a likely underestimate of the short- and long-term economic fallout of a full-blown crisis. In all cases, the scale of these likely global impacts—ranging from widespread goods shortages, mass unemployment, and a possible financial crisis—underscores the need for clear-eyed analysis about the costs of a conflict. 

In this context, policymakers and business leaders around the world have begun discussing the potential role of sanctions and other economic countermeasures in a military crisis. The G7’s coordinated use of sanctions against Russia in the wake of its invasion of Ukraine have highlighted the range of tools on the table. In Washington and other G7 capitals, as well as in Beijing, leaders are now considering the potential for, and implications of, sanctioning China. Yet G7 coordination in a Taiwan crisis would involve a different set of challenges. China’s economy is ten times larger and more globally interconnected than Russia’s, raising questions about the viability of joint economic countermeasures.

Given these open questions, the purpose of this report is to provide a data-driven and objective first look at the potential for a coordinated G7 response to a Taiwan crisis. It evaluates different economic statecraft tools and considers the global economic repercussions from their use. Based on an extensive series of in-person roundtable discussions in the United States, the European Union, and the United Kingdom, interviews held with G7 policymakers and experts, and our own independent economic analysis, the report sets out the order of magnitude of what is at stake and the coordination that would be required for sanctions options to be effective.

While few US, European, and Chinese officials want to see tensions escalate in the Taiwan Strait, the past year has shown that situations previously regarded as highly unlikely can quickly materialize into a devastating reality. Understanding the scenarios and risks of using the tools of economic statecraft is not only a useful exercise, but also a critical step in ensuring all sides understand the full impact of actions that may be undertaken in a crisis.

II. The role of economic statecraft in a Taiwan crisis

A sense of heightened risk in the Taiwan Strait and the use of sanctions against Russia has led decision-makers around the world to reflect on the potential use of economic countermeasures against China in a Taiwan crisis. US lawmakers have already proposed legislation mandating sanctions on China in the event of an invasion of Taiwan.² Surveys of European countries underline an increasing—if still minority—willingness to sanction China if it were to take military action against Taiwan.³ Officials in Beijing are asking these questions as well, with China’s State Council reportedly considering the potential for Western sanctions in a Taiwan crisis.⁴ The economic fallout from sanctions on Russia have also led business leaders and major banks to conduct contingency planning exercises exploring their exposures to a cross-strait crisis, including sanctions on China.

In defining what sanctions to use—if any—policymakers are likely to take a series of factors into consideration: what goals they are looking to achieve, what options are on the table to achieve those goals, and their relative impacts, costs, and limitations. This section reviews these factors and lays out the most likely options on the table.

Goals of economic countermeasures

Economic countermeasures—defined broadly here to include financial sanctions, export controls, and other restrictions on economic activity—can have a variety of objectives. They may aim to deter aggression, either by promising punitive economic actions in response to a transgression (deterrence by punishment) or by denying an adversary the technology or resources to engage in aggressive activity in the future (deterrence by denial). They may also aim to degrade an adversary’s ability or willingness to sustain aggression after it has begun.

The aim of economic countermeasures may evolve over time. The United States had long imposed export controls to limit the flow of military and dual-use technology to Russia. Immediately prior to Russia’s full-scale invasion, the United States and allies threatened sanctions on Russia in a bid to deter military action. After the invasion, the focus of sanctions shifted to degrading Russia’s ability and willingness to continue the war. Sanctions may also have had a signaling effect that G7 countries were aligned and willing to bear prolonged costs in support of Ukraine.

As in the case of Russia, the United States and allies have limited the flow of arms and military technology to China in part to blunt its ability to engage in aggression against Taiwan long before a potential crisis. The proper design of these long-term restrictions is a matter of contentious debate in the field of export controls and technology policy, but is not the focus of this paper.

Some G7 partners are already communicating to China that actions short of an invasion could trigger economic countermeasures

Economic countermeasures might also be considered after a full-scale invasion of Taiwan to degrade China’s ability to sustain the conflict. In fact, interviews and roundtables highlighted near consensus about the fact that sanctions would be imposed on China were it to use military power to seize Taiwan. However, if the case of Russia is any guide, these sanctions take time to have an effect. Recent studies suggest that absent military intervention from the United States and allies, Taiwan is unlikely to withstand a full-scale invasion for the length of time necessary for sanctions alone to meaningfully degrade China’s military capacity.⁵

Some level of sanctioning might therefore also be contemplated in a crisis below the level of invasion, to deter further aggression. Some G7 partners are already communicating to China that actions short of an invasion could trigger economic countermeasures. These actions are the core focus of this report. While we do not identify specific triggers for economic action below invasion—because these are still intensely debated—they might include a military quarantine scenario, where the PRC restricts the free movement of ships or planes to Taiwan; acts of overt economic coercion such as wide-ranging punitive restrictions on cross-strait trade; and major cyberattacks or other disruptions to telecommunications networks on the island. Taiwanese officials have described some of these below-invasion scenarios as the most likely and pressing military risks to Taiwan’s sovereignty.⁶ Some of these “gray zone” actions, besides, come with high global economic costs that could warrant efforts by G7 nations to deter Chinese actions.⁷

Current economic statecraft tools

In looking to achieve these goals, G7 leaders have a range of tools available. Many economic countermeasures have been deployed in the context of previous crises (Table 1), including Russia’s 2014 annexation of Crimea and 2022 full-scale invasion of Ukraine, making them useful starting points to assess potential future action.

In understanding whether these tools could also be deployed in a major cross-strait crisis, it is important to remember that some tools are already being used against China today, both by the United States and other members of the G7. Actions include, among others:

• Export controls including product-based and end-user-based controls on certain strategic technologies, such as semiconductors, integrated circuits, and supercomputing technology.⁸
• Restrictions on the trading of debt and equity instruments in certain military-related companies under the Non-SDN Chinese Military Industrial Complex Companies List.⁹
• Sanctions imposed on persons involved in the repression of minorities in Xinjiang, as well as small Chinese banks aiding Iran and North Korea in sanctions evasion.¹⁰
• US and EU coordination of sanctions against Chinese firms involved in supporting Russia’s war on Ukraine.

While these measures are applied at a much smaller scale than they would be in a Taiwan Strait crisis, they illustrate the fact that G7 nations have already shown willingness to use economic measures against China when Chinese actions or policies were considered problematic. Importantly, these measures have been selective. From manufactured goods to inputs for electric vehicles, to machine tools, and pharmaceuticals, China is deeply embedded in global supply chains in a way wholly more complicated than Russia’s energy exports. At the same time, China’s reserves, capital controls, the state-owned banking sector, and abundant fiscal space provide the Chinese economy with critical buffers and economic defense mechanisms.

Tools in a future crisis

In imposing sanctions in a Taiwan crisis, G7 partners would seek to amplify existing measures taken against China and focus on asymmetric dependencies. Policymakers will likely look to the same types of targets described in Table 1, with varying intensity depending on the level of escalation, namely:

1. Sanctions on China’s financial sector
2. Sanctions on individuals associated with the leadership of the Chinese Communist Party (CCP) and People’s Liberation Army (PLA)
3. Restrictions on industrial companies in sectors relevant to China’s defense industrial base

We take these three types of tools as our baseline for likely G7 countermeasures in a Taiwan crisis and analyze each in depth.

While these are the most likely sets of tools identified by experts based on past actions, future crises may bring new tools to the table too. Conversations with US and European officials made clear that Russia’s invasion of Ukraine reshaped the contours of what was possible in the realm of economic statecraft. Just as blocking Russia’s central bank reserves and implementing an oil price cap were initially considered unrealistic, crises may spur discussions around new tools. Roundtable discussants raised options ranging from targeting casinos in Macau, which are regarded as havens of capital flight for China’s elite as well as illicit finance and money laundering; to imposing controls on China’s digital industries and firms, which power much of the country’s urban and consumer economy; to limiting access to International Monetary Fund (IMF) Special Drawing Rights, and stopping repayments of dollar-denominated Belt and Road Initiative (BRI) debt. We do not explore these potential countermeasures in this study. However, some of the ideas discussed by stakeholders illustrate the range of additional tools that could be brought to bear in a crisis.

III. Sanctions scenarios and their costs

In this section we examine three likely channels of G7 sanctions—on China’s financial system, on certain individuals and entities, and on industrial sectors. We provide an assessment of China-G7 economic value at stake through use of each type of tool, and evaluate implementation challenges, possible effectiveness, and risks.

Economic countermeasures aimed at China’s financial system

In a Taiwan crisis, G7 leaders could consider deploying economic countermeasures targeted at China’s financial system. Financial sector sanctions are a central pillar of the G7’s recent sanctions program aimed at the Kremlin. These measures include actions to block transactions with major Russian banks, freeze their assets, and deny them access to the global dollar payments infrastructure.

This section explores the economic implications of sanctions on China’s financial system, considering two primary options: a targeted sanctions program to limit dollar financing to small banks involved in funding military-related activities, and a comprehensive sanctions program targeting China’s four largest banks and its central bank with the aim of cutting China off from global financial markets.

Global economic links: Finance

For an economy of its size, China has relatively limited external financial sector ties. China is the world’s second-largest economy and has the largest volume of international goods trade, yet it ranks eighth and ninth in the world in terms of total external assets and liabilities.¹¹ Nonetheless, these ties have critical global importance. As of the end of 2022, China held 95 percent of its $3.3 trillion in reserves in foreign currency (with the remaining held in gold).¹² China does not report the exact composition of its foreign exchange reserves, but it is known to hold at least $1.1 trillion in US government bonds through US custodians, and more routed through custodians in Belgium,¹³ as well as about $300 billion in corporate debt and equity.¹⁴ The remainder of China’s foreign currency reserves are held predominantly in euros, Japanese yen, and pounds sterling.¹⁵ In addition to China’s official reserves, China’s banking sector holds $1.5 trillion in cross-border assets according to State Administration of Foreign Exchange statistics, most of which is held in G7 currencies.¹⁶ 

Global bank holdings of assets within China’s banking system are much lower. On average, only 3 percent of global central bank reserve holdings are in RMB-denominated assets.¹⁷ G7 banks hold $112 billion in claims on Chinese banking institutions such as loans, deposits, and debt instruments, which is only 1 percent of total cross-border bank claims.¹⁸ While this means that global banks, on average, are not heavily exposed to China in terms of explicit bank assets, it also means that Chinese banks primarily borrow from Chinese domestic savers and do not depend heavily on foreign borrowing to maintain their balance sheets.

Global exposures to China’s banking system are much greater when considering China’s role facilitating cross-border financial flows, particularly trade. When Chinese importers and exporters do business abroad, they typically do so in foreign currencies: 77 percent of China’s total $6.8 trillion in goods and services trade is settled in currencies other than the RMB, primarily US dollars and euros.¹⁹ To facilitate these cross-border payments, Chinese banks maintain correspondent accounts at global banks, which debit or credit dollar and euro payments to the Chinese correspondent accounts on behalf of the foreign customer or supplier. Maintaining these correspondent accounts is a key part of the financial infrastructure underpinning global trade.

Chinese banks also finance other important cross-border flows, including $384 billion in repatriated income from foreign businesses and investments, $330 billion in inbound and outbound direct investment, and $381 billion in cross-border portfolio investment.²⁰

Scenarios

With these financial sector linkages in mind, we consider two potential sanctions scenarios: one in which G7 countries would impose limited sanctions on a small bank with linkages to China’s military or technology sector, and another where they would deploy full-scale sanctions on China’s central bank and China’s Big Four banking institutions.

Limited sanctions scenario

One potential scenario would involve imposing blocking sanctions on a small Chinese bank with limited financial ties to the global financial system and with links to China’s military or dual-use technology sectors. The nominal purpose of these sanctions would be to constrain the flow of foreign financing to military-relevant economic activities.

Actions of this kind have been imposed by the United States before. In 2012, the US Treasury Department sanctioned China’s Bank of Kunlun for providing financial services to six Iranian banks sanctioned by the United States for involvement with Iran’s weapons program and international terrorism.²¹ In 2017, the United States issued a final rule under Section 311 of the USA PATRIOT Act severing China’s Bank of Dandong from the international dollar financing system for its role in helping the Democratic People’s Republic of Korea (DPRK) evade sanctions.²²

The Bank of Kunlun and Bank of Dandong were relatively small and had limited ties to the global financial system. The financial impact from these actions on the global financial system was minimal. In the case of the Bank of Dandong, for instance, the bank processed $844 million in cross-border transactions in 2016 just prior to being identified as an institution of “primary money laundering concern,” a modest sum in the broader picture of global financial flows.²³ While these banks were cut off from the global dollar financing system, they remain connected to the rest of China’s banking sector. As raised in our roundtables, this enables them to continue providing financial services for US sanctioned entities, including Iran and the DPRK.

In a Taiwan crisis scenario, policymakers would face a similar challenge. G7 countries could impose blocking sanctions on small banks, freezing any foreign assets held in G7 jurisdictions and prohibiting domestic individuals and entities from transacting with those banks. However, even if the sanctioned banks lost direct access to correspondent banks in the United States and Europe, they would still have access to financing channels from other Chinese banks, and China’s military-industrial enterprises could still easily access dollar financing, if needed, from other channels in China’s state-run banking system. Rather than make a substantial impact on China’s financing flows, the primary impact of these types of sanctions would be limited to conveying an intent to escalate financial sanctions further, potentially on larger, more systemically important institutions.

Full-scale financial sector sanctions scenario

At the other extreme, the United States and allies could take much more drastic measures against China’s financial system by, for example, imposing blocking sanctions and denying SWIFT access to China’s central bank, its finance ministry, and China’s Big Four banks, which collectively hold one-third of China’s total banking assets.²⁴

The economic impact of such moves would be dramatic, both for China and for the world. This would effectively freeze China’s foreign exchange reserves held in overseas custodial accounts, making them unusable for the defense of China’s currency or to meet short-term obligations to finance China’s imports or external debt repayments. The bulk of overseas assets of the Big Four banks —amounting to around $586 billion—would be frozen.²⁵ This represents a floor, not the ceiling, of the global economic disruption from these actions, which are many magnitudes higher.

G7 assets in China would also be at risk. It is likely that China would freeze the (relatively small) renminbi-denominated holdings of G7 banks. Chinese banks, facing a sudden shortage of foreign exchange due to asset freezes, would likely fall into technical default on G7 bank-issued debt, totaling around $126 billion.

Sanctioned banks would also be cut off from the international dollar payments system. Chinese banks do not systematically report the scale of their cross-border transaction settlements, so we are left to estimate the scale of disruption if China’s Big Four banks were sanctioned. Starting from China’s balance of payments statistics on cross-border trade and investment, we estimate what share of that activity is attributable to the Big Four. We assume that the Big Four banks’ role in facilitating cross-border trade and investment is proportional to their share of foreign asset ownership in China’s whole banking sector, indicating approximately $3 trillion in trade and investment flows could be put at risk, primarily from disruptions to trade settlement. This is only a rough estimate and is likely an undercount, but it illustrates the scale of economic activity at risk from full-scale sanctions on China’s largest banks.

Over the long term, Chinese importers and exporters could move to other, unsanctioned banks for trade settlement and finance, but the immediate disruption to global trade would be substantial and smaller banks would likely struggle to backfill the enormous demand for trade-facilitating financial services in the short term. Eventually, Chinese importers and exporters would adapt to financial-sector sanctions by turning to a different set of banks and potentially engaging in more renminbi-denominated transactions (see Box 1 on China’s international payments alternatives). But the vast majority of China’s exports would be impacted in the short term, as it would be extremely difficult for Chinese companies to receive US dollar- or euro-denominated payments for goods.

$3 trillion in trade and investment flows could be put at risk, primarily from disruptions to trade settlement.

Freezing China’s official foreign exchange assets would also have substantial global spillovers. An asset freeze of China’s dollar reserves would suddenly make dollars in China scarce, driving down the value of the renminbi relative to the dollar. Beijing could fight this depreciation pressure in the short term through strict capital controls and exchange rate interventions, but ultimately would need to allow the renminbi to depreciate to ease outflow pressures and stabilize China’s balance of payments.

A weaker exchange rate would make goods imports more expensive and reduce China’s global economic throw weight. Disruptions to China’s export trade would also entail substantial economic hardship and financial stress for Chinese companies and suppliers to global markets. However, assuming that Chinese exporters and importers eventually found other non-sanctioned banks to legally conduct trade with foreign counterparties, China would still avoid a balance of payments crisis. China presently runs a large current account surplus, providing a consistent flow of dollars into its financial system. In fact, devaluation of the renminbi would ultimately make Chinese exports more competitive relative to other countries, which would push some of the impact of sanctions on to exporters in those countries. Other emerging market currencies, including those of US allies, would be likely to depreciate sharply against the US dollar as well. Countries that depended upon exports to China, such as Angola and Brazil, would see those export markets contract sharply.

The imposition of broad-based financial sanctions on Chinese banks would create significant dislocations within the global financial system and would likely require a coordinated policy response among developed market central banks in order to manage the fallout. Global supply chains would be upended while exporters and importers routed activities to unsanctioned banks. Countries that rely on dollar financing— to finance trade with the United States and Europe, for instance—would face a surge in financing costs, requiring the Federal Reserve to pump dollars back into the global economy through central bank swap lines. But even if swap lines with China were prohibited, these dollars would find their way back into China’s economy due to its trade surplus with the rest of the world.

Takeaways

While it is likely that a financial sanctions package would be on the table in the case of a major Taiwan crisis, avenues for sanctioning China’s financial system face limitations. A lower-scale response that targeted small banks involved with financing military activities would limit the negative impact on the global economy, but it would have little effect on Chinese behavior or military activities because other financing channels would remain open. On the other extreme, a full-scale sanctions response targeting China’s central bank and most of the country’s major commercial banks would have massive economic spillovers—for China’s economy, but also for the global financial system and the global economy. Second-order consequences could include a tightening of global trade financing conditions; weakness in emerging market currencies and balance of payments problems in emerging markets; major supply chain disruptions and interruptions to global manufacturing of consumer goods; and inflationary short-term impacts from interrupted China-world trade.

Sanctions on China’s financial sector could end up falling somewhere between these two extremes, with sanctions placed on midsize banks, for instance. Impacts from these sanctions on trade and financial markets would be more moderate than in the case of a maximal sanctions scenario, but these face many of the same limitations as more comprehensive sanctions.

Fundamentally, the long-term strategic benefit of financial-sector sanctions is unclear. Imposed on small banks, they would have minimal impact on China’s ability to finance military activities. At a large scale, sanctions would disrupt trade with China in the short run, but they would not fundamentally change China’s position within global manufacturing supply chains. Over time, China’s terms of trade would probably improve along with a weaker exchange rate. The symmetrical impact of such sanctions on China and the rest of the world reduces the credibility of such broad-based financial sanctions as a deterrent.

Box 1: How Well-Developed Are China’s International Payments Alternatives? 

Over the past five years, China’s Ministry of Finance and the People’s Bank of China (PBOC) have established several platforms to facilitate cross-border transactions and reduce reliance on dollar-based payment systems. Given the increased interest from across the Global South in alternative payment systems to the dollar in the wake of G7 sanctions on Russia, it is likely that in the next five years more of the Chinese systems could be used as a means of sanctions evasion.

In 2015, China launched its Cross-border Interbank Payment System (CIPS) to function as a settlement and clearance mechanism for renminbi transactions. An alternative to the dollar-based Clearing House Interbank Payment System (CHIPS), CIPS is supervised by the PBOC, and participants have the opportunity to message each other through the CIPS messaging system.

Data on CIPS usage suggest that transaction volumes have more than doubled in that period, growing by 113 percent.²⁶ However, while China is making significant progress in developing international payment alternatives, it lags behind the established global payment ecosystem.²⁷ Research indicates that CHIPS has ten times more participants and settles forty times more transactions compared to CIPS.²⁸ These incumbents have well-established networks, widespread acceptance, and trust among global users.

Perhaps the most significant payment alternative is China’s development of its Central Bank Digital Currency (CBDC), the e-CNY, which began in 2017. The retail CBDC project focuses on enabling individuals and businesses to use the e-CNY for everyday transactions. Interestingly, the PBOC has over 300 staff working on their CBDC project, and only about one hundred working on CIPS.²⁹ However, this retail CBDC project may have limited ability to help internationalize the yuan and facilitate its use as a means of sanctions evasion given its domestic focus and the lack of infrastructure for cross-border use.

The same cannot be said, however, of China’s wholesale CBDC ambitions. China’s wholesale project aims to streamline interbank transactions and improve its cross-border financial system efficiency. Project mBridge is a joint experiment with the Hong Kong Monetary Authority, Bank of Thailand, Central Bank of the United Arab Emirates, and Bank for International Settlements to create common infrastructure that enables real-time cross-border transactions using CBDCs. In October 2022, the project successfully conducted 164 transactions in collaboration with twenty banks across four countries, settling a total of $22 million, with almost half of all transactions in the e-CNY.

This initiative demonstrates China’s active involvement in exploring innovative solutions for international payments, particularly in the context of cross-border transactions which do not use dollars or euros. This system, though not yet ready for full launch, could help countries bypass dollar-denominated systems like SWIFT or CHIPS and develop an alternative financial architecture.

The biggest challenge for new China-based cross-border payments architecture is liquidity. China maintains capital controls on yuan and offshore clearing, and settlement of yuan is severely limited in comparison to the dollar, euro, pound, and yen. Removing these capital controls to provide liquidity pools for offshore clearing and settlement in yuan will come with some financial instability in Chinese markets, which is undesirable to leadership in the short term.

However, even if certain transactions will be more costly to execute, the recent history of sanctions evasions shows actors are willing to pay a premium to have specific transactions avoid dollars and US enforcement. China is investing significant resources in scaling up these capabilities.

Economic countermeasures aimed at individuals and entities associated with CCP and PLA leadership

Sanctioning the leadership and key associates of adversarial governments, criminal organizations, and terrorist groups is a well-established mechanism deployed by G7 nations and international organizations, including the United Nations. These measures are meant to pressure the targeted individuals, organizations, and governments to change their behavior or policies, while freezing their assets and restricting their ability to raise, use, and move funds.³⁰. In the event of a Taiwan crisis, G7 countries could impose targeted financial sanctions on Chinese government and military officials as well as other politically connected elites to attempt to deter further escalation and increase economic pressure on General Secretary Xi Jinping and his close allies.

Sanctions targeting Russian government and military officials and elites have been a central part of the G7 and allies’ sanctions strategy to counter Russia’s aggression toward Ukraine. Since the 2014 invasion of Crimea, G7 allies have collectively sanctioned more than 9,600 Russian-linked individuals, with a specific focus on government and military officials, oligarchs, and others with links to the regime as well as their family members and close associates who received asset transfers before a sanctions designation.³¹ As of March 2023, members of the Russian Elites, Proxies and Oligarchs (REPO) Task Force—a coalition of G7 nations, Australia, and the European Commission—have blocked Russian assets valued at more than $58 billion, including both financial accounts and assets such as real estate and luxury goods.³²

Separately, some G7 nations have imposed unilateral sanctions on PRC officials in response to human rights abuses and PRC actions in Hong Kong. As of May 2023, the United States had designated forty-two government officials, including former Chief Executive of the Hong Kong Special Administrative Region Carrie Lam and other PRC government officials, in response to actions undermining Hong Kong’s autonomy.³³ In March 2021, the EU also made a rare use of its Global Human Rights Sanctions Regime to sanction four high-ranking Chinese officials for their involvement in human rights abuses against ethnic minorities in the Xinjiang Uyghur Autonomous Region, with sanctions including travel bans and asset freezes³⁴—a move complemented by economic countermeasures taken the same day by the United States, the United Kingdom, and Canada.³⁵

It is highly likely that G7 nations would consider multilateral targeted designations against Chinese government and PLA officials and their associates in a major Taiwan crisis, given their relative success coordinating multilateral sanctions to counter Russia’s invasion of Ukraine.³⁶ The following section explores economic ties at stake and potential sanctions scenarios.

Global economic links: Individuals abroad

Assessing the scale of overseas assets covered by a potential sanctions regime on Chinese government, party, and military officials is extremely complex. There is limited available public information on the wealth of Chinese officials, in large part because that wealth is concealed via layers of personal networks and investment vehicles, and is often managed by third parties. These third parties invest on behalf of officials in domestic and overseas properties, publicly listed companies, and other investments—often in offshore jurisdictions such as the British Virgin Islands (BVI), the Cayman Islands, and Samoa. These offshore company structures often open bank or brokerage accounts in other jurisdictions, thereby further obscuring the relationship to the ultimate beneficiary.

For the purpose of this study, the authors used data derived from investigative reports and leaks of financial information such as the Panama Papers, which combined give a broad sense of the scale of assets connected to some of the highest-ranking figures of China’s leadership. In 2012, Bloomberg reported that Xi’s extended family held more than $400 million in business holdings and real estate.³⁷ The same year, reporting by the New York Times identified $2.7 billion in assets linked to former Premier Wen Jiabao and his close network.³⁸ Leaks of financial information including the offshore accounts analyzed by the International Consortium of Investigative Journalists in 2014 confirmed the existence of shell companies incorporated in the British Virgin Islands that are linked to the relatives of Wen and Xi, although the value of assets linked to these companies is unknown.³⁹ The leaked information also contained evidence of BVI-incorporated companies held by relatives of former Premier Li Peng and former President Hu Jintao, among others. Despite the opacity surrounding the overseas assets of the elite of the CCP, these single cases are potential indications that relevant, sanctionable assets likely represent tens of billions of dollars in aggregate.

This figure could grow quickly if the targets of financial sanctions were extended beyond high-level CCP and PLA leadership to include politically linked private business leaders. The estimated net worth of the top 200 wealthiest people in China is around $1.8 trillion.⁴⁰ Twenty-nine of those business leaders are current members of the National People’s Congress (NPC) or the Chinese People’s Political Consultative Conference (CPPCC), with a combined net worth of $278 billion. Much of this net worth is, however, linked to business activities taking place in China, rather than within G7 jurisdictions.

Twenty-nine of those business leaders are current members of the National People’s Congress (NPC) or the Chinese People’s Political Consultative Conference (CPPCC), with a combined net worth of $278 billion

Scenarios

A scenario involving sanctions on Chinese officials could proceed in several stages, with a first set of actions targeting a narrow and lower-level set of party, government, and military officials with direct links to a Taiwan crisis. Further actions could expand these sanctions to close associates of designated individuals, a longer list of officials, or ultimately to a broader set of politically connected business elites. Under the most extreme of scenarios, these sanctions could be widened to include China’s highest-level leaders in response to major developments in the Taiwan Strait.

Sanctions on a narrow set of CCP, government, and military officials 

One likely scenario would involve sanctions—asset freezes and travel bans—imposed on a narrow group of CCP, government, and military officials with clear responsibilities over actions taking place in the strait. China’s current minister of defense, Li Shangfu, is already under US sanctions⁴¹—but designations could be extended to cover select members of the Central Military Commission or high-ranking PLA commanders. These could also include close advisers to these officials or to China’s high-level leaders on Taiwan-related issues.

The nominal purpose of these sanctions would be largely symbolic, and a means to condemn Beijing’s actions. Their effectiveness in changing behavior is likely to be extremely limited and could contribute to a hardening of positions. Most of this group of designated officials would likely be highly aligned with Xi’s decisions on Taiwan. Narrowly crafted sanctions on officials might also generate limited financial outcomes, given that these individuals are already under tight political scrutiny in China and unlikely to be allowed major overseas holdings. The scope of sanctionable assets might grow marginally larger, however, if close associates and family members are included, especially children of government officials studying in G7 countries, as well as close aides and the third parties handling their investments. Similar to the Russian case, these individuals may become a focus for the G7 if asset transfers occur ahead of designations.

Sanctions on a wider range of CCP, government, and military officials as well as business elites 

In response to an escalation in the Taiwan Strait, G7 countries could decide to progressively expand sanctions to cover a longer list of government, CCP, and PLA officials. The list could also include certain business elites with known links to China’s leadership, who lend their public or financial support to China’s actions, or those who are active in sectors linked to China’s military-industrial base. The United States has already designated several Chinese executives and companies for breaking US law by providing support to North Korea, among other violations.⁴²  

In addition to asset freezes and travel bans, G7 governments might impose restrictions on professional and financial services provided to these elites, including wealth management or business advisory services.⁴³ While Chinese clients overwhelmingly rely on the expertise of wealth managers based in Hong Kong, a small percentage of other managers are located in Switzerland (1.6 percent), the UK (1.6 percent), and the United States (1.1 percent).⁴⁴ 

The purpose of this second round of sanctions would be to attempt to pressure these officials to push internally for a change in policy. Assuming intelligence about their overseas assets were available to G7 implementing authorities, these broader sanctions could end up covering tens of billions of dollars in overseas assets. The costs to designated officials could be high: besides the financial implications of an asset freeze, even the public revelation of foreign assets could be politically damaging.

Our roundtable participants noted that sanctions on individuals amid a Taiwan crisis could potentially produce a stronger response than has occurred with recent designations of Russians. Whereas many Russian officials have been under sanction since 2014 and have had time to adapt, such sanctions on China would be mostly new and immediately impactful to those designated.

Still, it remains unclear whether sanctions on China’s business elites would compel a change in policy. Business leaders arguably have the most to lose from Chinese aggression against Taiwan to begin with, since disruptions in trade and investment with Taiwan and G7 partners will affect businesses first and foremost. The waning influence of the private sector in governance due to crackdowns on the technology and financial sectors under Xi raises further questions about business elites’ ability to influence policy outcomes toward Taiwan.

Sanctions on China’s high-level leaders

In an extreme escalation in the Taiwan Strait, sanctions could end up targeting China’s highest-ranking officials including most members of the Political Bureau of the CCP’s Central Committee and Xi himself. If Russia sanctions are any indication, this third circle of sanctions could also include China’s ministers of foreign affairs, science, and technology or finance, the PBOC governor, or high-level members of China’s legislative bodies (the NPC and CPPCC). These sanctions would similarly be largely symbolic.

Takeaways

The G7’s response to Russia’s invasion of Ukraine demonstrates that coordinated multilateral financial sanctions on political and business elites are now a central tool in G7 economic statecraft. By design, these sanctions have the benefit of having relatively low immediate economic impacts on G7 economies, concentrating costs on a small number of targeted officials. In principle, these sanctions also have the benefit of avoiding indiscriminately targeting China’s broader populace.⁴⁵ Though in practice they often end up inadvertently affecting the broader population or the national economy, as foreign banks and private-sector entities reduce exposure to a broader range of individuals or entities than the ones directly sanctioned.

Their effectiveness as deterrence tools in a Taiwan crisis is in question, too. Narrow sanctions on CCP, government, and PLA officials would probably end up targeting political leaders already aligned with Xi’s decisions on Taiwan. Chinese officials may conceal their offshore assets through complex personal networks and corporate structures that are potentially painful and costly to unravel. They also require tight coordination and information sharing among sanctioning parties, in order to locate and act against sanctioned individuals’ assets across jurisdictions. (The foundation for this cooperation does exist, however, as a result of recent sanctions on Russia).

Broader sanctions on business elites could freeze greater overseas wealth, but this may have limited impact on policy outcomes. Private business leaders are already incentivized to disfavor Chinese aggression toward Taiwan and have diminishing political sway after years of power centralization under Xi. Yet because they are an important signaling tool, sanctions on Chinese officials would very likely be considered in a major Taiwan crisis.

Economic countermeasures aimed at China’s industrial sectors

Finally, G7 leaders may consider deploying export controls and other economic statecraft tools against Chinese companies or industries linked to China’s military or defense industrial base.

These actions featured prominently in the G7 sanctions program on Russia, with a variety of trade and investment-related measures imposed on companies and industries linked to mining, electronics, aviation, and other sectors. The United States implemented stronger sector-wide export controls on certain industrial and electrical equipment, added military-linked companies to the US Commerce Department’s (export-control) Entity List, and designated numerous companies on the SDN list.

Currently, Chinese firms with ties to the PLA and specific companies utilizing dual-use technologies already face sanctions and export controls. This signals additional businesses operating in these sectors as likely targets in a Taiwan crisis. In a crisis scenario, a number of economic countermeasures could be used to limit the flow of potential dual-use goods to China’s military and restrict the operation of sectors critical to China’s defense industrial base.

This section describes the economic linkages between potentially targeted sectors and the global economy, as well as the economic assets and flows that could be implicated under an economic statecraft program. To bring more granularity to our analysis, we use a case study approach that explores the potential for restrictions on China’s aerospace sector.

Our findings point to significant economic risks from a broad sanctions package, as well as deep interdependencies between China and G7 economies in potentially targeted sectors. This suggests that, if deployed, countermeasures would likely target narrower industries—or single firms within industries—where China depends on imported G7 technology and where global dependence on Chinese exports is small. Even then, sanctions could come with substantial costs to G7 technology exporters in the sanctioned industries.

Global economic links: Industries and supply chains

A number of Chinese industries could become the target of G7 countermeasures in the context of a major Taiwan crisis, due to their linkages to China’s defense sectors. Among them, chemicals, metals, electronics, aviation, and shipbuilding already feature prominently in US lists of Chinese military-industrial companies, including the Non-SDN Chinese Military-Industrial Complex Companies list and the Department of Defense’s Chinese Military Companies list—making them likely potential targets for future action.⁴⁶  

Collectively, these five industries already comprise over ten percent of Chinese gross domestic product, produce over $6.7 trillion in annual revenue, and employ over 45 million people.⁴⁷ They also are deeply linked to the global economy: in 2018, Chinese companies in these industries imported goods valued at $686 billion, and exported goods valued at nearly $1.1 trillion.

These sectors are also linked to the global economy through investment. Collectively they have been the destination for $107 billion in direct investment from the United States, United Kingdom, and European Union since 2000, and Chinese companies in these sectors have invested at least $179 billion abroad, either through acquisitions or greenfield investment, according to Rhodium cross-border FDI monitoring. Bloomberg data and Chinese official data suggest that foreign holdings of listed Chinese companies and their subsidiaries in these sectors amount to about $120 billion, and these firms have at least $76.9 billion in dollar-denominated debt instruments currently outstanding.⁴⁸

Scenarios

G7 countries have a range of economic countermeasures that could be brought to bear against select Chinese industries in the event of a Taiwan crisis. Here we consider two potential scenarios, a maximalist export controls scenario targeting major industries with comprehensive export controls, and a targeted sanctions scenario using China’s aerospace industry as a case study.

Maximalist export controls scenario

In an extreme scenario, G7 countries could impose strict export restrictions on trade with China on a range of major industrial sectors, such as chemicals, metals, electronics, and transportation equipment. These sanctions, though highly costly, would not be entirely unprecedented. In the case of Russia, the United States and other G7 countries imposed restrictions on exports in the oil and gas, metals and mining, defense, and technology sectors through a combination of tightened export controls and property blocking rules.

The disruptions to China from such sanctions would be substantial: G7 exporters are the source of 18 percent of the imported content these industries in China consume, totaling $153 billion based on trade in value-added data that estimates the origin and value of production activity along supply chains. G7 countries also account for 43 percent of China’s export market in these industries, putting $225 billion in Chinese manufacturing activity at risk. Altogether, over fifteen million jobs in China are estimated to depend on exports in these sectors. Many more jobs would be put at risk from the loss of imported inputs into Chinese production processes.

These dependencies run both ways, however, and impacts on the sanctioning countries would also be extremely high. The $153 billion in goods that G7 countries export to these industries in China support approximately 1.3 million jobs across the G7; and China itself is the source of 25 percent of G7 imports in these industries.

Even these substantial figures far underestimate the total economic impact from a total ban on trade between G7 economies and these industries in China. The value-added approach provides a useful estimate of the value that different countries contribute to well-functioning global value chains. But disruptions from a sudden stop of trade in these industries—in particular in hard-to-replace critical components—would result in massively greater economic disruption until alternative sources were fully brought up to speed.

Exports from China to the G7 would be disrupted as well. Trade restrictions on foreign inputs to these industries would affect Chinese production and exports. China could also take retaliatory action banning exports from these and other sectors to the G7.

In some cases, alternatives to disrupted trade flows might be found quickly, putting the efficacy of trade restrictions in doubt. A ban on G7 exports of iron ore to China, for instance, would disrupt only a small volume of trade unless other partners such as Australia, which exported $72 billion of iron ore exports in 2022, were also to join. Even so, these supplies could in large part be replaced by exports from other countries such as South Africa and Brazil.⁴⁹ Additionally, the G7’s challenges in halting the export of high-end Western technology to Russia following its invasion of Ukraine demonstrate that such regimes can be porous.⁵⁰

The deep interlinkages between Chinese and global industries mean potential economic disruptions from targeting certain sectors could be significant. Altogether, a conservative accounting of the trade flows disrupted by export controls in these sectors amounts to at least $378 billion in disrupted trade.⁵¹  

Except under extreme circumstances, it is unlikely that G7 leaders would be able to agree to trade restrictions on this scale. Germany, for instance, is deeply invested in and dependent on China in the chemicals industry. The French, UK, and US aviation industries have huge sales to China (see case study below), and Japan and non-G7 members South Korea and Taiwan are deeply connected with mainland China in electronics. These linkages would make agreeing on a broad package extremely difficult. Broad trade restrictions would also be indiscriminate in their impact on China’s citizenry, a fact with serious ethical implications and potentially political ones, as a broadbased export-control regime could in fact strengthen popular support for the government rather than undermine it.⁵²

Finally, a broad export-control package would have major spillovers to the global economy due to global value chains that depend on imports of Chinese intermediate goods (electronics, for instance) that would be disrupted by strict controls. These considerations make measures of this scale highly unlikely, except under the most extreme circumstances.

Targeted sanctions scenario

Due to the costs of a maximalist approach, economic countermeasures against China’s industrial sectors are more likely to be narrower in scope, targeting specific companies or subsectors with high technological dependencies on G7 countries and relatively low global dependency on Chinese exports. The key feature of these countermeasures would be asymmetry: imposing restrictions that disproportionately affect China’s economy. Importantly, asymmetry does not imply costlessness. Any effective trade restriction inevitably results in costs to the sanctioning economy and the global economy as a whole.

China’s aerospace industry, which depends on foreign-sourced engines and parts, provides a case in point. In a potential sanctions scenario, the United States and G7 partners could impose blocking sanctions and export restrictions on China’s two largest aerospace companies, the Commercial Aircraft Corporation of China (COMAC) and the Aviation Industry Corporation of China (AVIC). These companies depend heavily on inputs from overseas suppliers. Of the eighty-two primary suppliers to China’s first narrow-body jet, the COMAC C919, only fourteen are from China (and seven of those are Chinese-foreign joint ventures).⁵³ China’s most critical vulnerability is engines: all three of its domestically manufactured commercial aircraft rely on foreign-produced engines, and China’s domestic jet engine manufacturers are widely believed to be far behind Western competitors in terms of technological sophistication.⁵⁴

In a scenario in which blocking sanctions and export restrictions were placed on AVIC and COMAC, all exports of aerospace goods to these firms could be prohibited, amounting to approximately $2.2 billion in aerospace parts trade at risk.⁵⁵ However, the ultimate impact of such measures on China’s aerospace ambitions would be much greater. China has begun mass production of its ARJ21 regional airliner–which depends on GE engines–and exported its first model to Indonesia last year. COMAC’s flagship C919 narrow-body jet marked its first commercial flight in May 2023, and the country has aspirations to sell over 1,200 over coming years. Restricting the sale of aviation parts to COMAC and AVIC would substantially disrupt China’s civil aviation ambitions.  

$33 billion of G7 aerospace exports to China could be disrupted through retaliatory measures.

While the impact of these measures would be particularly acute for China, the costs on foreign aerospace companies would also be substantial. China could respond to restrictions by halting aerospace exports to G7 countries. China exported $1.2 billion in aircraft parts to G7 countries in 2018, including inputs to for eign airliners. While most are low-tech inputs, they can be difficult to replace in the short run: a shortage of wire connectors that coincided with widespread lockdowns in China in 2022 led to US production delays for the Boeing 737.⁵⁶ China could also respond by delaying purchases of Airbus and Boeing planes. In total, approximately $33 billion of G7 aerospace exports to China could be disrupted through retaliatory measures.

Foreign aerospace companies also have substantial tie-ups with AVIC and COMAC. Since 2000, US and British companies and those based in EU member states have invested an estimated $3.7 billion in China’s aerospace sector, according to Rhodium’s cross-border FDI tracking. A substantial number of these projects are connected to AVIC and COMAC, including Airbus’s A320 final assembly line in Tianjin, which produces six aircraft per month, about 10 percent of Airbus’s average monthly production.⁵⁷

AVIC and COMAC also have invested in global aerospace companies. AVIC, for instance, acquired Austrian FACC AG, which produces aerostructures and other components for Airbus, Boeing, and other global firms. In a scenario where COMAC and AVIC were put under blocking sanctions, these operations would likely be forced to wind down or divest

Finally, foreign investors would be exposed to losses in equity and debt in AVIC. Foreign equity holdings in twenty-four listed subsidiaries of AVIC companies totaled $1.4 billion, or 1.4 percent of their combined market capitalization as of April 2023.⁵⁸ Dollar-denominated debt issued by AVIC and subsidiaries amounted to $3.8 billion, approximately 21 percent of its total debt issuance.⁵⁹  

Sanctions on China’s leading aerospace companies and export controls on the components they import would be a heavy blow to its civil aerospace ambitions, making them a plausible economic countermeasure in a Taiwan crisis. However, the impacts on foreign aerospace companies would be significant given the high degree of trade and investment ties to China, making these countermeasures costly and potentially difficult to coordinate in a crisis. Targeted sanctions on other sectors where G7 countries hold asymmetrical technological advantages could also be considered, but these all come with non-negligible costs to the sanctioning economies as well.

Takeaways

China is deeply connected to the global economy in sectors that would potentially be targeted for economic countermeasures in a Taiwan crisis. The expansive nature of these ties would make broad export controls and trade restrictions extremely costly and likely hard to justify except in the most extreme circumstances.

Targeted sanctions on specific firms and technology choke points are more plausible, but they come with substantial costs to foreign companies. Our case study, with export controls placed on China and full blocking sanctions imposed on China’s leading aerospace manufacturers, shows that tens of billions of dollars in aerospace goods trade, inbound and outbound direct investment, and portfolio holdings in China’s aerospace sector would be put at risk. While China would face substantial challenges in achieving its goal of developing a strong domestic commercial aviation industry, foreign aerospace companies would lose out on billions of dollars in exports and sales to China and risk seeing billions of dollars in direct investment lost.

IV. Practical challenges in sanctions development

Beyond identifying specific tools and appropriate targets for economic countermeasures, policymakers will confront a range of complex coordination issues around implementing sanctions in a Taiwan crisis. Discussions with participants in our roundtables highlighted areas of consideration in developing economic countermeasures to deter aggression against Taiwan.

Understanding Taiwan’s perspective. A crucial factor in designing G7 economic responses to possible aggression against Taiwan should be the policy preferences of Taiwan itself. Depending on the nature of the crisis and political conditions in Taiwan, Taiwanese officials might not support economic countermeasures against China and opt for a de-escalatory response. Given the depth of economic ties between China and Taiwan, certain economic countermeasures against China could be highly costly for the Taiwanese economy. Public opinion would likely be divided on the question of how to respond. With only mixed Taiwanese support, G7 coordination on economic countermeasures could be difficult to achieve. Strong Taiwanese support on the other hand would make coordination easier, so long as Taiwanese actions were not seen to have precipitated the crisis.

Defining clear redlines and triggers across the G7. A key barrier to coordinating sanctions among G7 partners and with Taiwan arises from the difficulties in agreeing on what Chinese acts of aggression should trigger economic countermeasures. While some actions might be seen by all parties to have crossed redlines–such as a military quarantine of Taiwan—Chinese coercion against Taiwan often takes the form of “gray zone” measures that are more ambiguous and brush up against but do not clearly cross redlines.⁶⁰ Getting G7 nations to agree to impose economic countermeasures against China in response to such actions will be more challenging. The roundtables highlighted different levels of tolerance for escalatory action measures among G7 partners.

The specific drivers of a crisis would matter as well: European experts note that a crisis that was seen to be provoked by the United States or Taiwan would make G7 alignment more difficult, especially given divergent views among EU member states about how to respond to a cross-strait crisis.

Coordinated signaling in order to deter. The challenges involved with identifying redlines and agreeing on responses in advance also complicate efforts to signal resolve to China. Successful deterrence depends on the would-be aggressor knowing what actions would provoke a response and believing that the defender’s threats of retaliation are credible.⁶¹ The ambiguous nature of Chinese escalatory actions and the potential for disagreements among partners over how to respond in the moment of crisis make establishing deterrence through the threat of economic countermeasures a significant challenge.

Participants in roundtables disagreed about the best signaling approach, with some arguing that clarity about redlines and consequences is essential, and others arguing that providing too much specificity could instead encourage aggressive behavior and focus China’s countersanctions and sanction-proofing work. Providing clarity on what Chinese actions would elicit a punitive response could encourage Beijing to take actions just below such thresholds.

Building out necessary tools. Our roundtables highlighted the fact that G7 countries joining a sanctioning coalition may need additional legal tools to carry out effective countermeasures on China. In the wake of enhanced export controls on Russia, for instance, the EU faced challenges restricting reexports of export-controlled products through third countries to Russia, as doing so would require additional legal authorities.⁶² And differences in UK, EU, and US regulations have complicated the efforts of multinational companies to wind down their operations in Russia.⁶³ For effective action and deterrence, such authorities would need to be shored up.

Scoping a cost mitigation strategy. Even limited economic countermeasures against China would have global economic spillovers. This means any sanctions program would likely need to be paired with measures to support industries at home as well as third countries affected by lost trade and investment with China. Sanctions triggering a devaluation of the renminbi would negatively affect countries dependent on commodity exports to China. A stronger dollar resulting from global investors seeking liquidity and safe assets in a crisis would put additional stress on countries with substantial dollar-denominated debt. G7 countries would need to manage the global spillovers of sanctions with additional dollar liquidity, loan extensions and forgiveness, and other tools to support the global economy in a period of economic stress.

Factoring in the market reaction. Any G7 economic statecraft response would have to contend with additional disruptions to global supply chains from Chinese aggression against Taiwan and the resulting market impacts. Russia’s 2022 invasion of Ukraine caused market gauges like the S&P 500 to fall by around 4 percent, and the initial market impact of a Taiwan crisis could be significantly larger due to the size and importance of the economies involved. US officials have estimated a disruption to the exports of Taiwan Semiconductor Manufacturing Company alone could cost the global economy between $600 billion to $1 trillion a year.⁶⁴ Roundtable participants stressed that G7 actions would have to avoid aggressively compounding the inevitable supply chain and market effects of a crisis. The initial shock could undermine domestic political support for sanctions that would incur additional economic costs.

Conclusions and recommendations 

Policymakers in G7 capitals are increasingly discussing Taiwan crisis scenarios, and starting to explore the range of options available to them in responding to Chinese actions against Taiwan, both beyond and below the level of invasion. While our work shows that maximalist countermeasures would be highly costly and therefore unlikely except in the most extreme circumstances, G7 countries may consider a set of more limited tools that target areas of asymmetric Chinese dependence on foreign technology and critical inputs. 

That options are available, and that G7 leaders are discussing them, does not mean that deploying them in an aligned fashion would be easy. Coordination on economic countermeasures will be critical to effective deterrence, but could be hard to achieve given the difficulty to define red lines in a conflict that is likely to be marked by ambiguity and uncertainty. Given these limitations, economic countermeasures can only be one part of a broader deterrence effort and toolbox that also includes diplomatic and military channels.

From our research, roundtables, and interviews, a set of recommendations emerged for policymakers considering the use of economic countermeasures in a Taiwan crisis:

• G7 partners and Taiwan should scale up private coordination and signaling. G7 discussions about the role of economic countermeasures in a Taiwan crisis are still in the early stages. Given the challenges involved in agreeing upon red lines and appropriate countermeasures, pragmatic discussions around contingencies must be a priority. This includes creating effective private channels of communication among G7 partners and key stakeholders on emerging trends, financial ties, and shared vulnerabilities. Meanwhile, G7 partners should privately message to China the extent they are willing to go in using economic tools to counter Chinese aggression toward Taiwan. Coordination with Taiwanese officials is also crucial.
• The G7 should coordinate beyond its membership. This report assumes that most or all of the current coalition that has imposed sanctions against Russia would align on measures in a Taiwan Strait crisis. Roundtables and consultations with like-minded capitals in the Asia-Pacific region have suggested this is a reasonable assumption. However, even more so than in the case of Russia, exchanges outside the G7, including the rest of the G20, will be necessary given the scale of economic disruption at stake.
• Economic asymmetries need to be better understood. Policymakers argued that the most likely economic countermeasures would focus on areas where China is asymmetrically dependent on foreign goods, technology, and finance. Further research is needed to identify these areas and the potential costs, vulnerabilities, and limitations of targeting them in a crisis.
• Take practical legal steps now to boost the credibility of G7 deterrence. Discussants noted that successful deterrence requires making clear that G7 nations are ready to act decisively in a crisis. This may require legal steps, including: shoring up of the EU’s framework for export controls; advance preparation of US executive orders specifying and granting sanctions authorities to the Office of Foreign Assets Control; preliminary analysis on the potential impact and spillovers of proposed packages; and the construction of communication channels among US government stakeholders such as the Federal Reserve, Commodity Futures Trading Commission, Securities and Exchange Commission, Office of the Comptroller of the Currency, Financial Crimes Enforcement Network, and appropriate bilateral, plurilateral, and multilateral counterparts. This may include preparing the legal and regulatory landscape across G7 jurisdictions to ensure appropriate authorities are in place to deter or respond to a crisis.
• Invest in other forms of deterrence. Economic countermeasures should be considered as part of a whole-of-government and multilateral strategy as they have costs and limitations that can make them less effective on their own. These tools will be more effective when paired with traditional tools of deterrence in both the military and diplomatic realms.
• Keep lines of communication open. Bilateral and plurilateral communication is the best tool to de-escalate in a crisis. Recent breakdowns in military-to-military communication channels between the United States and China are of serious concern given elevated tensions in the region. Maintaining open communication lines and regular exchanges with Chinese counterparts is a key element in any risk-mitigation strategy.
• Balance credible threats with credible assurances. Effective deterrence requires credible threats to be matched with credible assurances. The G7 should make clear to Beijing it has no desire to change the status quo in the Taiwan Strait. Efforts to maintain the status quo and shore up traditional diplomatic, military, and economic tools to ensure peace and stability in the Taiwan Strait should be the priority. 

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About the authors

Charlie Vest is an associate director on Rhodium Group’s corporate advisory team. He manages research and advisory work for Rhodium clients and contributes to the firm’s research on US economic policy toward China. Vest holds a master’s degree in Chinese economic and political affairs from UC San Diego and a bachelor’s degree in international affairs from Colorado State University. Prior to joining Rhodium, he worked in Beijing as research manager for the China Energy Storage Alliance, a clean energy trade association.

Agatha Kratz is a director at Rhodium Group. She heads Rhodium’s China corporate advisory team, as well as Rhodium’s research on European Union-China relations and China’s economic statecraft. She also contributes to Rhodium work on China’s global investment, industrial policy and technology aspirations. Kratz holds a Ph.D. from King’s College London, having studied China’s railway diplomacy. Her previous positions include associate policy fellow at the European Council on Foreign Relations and editor-in-chief of its quarterly journal China Analysis, assistant editor for Gavekal-Dragonomics’ China Economic Quarterly, and junior fellow at the Asia Centre in Paris.

Acknowledgements

This report was written by Charlie Vest and Agatha Kratz with support from Juliana Bouchaud in collaboration with the Atlantic Council GeoEconomics Center. The principal contributors from the Atlantic Council GeoEconomics Center were Josh Lipsky, Kimberly Donovan, Charles Lichfield, and Niels Graham.

The GeoEconomics Center and Rhodium Group wish to acknowledge a superb set of colleagues, fellow analysts, and current and former officials who shared their ideas and perspectives with us during the roundtables and helped us strengthen the study in review sessions and individual consultations. These individuals took the time, in their private capacity, to critique the analysis in draft form; offer suggestions, warnings, and advice; and help us to ensure that this report makes a meaningful contribution to public debate. Our gratitude goes to Dave Shullman, Jörn Fleck, Logan Wright, Daleep Singh, Jeremy Mark, Richard Aboulafia, Annie Froehlich, Julia Friedlander, David Barboza, Chris Skaluba, the Centre for Financial Crime and Security Studies at the Royal United Services Institute (RUSI), and Atlantik-Brücke.

This report is written and published in accordance with the Atlantic Council Policy on Intellectual Independence. The authors are solely responsible for its analysis and recommendations.

The post Sanctioning China in a Taiwan crisis: Scenarios and risks appeared first on Atlantic Council.

The rise of sustainable investing in the private sector

Mobilizing private sector capital to boost sustainable development and ESG priorities makes sense given the numbers. With the top 500 asset managers holding $131.7 trillion in Assets Under Management (AUM) and the combined market capitalization of the top ten global companies reaching over $10 trillion in 2022, the private sector is well-positioned to contribute. Moreover, sustainable investing, mostly in renewable energy, was the fastest growing Foreign Direct Investment (FDI) theme in 2021—with 70% directed to developing countries. Up until 2021, financial markets have also experienced large shifts toward sustainable investing, with ESG fund issuance increasing by 53% to $2.7 trillion in 2021, while the green, social, sustainable and sustainability-linked bond market rose $1 trillion, grabbing 10% of the global debt market share. Sustainable companies also issued $48 billion in new equity, while sustainable lending reached close to $717 billion in borrowing. For example, in Indonesia, companies like Pertamina Geothermal Energy are looking to issue green bonds to help grow its business but also facilitate the transition to clean energy.  

Meanwhile, multinational corporations (MNCs) are integrating sustainability metrics into their supply chains, based on the Science Based Targets Initiative (SBTI). Financial and reputational risks from poor ESG practices can negatively impact a company’s future profits and resilience, which filter down to its local value chain. Many MNCs, including, Nestle, PepsiCo, and Unilever, are working towards preventing this by establishing and adhering to SBTI targets to increase sustainable practices within their global supply chains. Others, including Starbucks, are diverting funds to support climate and water projects in developing countries in an effort to conserve or replenish 50% of the water they deplete through their operations, including the agricultural supply chain. 

Together, ESG investing and SBTI targets should contribute significantly to sustainable development and lower the cost of hitting the SDGs. However, last year revealed several barriers that threaten that potential.

Roadblocks to investing in sustainable development

Sustainable finance faced challenges in 2022 as increased global regulatory scrutiny and divergent ESG standards led to a dip in ESG investing. Reuters reported that in 2022, sustainable investments reversed course for the first time in a decade, with sustainable bond sales decreasing by 30% and green bonds down 23%. Overall, ESG performance declined by nearly 9%, as international investment in ESG, especially climate change, declined.

Varying ESG rating standards, methodology, and data sources, that are often reclassifying sustainably labelled products, contributed to lower levels of ESG investing in 2022. Several ESG labelled securities were downgraded due to criteria conflicting with both major ratings agencies, while conflicting or overly prescriptive requirements led to a decline in support for ESG related shareholder proposals and the withdrawal of several financial industry members from regional ESG alliances. With over 600 ESG data providers, globally, it is not surprising a lack of consistency and standardization leave investors confused about the true risks and rewards from sustainable finance. Recent research reported that 20 of the 50 largest global asset managers assess their sustainable finance products using four or more ESG rating providers, while the other 30 use internal models for the same purpose. Underlying biases in ratings can often exclude developing countries struggling to attract sustainable finance due to inherent country-specific risks, like fossil fuel dependence, budget constraints, and high sovereign debt from external shocks, market access, and lack of technological innovation. However, some asset managers, like Abrdn, have developed in-house ESG ratings system based on data and metrics from external sources, like the World Bank and IMF, to consider unique factors when evaluating alignment with the SDGs for companies listed in their Emerging Markets Sustainable Development Corporate Bond Fund. 

Global regulations for ESG have also complicated cross-border sustainable investing, potentially leading to an increase in compliance costs and reduction in the number of eligible sustainable funds for firms.  Although evolving European, UK, and US frameworks regulating ESG have similar objectives, the approaches towards sustainable investing vary among the jurisdictional regulations and oversight bodies, especially around labelling and reporting. This disparity has also encroached on the Asia-Pacific financial industry, where many banks are starting to require local asset managers to comply with European ESG standards despite the existence of similar local regulations.  An analysis of ESG and sustainable-labelled funds identified that less than 4% meet the standards of all three jurisdictions, while 85% do not comply with any of them.  Additionally, different jurisdictional requirements and contradicting assessments of how to measure sustainable supply chains brought an additional level of uncertainty to MNC’s ESG initiatives in FDI. Companies are starting to realize they may not have fully assessed the impact of carbon emissions on its operations in other countries, specifically in the developing market.  Streamlining allowing for flexibility in the global ESG regulatory framework will be critical to ensuring sustainable investments increase and assist with countries in meeting their ESG goals. 

A way forward

To help meet the SDGs, the World Bank recently announced the creation of a roadmap that focused on three main objectives, including increasing private sector funding, improving country-level engagement and analysis, and establishing a global taxonomy for sustainable investment tools. UN Deputy Secretary-General Amina Mohammed recently warned that “the SDGs will fail without the private sector,” because private sector actors can “invest in the transitions necessary to accelerate development progress and get the SDGs back on track.” The private sector has not only the financial capacity, but also the commitment, to fuel sustainable investing, but faces barriers to keep up the momentum. The IMF and World Bank have an incredible opportunity to address the current ESG investing challenges. The World Bank roadmap is an important first step, but more will be needed to ensure globally consistent standards and data for ESG. The potential for greenwashing or indiscriminate exclusion of countries can be avoided by working with governments and ratings providers, and by improving country-level engagement to both align metrics and to integrate unique country risks in sustainable investing and supply chains. With many firms already leveraging IMF and World Bank data, creating a formal framework will encourage the expansion and scaling up of private sector ESG financing for regions in urgent need of funding.

Nisha Narayanan is a Non-Resident Senior Fellow with the GeoEconomics Center.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

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The post How ESG investing can better serve sustainable development appeared first on Atlantic Council.

Imran Khan, Pakistan’s former prime minister, has been on the warpath in the streets of Pakistan against the military-led establishment ever since he was voted out by parliament last year. Once seen as the military’s darling and reportedly assisted by the military and its intelligence agencies in the elections that brought him to power in 2018, he has now turned on the army and its chief. In an interview with the Atlantic Council this week, he also claimed that the former army chief General Qamar Javed Bajwa told him “frequently” that the army was not equipped or prepared for a war with India.

In the interview, conducted June 18, Khan confirmed that there was indeed an opening for peace with India—despite New Delhi’s rescinding of disputed Jammu and Kashmir’s semi-autonomous status in 2019—and the Pakistani army chief favored it. (Bajwa had previously revealed this plan to reporters.) Normalizing trade between the two nuclear-armed countries was reportedly one of the steps that was to be taken before Indian Prime Minister Narendra Modi could visit Pakistan.

Watch the full interview

However, despite successfully deescalating a military standoff in 2019, Khan couldn’t explain why he faltered on trade normalization with New Delhi after India changed its relationship with the disputed territory of Kashmir by removing its special status in the Indian union. Khan responded to India’s Kashmir move by closing the border for trade with India.

“I don’t remember the trade talks,” Khan said. “All I know is that there was supposed to be a quid pro quo. India was supposed to give some concession, give some sort of a roadmap to Kashmir, and I was going to then host Prime Minister Modi in Pakistan. But it never materialized.”

Bajwa’s plan, which included a ceasefire with Indian forces on the Line of Control in Kashmir, was a lost opportunity for establishing long-term peace with Pakistan’s archrival. “I tried everything, but I came across this brick wall,” Khan said. “And I realized it’s something to do with the RSS-BJP [the Modi-aligned ideological movement and political party] mentality where they’ve cashed in on hostility with Pakistan. That’s all.”

Transcript

Jun 20, 2023

Read Imran Khan’s full Atlantic Council interview on failed peace with India, Pakistan’s plight, and his own fate

By Atlantic Council

In an Atlantic Council conversation, former Pakistani Prime Minister Imran Khan shared details about a potential peace plan with India and discussed the future economic and political prospects for Pakistan.

Economy & Business Elections

Currently, Khan says he is facing nearly 160 legal cases, ranging from terrorism to corruption to conspiracy against the state—a roster that keeps him busy court-hopping to secure bail or relief. The seventy-year-old former cricket champion-turned-populist firebrand spends his weekdays commuting from city to city in protective gear to attend court hearings. Every evening, he addresses his followers on YouTube from his residence in Lahore, which just last month was surrounded by security forces.

Khan said he fears that he may be incarcerated over the next two weeks but admitted that he’s “prepared for everything,” including the prospect of being assassinated. (Khan was wounded in an assassination attempt last November and claims to have survived another plot in March.)

Reviewing his performance as premier, Khan admitted to political blunders during his tenure, including granting an extension of service to Bajwa, who Khan claims was responsible for engineering his ouster. He did not elaborate on the exact reasons for their break-up.

Khan confessed that he was dependent on the military’s clout to push his reforms through parliament because he had a weak coalition government with a razor-thin majority. But this admission—needing the military to remain in power—runs counter to his claim that he didn’t need or get the military’s support to achieve power in the 2018 general elections.

“If you want a reform program and to take on the big mafias, you cannot do it if you have a coalition with government, with a thin majority, you can’t do it,” Khan said. “So that is the mistake I made. And that’s why I became more and more dependent on the army chief, because he could get a budget passed because they have the clout. It’s exactly what’s happening right now. If the military withdraws support, this coalition would fall apart in days.”

Crucially, Khan also said he sacked the current army chief, General Asim Munir, from his previous position as the director-general of the Inter-Services Intelligence (ISI) because he “couldn’t work with him.” He did not explain why. Yet he went on to declare his willingness to talk to the all-powerful chief of army staff now—but not to his civilian counterparts—an unsustainable position in a multi-party parliamentary democracy that he wants to lead again. Claims by former members of Khan’s own party suggest that Khan sacked Munir because he had alleged that Khan’s wife was involved in corruption; Khan has denied these allegations.

While Khan defended his economic and foreign policy record and claimed that his Pakistan Tehreek-e-Insaf (PTI, or Movement for Justice) is the most popular party in the country’s history, he also claimed that ceding further space to Pakistan’s all-powerful military while he was in power was the right thing to do—until it wasn’t.

But as Pakistan faces the prospect of economic default, and his quest for an immediate election seems to be waning, Khan stands isolated. Over one hundred of his party leaders, including many senior deputies, have left the PTI, through what he claims is coercion by the military. Thousands of party workers face trials over the riots of May 9, when many Pakistanis took to the streets to attack government and military installations while protesting what Khan says was his provocative detention, designed to trigger mass outrage.

“The country is going into a black hole,” he said. “The only policy is to get rid of Imran Khan. That’s no policy. I mean, what is the future of Pakistan?”

Meanwhile, the military-backed regime continues its legal and information crackdown against sections of the press and public who dare to support Khan on mainstream and social media. Also, as the military claims that Khan and the PTI leadership tried to sow dissent in the rank and file of the all-powerful army—treason by definition and law—Khan has denied that he has any active links to senior military leadership.

None of Pakistan’s foreign friends and allies have issued any statements in favor of Khan. The US State Department said last week that it would refrain from comment as Khan is a “private citizen”—a categorization that he shrugged off without expressing regrets about his bashing of the United States following his ouster. Khan continued to blame a senior US official for, as Khan claims, making his removal as prime minister a condition for US assistance and goodwill—a claim that he watered down earlier this year while blaming Bajwa for poisoning the US view of Khan through Husain Haqqani, Pakistan’s former ambassador to Washington. (Haqqani has rejected Khan’s allegations as baseless and his attorney has issued a cease-and-desist notice to Khan, threatening legal action if Khan keeps on alleging Haqqani’s involvement in the former premier’s ouster. The US State Department has said that “there is not and there has never been a truth to” Khan’s claims that the United States was involved in removing him from power, adding that “we will not let propaganda, misinformation, and disinformation get in the way of any bilateral relationship, including our valued bilateral [partnership] with Pakistan.”)*

Further evidence of Khan’s shifting position is his party’s active support for lobbying efforts inside the United States, including letters from members of the US Congress admonishing the Pakistani military’s crackdown. Furthermore, not a single influential member of the fifty-seven-state Organization of Islamic Cooperation (OIC), a grouping that Khan claims to have galvanized, has come out in support of him.

Khan has responded by saying that as long as he has the people of Pakistan behind him, he doesn’t need foreign help. How he will do this now is unclear considering that many of his party’s senior leaders have deserted him after having been arrested and released by the authorities. Khan claims they were coerced and has named new, younger members to replace them. He believes strongly that he is still the most popular political leader in Pakistan and this will help him yet again in the elections that currently are expected to be held in October or November.

Khan said that popularity is the reason why his enemies have tried to kill him. “As long as that reason is there, they could try again,” he said. “So, in that sense, mentally, I mean I have overcome the fear of dying. I feel that I should be prepared for everything.”

Wajahat S. Khan is a nonresident senior fellow at the Atlantic Council’s South Asia Center and an Emmy-nominated journalist and author. He is the former bureau chief in Kabul and Islamabad for NBC News.

This article was updated to include the US State Department’s denials of Khan’s allegations about US involvement in his ouster.

The post Imran Khan on the failed India-Pakistan thaw and why he’s ‘prepared for everything’—even death appeared first on Atlantic Council.

This is the 3rd installment of the Unlocking Economic Development in Latin America and the Caribbean report, which explores five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Improving state governance, institutional capacity, and transparency

The private sector has a strong opportunity to contribute to, and benefit from, a better business climate in LAC by partnering with governments to improve state governance, particularly in three areas: “regulation and institutional environment,” “political instability,” and “corruption.” Every survey respondent named at least one of these issues as a regional detriment, while 85 percent selected two, as seen in Figure 8. Several indices of governance, such as the World Justice Project’s Rule of Law Index, rank LAC below the OECD average for measures of accountability, political stability, and government effectiveness, among other indicators, and below the global average for rule of law.¹

Quality of government and respect for the rule of law—including transparency, accountability, and enforceability—are instrumental in improving effective delivery of public services, as well as creating a business climate that incentivizes domestic and foreign investment and supports private-sector development.

Recommendations for the private sector

Businesses in LAC can assist governments in combating institutional capacity and governance challenges. Private-sector know-how and technology, including digital and cloud-based tools, can streamline government-service delivery and improve user experience. Public-private collaboration on information access and analytics, regulatory issues, and integrity mechanisms can help expose graft, boost transparency, and establish best practices, while keeping citizens informed. Together, these steps can help mitigate the region’s trust deficit, cultivate an attractive business climate, and boost economic growth.

1. Improving digital-government services: Private-sector technology and expertise should be leveraged to optimize the provision of government services and boost trust in government.
2. Promoting information access and analytics: Firms and citizens can examine and disseminate governments’ open data in ways that enforce transparency and accountability in the public sector (for example, in public procurement).
3. Improving integrity and regulatory quality: Commitment by the private sector (and the public sector) is critical to enhancing governance in LAC, from combating corruption to improving regulations.

About the author

Staff

Pepe Zhang

Senior Fellow

Adrienne Arsht Latin America Center

China Coronavirus

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Enhancing market size, scalability, and regional integration in Latin America and the Caribbean

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To sustain the ongoing recovery against short-term headwinds and boost inclusive, productive, and sustainable development in the long term, governments cannot, and should not, act alone. The private sector can strengthen the hard and soft infrastructure supporting Latin America and the Caribbean’s economies, while drawing them closer together through trade, regulatory, and other integration.

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Accelerating digitalization and innovation in Latin America and the Caribbean

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Addressing multidimensional inequality

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The post Improving state governance, institutional capacity, and transparency appeared first on Atlantic Council.

Recent progress between US and European Union (EU) negotiators to secure a more sustainable transatlantic data transfers regime has put a critical area of the transatlantic economy on a more secure footing. Yet the work for digital policymakers on both sides of the Atlantic is far from done.

Imminent completion of the US-EU Data Privacy Framework (DPF), to replace the invalidated Privacy Shield agreement, will open a new chapter in transatlantic data transfers. However, the DPF is expected to face an immediate challenge in the Court of Justice of the European Union from European privacy advocates whose past efforts doomed previous data transfer agreements.

Washington and Brussels should explore other forms of bilateral engagement on this long-troublesome set of issues. They could ask the Trade and Technology Council (TTC) to study commonalities in transatlantic approaches to accountability for personal data in the commercial context. A second avenue could be a stand-alone digital trade agreement, utilizing at least some elements of provisions on that subject developed during the failed Transatlantic Trade and Investment Partnership negotiations.

But fashioning sustainable data transfer architecture is a global – and not simply transatlantic – problem. The EU’s model of conditioning data flows on strict privacy protections has won widespread adherence around the world, but it has yielded a complex and tangled international reality. The US approach of open data flows has supporters internationally, but it has faltered in recent years as US administrations have abjured broad-scale trade agreements. The US failure to adopt comprehensive privacy legislation also makes it a global outlier.

This issue brief outlines and assesses multilateral efforts to achieve greater policy coherence across the global data transfer ecosystem. These include the World Trade Organization’s e-commerce negotiations, the Organization for Economic Co-operation and Development’s declaration on government access to personal data, Council of Europe Convention 108+, the G7 Data Free Flow with Trust initiative, and the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules system.

The interplay and synergies among these mechanisms could in time encourage a durable, interoperable global data transfer architecture.

About the author

Fellow

Kenneth Propp

Nonresident Senior Fellow

Europe Center

European Union Digital Policy

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The post More than adequate: New directions in international data transfer governance appeared first on Atlantic Council.

Click to jump to an expert analysis:

Markus Garlauskas: Measure Blinken’s success by the world’s reaction, not Beijing’s intransigence

John K. Culver: Blinken’s visit shows how China will be a 2024 campaign issue in the US

Matthew Kroenig: The relationship will continue to be defined by its more confrontational elements

Dexter Tiff Roberts: Xi had his own reasons to meet with Blinken

Emma Verges: Any US-China thaw is unlikely to extend to Taiwan

Thomas Cynkin: China is interested in stabilizing ties, but the US is the demandeur

Parker Novak: The developing world will welcome Blinken’s visit to Beijing

Measure Blinken’s success by the world’s reaction, not Beijing’s intransigence 

Before Blinken even departed for Beijing, Washington was setting the bar low for his meetings, with a top US diplomat warning not to expect any breakthroughs. There was little reason to expect, for example, that Beijing would accept one of Blinken’s top asks—resumption of bilateral military-to-military communications between the People’s Republic of China (PRC) and the United States. Beijing has regularly rebuffed this request, in line with its longstanding policy of skepticism of military-to-military hotlines, including frequently suspending them or refusing to answer them in the very moments of crisis for which they are designed.

After his meetings, Blinken publicly emphasized that he had made this ask repeatedly, which was emblematic of the pattern of the entire visit. Blinken made his case to Beijing’s officials on various issues, they remained unmoved, and then Blinken made his case again on these issues, this time to the global media. In the end, perhaps Xi and his officials were actually not the most important audience for this and other messages from Blinken.

Though a breakthrough on military-to-military communications or other important issues would have been ideal, building support for Washington’s position on the global stage would still represent a worthwhile outcome for Blinken’s visit. Establishing more clearly that the United States is seeking to responsibly manage disagreements with the PRC and to prevent a military conflict could help blunt criticism that Washington is recklessly fueling tensions. Similarly, Blinken made the point at the post-meeting press conference that a Taiwan crisis would have global implications. This was likely aimed at convincing US allies and partners that deterring and restraining PRC aggression against Taiwan is in their interest as well. Ultimately, even if Beijing’s position remains unchanged, if Blinken’s efforts resonate in friendly capitals, then it could still be considered a great success.

—Markus Garlauskas is the director of the Indo-Pacific Security Initiative of the Scowcroft Center for Strategy and Security and a former senior US government official with experience as an intelligence officer and strategist.

Blinken’s visit shows how China will be a 2024 campaign issue in the US

The most notable aspect of Blinken’s visit to Beijing is that it happened at all after being postponed in early February as a Chinese reconnaissance balloon drifted across a large portion of the United States. The Biden administration, reflecting the domestic competition for politicians to out-hardline one another on China policy, set low public expectations for the visit. So the result mildly exceeded the minimum threshold—he was hosted by his counterpart, Chinese Foreign Minister Qin Gang; held meetings with Qin’s boss, Director of the Communist Party Foreign Affairs Commission Wang Yi; and was granted an audience with Xi. 

Substantively, Blinken’s “successful” visit and mutual pledges that the senior officials from both countries will continue talking sets the stage—but doesn’t guarantee—that US President Joe Biden could meet Xi in San Francisco during the Asia-Pacific Economic Cooperation Leaders’ Summit in November. No Chinese president has failed to attend the annual summit since the first in 1993 (the 2020 and 2021 summits were virtual due to the global pandemic). In the meantime, the door is open for cabinet-level visits, perhaps including US Treasury Secretary Janet Yellen, US Commerce Secretary Gina Raimondo, or US Trade Representative Katherine Tai. Direct senior military engagement appears to remain off the table.

The other notable aspect of Blinken’s visit was the level of anti-China rhetoric unleashed in the United States over the mere prospect that it would occur. Various US media, citing unnamed sources, revealed a Chinese intelligence facility in Cuba, although apparently it dates back years. The secretary’s cautious visit underscores that China will be a campaign issue in the 2024 presidential race, and while US allies may welcome signs that Washington and Beijing are trying to build a floor under what remains of the relationship, there is little upside politically for progress.

—John K. Culver is a nonresident senior fellow with the Atlantic Council’s Global China Hub and former US national intelligence officer for East Asia.

The relationship will continue to be defined by its more confrontational elements

Blinken’s visit to Beijing shows that the Biden administration wants to pursue a balanced strategy toward China. On one hand, there is a need to compete and protect US interests from a wide range of threats posed by China. On the other hand, Washington wants to pursue an engagement track to maintain clear channels of communication, to prevent competition from veering into conflict, and to cooperate on shared global challenges.

Blinken’s visit revealed that maintaining an effective engagement track will remain challenging. The trip did not achieve breakthroughs on any of the major desired deliverables, such as the establishment of a military-to-military hotline. And the readout of the meetings suggest that the two sides mostly exchanged rehearsed talking points on contentious issues, such as Taiwan.

This visit and planned follow-up trips from other Biden administration officials in the coming weeks still serve a useful purpose, but they will not be able to meaningfully shift the trajectory of the US-China relationship, which will continue to be defined by its more confrontational elements.

—Matthew Kroenig is vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security and the Council’s Director of Studies.

Xi had his own reasons to meet with Blinken

As a backdrop to the US secretary of state’s visit to China, including Xi’s decision to sit down with Blinken on Monday, it’s important to consider the role played by the dismal state of the Chinese economy. And it is in serious bad straits, with the poor showing by retail sales and industrial production in May providing more evidence. Already, the People’s Bank of China has cut interest rates and Beijing is preparing big stimulus spending. At the same time, it needs job-providing, tax-paying, innovation- and technology-producing private and foreign investors to keep investing, even as the recent crackdown on some foreign firms has spooked them. 

Since at least March, Beijing’s official message has been that China is open to the world and that includes American companies. Just before giving an audience to Blinken, China’s president and party general secretary had already met with Microsoft co-founder Bill Gates, where he touted the importance of the friendship between the US and Chinese peoples. If Xi had stiffed Blinken (Xi met with earlier US secretaries of state) that would have sent the opposite message about China’s openness—including to business. As I anticipated before the visit, by meeting with Blinken, Beijing got to look benevolent and still have Washington in the supplicant seat.

Talking is the first step and key to avoid ugly mishaps flaring into outright conflict, as might have happened if the Chinese fighter jet that recently buzzed a US spy plane had instead collided with it. But even as some high-level contacts have now been reestablished, Beijing rebuffed Blinken on setting up a military crisis hotline. And senior discussions between the two sides, of course, doesn’t equal resolving the many deep disagreements, including over the future of Taiwan, semiconductor chips, and human rights. Nor does it erase the deep suspicion each country’s leadership feels towards the other.

—Dexter Tiff Roberts is a nonresident senior fellow with the Indo-Pacific Security Initiative and Global China Hub.

Any US-China thaw is unlikely to extend to Taiwan

During Blinken’s trip to China, his talks with Xi, Wang, and Qin highlighted sensitivities about external interference in perceived internal affairs. This becomes all the more complicated in the context of Taiwan, which Beijing views as a domestic matter implicating not only Chinese geopolitics but also nationalism. The United States, on the other hand, understands it to be of international concern, particularly in the name of promoting a free and open world and upholding an international rules-based order.  

As Beijing wishes to showcase its handling of the matter, it seems timely that Blinken’s visit coincided with the Fifteenth Straits Forum, which kicked off in Xiamen the day prior to Blinken’s arrival in Beijing. Xi even sent a congratulatory letter to the forum. Meanwhile, in talks with Blinken, Qin identified the Taiwan issue as “the most pronounced risk in the China-US relationship.” It comes as no surprise that Beijing worries about US interference in Taiwan. 

Blinken’s visit to Beijing laid the groundwork for the thawing of US-China relations, in a return to the consensus that Biden and Xi reached in Bali on maintaining open lines of communication. While communication cannot get rid of fundamental disagreements on certain issues, it can help overcome misperceptions which otherwise threaten to antagonize and lead to divisive actions. Perhaps these talks might inform a recalibration of greater engagement within the scope of a US-China strategy. 

—Emma Verges is a program assistant with the Indo-Pacific Security Initiative. 

China is interested in stabilizing ties, but the US is the demandeur

Blinken’s China visit ostensibly helped restore a more amicable tenor in bilateral communications, if not actual stability, to the Sino-US relationship. Before the visit, China’s foreign minister had a tense exchange with Blinken by telephone, in which the lead Chinese diplomat pinned the blame for the dismal state of bilateral relations squarely on the United States. This may have been a way for him to get the tough talk on the record before the actual visit, in order to clear the way for more workmanlike discussions in Beijing. A promising first sign was when Qin met Blinken outside their meeting hall, rather than follow the usual practice of waiting for him inside—a key gesture in a political system that imbues such gestures with deep symbolism. Blinken also met with Qin’s superior in the Chinese leadership, the director of the Chinese Communist Party Central Foreign Affairs Office, for a similar workmanlike exchange along familiar lines.

The Chinese are masters at dangling the possibility of senior leadership meetings as incentives for “good behavior” during bilateral discussions, and this was no exception, as Blinken’s meeting with Xi was only confirmed about an hour or so before it took place. Overall, the symbolism was clear: China is interested in stabilizing ties with the United States, but the United States is the demandeur. In similar form, while Blinken pressed repeatedly for restoring military-to-military contacts, the Chinese resisted on the convenient grounds that Defense Minister Li Shangfu has been sanctioned by the United States (in 2018, for Russia’s arms sales to China). The United States repeatedly raising the issue has no doubt convinced Beijing that it can hold out for a concession, or at least a significant warming in bilateral relations, before acceding to the US request. 

Blinken’s visit may have helped “stabilize” the relationship, but what’s more important right now is how Washington is negotiating with itself on how hard to push China in advancing US national interests. An outbound investment executive order has been on hold for months, a possible ban or limit on TikTok remains up in the air, and the Commerce Department continues to allow some export licenses issued to US suppliers for sales to blacklisted Huawei. The wisdom of these and other measures should be considered on their own merits. It is laudable for Washington to work on improving communication with Beijing; after all, Washington and Moscow managed to maintain channels through the height of the Cold War. That said, it is important that the desire to improve ties not lead Washington to trade something for nothing, or to be deterred from taking basic steps to protect US national interests vis-à-vis China.

—Thomas Cynkin is a nonresident senior fellow in the Indo-Pacific Security Initiative and the practice lead, Japan and Northeast Asia, of the Transnational Strategy Group.

The developing world will welcome Blinken’s visit to Beijing

Broadly speaking, developing countries are averse to picking sides in the accelerating geopolitical competition between the United States and China. They don’t see the choice in front of them as a binary one, and they want to avoid becoming pieces on the proverbial geopolitical chessboard that are pushed around by larger powers. Instead, they seek to maintain positive relationships with the two behemoths—a balancing act, for sure, but a manageable one from their point of view.

Collectively, these countries have trillions of dollars in development needs, and no single source can meet the necessary scale. Their leaders know that they stand to benefit as the world’s two most powerful nations lavish them with attention and resources, each aiming to gain an upper hand over the other in their global contest for influence. Indonesia, for example, has welcomed support from several countries as it tries to grow its economy and create jobs for the 1.7 million young people entering its workforce every year.

In recent months, the direction of US-China relations has caused alarm bells to ring across the developing world. Increasing tension around Taiwan, for example, is raising concerns in Southeast Asian capitals that their region is being put on a path toward armed conflict that could spell economic doom for them. It’s why, at the Shangri-La Dialogue earlier this month, a parade of Southeast Asian officials called for communication and diplomacy between the United States and China.

With this perspective in mind, the developing world will welcome Blinken’s visit to China. Leaders in developing countries will see it as a credible effort to sensibly manage a relationship that impacts the entire globe and welcome any respite in tension it provides, even if only temporary. It won’t escape their attention that China refused restoration of military-to-military communications, despite the United States’ repeated efforts to do so—bolstering the case that, between the two, the United States is the more responsible actor.

—Parker Novak is a nonresident fellow with the Global China Hub and Indo-Pacific Security Initiative.

The post Experts react: Blinken makes the rounds in Beijing. Will there be a US-China thaw? appeared first on Atlantic Council.

This is the 2nd installment of the Unlocking Economic Development in Latin America and the Caribbean report, which explores five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Accelerating digitalization and innovation

When asked about areas where they see themselves making an important social impact, 47 percent of surveyed services firms selected “digital transformation,” making it the second most impactful area only after “economic growth and job creation” (as shown below in Figure 7). Indeed, the private sector can unlock the three enablers (infrastructure, skills, and adoption), thus helping the region materialize its digital friendliness into better digital outcomes. In particular, firms in the services industries (financial, telecommunications, and information technology) consider digital transformation a vital part of their responsibility and contribution to society.

Recommendations for the private sector

The private sector is well positioned to help LAC economies, governments, and citizens make the most of its digital-innovation potential. As employers, service providers, consumers, partners, and investors, companies can leverage an ecosystem approach to enhance digital infrastructure, skills, and adoption within and across countries, delivering better digital outcomes conducive to economic inclusion and competitiveness.

1. Improving digital infrastructure: Firms can help strengthen digital connectivity in LAC, both operationally (as information and communication technology (ICT) product and service providers and investors can help strengthen digital connectivity in LAC operationally and financially.
2. Fostering skills: Employers and employees should stay innovative and competitive in an increasingly digitized economy through upskilling, reskilling, and workforce-development programs.
3. Promoting adoption: Multinational corporations (MNCs) can accelerate digital development by undertaking internal digital transformation and spurring adoption among suppliers and other businesses within their entrepreneurial ecosystems.

About the author

Staff

Pepe Zhang

Senior Fellow

Adrienne Arsht Latin America Center

China Coronavirus

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One of the most glaring examples of governments’ poor performance is the egregiously low number of victims governments identify—a problem I routinely faced over the last two decades working on this issue as a federal prosecutor, nongovernmental organization leader, and US ambassador. The United Nations (UN) Protocol to Combat Trafficking in Persons is one of the most widely subscribed instruments of international law, under which governments commit to identifying the people whom traffickers exploit. According to the latest TIP report, however, governments around the world reported identifying only 115,324 human trafficking victims in the last year. This number comes from data governments provide to the US State Department about the number of victims whom law enforcement or nongovernmental organizations identify and who receive protection services. Although this number is higher than last year’s number, it is slightly lower than the high of 118,932 victims identified in 2019.

Meanwhile, the estimated number of human trafficking victims is increasing. Compare the number of victims that governments reported identifying with the UN estimate based on surveys and data modeling. The UN estimates that traffickers are compelling 27.6 million people into forced labor or sex trafficking.

If 27.6 million victims exist and governments are only identifying 115,324 victims, then the world only identifies less than half of 1 percent of the estimated victims (0.4 percent). This means that 99.6 percent of victims remain trapped by their traffickers, unable to decide where they work or who touches their bodies.

Sex trafficking dominates the discussion of governments’ lackluster victim identification efforts. Forced labor has received less attention, but in this year’s TIP report governments identified a higher number of forced labor victims than in any prior year: 24,340. This improvement, along with governments prosecuting the largest number of labor traffickers, is encouraging. However, when the victim identification statistics are isolated for just forced labor, governments are only identifying 0.1 percent of the total estimated forced labor victims.

Victim identification is made even more difficult due to state-sanctioned human trafficking. The TIP report found that in eleven countries, the governments themselves trafficked people. These offenders include Cuba, North Korea, Eritrea, and China, where millions of Uyghurs are forced to work in Xinjiang reeducation camps. It is especially odious when the government charged with identifying victims is, in fact, the perpetrator.

Without effective victim identification, governments cannot hold traffickers accountable, and people of goodwill cannot offer tailored, trauma-informed services to trafficking survivors. Society cannot address what it cannot identify. Victim identification is the prerequisite to successful prosecution and prevention of this crime. Yet, governments’ rate of victim identification is appallingly low.

It is time for governments to match their rhetoric with their resources and dramatically increase funding for prevention efforts, investigators, prosecutors, service providers, and trauma-informed care. Specialized investigative units should no longer be paper tigers. Survivor leadership should no longer be an ornamental add-on. Holding companies and individuals accountable for committing human trafficking crimes should no longer be elective. Human trafficking victims should no longer be prosecuted for the unlawful acts their traffickers compel them to commit.

Improvement and success must begin with increased victim identification. There are several practical steps that concerned citizens should ask their governments to take:

• Mandate that educators and health care providers become mandatory reporters.
• Invest in specialized investigative units and prosecutors focused on stopping traffickers. 
• Create pathways for survivors to rid themselves of criminal records caused by their traffickers. 
• Ensure companies are not using forced laborers to produce solar panels, electric vehicles, apparel, tomatoes, and batteries. 
• Fund trauma-informed services for survivors. 
• Elevate and center survivors in the fight to put traffickers out of business.

Traffickers thrive in an ecosystem where mere intentions and underfunded public justice systems are their only challenges. It is time for leaders to arise and become champions for freedom. Millions of victims count on governments, civil society, and faith communities to do more than merely care about their plight, designate awareness days, and think good thoughts. Survivors need the world to accelerate its strategic investment and meaningful action to increase victim identification.

John Cotton Richmond is a nonresident senior fellow at the Atlantic Council, chief impact officer at Atlas Free, president of the Libertas Council, and former US ambassador-at-large to monitor and combat trafficking in persons.

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