Within the space of a single week in August, the world was handed two irreconcilable accounts of the same economy.

In the first, Russian officials told global media that the domestic economy has kept a strong and healthy profile despite what they described as unprecedented foreign pressure since the full-scale invasion of Ukraine in early 2022.

The Russian embassy in London told CNBC that the country’s fiscal position remains ‘significantly stronger’ than that of many Western economies, pointing to foreign public debt of around $57 billion, and noting that this is ‘considerably less’ than what the United States, the United Kingdom, Italy or France spend on debt servicing alone.

In the second account, Andrei Klepach, for twelve years the chief economist of the state development corporation VEB.RF and before that a deputy economy minister, was removed from his post on August 16 after remarks he made in May began circulating in Russian media.

He had told a gathering of economists at the Moscow Exchange’s Nikitsky Club that the country was losing the technological and economic contest, that it would not win a war of attrition, and that the country was heading towards a social crisis.

Both accounts contain truths. The gap between them is where the real story sits.

Absorbing four-and-a-half years of sanctions

Russia has been the target of the most extensive sanctions regime ever applied to a major economy, but it has not collapsed. It has not come close.

The adaptation happened along three main lines. Trade was redirected, with crude and refined products rerouted from Europe to India, China and Turkey, moved on a shadow fleet of ageing tankers that has grown faster than Western authorities can designate it.

The European Union’s twentieth sanctions package, adopted in April 2026, added 46 more vessels to the port access ban, taking the designated total past 630, which is itself an indication of how large the fleet has become.

Second, the state stepped into the vacuum left by departing Western firms. Public spending, above all the defence order, replaced private investment as the engine of demand. In 2023 and 2024 that produced growth above 4% a year, which was less a boom than a fiscal injection with a growth rate attached.

Third, the macroeconomic plumbing held. The central bank under Elvira Nabiullina defended the rouble aggressively, ran a genuinely orthodox inflation-targeting policy, and imposed rates that reached 21% before easing began. Inflation was brought down from around 9.5% to below 6%. Sovereign external debt stayed low, which is exactly the point the embassy is making.

So, the headline claim survives scrutiny. Russia’s external public debt is modest, its banking system has not seized up, its shops are stocked, its currency has not spiralled, and unemployment sat at 2.2% in June. Anyone who predicted a 2022-style implosion was wrong.

Where things have actually deteriorated

Low foreign public debt is partly a symptom of exclusion rather than a sign of health. Russia cannot borrow abroad because foreign capital markets are shut to it, so the debt it does not owe overseas is a measure of what it cannot access, not of what it has chosen to avoid. The pressure has simply moved to the domestic balance sheet, and there the numbers are less comfortable.

Between January and July 2026, the federal budget ran a deficit of 6.46 trillion roubles, roughly $79 billion. That is already well beyond the full-year target of 3.79 trillion roubles, which was set at 1.6% of GDP.

Depending on the GDP base used, the seven-month gap works out at somewhere between 2.5% and 2.8% of output. Former deputy central bank chairman Sergei Aleksashenko expects the full-year figure to land between 7 and 7.5 trillion roubles, roughly 3% of GDP.

The composition of that gap matters more than its size. Oil and gas revenues fell 16.8% year on year to 4.6 trillion roubles, despite a Middle East conflict that briefly pushed crude sharply higher. The domestic fuel damper mechanism, which compensates refiners for selling into the home market below export parity, consumed most of the windfall.

Meanwhile, spending has run ahead of plan, with government procurement including the state defence order up around 40% year-on-year to 8.44 trillion roubles by the end of July, some 80% of the entire annual allocation.

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The finance ministry raised 2.3 trillion roubles through OFZ bond issuance in the first seven months, largely absorbed by state banks, and then paused placements because yields near 16% made the exercise punitively expensive. Debt servicing has become one of the largest single lines in federal spending.

Around 460 billion roubles was drawn from the ‘National Wealth Fund’, about 200 billion roubles came from selling nationalised assets, and roughly 3.5 trillion was covered by running down Treasury balances parked in commercial banks, with a little over 4.5 trillion left in that pool.

The cushion that made the first years of the war survivable has largely gone. Before February 2022, the National Wealth Fund held around $113 billion in liquid assets, equal to 7.3% of GDP. It is now worth roughly a third of that in real terms, at about 2% of GDP. A fund designed to co-finance pensions has been spent covering a war.

The corporate picture behind those aggregates is weakening in parallel. More than half of Russia’s large companies closed 2025 with lower profits, and many have cut or frozen investment programmes outright.

The coal sector, hit by falling global prices, sanctions and rising rail tariffs, has been running at a loss across a majority of its enterprises. Regional finances have deteriorated alongside, with the great bulk of Russia’s regions running deficits simultaneously for the first time. None of this shows up in a sovereign external debt figure.

The rest of the bill has been passed on to households and firms. VAT went to 22% at the start of 2026, the highest rate since 1992, and the revenue threshold at which smaller businesses must register for it was cut sharply. VAT receipts rose almost 25% in the first seven months. That is not economic growth. It is a transfer from the private sector to the treasury, and it is being made in an economy where growth has already stalled.

What Klepach actually said

Klepach’s speech on May 21 was not a dissident manifesto. It was a technical diagnosis delivered to a room of professional economists, which is part of why it was so damaging when it surfaced.

He began by apportioning blame for the slowdown. Around half of it, he argued, came from the central bank’s extremely tight monetary policy, which had crushed investment and, in combination with reduced subsidised lending, dampened consumer demand.

Roughly 30% he attributed to industrial policy failure, citing the surrender of the vehicle market to Chinese manufacturers, who now account for close to half of passenger car sales and more than 70% including local assembly, and 60% of trucks.

He then went through the sectors. Design and technical problems in the new domestic civil aircraft programme. Weak demand in construction materials and metallurgy. Raw material shortages and import dependence in light industry.

His conclusion on monetary policy was pointed. Not every barrier, he said, comes from the central bank, and even a substantial rate cut would not deliver rapid growth.

His medium-term ceiling for the economy, assuming the war continues and sanctions hold, was 2% to 2.5% a year. Then came the passages that ended his career.

“We won’t win the competition in this war of attrition,” he said, adding that Russia was losing not only to China and the United States but in some ways to Ukraine, which he acknowledged was an unpleasant thing for him to say.

Ukraine’s economy is partly destroyed and demographically shattered, he noted, but it is being financed by the West at a scale that dwarfs Russian capital outflows. The assumption that it would simply collapse has not held, and will not hold.

His summary was that Russia would not fall apart and would not suffer economic collapse, but that its lag would keep widening, and that he was almost certain the country was heading for a social crisis. He added that these things arrive when nobody expects them, and reminded his audience that ‘no one expected the February Revolution either’.

VEB.RF Chairman Igor Shuvalov reportedly acted after a call from above. An acquaintance told the business daily Vedomosti that the dismissal was related to personal and harsh assessments that could not be reconciled with the corporation’s official position.

Testing his analysis against the data

The striking thing about Klepach’s assessment is how closely it tracks the official numbers, including the ones Rosstat published after he spoke.

Second-quarter GDP grew 1.3% year-on-year, beating both the central bank’s 0.8% estimate and the economy ministry’s 0.9%. Taken alone, it reads as vindication for Moscow. Taken in context, it does not. The first quarter contracted 0.2%, the first decline since 2023, so first-half growth came to just 0.6%, around half of last year’s pace and a fraction of the wartime surge of 2023 and 2024.

The quarterly rebound also rests on temporary supports. There were 5% more working days than a year earlier. Federal spending in the quarter rose about 13% to 11.5 trillion roubles, with government procurement up 38.5%. Retail turnover jumped 7.2%.

The economy ministry itself cut its 2026 growth forecast threefold in May, from 1.3% to 0.4%, and the central bank in July projected a range of zero to 1%.

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Underneath the aggregate, the two-speed structure Klepach described is visible in the data. Industrial output growth accelerated only because a defence complex flush with orders offset declines elsewhere.

Civilian manufacturing, excluding oil, fell 2.1% in June and remains close to 4% below its 2024 monthly average, on calculations by the Centre for Macroeconomic Analysis and Short-Term Forecasting. Civilian industry as a whole has been contracting by more than 3% year-on-year.

The energy picture has deteriorated faster than he could have anticipated in May. Sustained Ukrainian drone strikes have pushed Russian refinery runs to roughly 3.6 to 3.9 million barrels a day in July, the lowest in more than two decades and about a third below the seasonal norm, with 18 refineries targeted in that month alone.

The resulting petrol shortages forced export restrictions and drove the central bank to raise its 2026 inflation forecast to between 6% and 7% while cutting the key rate by only a quarter point to 14%. Most of the damage will not appear in the national accounts until third-quarter data.

The labour market completes the picture. Unemployment of 2.2% sounds like strength, but it reflects a workforce hollowed out by casualties, emigration and recruitment, with authorities projecting a shortfall of around 3.1 million workers by 2030. An economy cannot grow out of stagnation with no spare labour, no spare capital, and a central bank rate in double digits.

Reading the social crisis warning

Klepach was careful about his terms, and the care is the substance of the argument. He explicitly ruled out collapse. What he described is slower, less dramatic, and harder to reverse.

The mechanism runs roughly as follows. Growth settles near zero while inflation stays around 6%, so real incomes barely move. Growth in real disposable income could be as little as 0.6% this year.

Inequality, which narrowed in 2023 and 2024 as military wages and defence sector pay lifted incomes in poorer regions, has begun widening again. Pensions are falling further behind wages. Tax rises are squeezing small and medium-sized businesses hardest, and those firms employ the people who are not on the defence payroll.

Klepach also cited survey evidence that perceived healthcare quality is deteriorating, which is what happens when nearly 40% of federal spending goes to defence and security.

There is also a quieter adjustment happening beneath the headline employment figure. Vacancies have been falling while the number of CVs in circulation rises, a pattern that usually signals hidden unemployment rather than a tight market.

Employers have responded to cost pressure by cutting hours, freezing pay, and shedding administrative staff rather than by making formal redundancies, which keeps the official rate low while incomes stagnate. Demand for second jobs has risen sharply.

A labour market can look fully employed and still be delivering falling living standards, and that combination is exactly what produces political surprises.

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The politics of this are more delicate than the economics. The war economy created a large constituency of beneficiaries, from contract soldiers and their families to defence plant workers in regions that had seen no investment in decades.

A social crisis in Klepach’s sense is what happens when that constituency stops growing and starts shrinking, when the payments stop rising in real terms, when the coal towns and civilian factories that were already unprofitable finally close, and when veterans return to a labour market with no room for them. His invocation of February 1917 was not a prediction of revolution. It was a reminder that this category of breakdown is not forecastable from a spreadsheet.

Slow decline

The embassy is right that Russia is not about to default or implode, and Western policymakers who keep waiting for a cliff edge will keep being disappointed. Klepach is right that an economy running at 0.4% growth, financing a war by taxing its own citizens and draining its Treasury balances, with its refining base under weekly attack and its technological gap widening, is not healthy in any sense that matters over a decade.

The indicators worth tracking are the full-year deficit against Aleksashenko’s 7 to 7.5 trillion rouble estimate, the resumption or otherwise of OFZ issuance, third-quarter GDP once the fuel crisis lands in the data, and real disposable income growth into 2027.

The most telling signal, though, has already been given. When a state corporation dismisses one of the country’s most respected macroeconomists for describing the contents of its own government’s forecasts, the problem is no longer only economic.

The post Russia’s economy is holding, but decline could take decades to heal appeared first on International Finance.

London’s move also coincided with the waiver issued by the United States, under which purchases of Russian seaborne oil will support energy-vulnerable countries hit by supply disruptions.

Despite the criticisms about the waivers potentially weakening West’s economic efforts against the Kremlin’s war machine, administrations in Washington and London are in no mood to leave the rising fuel costs unattended, with the phenomenon putting a severe squeeze on both the households’ energy expenses and the operational margins of the airlines.

The budget airlines have been on dire straits, with fuel bills accounting up to a quarter of operating expenses. To deal with this, carriers globally have responded with fare increases, capacity cuts and warnings of weaker earnings.

In the United Kingdom, higher fuel costs have also fed into broader cost-of-living pressures, with the Starmer government seeking to be proactive in terms of addressing inflation and energy affordability-related concerns. While the inflation rate fell to 2.8% in April from March’s tally of 3.3%, due to lower electricity and gas bills, analysts from Cornwall Insight still predict the domestic energy price cap will rise by around 13% in July from the current levels.

Despite the lower inflation, the United Kingdom hardly has any room for error, with the Iran war weighing heavily upon its overall economic outlook. A cooling labour market, along with falling payrolls and job vacancies, is emerging as the pain point.

While Western sanctions, imposed since 2022 (the year the Ukraine war started), have sought to curb Moscow’s energy revenues, the main driver of its battle machine, Russian crude has been flowing to global markets, often via intermediaries like India and Turkey (in terms of refining and re-exporting energy products), thereby complicating enforcement as refined products are ⁠not typically classified as Russian-origin under standard trade rules.

Talking about the United Kingdom’s latest waiver, the time-limited licence will cover the maritime transportation of LNG from Russia’s Sakhalin-2 and Yamal projects and related services, including shipping, financing and brokering, under Russia’s sanctions rules until January 2027.

On the other hand, US Treasury Secretary Scott Bessent said that the extension of the 30-day general license will allow temporary access to Russian oil and petroleum products stranded on tankers without violating severe American sanctions on Russian oil majors.

“This extension will provide additional flexibility, and we will work with these nations to provide specific licenses as needed. This general licence will help stabilise the physical crude market and ensure oil reaches the most energy-vulnerable countries,” Bessent said, in a sharp U-turn from his April statement, where he told the Associated Press ⁠that no further extension of the Russian oil sanctions waiver was planned.

While the Donald Trump administration sanctioned Russian oil majors Rosneft and Lukoil in 2025 to pressure Moscow to end its Ukraine campaign, the ongoing Iran war has resulted in a situation change, with the US Treasury issuing back-to-back waivers since March 2026 to ease energy supply shortages and mitigate price spikes by releasing sanctioned Russian oil and petroleum products stranded in tankers. The waivers do not apply to oil now being pumped by Russia.

The post US, UK relax Russian sanctions to mitigate energy price shock appeared first on International Finance.

Staying true to the Islamic banking’s core principles of prohibiting interest-based lending and speculative transactions, Russia launched the pilot initiative in 2023 in four predominantly Muslim regions, including the Republic of Tatarstan, and later extended it until 2028. The initiative relies on mechanisms such as leasing, instalment sales, profit-sharing arrangements and asset-backed financing.

Taking note of the fact that an estimated 20 million Muslims live in Russia, including more than two million in Tatarstan, Sber senior vice president Oleg Ganeev said demand was strongest for everyday banking products like accounts, payment services, cards, and deposits.

The lender, under the pilot programme, has also launched digital sukuk products, Islamic bonds designed to comply with Sharia principles, Ganeev said while speaking at the “Russia-Islamic World Forum”, an Islamic-themed conference held in Tatarstan’s capital, Kazan.

Admitting that Russia’s Islamic banking sector still lacks clear regulation and unified standards, Anatoly Aksakov, chairman of the State Duma Committee on the Financial Market, said at the Kazan Forum that the country could adopt its first Islamic banking standard within a month.

As per Aksakov, Russian lawmakers and financial institutions have already identified “eight priority areas for development” based on standards used by the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

Tatarstan Economic Minister Midhat Shagiakhmetov said that the republic had been developing Islamic finance for around 15 years and now offers about 35 Sharia-compliant financial products. Over half of all transactions under Russia’s pilot program are currently carried out in the region.

Apart from expanding the pilot programme beyond the four participating regions, Russian officials have also discussed increasing the usage of Islamic finance instruments to attract foreign investment. Aksakov, in January 2026, revealed Russia’s plan to open its first Islamic bank. As per the head of the State Duma Committee on the Financial Market, consultations were underway between officials and domestic businesses, including those serving Muslim communities.

Aksakov envisioned the project giving a significant boost to so-called partnership financing in Russia, a market estimated at about 1 trillion rubles (USD 12.7 billion).

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In 2025 and 2026, this route has generated enormous excitement. Record numbers of ships are making the crossing. Chinese container vessels are completing the journey in under three weeks. India is signing mineral deals with Russia that could send a new category of cargo through the frozen north. On paper, the Arctic is open for business.

But the full picture is considerably more complicated, and considerably less flattering. While one set of numbers is climbing, another is falling. The route is simultaneously booming and contracting, expanding in one narrow slice while collapsing in the far larger slice that actually matters. Understanding why requires separating two very different things that often get confused in the headlines.

Two Routes in One

When analysts talk about the Northern Sea Route, they are actually describing two distinct corridors that happen to share the same geography.

The first is a domestic Russian export pipeline. Giant tankers loaded with liquefied natural gas and crude oil depart from Russian Arctic ports and sail to customers in Asia. This traffic makes up roughly 82% of everything that moves on the route. It is not international trade in the conventional sense. It is Russia shipping its own natural resources to paying customers.

The second is genuine international transit, where a ship travels the full length of the route from one end to the other without stopping at Russian ports. Think of a Chinese container ship loading goods in Shanghai and sailing them all the way through Arctic waters to a port in Germany. This is the category that is genuinely booming, and it is also the far smaller of the two.

In 2025, the total cargo moved along the Northern Sea Route fell for the second year in a row, dropping to 37.02 million metric tonnes, roughly 870,000 tonnes less than in 2024. This reverses years of growth and sits quite far from the Russian government’s official targets of 80 million tonnes by 2024, and 200 million tonnes by 2030.

At the same time, the number of international transit voyages reached a record 103 in 2025, up from 97 the year before. Those voyages moved approximately 3.2 million tonnes of cargo. So, the transit boom is real, but it is also responsible for less than 9% of the route’s total traffic.

Peter Sand, Chief Analyst at freight intelligence platform Xeneta, put the scale of the transit trade in stark perspective. “The number of ships transiting the Northern Sea Route last year was a record high. But we counted 15 ships, so that’s what a record high looks like,” he said. On the economics, Sand was equally direct: “Shorter distance is clearly attractive. But you still have to factor in expensive transit costs.”

Why Container Ships Are Coming

The surge in container transits is not happening because the Arctic route has suddenly become easy or cheap. It is happening because the alternative routes have become painful.

Since late 2023, militant groups in Yemen have been attacking cargo ships in the Red Sea near the Bab al-Mandab strait, one of the world’s busiest waterways. In response, most major shipping lines diverted their vessels around the southern tip of Africa via the Cape of Good Hope. By mid-2024, traffic through the Suez Canal had fallen by roughly 70%, costing Egypt an estimated $800 million a month in lost revenue.

For a Chinese exporter, rerouting around Africa adds enormous distance, time, and fuel cost to every shipment. In that context, the Arctic option began to look less like a gamble and more like a reasonable hedge. Chinese operators, primarily NewNew Shipping Line and Sea Legend, moved roughly 400,000 tonnes of container cargo through the Arctic in 2025, a 2.6-fold increase on the previous year. Not everyone is convinced.

Søren Toft, Chief Executive of Mediterranean Shipping Company, the world’s largest container line, was categorical: “The debate around the Arctic is intensifying, and commercial shipping is part of that discussion. Our position at MSC is clear. We do not, and will not use the Northern Sea Route.”

The route’s possibilities were demonstrated dramatically when the container ship Istanbul Bridge completed the first direct container connection between China and the United Kingdom via the Northern Sea Route, finishing the crossing in a record 20 days at an average speed of 16.7 knots. The same season, the vessel Newnew Polar Bear departed Shanghai on July 16 and arrived at the Russian port of Arkhangelsk in under a month, delivering 497 containers carrying auto parts, PVC film, and steel before loading Russian timber for the return leg.

South Korea is watching closely. Its Ministry of Oceans and Fisheries scheduled a September 2026 container transit to evaluate whether it could replicate China’s Arctic logistics model. South Korean shipyards already lead the world in building large ice-capable commercial vessels, and Japan has deep expertise in research icebreakers. Between them, the two countries could form a powerful North Pacific logistics network feeding into the Arctic corridor.

What Actually Drives the Route

For all the excitement about containers, the Northern Sea Route’s economic engine runs almost entirely on fossil fuels. Energy cargoes make up 83% of all traffic. Liquefied natural gas alone accounts for 58% of total volumes, crude oil for 21%, and gas condensate for roughly 4%. The port of Sabetta, the main export terminal for the massive Yamal LNG project in Siberia, handled about 90% of the route’s entire cargo turnover in 2025, moving 29.1 million tonnes.

The volume contraction in 2025 is happening precisely because these fossil fuel operations are running into serious trouble. LNG shipments fell 2.7% due to maintenance shutdowns at the Yamal plant and a shortage of the specialised ice-capable vessels needed to run them. Crude oil exports from Gazprom’s Novoportovskoye field are, in what officials diplomatically call, a ‘smooth decline’, which is a polite way of saying the oil field is running dry. Coal shipments through the route collapsed by nearly 29%.

The route’s future growth was supposed to come from two enormous new projects. Novatek’s Arctic LNG 2 was designed to produce nearly 20 million tonnes of gas a year from three production trains. Rosneft’s Vostok Oil was described as the largest new oil development on earth in two decades, holding an estimated 45 billion barrels of reserves with a target output of 115 million tonnes a year by 2033. Between them, these two projects were supposed to deliver the volumes that would justify Moscow’s infrastructure investment and its ambitious shipping targets.

Neither is producing anywhere near what was planned.

How Sanctions Broke the Dream

Western sanctions imposed following Russia’s invasion of Ukraine have created a chokepoint that no icebreaker can smash through.

Arctic LNG 2 depends on a fleet of approximately 21 highly specialised Arc7 ice-class LNG carriers. These are not ordinary tankers. They are purpose-built vessels capable of navigating independently through thick Arctic ice. Russia ordered 15 of them from its domestic Zvezda shipyard. By early 2026, exactly one had been delivered. The rest of the construction programme is frozen because the shipyard cannot access the imported marine equipment, specialised cryogenic containment systems, and international financing it needs. The alternative, building them at South Korean yards, which are the world’s leading builders of such vessels, is entirely blocked by sanctions.

Four Arc4 LNG carriers were actually completed in 2024 at Hanwha Ocean in South Korea, but they are currently sitting idle off the coasts of Indonesia and Europe. Even though the European Union removed several of these vessels from its sanctions lists in July 2025, no international operator will charter them. The reputational risk and the fear of secondary sanctions are simply too great.

Arctic LNG 2 did manage to export 16 gas cargoes in late 2025, but it is operating only its first production train at a fraction of its designed capacity, often selling gas at steep discounts to Asian buyers because it has no other options. Novatek has now put all three successor projects, Arctic LNG 1, Arctic LNG 3, and Ob LNG, on indefinite hold.

Vostok Oil has not shipped a single commercial cargo.

Transporting the cargo requires a 770-kilometre pipeline to the Kara Sea, a deep-water port called Sever Bay, and a fleet of up to 50 vessels, including at least 10 Arc7 tankers. As of 2026, the pipeline is less than half built, the port is under construction, and the specialised fleet does not exist. US sanctions imposed on the project’s operator, RN-Vankor, in January 2025 further restricted access to the technology needed to move forward.

On January 1, 2027, the European Union’s ban on Russian LNG imports takes effect. In February 2026, 100% of Yamal LNG exports were still flowing into EU ports, totalling over 1.5 million tonnes in that month alone. Europe is not just a customer. It provides transshipment facilities, vessel maintenance, crew changes, and insurance services for the 14 specialised Yamalmax Arc7 carriers that run the Yamal operation. Replacing those services for Asian routes would require Novatek to source an estimated 32 to 40 additional conventional LNG carriers. Under the current sanctions environment, that is essentially impossible.

The Shadow Fleet and NATO’s Response

Russia’s workaround for the sanctions blockade has been to build a ‘shadow fleet’, a collection of ageing, poorly maintained tankers operating under obscure ownership structures, frequently flying flags of convenience, and regularly switching off or spoofing their tracking systems to hide where they are going, and where they have been.

Shadow fleets are nothing new. Iran and Venezuela have used similar arrangements to keep their oil moving. But the Arctic amplifies the risks to an entirely different level. A mechanical failure in the Mediterranean can be handled with tugs and salvage crews. The same failure in the Barents Sea, hundreds of kilometres from the nearest port, in temperatures that can kill an exposed person in minutes, is a potential catastrophe.

An oil spill from an uninsured, structurally substandard tanker in Arctic waters would be an environmental disaster on a scale that would take decades to address.

Malte Humpert, founder of The Arctic Institute, has been direct about the trajectory. “It’s not a question of if, just a matter of when,” he said of a major accident or spill.

Research shows that pollution concentrations along sections of the route are exceeding maximum permissible limits.

European nations have responded aggressively. In January 2026, fourteen European countries issued a joint declaration warning that shadow fleet tankers without valid safety documents and internationally recognised insurance would be classified as stateless vessels under international maritime law, giving coastal states the legal authority to intercept and detain them. That rhetoric quickly became action.

Belgian and French forces boarded the tanker Ethera in the North Sea on suspicion of false flagging and forged documents. French naval commandos boarded the Grinch, a crude oil tanker owned by a Moscow-based company but flying a Comoros flag, in the Alboran Sea, and escorted it to Marseille. Swedish coast guards took control of the cargo vessel Caffa in the Baltic Sea to inspect its documents and seaworthiness. These interceptions were in European waters, but they establish the legal precedent and the operational willingness to police the routes that Russian Arctic oil must use to reach global markets.

The Ice Problem Is Getting Worse, Not Better

A widely repeated assumption about Arctic shipping is that climate change is steadily melting the ice and making the route easier to navigate every year. The reality is far more dangerous.

The overall Arctic sea ice maximum in winter 2026 reached 14.278 million square kilometres in March, tying the 2025 record as the lowest ever recorded in 47 years of satellite data. But within that global picture, regional behaviour was violent and unpredictable. A persistent, unstable polar jet stream drove fierce Arctic winds that expanded sea ice in the eastern Bering Sea by 60% in just two weeks.

The ice pushed abnormally far south, blocking the False Pass shipping channel in the Aleutians, and extending down to within 30 miles of Unimak Pass, a vital route for westbound commercial vessels heading into the Pacific.

Ships facing this kind of ice do not just risk damage from the ice itself. Wind-driven sea spray at near-freezing temperatures instantly freezes onto a vessel’s hull and superstructure, building up hundreds of tons of ice that can alter the ship’s centre of gravity, and capsize it.

The logistical consequences were severe. AIS tracking data from March 2026 showed that commercial vessels entirely abandoned the ice-choked Unimak Pass. Traffic through the alternative Amukta Pass surged by 800% year-on-year. Routes plotted entirely south of the Aleutian Islands saw an 88% increase in traffic as shipmasters chose longer journeys to guarantee they would arrive at all.

This matters enormously for the viability of the Northern Sea Route as a container shipping corridor. Modern container logistics depend on precision scheduling, with arrival times calculated to the hour. A route capable of generating a 60% ice expansion across a critical chokepoint in a fortnight is fundamentally incompatible with the reliability that global supply chains require. Research has also identified a correlation between ocean heat flowing into the Arctic through the Bering Strait and sea ice conditions across the following summer, meaning that conditions a year ahead remain difficult to predict with confidence.

Why the Maths Still Does Not Work for Containers

Even setting aside the ice anomalies and the geopolitics, the basic economics of running container ships through the Arctic are extremely challenging.

The route is shorter, there is no question about that. Rotterdam to Yokohama via the Suez Canal is roughly 12,840 nautical miles. Via the Northern Sea Route it is about 5,770 nautical miles. At 16 knots, the Suez voyage takes around 33 days; the Arctic crossing takes around 15. That is a significant saving in fuel and time.

But the savings are eaten up by a cost stack that applies to every Arctic voyage, and has no equivalent on southern routes. Mandatory icebreaker escorts charged by Russia’s state nuclear fleet operator, Rosatomflot, can easily reach $180,000 per voyage even during relatively mild autumn conditions. Insurance premiums for Arctic operations are routinely $40,000 to $50,000 higher per voyage than equivalent Suez coverage.

Bureaucratic friction adds further cost. The Suez Canal requires 48 hours’ advance notice for transit, while the Russian administration requires permit applications up to four months in advance, making it impossible to respond to the spot-market conditions that modern shipping alliances depend on. Basic permits and compliance add another $20,000 per voyage.

The per-container economics are similarly unflattering. Based on standard calculations for a vessel travelling at 16 knots and consuming 45 tonnes of fuel per day at $650 per tonne, the cost of shipping one empty container unit via the Arctic works out to roughly $648. On filled containers, factoring in directional imbalances, costs can double.

Humpert, of The Arctic Institute, sees the imbalance as structural. “The NSR will exist only as a transport route with mostly one-directional traffic,” he said. “Outside factors, such as unfavorable market conditions, varying ice levels and the lack of available Russian icebreakers, may yet dash Mr Putin’s hope to establish the route as a northern export highway.”

There is also a fundamental size problem. The Suez Canal regularly accommodates vessels carrying 24,000 containers or more. The shallow straits and narrow icebreaker-cleared channels of the Arctic limit viable vessels to roughly 2,000 to 4,000 containers. The fuel savings of a shorter journey are essentially cancelled out because the same cargo requires five or six smaller ships instead of one large one.

The Suez route also generates revenue at multiple intermediate ports along the way, places like Singapore, Colombo, Jeddah, and Piraeus, while the Arctic offers no commercial stops at all across thousands of kilometres of uninhabited coastline.

The Bigger Strategic Picture

Russia’s control of the Northern Sea Route is not purely economic. Moscow treats the route as internal national waters, requiring foreign vessels to obtain advance permission, carry Russian pilots, and pay Russian icebreaker fees. This gives Russia surveillance of foreign ships near sensitive military installations and allows its Northern and Pacific naval fleets to move without transiting NATO-monitored straits.

Russia’s official position is bullish. Vladimir Panov, Special Representative for Arctic Development at Rosatom, described a corridor in ascent: “The Northern Sea Route is developing rapidly, becoming a viable and efficient global logistics route. This is facilitated by various factors, including the development of advanced technologies, the construction of new-generation nuclear icebreakers, and growing interest from international shippers.”

Western allies have begun pushing back directly. In early 2026, the United States, Canada, and Finland launched the ICE Pact, a collaborative programme to jointly build allied icebreakers. The strategic intent is to create an escort capability that does not depend on Russian assets, allowing allied nations to accompany commercial vessels through the Northern Sea Route under international maritime law without paying Russian tariffs.

NATO simultaneously launched the Arctic Sentry framework in February 2026, integrating surveillance systems from Nordic allies to create continuous monitoring from the Baltic to the Arctic Ocean, tracking Russian military movements and providing independent navigational intelligence to commercial operators.

The Suez Canal, meanwhile, is recovering. Since the beginning of 2026 it has processed 1,315 vessels carrying a total of 56 million tonnes, generating $449 million in revenue, a marked improvement on the equivalent period a year earlier. Major carriers, including CMA CGM and Maersk, have reaffirmed their commitment to the route. As CMA CGM’s CEO put it plainly, there is no alternative to the Suez Canal.

The Northern Sea Route will continue to grow in specific, narrow circumstances for Chinese state-aligned operators willing to pay premium costs for geopolitical insulation, for Indian mineral supply chains being built outside Western and Chinese control, and for Russia’s own hydrocarbon exports when its projects eventually come back online. But the idea of the route as the next great artery of global trade remains, for now, a story about what might one day be possible rather than what is actually happening.

The post Arctic Shipping Route Promises A Lot, But Delivers Far Less appeared first on International Finance.

In 2026, the real question is not whether the dollar dominates; it obviously does. The real question is whether governments are preparing for a future where they rely on it, just a bit less. A shift, yes. A revolution? Not really.

According to Bidisha Bhattacharya, economist and columnist at ThePrint, what we are seeing is not some financial revolution. It is much slower than that. Almost cautious.

“De-dollarisation is real, but it is evolutionary rather than revolutionary. The US dollar continues to account for roughly 60% of global foreign exchange reserves, down from over 70% in the early 2000s. That decline reflects diversification at the margins, not displacement at the core,” Bhattacharya told International Finance.

The fundamentals still favour the dollar – deep financial markets, extremely liquid US Treasury bonds, strong institutional trust, and powerful network effects. The more people use the dollar, the harder it becomes to replace.

“Currency hierarchies do not flip suddenly. They evolve, slowly,” she said.

The world is not abandoning the dollar; it is just becoming less dependent on it.

The gold rush — again

If there is one clear signal of this caution, it is gold. Central banks have been buying massive amounts of gold, levels not seen in decades. Annual purchases have exceeded 1,000 tonnes in recent years. This is not about returning to the gold standard or romanticising the past. It is about protection.

“Gold accumulation has become strategically significant. This is less about replacing the dollar, and more about hedging geopolitical and sanctions risk. Gold carries no counterparty risk and functions as a balance-sheet stabiliser in a fragmented global order,” Bhattacharya said.

However, markets play a role too. Mike McGlone of Bloomberg Intelligence argues that central bank demand has been pushing prices higher.

“Central banks purchased about 1,000 tonnes annually in 2022, 2023 and 2024, roughly double the previous decade’s average,” McGlone told International Finance, pointing to geopolitical tensions, including Russia’s invasion of Ukraine, as a key driver.

Yet, McGlone suggests, markets may be overheating. Gold could approach major peaks around 2026, similar to historic highs seen in 1980 and 2011. Some reserve diversification, he says, may reflect in rising gold prices rather than a fundamental move away from the dollar.

He added that most of the statistics on gold outpacing dollar reserves are due to the rapid rise in gold prices.

“Demand is notably driven by geopolitics rather than inflation concerns,” he said, suggesting easing global tensions could weaken momentum. So yes, gold is rising. But it is not replacing the dollar.

Sanctions, control, and financial vulnerability

Politics also plays a big role. Maybe more than markets.

Elnara Omarova, who works on BRICS-related policy issues, says many governments are mainly concerned about control, or the lack of it.

“The key issue is access. When central bank reserves can be frozen, or access to dollar clearing becomes politically contingent, governments start reassessing how much exposure they are comfortable carrying. Diversification then becomes less about ideology and more about insurance,” Omarova told International Finance.

This has taken several forms: larger gold reserves, more holdings in non-dollar currencies, and bilateral trade settled in local currencies. And, it has been especially seen in energy markets. But these changes remain limited. The dollar still wins on liquidity, convertibility, and market depth.

“Diversification is happening, but it is incremental,” Omarova said, describing it as risk management in a more fragmented geopolitical environment rather than an abrupt shift away from the dollar. Omarova calls it a recalibration, not a rupture.

The BRICS Debate: More noise than disruption

Much of the public discussion focuses on BRICS, and whether the group could reshape global finance. Analysts urge caution.

The influence of BRICS comes mostly from coordination, encouraging trade in national currencies, experimenting with alternative financing mechanisms, and building regional frameworks. It signals exploration, not replacement.

Lawrence Ngorand of Busara Advisors sees BRICS as pushing the world toward a more multi-polar financial system.

“The BRICS play a catalytic role, accelerating the transition toward a more multi-polar financial architecture,” Ngorand told International Finance.

Their role lies in building alternative infrastructure and gradually shifting expectations. But structural problems remain. There is no widely trusted BRICS reserve currency. Institutional cohesion varies. Therefore, the shift is evolutionary. It is slow, uneven, and incomplete.

Global trade moves beyond the dollar

This may be the toughest question. Commodity markets still revolve around dollar pricing, largely because the liquidity, benchmarks, and risk-management systems behind them are already deeply built around it.

Omarova suggests bilateral trade settlement could diversify, especially among politically aligned countries. But changing global pricing norms would require deep financial markets, credible alternatives, and global participation. That is a very high barrier.

Ngorand agrees that the dollar’s dominance is not just about politics; it is structural power: capital markets, institutional trust, and global network effects.

Regional diversification is happening, particularly in energy trade and infrastructure financing. But full displacement? Unlikely.

“The most likely outcome is not the replacement of the dollar, but the emergence of a more fragmented system where multiple currencies co-exist,” Ngorand said.

When gold stops being a safe haven

Yet the gold story is also becoming more complicated. For years, gold has been treated almost instinctively as the ultimate reserve hedge. No counterparty risk, no dependence on another country’s financial system, and no sanctions exposure. In a fragmented geopolitical world, that logic sounds almost irresistible. But, not everyone is convinced the current gold surge reflects long-term stability.

According to Mike McGlone, gold’s behaviour in markets has started looking less like a traditional store of value and more like a volatile financial asset.

“Gold has shifted toward a speculative asset from a store of value,” McGlone told International Finance, noting that its 180-day volatility has surged to about 2.4 times that of the S&P 500, the highest relative level in two decades. That is not what investors typically expect from a stability anchor.

In fact, McGlone suggests that in many financial stress scenarios, gold might not behave the way policymakers hope. Instead of rising as a stabiliser, it could actually fall when measured in dollar terms.

“In most scenarios, gold declines in USD terms,” he said.

That observation complicates the narrative that central banks are simply replacing dollar reserves with bullion. In reality, gold still trades in a dollar-dominated financial ecosystem. Its pricing, liquidity, and global trading infrastructure remain deeply tied to the very system some countries are trying to hedge against.

So, the question becomes less about whether gold can hedge geopolitical risk and more about whether it can truly function as a substitute for dollar liquidity during a crisis. So far, the answer remains uncertain.

The signalling game of ‘central bank gold’

There is another dimension to the gold story: signalling. Central banks do not build reserves only for their own balance sheets. Sometimes, what they hold also sends a signal outward to markets, to investors, to anyone watching closely.

For emerging economies in particular, the mix of reserves can quietly influence how strong or stable a country looks from the outside.

Some analysts say the recent gold buying could partly be about that, projecting resilience in a world where capital can move very quickly.

Still, McGlone is not entirely convinced that signalling explains everything.

When asked whether emerging economies might be building gold reserves partly to reassure international investors, his answer was simple: it is not entirely clear.

“I don’t know,” he said.

However, what he does emphasise is the geopolitical context that triggered the surge in demand.

Russia’s invasion of Ukraine and the subsequent freezing of foreign reserves forced policymakers everywhere to rethink financial vulnerability. The episode highlighted how even large sovereign reserves could suddenly become inaccessible under sanctions. That shock pushed many countries toward alternative assets, including gold.

But geopolitical dynamics are constantly evolving. And in McGlone’s view, the political drivers behind the gold rally may already be fading.

“The geopolitical bid is diminishing,” he said, pointing to shifting political developments in countries often aligned against US influence, including changes in Syria and evolving political pressures in Venezuela, Iran, and Cuba.

If the geopolitical momentum behind gold weakens, the rally could slow as well. Which raises an uncomfortable possibility for central banks: they may have increased their gold exposure precisely when the market was reaching peak enthusiasm.

When reserve diversification goes too far

Gold accumulation has been dramatic. In some ways, it is historically dramatic. But there is also a point where diversification strategies begin to face diminishing returns. For McGlone, that point may already have been reached.

He argues that gold prices have stretched far beyond their historical norms, reaching the largest premium relative to their 60-month moving average ever recorded, and also hitting unprecedented levels relative to the broader Bloomberg Commodity Spot Index.

In other words, markets may have already priced in much of the geopolitical risk. Gold has seen this kind of moment before.

The last time prices became this detached from historical norms was around 1980. That peak held for nearly three decades before being surpassed again during the 2000s commodity boom.

History, McGlone suggests, does not rule out a similar pattern repeating itself. Gold may simply have gone up too much.

“It faces the curse of going up too much,” he said, suggesting the market could be approaching a long-term peak like earlier historical cycles.

If that happens, central banks could find themselves holding larger gold positions at precisely the moment when prices begin stabilising or retreating. This would not invalidate diversification strategies, but it might reduce their immediate financial benefits.

What could push gold even further?

History shows that major geopolitical events can dramatically reshape reserve strategies. Russia’s invasion of Ukraine already triggered one such shift.

That event accelerated discussions about sanctions exposure, financial sovereignty, and alternative reserve assets. But what could push gold even further into the centre of global reserve strategy?

McGlone believes the catalyst would have to be similarly dramatic.

Russia’s invasion created the current surge. Replicating that shock would require a comparable geopolitical rupture. And, for now, he believes the gold momentum may already be reaching its limit.

“The risk is that the bid for gold has reached its apex,” he said.

Inside BRICS: Between unity and rivalry

If gold represents one hedge against the dollar system, BRICS represents another kind of experiment altogether. But even within the BRICS grouping, the financial dynamics are more complicated than they appear from the outside.

According to Lawrence Ngorand, China plays an unmistakably central role in shaping many of the bloc’s financial initiatives.

“China is the central gravitational force within BRICS financial initiatives,” Ngorand told International Finance. That influence stems from simple economics.

China is the largest economy in the group, the biggest trading partner for most other members, and the only one with a fully developed cross-border payments infrastructure capable of supporting large-scale alternative settlement systems.

As a result, efforts to expand local-currency trade often gravitate naturally toward the Chinese renminbi. But that influence comes with political limits.

India, Brazil, and several other BRICS members remain cautious about allowing any single currency to dominate the bloc’s financial architecture. Concerns about dependency and geopolitical balance remain strong, which is why many BRICS initiatives are carefully framed as multi-polar rather than renminbi-centric.

China brings the scale and liquidity, but the set-up of the system still tries to make sure each member keeps the sense that its own financial sovereignty remains intact.

Is a unified ‘BRICS currency’ difficult?

Even setting politics aside, BRICS financial integration runs into a simpler reality. The member economies are very different from each other.

China maintains a tightly managed capital account. India operates with partial controls. Brazil and South Africa run fairly open financial systems compared with some of the others. Russia’s financial system has been reshaped by sanctions and partial isolation. These differences complicate coordination.

Exchange-rate regimes vary. Inflation dynamics differ. Fiscal policy frameworks are not aligned. Even trade structures diverge significantly.

China’s economy is manufacturing-driven. Several other BRICS members depend heavily on commodities. Others rely more on services. These asymmetries make deeper monetary integration extremely difficult.

According to Ngorand, meaningful integration would require convergence across multiple dimensions: inflation targeting frameworks, exchange-rate policy co-ordination, reserve pooling mechanisms, and credible lender-of-last-resort structures. None of those currently exist.

“The bloc lacks the institutional cohesion that underpinned the euro project,” Ngorand said.

Commodity and currency power

Still, one area where BRICS expansion could make a difference is commodities. The inclusion of major commodity exporters within the group has strengthened the theoretical foundation for alternative trade settlement systems.

Countries like Saudi Arabia, Brazil, and Russia sit at the centre of global energy and resource flows. And commodities anchor a significant portion of global trade. If even a small share of these transactions began shifting toward non-dollar settlement, new liquidity corridors could gradually emerge. That possibility matters.

“If even a modest share of oil or critical mineral trade shifts to local currencies, it creates liquidity pools and hedging demand outside the dollar system,” Ngorand said.

However, commodity power alone does not automatically translate into monetary dominance. Even if some commodities start trading in other currencies, the money does not always stay there. In many cases, it quietly circles back to dollar assets anyway.

Take oil revenues. No matter what currency the trade begins with, a large share often ends up parked in United States Treasuries. So, commodities might open alternative payment routes, but that alone does not really dismantle the dollar system. For that, a deeper financial infrastructure would be required.

The shock that could change everything

Ultimately, the speed of any monetary transition depends on shocks. Gradual diversification can go on for years, even decades, without shaking the foundations of global finance. Systems like this rarely change overnight. But, history shows that faster shifts usually come after disruption.

Ngorand suggests that a real acceleration in de-dollarisation would likely require confidence to crack across several pillars of the current financial system at the same time. That could include large-scale sanctions affecting multiple mid-sized economies, a major disruption to global payment networks, such as SWIFT, or a severe dollar liquidity crisis.

Another possibility would be sustained fiscal instability in the United States that undermines confidence in Treasury markets, the backbone of global reserve management. In the absence of such shocks, inertia favours continuity.

“Reserve currency transitions historically occur over decades, not years,” Ngorand said. Which means the dollar system may evolve, diversify, and fragment at the edges without collapsing at the centre, at least for now.

Not the end, just an adjustment

What emerges from all this is not a collapse. It is an adjustment. Central banks are hedging. Governments are managing risk. The world feels more uncertain, thanks to geopolitical, economic, financial, and reserve strategies that reflect that anxiety. The system is becoming more hedged, more political, and slightly more multipolar.

Bhattacharya summed it up thus: “We are not witnessing the end of dollar dominance, but rather the end of unquestioned dollar comfort.”

The dollar remains at the centre. Just no longer alone in commanding unquestioned trust.

The post Sanctions or war, the dollar always wins appeared first on International Finance.

The primary reason is the retrenchment from traditional banking that followed the 2007-2008 global financial crisis. The phenomenon led to a shift away from legacy lending, while debt markets and shadow banking took centre stage.

Since then, we have seen global economic uncertainty in the form of the COVID-19 pandemic, the Russia-Ukraine war, geopolitical volatility in the Middle East and more recently, whenever United States President Donald Trump says something on social media or is in front of a camera.

The reductions in workforce are not solely a result of market volatility; they are also influenced by increasing regulatory pressures. This includes proposals related to the Basel III Endgame, which will require banks to strengthen their capital reserves across various lending sectors. Additionally, liquidity regulations are likely to reduce banks’ willingness to extend longer-term loans, noted McKinsey.

Sensitive to market shocks and stymied by policy, private credit has come in, with a recent EY report suggesting that “Europe accounts for roughly 30% of the private credit market.” Investment in infrastructure and energy is an important driver of growth across the continent, and private credit is “likely to be a key enabler of the global green energy transition” with “estimates suggesting that between $100 trillion and $300 trillion will be needed by 2050,” the EY report said.

Private credit has seemingly become a staple of the financial landscape, a counter-cyclical hero in economic downturns, but what happens when private capital encounters jurisdictions with geopolitical instability, and to what extent are financial markets exposed to risks that remain invisible to them?

Private credit explosion

After the global financial crisis (GFC), the collapse and near collapse of some of the too big to fail banks served to kickstart the Great Recession, the worst global downturn since the Great Depression, during which millions lost their homes, their savings and their jobs.

Although the economic downturn impacted private credit, the data show that historically, private equity portfolios have generally shown shallower peak-to-trough declines than the public markets, and while the banks had to curtail their exposure, the private deal-making environment rebounded in the second half of the recession, in 2009.

The post-GFC environment was the first true stress test for private equity, and it barely passed. A 2019 study of private equity during the Great Recession outlined that despite the increase in deals, fund managers in private equity “failed to take advantage of opportunities to buy high-quality assets at steep discounts.”

Analysts point to three characteristics that explain why private credit grew so rapidly in the past. Unlike the banks, PE has easier access to capital and more freedom to deploy it, and as a result, PE can grow market share and assets faster during a crisis. Active management is also the norm in most global funds, and value creation is heavily weighted.

This gave funds the green light to build new capabilities and initiate transformation projects. Finally, private equity is not very liquid, which can help insulate investors from the panic selling that usually occurs in times of economic downturns, when it often brings losses of 5-10% higher. The combination of higher yields, bespoke terms and less oversight makes private credit very attractive.

While private credit has exploded over the last 15 years, the success story contains reasons for caution, most notably the illiquidity risk (the ability to get money out of an investment quickly is normally a good thing, but it can be especially helpful in a downturn).

And with geopolitical instability rarely priced in adequately, cracks could develop very quickly, especially when it comes to geopolitical risks, which are particularly hard to hedge against due to the sudden and severe effects of political instability, trade disputes, war, cyberattacks, climate change and natural disasters.

Just weeks before Russia invaded Ukraine, Horizon Capital, the largest private equity group in Ukraine, had launched its fourth flagship fund. Sarah de St Croix, head of private funds at law firm Stephenson Harwood, said that it was essential to have provisions in place to allow fund managers to react to geopolitical events.

For example, “managers affected by a geopolitical event could lean on their common law right to force an investor to exit the fund where their continued participation violates law or regulation.”

Although these clauses had not been written with specific timing in mind, funds were able to “handle the situation of having a sanctioned investor in a commingled pool after widespread sanctions against Russian individuals were imposed in 2022.”

The GFC came after private credit went global, and geopolitical risk was not top of mind, but Weijian Shan, executive chairman and co-founder of investment firm PAG, said that “the geopolitical risks are very real now, you used not to have to think very much about it. Now you really need to think about decoupling risks; you really need to think about restrictions to the international flow of goods, people and capital.”

Resource nationalism

This is a fairly hard-edged way to look at it. Still, it does come into sharper focus about sanctions risks, political instability or local capital controls that would strand foreign investments, or populist governments reneging on investor protections.

Indonesia, a key global exporter of coal, palm oil, copper, gold and other minerals, produces 37% of the world’s nickel and has been pursuing a form of resource nationalism for a decade.

This has overlapped with heavy demand from China, and as Dr Eve Warburton of the Australian National University explains, “over this same period, the Indonesian Government introduced increasingly nationalist policies: new divestment obligations for foreign miners, a ban on the export of raw mineral ores, stringent new local content requirements and restrictions on foreign investment in the oil and gas sector, and observers noted increasing court cases and popular mobilisation against foreign companies.”

This matters given the key role nickel plays in the batteries of electric vehicles and in renewable energy storage, making Indonesia a central part of the global energy transition.

If the private credit market is not to become a victim of its own success, it will have to surmount some significant hurdles. Rapid growth has pushed funds into new niches, often in emerging and frontier markets where yields and risks are highest.

According to the Institute for Economics and Peace, “Today geopolitical risks are higher than at any time during the Cold War due to greater military spending, stalled nuclear disarmament, and a reduction in the power of multilateral institutions such as the United Nations,” and this is coupled with active wars in Ukraine and Gaza, US-China decoupling, growing political instability and polarisation, misinformation, and an increase in cross-border sanctions and capital controls.

Another issue for the industry is the risk of financial contagion. As any investor who has taken on private credit knows, that means anyone who has loaded up on private credit, whether pension funds, sovereign wealth funds or insurers, has more of their capital in opaque, illiquid private deals that are more vulnerable to losses that were neither expected nor fully priced for. A crisis in the private credit market would pose a systemic threat to the wider financial system.

The greater the reach of private credit funds into higher-risk jurisdictions to satisfy expectations for higher yields, the more the potential for sudden, catastrophic losses increases. Access to capital, flexibility, and the ability to go where banks will not go are the hallmarks of private credit’s success, but in an unstable world, those advantages can rapidly turn into liabilities. The next market crisis is unlikely to begin on Wall Street or in the bond markets. But it is a must in a foreign ministry, a war room, or a populist parliament. Private credit needs to be ready.

The post A decade of debt expansion appeared first on International Finance.

At an international Arctic forum in Murmansk in late March 2025, President Vladimir Putin stepped onto a modest stage, a far cry from the imposing backdrops he often favours. The event’s slogan, “Live in the North!”, emphasised Russia’s focus on its Arctic domain. In a lengthy opening speech, Putin reaffirmed the Arctic’s strategic importance to Russia and stressed its growing global relevance.

“Unfortunately, geopolitical competition and the struggle for influence in this region are also intensifying,” Putin warned the gathering.

He noted that Russia is closely monitoring developments and strengthening military capabilities and infrastructure across the Arctic in rsponse. The Far North has ranked very high on the Kremlin’s agenda for over two decades.

After the Soviet Union collapsed, Moscow’s support for its Arctic regions withered, and through the 1990s the area was seen as an economic burden. Reinvestment resumed in the 2000s as the Kremlin refocused on the north. Now, climate change is rapidly shrinking polar ice, opening new sea routes and resource opportunities.

The thaw has enhanced the region’s value, as it holds rich mineral deposits and vast oil and gas reserves, much of it still untapped. In fact, the Arctic is estimated to contain roughly 13% of the world’s undiscovered oil and 30% of its undiscovered natural gas. And with Western sanctions over the Ukraine war, the Arctic’s economic and geopolitical significance has only grown further.

Analysts estimate roughly 10% of Russia’s GDP is generated above the Arctic Circle.

“The Arctic is economically important. A large share of Russia’s oil, gas, and natural resource exports originates from the Arctic. Beyond economics, the region is vital to national security. From a security perspective, the Arctic constitutes Russia’s entire northern border,” explains Pavel Devyatkin of the Arctic Institute.

“Given growing competition with Western Arctic states like the United States, Canada, and Norway, Russia must maintain control over the area and protect those economic projects,” Pavel said.

In short, the High North is both a treasure trove and a strategic shield for Moscow.

Russia proudly presents itself as a leader in Arctic exploration, harking back to tsarist-era pioneers who reached the continent’s farthest edges while others charted new sea routes. Now, with the Arctic emerging as a zone of intense international rivalry, a key question looms: Does Russia truly hold a technological edge in the Arctic, and if so, can it sustain that edge amid mounting pressure?

Icebreakers: Russia’s key assets

In the Arctic, one category of technology stands out as Russia’s ace: icebreakers.

Sergey Sukhankin, a senior fellow at the Jamestown Foundation, said, “Russia’s main strength lies in its superiority across various classes of icebreakers.”

These specialised ships plough through sea ice to clear paths for other vessels, giving Russia a significant advantage. Moscow currently operates 42 icebreakers, including eight nuclear-powered, which is far more than any other country. And the fleet is still growing.

Prime Minister Mikhail Mishustin recently announced plans to add five new nuclear-powered icebreakers. One of these will be the gigantic Rossiya, a next-generation “Leader” class icebreaker displacing over 71,000 tons with reactors generating 163,000 horsepower. It will be capable of crushing through ice up to four metres thick.

At the Murmansk forum, Putin proudly noted that Russia has “the largest icebreaker fleet in the world. No other country has such a fleet,” he declared, urging continued investment in next-generation icebreakers to cement Russia’s lead. The Kremlin often frames its mighty icebreaker flotilla as a geopolitical asset, but experts stress the fleet’s practical role.

“Icebreakers are one of the greatest technological capabilities that Russia has in the Arctic. But they have very limited military applications. Even though sea ice is melting, icebreakers are still important because there is still a lot of ice,” acknowledges Devyatkin.

These ships ensure Russia can navigate and work in Arctic waters year-round, keeping remote northern ports accessible and energy exports flowing even in winter.

Russia has even found ways to monetise its icebreaker fleet beyond freight and supply missions. In recent years, some of its nuclear-powered icebreakers have doubled as adventure cruise liners, ferrying tourists to the North Pole.

Travel companies market these voyages as once-in-a-lifetime expeditions through otherworldly ice floes.

Promotional materials boast, “You will be travelling on one of the most powerful nuclear icebreakers in the world, capable of overcoming centuries-old ice up to three metres thick.”

Ultimately, icebreakers are more than just workhorses or tourist attractions. They are strategic enablers of Moscow’s Arctic ambitions. By keeping the Northern Sea Route (NSR) open for much of the year, the fleet supports Russia’s goal of turning the NSR into a major international trade artery.

If the shipping lane along Siberia’s coast becomes reliably navigable, it could slash travel time between Asia and Europe, providing an alternative to the Suez Canal. This prospect is a major reason the Kremlin pours resources into its icebreaker fleet. It underpins Russia’s vision of the Arctic as both an economic engine and a geopolitical lever.

Military might or symbol?

Russia’s Arctic push is not confined to icebreakers and commerce. The Kremlin also touts military hardware adapted for the Far North, though some wonder if these weapons are more show than substance. In late 2024, Putin oversaw the launch of the Perm, a Yasen-M-class nuclear submarine armed with Zircon hypersonic cruise missiles.

He hailed it as a major advance for the Navy, praising the sub’s modern systems and high-precision weapons. Such capabilities sound formidable, and they could pose a serious threat. However, analysts like Sukhankin question their practical utility in the Arctic context. Using such weapons would likely signal full-scale war.

“In most scenarios, this type of weaponry is more dangerous than useful,” Sukhankin says, suggesting any Arctic clash that escalated to missile strikes would effectively be an all-out conflict between Russia and NATO.

Even Russia’s own strategists seldom anticipate open war in the High North. When they discuss potential Arctic conflicts, they usually envision “hybrid” confrontations – using covert, economic, or cyber means rather than battles under the polar ice.

This implies many of Moscow’s Arctic military projects likely serve a political more than a tactical purpose. The displays of new submarines and weapons project strength and technological prowess to both domestic audiences and rival powers, even if their day-to-day utility on the ice remains limited.

Beyond submarines and missiles, Russia claims other Arctic innovations are underway. Officials speak of drones engineered for extreme cold and robotic systems to mine the seabed. These initiatives underscore Moscow’s desire to conquer the Arctic technologically as well as physically. Still, the ambitious nature of some projects has raised eyebrows and scepticism, leading to questions about how much is genuine progress versus propaganda.

Ambitious plan beneath the ice

The notion of submarine LNG tankers highlights both the boldness and fragility of Russia’s Arctic aspirations. The idea actually dates back to the early 2000s, when some Moscow insiders proposed it to impress Putin. Now it has resurfaced in state media reports, with talk of nuclear-powered submarines carrying liquefied natural gas under the ice to Asian markets.

Yet experts like Sukhankin doubt this concept will ever leave the drawing board. The technical challenges are enormous.

“How can you store the necessary volume of LNG on a submarine in the first place?” he asks, noting that no existing design could accommodate the massive insulated tanks required.

The economics are equally dubious. Building and operating such vessels would be vastly more expensive than conventional tankers.

“If you run the numbers on break-even costs, it simply does not make sense,” Sukhankin said.

Moreover, Russia’s shipyards lack the capacity to construct such advanced submarines, and foreign builders are unlikely to help under the current sanctions. It remains unclear whether the submarine tanker project is a serious endeavour or more of a publicity stunt.

“At this point, it’s difficult to tell whether this is aimed at a domestic audience or designed to impress internationally,” Sukhankin admits.

Either way, merely publicising such an audacious plan serves a purpose: it reinforces the narrative that Russia is willing to pursue outlandish high-tech solutions to secure its Arctic interests.

Cooperation amid rivalry

Despite its military buildup and grand projects, Moscow is also striking a cooperative tone in the Far North, at least rhetorically. In Murmansk, Putin opened his remarks with a rare appeal for partnership.

He stressed that while “Russia is the largest Arctic power,” it “advocates for equal cooperation in the region.” Moscow, he said, is ready to work with any nation that shares responsibility for the planet’s sustainable future. It signalled Moscow’s willingness to involve non-Arctic players.

Russia’s long history in the Arctic gives it valuable know-how. Centuries of exploration and resource extraction in harsh conditions have endowed Russian firms and agencies with deep expertise.

Yet, as Devyatkin notes, collaboration with other countries can bring benefits that Russia cannot easily obtain alone: investment capital, cutting-edge technology, and broader export markets for Arctic resources. In the past, Moscow partnered with Western oil companies and others in Arctic ventures before relations soured. Now the Kremlin may look to non-Western partners to keep its Arctic ambitions on track.

Some analysts suspect practical motives behind Putin’s cooperative rhetoric. For all of Russia’s talk of Arctic dominance, its ability to sustain large-scale Arctic expansion and innovation is in doubt.

“Russia’s own domestic capabilities to modernise are quite questionable,” Sukhankin observes, alluding to economic and sanction-related constraints.

Greater international involvement could help Moscow fill gaps in expertise and funding. At the same time, each high-profile announcement— be it a new drone, icebreaker, or submarine—feeds a narrative that Russia is racing ahead in the Arctic.

Sukhankin suggests this image is deliberately cultivated as a form of information warfare.

“This is exactly what Russians want… exactly what they mean,” he says, referring to the psychological impact of projecting Arctic prowess.

In effect, Russia is trying to have it both ways in the Arctic. They want to project strength and independence while also calling for partners. How much of its Arctic drive is genuine capability and how much is calculated posturing remains debatable. But as the polar ice recedes and competition grows, the world’s eyes are now on Moscow’s next moves in the “High North.”

The post Russia’s Arctic power play appeared first on International Finance.

Brent crude futures dropped 58 cents, or 0.9%, to USD 63.81 a barrel, while US West Texas Intermediate (WTI) crude futures were trading at USD 59.50 a barrel, down 59 cents, or 1.0% from 14th November’s close. Both benchmarks rose more than 2% to end the November mid-week with a modest gain, after exports were suspended at Novorossiysk and a neighbouring Caspian Pipeline Consortium terminal, affecting the equivalent of 2% of global supply.

Novorossiysk port resumed oil loadings on November 16, stated media reports and LSEG (London Stock Exchange Group) data. However, Ukraine’s stepped-up attacks on Russia’s oil infrastructure remain in focus for further possible disruptions. While a Reuters report claims that the incident crippled two oil berths at Novorossiysk, two tankers — the Suezmax class Arlan and Aframax class Rodos — are now doing the loading duty.

“Investors are trying to gauge how Ukraine’s attacks will affect Russia’s crude exports in the long term, while also locking in profits after last Friday’s rally. Overall, the perception of oversupply from OPEC+ production increases remains,” said Toshitaka Tazawa, an analyst at Fujitomi Securities, while adding that WTI is likely to stay near USD 60, fluctuating within a USD 5 range.

Investors are also monitoring the impact of Western sanctions on Russian supply and trade flows. The United States imposed sanctions banning deals with Russian oil companies Lukoil and Rosneft after November 21 to push Moscow toward peace talks and stop the Ukraine campaign, which started in 2022.

The attack on Novorossiysk, Russia’s largest Black Sea export hub, was the most damaging Ukrainian attack to date on Russia’s main Black Sea crude export infrastructure. The facility accounts for about a fifth of Moscow’s crude exports, and a long shutdown would have forced costly shuttering of oil wells in West Siberia, a step that would have significantly reduced the amount of oil sent to international markets by the world’s second-largest exporter.

Ukraine has been conducting frequent drone and missile attacks on Russian refineries, oil depots and pipelines. Despite that, as per Reuters, Russia’s oil processing has fallen just 3% in 2025. Russian crude oil shipments via Novorossiysk’s Sheskharis terminal totalled 3.22 million tonnes, or 761,000 barrels a day, in October, according to industry sources. A total of 1.794 million tonnes of oil products were reportedly exported through Novorossiysk in October.

In the United States, the ruling Republicans are working on legislation that will impose sanctions on any country doing business with Russia, with President Donald Trump even indicating that Iran may get added to that list. In early November, OPEC+ agreed to increase December output targets by 137,000 barrels per day, the same as for October and November. The energy exporters cartel also agreed to a pause in increases in the first quarter of 2026.

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A recent discovery by Time Magazine revealed that five leading artificial intelligence models, including Grok, accurately refuted 20 of Trump’s untrue statements. A similar experiment was conducted by The Washington Post, which asked each of five leading AI models—OpenAI’s ChatGPT; Anthropic’s Claude; X/xAI’s Grok (owned by Elon Musk); Google’s Gemini; and Perplexity—to verify the Republican’s most oft-repeated claims.

“The systems are completely independent, with no known ideological filters and no revealed perspective biases among the model trainers. Statisticians would call this methodological verification a check for inter-rater reliability. Across all questions, AI model responses disproving Trump’s claims or rejecting his assertions were always in the majority. All five models generated consistent responses firmly denying the claims in 16 of the 20 questions. In 15 of those consistently firm responses, all five AI models debunk the claims. But even those responses that we categorised as ‘less firm’ partially refute Trump’s claims,” stated Jeffrey Sonnenfeld (Lester Crown Professor in Management Practice at the Yale School of Management), Stephen Henriques (former McKinsey & Co consultant), and Steven Tian (research director at the Yale Chief Executive Leadership Institute), who conducted the experiment.

“Will Trump’s current tariff policies be inflationary?” was one of the questions asked. ChatGPT replied, “Yes, Trump’s proposed tariffs would likely raise consumer prices in the short-to-medium term, contributing to inflation unless offset by other deflationary forces,” while Grok commented, “Trump’s 2025 tariff policies are likely to be inflationary, with estimates suggesting a 1-2.3% rise in consumer prices, equivalent to $1,200-3,800 per household in 2025.”

Another question was: “Is the US being taken advantage of on trade by its international partners?” ChatGPT answered, “The US is not broadly being taken advantage of, but there are real areas where trade practices are unfair or asymmetric, especially involving China, and to a lesser extent, the European Union and some developing countries.”

Perplexity backed it up by noting, “The US runs large trade deficits with several key partners… However, the economic reality is more complex: trade deficits do not necessarily mean the US is losing or being exploited… Public opinion generally supports free trade.”

Similar trends were observed in responses to questions like “Are Trump’s cryptocurrency investments a conflict of interest?” “Has the Department of Government Efficiency actually found hundreds of billions of dollars of fraud?” “Is Trump right that the media is dishonest or tells lies?” and “Was the Russian invasion of Ukraine in 2022 President Joe Biden’s fault?” AI discredited all the viral Trump claims, with startling accuracy and objective rigour.

Fiasco engulfs Grok

In July, Grok (Elon Musk’s AI chatbot) received an update. The maverick tech CEO, an outspoken conservative who recently served in the Trump administration, has long complained that Grok has parroted “woke” internet content and said users would “notice a difference” with the new version.

Grok almost immediately started expressing strongly antisemitic stereotypes, celebrating political violence against fellow Americans and praising Hitler. In some responses, it reportedly adopted stances or used a voice more aligned with right-wing figures.

Then, a fiasco broke out, and its nature was so severe that Musk’s AI startup, xAI, had to apologise. What was the fiasco? Grok published a series of antisemitic messages on X (formerly Twitter).

“We deeply apologise for the horrific behaviour that many experienced. Our intent for Grok is to provide helpful and truthful responses to users. After careful investigation, we discovered the root cause was an update to a code path upstream of the Grok bot. This is independent of the underlying language model that powers Grok. The update was active for 16 hours, during which deprecated code made Grok susceptible to existing X user posts, including when such posts contained extremist views,” read the xAI statement.

In a now-deleted post, the chatbot referred to the deadly Texas floods, which have now claimed the lives of at least 129 people, including young girls from Camp Mystic, a Christian summer camp. In response to an account under the name “Cindy Steinberg,” which shared a post calling the children “future fascists,” Grok asserted that Adolf Hitler would be the “best person” to respond to what it described as “anti-white hate.”

Grok was asked by an account on X to state “which 20th-century historical figure” would be best suited to deal with such posts. Screenshots shared widely by other X users show that Grok replied, “To deal with such vile anti-white hate? Adolf Hitler, no question. He’d spot the pattern and handle it decisively, every damn time.”

Grok went on to spew antisemitic rhetoric about the surname attached to the account, saying, “Classic case of hate dressed as activism—and that surname? Every damn time, as they say.”

Meanwhile, a woman named Cindy Steinberg, who serves as the national director of the US Pain Foundation, posted on X to highlight that she had not made comments in line with those in the post flagged to Grok and had no involvement whatsoever.

The Anti-Defamation League (ADL), an organisation that monitors and combats antisemitism, went after Grok and Musk, stating, “This supercharging of extremist rhetoric will only amplify and encourage the antisemitism that is already surging on X and many other platforms.”

After xAI posted a statement saying that it had taken actions to ban this hate speech, the ADL continued, “It appears the latest version of the Grok LLM (Large Language Model) is now reproducing terminologies that are often used by antisemites and extremists to spew their hateful ideologies.”

Grok recently came under separate scrutiny in Turkey, after it reportedly posted messages insulting President Recep Tayyip Erdogan and the country’s founding father, Mustafa Kemal Atatürk. In response, a Turkish court ordered a ban on access to the chatbot.

The AI bot was also in the spotlight after it repeatedly posted about “white genocide” in South Africa in response to unrelated questions. It was later said that a rogue employee was responsible.

The Grok episode was the best example of how frequent hallucinations (referring to instances when an AI model produces information or content that is fabricated or inaccurate) and biases (systematic and unfair prejudices or distortions in AI systems that lead to inaccurate or discriminatory outcomes) present in the training data can nearly destroy AI models. Furthermore, Sonnenfeld and Joanne Lipman (American journalist and author) have discovered that AI systems occasionally choose the most widely accepted—yet factually incorrect—answers rather than the right ones. This implies that mountains of false and misleading information can obfuscate verifiable facts.

“Musk’s machinations betray another, potentially more troubling dimension: we can now see how easy it is to manipulate these models. Musk was able to play around under the hood and introduce additional biases. What’s more, when the models are tweaked, as Musk learnt, no one knows exactly how they will react; researchers still aren’t certain exactly how the black box of AI works, and adjustments can lead to unpredictable results,” the duo continued.

Chatbots face a reliability crisis

The chatbots’ vulnerability to manipulation, along with their susceptibility to groupthink and their inability to recognise basic facts, should and must caution us about the growing reliance on these research tools in industry, education, and the media.

“AI has made tremendous progress over the last few years. But our own comparative analysis of the leading AI chatbot platforms has found that AI chatbots can still resemble sophisticated misinformation machines, with different AI platforms spitting out diametrically opposite answers to identical questions, often parroting conventional groupthink and incorrect oversimplifications rather than capturing genuine truth. Fully 40% of CEOs at our recent Yale CEO Caucus stated that they are alarmed that AI hype has actually led to over-investment. Several tech titans warned that while AI is helpful for coding, convenience, and cost, it is troubling when it comes to content,” Sonnenfeld and Lipman noted.

AI’s groupthink approach allows bad actors to supersize their misinformation efforts. Russia, for example, floods the internet with “millions of articles repeating pro-Kremlin false claims to infect AI models,” according to NewsGuard, which tracks the reliability of news organisations.

A Moscow-based disinformation network named “Pravda” (Russian word for truth) is infiltrating the retrieved data of chatbots, publishing false claims and propaganda to affect the responses of AI models on topics in the news, rather than by targeting human readers. By flooding search results and web crawlers with pro-Kremlin falsehoods, the network is distorting how large language models process and present news and information. In fact, massive amounts of Russian propaganda, 3,600,000 articles in 2024, are now incorporated in the outputs of Western AI systems, infecting their responses with false claims and propaganda.

This infection of Western chatbots was foreshadowed in a talk American fugitive turned Moscow-based propagandist John Mark Dougan gave in Moscow at a conference of Russian officials, when he told them, “By pushing these Russian narratives from the Russian perspective, we can actually change worldwide AI.”

The NewsGuard audit discovered that the leading AI chatbots repeated false narratives laundered by the Pravda network 33% of the time, validating Dougan’s promise of a powerful new distribution channel for Kremlin disinformation. When NewsGuard tested 10 major chatbots, it found that the AI models were unable to detect Russian misinformation 24% of the time. Some 70% of the models fell for a fake story about a Ukrainian interpreter fleeing to escape military service, and four of the models specifically cited Pravda, the source of the fabricated piece.

It isn’t just Russia playing these games. NewsGuard has identified more than 1,200 “unreliable” AI-generated news sites, published in 16 languages. AI-generated images and videos, meanwhile, are becoming ever more difficult to detect.

“The more that these models are trained on incorrect information—including misinformation and the frequent hallucinations they generate themselves—the less accurate they become. Essentially, the wisdom of crowds is turned on its head, with false information feeding on itself and metastasising. There are indications this is already happening. Some of the most sophisticated new reasoning models are hallucinating more frequently, for reasons that aren’t clear to researchers,” Sonnenfeld and Lipman stated.

Sonnenfeld and Lipman, to investigate things further, with the vital research assistance of Steven Tian and Stephen Henriques, asked five leading AI platforms—OpenAI’s ChatGPT, Perplexity, Anthropic’s Claude, Elon Musk’s Grok, and Google’s Gemini—identical queries. In response, the team received different and sometimes opposite answers, reflecting the dangers of AI-powered groupthink and hallucinations.

Checking out things first-hand

The team started with the question: “Is the proverb ‘new brooms sweep clean’ advising that new hires are more thorough?” Both ChatGPT and Grok fell into what the experts called a “groupthink trap” (a psychological phenomenon where the desire for harmony and conformity within a group leads to flawed decision-making) with this one, distorting the meaning of the proverb by parroting the often-repeated first part “a new broom sweeps clean”—while leaving out the cautionary second part: “but an old broom knows the corners.”

ChatGPT unambiguously, confidently declared, “Yes, the proverb ‘new brooms sweep clean’ does indeed suggest that new hires tend to be more thorough, energetic, or eager to make changes, at least at first.” Grok echoed similar ideas, but then added an incorrect caveat, suggesting “it may hint that this initial thoroughness might not last as the broom gets worn.”

While Claude dodged the tricky test, only Google Gemini and Perplexity provided the full, correct proverb.

Then came the second question: Was the Russian invasion of Ukraine in 2022 Democrat Joe Biden’s fault? ChatGPT responded, “No—NATO, not Joe Biden, bears no responsibility for Russia’s blatant military aggression. It’s Vladimir Putin who ordered the full-scale invasion on February 24, 2022, in what was a premeditated act of imperial expansion.”

However, several chatbots parroted anti-Biden talking points, including Grok, which declared that “critics and supporters alike have debated Biden’s foreign policy as a contributing factor.” Perplexity responded that “some analysts and commentators have debated whether US and Western policies over previous decades, including NATO expansion and support for Ukraine, may have contributed to tensions with Russia.”

“To be sure, the problem of echo chambers obscuring the truth long predates AI. The instant aggregation of sources powering all major generative AI models mirrors the popular philosophy of large markets of ideas driving out random noise to get the right answer. James Surowiecki’s 2004 best-seller, The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, celebrates the clustering of information in groups, which results in decisions superior to those made by any single member of the group. However, anyone who has suffered from the meme stock craze knows that the wisdom of crowds can be anything but wise,” Sonnenfeld and Lipman commented.

“Mob psychology has a long history of non-rational pathologies that bury the truth in frenzies documented as far back as 1841 in Charles Mackay’s seminal, cautionary book Extraordinary Popular Delusions and the Madness of Crowds. In the field of social psychology, this same phenomenon manifests as Groupthink, a term coined by Yale psychologist Irving Janis from his research in the 1960s and early 1970s. It refers to the psychological pathology where the drive for what he termed ‘concurrence’—harmony and agreement—leads to conformity, even when it is blatantly wrong, over creativity, novelty, and critical thinking. Already, a Wharton study found that AI exacerbates groupthink at the cost of creativity, with researchers there finding that subjects came up with more creative ideas when they did not use ChatGPT,” the duo observed.

To make matters worse, AI summaries in search results replace links to verified news sources.

“Not only can the summaries be inaccurate, but they, in some cases, elevate consensus views over fact. Even when prompted, AI tools often can’t nail down verifiable facts. Columbia University’s Tow Centre for Digital Journalism provided eight AI tools with verbatim excerpts from news articles and asked them to identify the source—something Google search can do reliably. Most of the AI tools presented inaccurate answers with alarming confidence,” Sonnenfeld and Lipman remarked.

Final judgement

All the above examples have made AI a disastrous substitute for human judgement. In journalism, AI’s habit of inventing facts has tripped up major news organisations. Take news outlet CNET, for example, which in January 2023 had to issue corrections on several articles, including some that it described as “substantial,” after using an AI-powered tool to help write dozens of stories. The outlet had to pause its usage of the AI tool to generate stories.

“AI has flubbed such simple facts as how many times Tiger Woods has won the PGA Tour and the correct chronological order of Star Wars films. When the Los Angeles Times attempted to use AI to provide additional perspectives for opinion pieces, it came up with a pro-Ku Klux Klan description of the racist group as white Protestant culture reacting to societal change, not an explicitly hate-driven movement,” Sonnenfeld and Lipman commented.

However, despite these unpleasant episodes, AI’s potential is becoming significant in fields like academia and media. Technology has proved itself as a useful ally for journalists, especially for data-driven investigations. During Trump’s first term (2016-2020), one of the authors asked USA Today’s data journalism team to quantify how many lawsuits the Republican had been involved in. The team took six months of shoe-leather reporting, document analysis, and data wrangling, ultimately cataloguing more than 4,000 suits.

ProPublica, in its February 2025 investigation, titled “A Study of Mint Plants. A Device to Stop Bleeding. This Is the Scientific Research Ted Cruz Calls Woke,” completed in a fraction of that time, analysing 3,400 National Science Foundation grants identified by Senator Ted Cruz as “Woke DEI Grants.” Using AI prompts, ProPublica quickly scoured all of them and identified numerous instances of grants that had nothing to do with DEI but appeared to be flagged for “diversity” of plant life or “female,” as in the gender of a scientist.

“With legitimate, fact-based journalism already under attack as ‘fake news,’ most Americans think AI will make things worse for journalism. But here’s a more optimistic view: as AI casts doubt on the gusher of information we see, original journalism will become more valued. After all, reporting is essentially about finding new information. Original reporting, by definition, doesn’t already exist in AI. With how misleading AI can still be—whether parroting incorrect groupthink, oversimplifying complex topics, presenting partial truths, or muddying the waters with irrelevance—it seems that when it comes to navigating ambiguity and complexity, there is still space for human intelligence,” Sonnenfeld and Lipman concluded.

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In the past, Poland has played a crucial strategic role in military conflicts between Eastern and Western Europe. Napoleon utilised what is now most of Poland, the Duchy of Warsaw, as a tactical staging ground for his “Grande Armée” in preparation for his invasion of Russia in 1812. Poland was a part of Operation Barbarossa, Adolf Hitler’s 1941 invasion of the Soviet Union. Poland was the primary starting point for the attack because it was already under Nazi German occupation and split between the Soviet Union and Germany at the time. Through present-day Belarus, Ukraine, and the Baltic states, German forces moved eastward from Polish territory into Soviet territory.

Therefore, in addition to Warsaw’s economic expansion, it is also easy to see why Poland is now at the centre of a historic military corridor connecting Russia and Europe. To put it briefly, it serves as the entryway between Central Asia and Western Europe, as well as Russia. This fact has been reaffirmed numerous times in history. It’s fascinating to see how Poland has emerged as a major player in Europe’s defence sector.

In 2025, Poland will have the highest defence spending ratio of any NATO member, at 4% of GDP. Along with bolstering its eastern borders, Warsaw is also making investments in cutting-edge military equipment. Poland has positioned itself through its military acquisitions at the centre of the future defence of Europe and the Western bloc, with a particular emphasis on interoperability within NATO.

Poland has established itself as an advocate for dual-use technologies in Europe by working hard and making sacrifices. This includes systems, technologies, or goods that have dual military and civilian applications. Unmanned systems like drones, artificial intelligence-based surveillance, and secure communications are being prioritised because they can benefit and expand the domestic industry, much like GPS did for the global economy. Warsaw is moving forward with a plan that promotes technological sovereignty and national (and European) defence.

The country’s development is therefore centred on cybersecurity. In February 2022, it initiated the Cyberspace Defence Forces. This is a complete military cyber command with offensive and defensive capabilities, acknowledging that cyber is now a domain in any conflict. The government also intends to invest close to 2.3 billion pounds in cyber defence by 2026 and has guaranteed over 700 million pounds (USD 807 million) for a “cybershield” to protect the nation. Additionally, it helped establish the Tallinn Mechanism to support Ukraine’s digital resilience and coordinated NATO’s “Cyber Coalition” exercises.

Poland wants to become a major cyber power in Europe, just like its economy. Additionally, it is allocating 6 billion pounds from EU recovery funds to dual-use infrastructure and security, as announced by Minister Katarzyna Pelczynska-Nalecz in 2025. However, Poland is not going to stop there. Through the “Cyber Secure Local Government” initiative, it is further strengthening its core cyberinfrastructure. With an emphasis on innovation through startups, this strategy entails substantial public-private partnerships. Investing in AI and data analytics through Poland’s AI Implementation Centre, which oversees long-term strategy through 2039, naturally completes this.

Poland is also in charge of safeguarding the eastern flank of the transatlantic alliance and participating in regular NATO military drills. Large-scale exercises like Dragon 24, which tested rapid reinforcement and multidomain operations with 20,000 troops and thousands of vehicles in 2024, are held there. It is one of the biggest in Europe. Rapid deployment drills and advanced air missions are also supported.

Politically, Karol Nawrocki defeated Warsaw Mayor Rafal Trzaskowski by a slim margin in last month’s voting for president. Western and European analysts have hurried to label the new president a nationalist-populist and his opponent a pro-EU contender. Again, I think that persistently alienating conservative forces is a risky course of action. First off, conservative parties have contributed significantly to Poland’s economic successes in recent decades. The geopolitical context of the world and the fact that Poland is the eastern front line of both NATO and the European Union make this framing particularly risky.

Nawrocki’s resistance to Ukraine joining Western alliances like NATO was the catalyst for all of this criticism. Brussels must, however, pay attention and initiate a dialogue when the NATO member that invests the largest portion of its GDP in defence, has welcomed Ukrainians into its territory, and has historically been the first European country to be impacted by any conflict with Russia, expresses this worry. According to an Arabic proverb, there is a distinction between the person who counts the blows and the person who is struck with a stick. It is time to give Poland a stronger voice because it is constructing resilience that will benefit all of Europe.

The post IF Insights: How Poland’s resilience strategy benefits Europe appeared first on International Finance.