“In the coming days, we may unsanction the Iranian oil that’s on the water. It’s about 140 million barrels. So, depending on how you count it, that’s 10 days to two weeks of supply,” the senior official told the country during Fox Business ‌Network’s “Mornings with Maria” programme.

According to Scott Bessent, the addition of sanctioned Iranian oil ‌into global ⁠supplies would help keep oil prices down for ⁠the next 10 to 14 days. Discussing oil prices, it has been above USD 100 per barrel for much of the past two weeks, with Iran closing the Strait of Hormuz and tankers carrying energy consignments getting attacked frequently.

The United States Treasury has already taken a similar step, by allowing the sale of sanctioned Russian oil stranded in tankers, which has reportedly added 130 million barrels to stretched global supplies.

Scott Bessent noted that the Trump administration ‌would take other actions to increase oil supply, including a unilateral release of stocks from the Strategic Petroleum Reserve above the recent coordinated joint G-7 release of 400 million ⁠barrels.

He said the Treasury would “absolutely not try to intervene in oil futures markets, but would take actions to increase physical supplies to try ‌to make up for the 10 million to 14 million barrel-per-day deficit caused by the closure of the Strait of Hormuz.”

“So, to be clear, we’re not intervening in the financial markets. We are supplying the physical markets,” the Treasury Secretary noted, while stating that China had become an “unreliable” supplier of refined products, as it has stopped exporting jet fuel and other products to other Asian countries.

Confirming the news, a Reuters report claimed that if the Trump administration eases sanctions on Iranian oil, one option would be a waiver similar to one used for Russian oil, allowing sales of crude already stranded at sea and confined to a narrow time frame.

“A potential waiver could accelerate the diversion of oil already destined for China into global markets more broadly, helping ensure adequate supply and blunting Iran’s leverage over the Strait of Hormuz,” a source familiar with the US Treasury’s planning told the media outlet.

Meanwhile, Trump lauded Japanese Prime Minister Sanae Takaichi during a White House meeting on March 19 for “really stepping up to the plate” ⁠on Iran. The Asian giant has joined European nations, in taking steps to stabilise energy markets, apart from ensuring safe passage for ships through the Strait of Hormuz.

The post Middle East conflict: Trump administration official teases US’ next move for oil market 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 report provides an exhaustive analysis of the drivers behind this “sovereign pivot.” It argues that the return to gold is a rational response to a converging trifecta of systemic pressures. Fiscal Dominance in the United States, where unmanageable debt loads have constrained monetary policy and eroded the dollar’s store-of-value proposition. Geopolitical Fragmentation, exemplified by the weaponisation of the financial system and acute crises such as the 2026 Greenland diplomatic standoff. And Technological Bifurcation, where new payment rails like Project mBridge are enabling a post-dollar trade architecture that increasingly utilises gold as a neutral settlement asset.

Drawing on data from 2025, the analysis details the specific strategies employed by key institutional actors, ranging from the “stealth accumulation” of the People’s Bank of China and the logistical feats of the Reserve Bank of India’s repatriation programme, to the defensive posturing of European central banks, such as the National Bank of Poland. The evidence suggests that we are witnessing the end of the “return on capital” era for reserve managers and the beginning of the “return of capital” era, where the primary objective is immunity from seizure, sanctions, and debasement.

The age of fiscal dominance

To understand why central banks are shifting to gold with such urgency, one must first dissect the deterioration of the fiscal landscape in the United States. The traditional inverse correlation between gold and real interest rates has broken down, replaced by a correlation with US fiscal instability. We have entered the age of “fiscal dominance,” a regime where the central bank’s primary function shifts from inflation targeting to sovereign solvency assurance.

By late 2025, the United States’ gross national debt surpassed $38 trillion, a milestone that carries grave implications for the global reserve system. For the first time since the demobilisation following World War II, debt held by the public has reached approximately 100% of Gross Domestic Product (GDP).

However, unlike the 1940s, this accumulation is not the result of a temporary existential conflict but the product of structural deficits that show no sign of abating.

The most critical metric driving central bank anxiety is the cost of servicing this debt. In fiscal year 2025, net interest payments on the federal debt exploded to $970 billion, nearly tripling the $345 billion paid just five years prior in 2020. By early 2026, the annualised run rate for interest payments breached $1.1 trillion, surpassing the entire US national defence budget.

The inversion where a superpower spends more on past consumption than on future security signals a potential “Minsky Moment” for US Treasury securities. Nearly one-fourth of these interest payments flow to foreign investors, including strategic rivals like China, effectively transferring wealth abroad to service domestic profligacy. Central bank reserve managers, tasked with preserving national wealth, are increasingly viewing US Treasuries not as risk-free assets, but as certificates of confiscation via inflation.

The concept of fiscal dominance posits that when government debt reaches unsustainable levels, the central bank loses the agency to set interest rates based on economic cooling needs. If the Federal Reserve were to raise rates to combat persistent inflation, which remained sticky throughout 2025, it would cause interest service costs to spiral further, potentially triggering a sovereign default or necessitating draconian austerity.

Consequently, the market has concluded that the Fed is “trapped.” It must keep interest rates artificially low relative to inflation to alleviate the government’s debt burden, a process known as financial repression. This realisation drives the “debasement trade.” Investors and central banks understand that the only political path of least resistance for the US government is to inflate away the real value of the debt. In this environment, gold serves as the only asset with no counterparty liability and an infinite duration, immune to the printing press.

Compounding the fiscal arithmetic is the overt politicisation of the Federal Reserve. The period from 2025 to 2026 has seen an unprecedented attack on the independence of the US central bank. President Donald Trump, in his second term, has repeatedly criticised Federal Reserve Chairman Jerome Powell, going so far as to suggest his termination for failing to lower rates rapidly enough to support administration policies.

Rumours of Powell’s forced resignation circulated intensely throughout 2025, creating volatility in global markets. While legal scholars debate the President’s authority to fire the Fed Chair “for cause,” the mere existence of the threat undermines the dollar’s credibility. For foreign central banks, the Fed’s independence was the guarantor of the dollar’s value. If the Fed is perceived as “captured” by the executive branch, forced to monetise debt or fund tariffs, the risk premium on holding dollars rises exponentially.

The political friction has led to a decoupling of gold prices from traditional drivers. Historically, high nominal interest rates like the 4.25%-4.5% range seen in 2025 would dampen gold demand. However, in 2025 and 2026, gold surged alongside yields, indicating that the market is pricing in institutional risk rather than opportunity cost. As Gold Policy Advisor Ugo Yatsliach notes, central banks are preparing for a world where “dollar assets can be sanctioned, seized or devalued” by political fiat.

For decades, the standard central bank reserve portfolio mirrored the 60/40 investment strategy. Almost 60% in risk assets (equities) and 40% in defensive assets (sovereign bonds). US Treasuries were the bedrock of the defensive allocation. However, the correlation between equities and bonds turned positive in the high-inflation environment of the mid-2020s, meaning both asset classes fell together.

With US Treasuries suffering consecutive years of real losses, and facing the prospect of further issuance to fund the deficit, reserve managers are actively seeking a replacement for the “40%” defensive slice of their portfolios. Gold has emerged as the superior alternative. It offers the safety profile of a bond (no default risk) with the upside of an equity (inflation protection), without the political baggage of the US Treasury market.

Geopolitical fragmentation

While fiscal dominance provided the combustible material for the gold rally, geopolitical fragmentation acted as the spark. The era of the “Great Moderation” and global integration has given way to a chaotic multipolarity, where economic warfare has become a standard tool of statecraft.

In January 2026, a bizarre yet dangerous diplomatic crisis exemplified the volatility of the new order. President Trump renewed his administration’s interest in acquiring Greenland from Denmark, citing critical national security interests and the island’s vast mineral wealth. Unlike his previous attempts, this initiative was accompanied by coercive economic threats.

When European leaders, including the Danish Prime Minister, rejected the proposal, the US administration escalated tensions by threatening a 10% tariff on eight NATO allies, including the UK, Germany, France, and the Netherlands, unless they facilitated the transfer. The crisis intensified when rumours of a US military “reconnaissance mission” Operation Arctic Endurance surfaced, raising the spectre of an armed standoff between NATO members.

The market reaction was immediate and violent. The “Greenland Tax” was priced into every ounce of gold, pushing spot prices past $5,100. Investors and central banks fled US assets, fearing that if the US could threaten its closest military allies with economic devastation over a territorial dispute, no jurisdiction was safe. Although President Trump eventually de-escalated the military rhetoric at the Davos World Economic Forum, the damage to trust was permanent. The incident proved that the “political risk” usually associated with Emerging Markets had arrived in the G7.

The Greenland Crisis was merely the latest chapter in a narrative that began with the G7’s freezing of Russia’s foreign exchange reserves in 2022. This event remains the primary psychological driver for emerging market central banks. It demonstrated that FX reserves are not “money” in the bank, but credit claims extended to foreign powers, claims that can be cancelled at will.

The realisation birthed two distinct groups of gold buyers. The Axis of Evasion, countries like China, Russia, and Iran that are actively preparing for or currently under sanctions, for whom gold is an operational necessity to bypass the US dollar system, and The Strategic Hedgers, countries like Saudi Arabia, Brazil, and India that are technically US partners but wish to maintain strategic autonomy, diversifying not to attack the dollar, but to insulate themselves from becoming collateral damage in US foreign policy disputes.

The US administration’s willingness to use the dollar as a cudgel, imposing tariffs on allies and sanctions on rivals, has accelerated “de-dollarisation” from a theoretical concept to a practical urgency. Central banks are responding by reducing their holdings of US Treasuries and recycling trade surpluses into gold.

China, for instance, has reduced its US Treasury holdings from $1.3 trillion in 2011 to roughly $765 billion by 2025, utilising the proceeds to fund its massive gold accumulation programme. Similarly, Saudi Arabia and other petrostates are increasingly settling trade in non-dollar currencies and storing the surplus in neutral assets. Gold serves as the only asset that is “politically neutral” as it carries no visa, requires no SWIFT code, and recognises no sanctions.

The great accumulation

The theoretical shift in reserve management doctrine has translated into massive physical flows. Central banks have transitioned from being net sellers of gold, a trend that persisted until 2010, to becoming the dominant “whales” of the market. In 2025, central bank purchases accounted for nearly 25% of annual global gold demand, a historic high.

Central bankers, despite their technocratic veneer, are susceptible to herd behaviour. Hugh Morris of Z/Yen Group identifies a powerful “groupthink” dynamic driving the current rush. As early movers like Poland and China publicised their gold buying, it created a “fear of missing out” (FOMO) among peers. Reserve managers faced a new reputational risk. If a crisis occurred and they held only depreciating dollars while their neighbours held appreciating gold, they would be viewed as incompetent.

This herd behaviour is creating a self-reinforcing price loop. As central banks buy, the price rises, as the price rises, the value of gold reserves increases, validating the strategy and encouraging further buying to maintain target allocation percentages.

China is the gravitational centre of the gold market. The PBoC officially reported gold purchases for 14 consecutive months through the end of 2025, adding approximately 27 tonnes per month. By December 2025, official reserves stood at 2,306 tonnes.

However, market analysts widely believe these figures understate the reality. Goldman Sachs and other forensic accountants estimate that China’s true accumulation is likely significantly higher, potentially exceeding 5,000 tonnes. The “stealth accumulation” is executed through state-owned banks and sovereign wealth funds such as the CIC to avoid spiking the market price too rapidly and to mask the full extent of China’s preparation for a post-dollar order.

The accumulation is linked to the internationalisation of the Renminbi (RMB). By backing the RMB with a “gold wall,” China aims to increase the currency’s attractiveness as a trade settlement unit. The fact that gold now constitutes 8.5% of China’s official reserves up from 3% a decade ago signals a determined strategic shift.

India’s strategy in 2025 was defined by repatriation. In a logistical operation shrouded in secrecy, the RBI moved over 100 tonnes of gold from the Bank of England’s vaults in London back to domestic storage in India. By September 2025, the RBI held over 65% of its 880-tonne reserve domestically, up from just 38% in 2022.

The decision was clearly motivated by the lessons learnt from the sanctions imposed on Russia. The assets held abroad are assets at risk. The RBI’s governor and analysts cited the need to “insulate” India’s wealth from geopolitical freezing risks. Furthermore, despite high prices, the RBI continued to accumulate gold, aiming to raise the metal’s share of forex reserves to 20%. This demand was price-inelastic. The strategic imperative of sovereignty outweighed the tactical consideration of buying at all-time highs.

The most aggressive buyers relative to GDP have been the Eastern European nations on the frontline of the NATO-Russia tension. The National Bank of Poland (NBP) aggressively bought gold throughout 2025, surpassing the holdings of the European Central Bank (ECB) and reaching over 550 tonnes. NBP Governor Adam Glapiński has explicitly linked this buying to national security, stating that gold ensures Poland’s creditworthiness even if it were cut off from the global financial system during a war.

Similarly, the Czech National Bank (CNB) has engaged in 33 consecutive months of buying, targeting 100 tonnes by 2028. These nations are buying for existential hedging. They are preparing for a scenario where the Euro or Dollar payment systems might fail them in a moment of supreme crisis.

The Central Bank of Turkey remains a relentless buyer, adding to reserves for 28 consecutive months, using gold as a tool to manage the Lira’s volatility and as ultimate collateral for the banking system. The Monetary Authority of Singapore has accumulated significant gold to balance its massive equity portfolio, highlighting in 2025 gold’s role as a stabiliser in a “high-risk” global environment. Switzerland’s Swiss National Bank, while not actively buying new tonnage in the same volume, reaped a windfall of CHF 36 billion in 2025 solely from the revaluation of its massive 1,040-tonne holding, a success story that has served as a potent advertisement for gold’s utility to other central banks.

Architecture of post-dollar trade

The gold rush is not taking place in a technological vacuum. It is intimately linked to the development of new cross-border payment systems designed to bypass the US dollar and SWIFT. In these architectures, gold is evolving from a passive asset sitting in a vault to an active settlement token.

Project mBridge is arguably the most significant development in global finance that the general public ignores. Originally a collaboration between the BIS and the central banks of China, Hong Kong, Thailand, and the UAE, it allows for direct peer-to-peer exchange of Central Bank Digital Currencies (CBDCs).

In late 2024, the BIS withdrew from the project, leaving it under the operational control of China and its partners. It’s a move that signalled the platform’s transition from “pilot” to “geopolitical tool”. By late 2025, mBridge had processed over $55 billion in transaction volume, a staggering 2,500-fold increase since its inception.

The platform allows, for example, a Thai company to pay a UAE supplier in Digital Yuan (e-CNY), which the UAE firm can immediately convert to Digital Dirham or hold. Crucially, the system supports “payment versus payment” (PvP) settlement without using a US correspondent bank. This eliminates the risk of US sanctions blocking the trade.

Where does gold fit in? In a multi-CBDC arrangement, trade imbalances inevitably arise. If the UAE accumulates too much e-CNY, it may want to swap it for a neutral asset. mBridge’s architecture is being designed to integrate tokenised gold as a bridge asset. Gold becomes the “reference unit” that clears the ledger, effectively remonetising the metal for the digital age.

The expanded BRICS bloc has explicitly called for a non-dollar payment system, dubbed “BRICS Pay”. While skeptics dismiss the idea of a single “BRICS currency” due to the economic disparities between members, the bloc is coalescing around a “Unit of Account” model backed by a basket of commodities, primarily gold (40%) and oil.

Russia and China have already operationalised the digital rouble and digital yuan for bilateral energy trade. BRICS Pay aims to link these domestic payment systems. The threat of 100% tariffs from the US administration on countries abandoning the dollar has only accelerated this development. Member nations realise that to survive such economic warfare, they need a settlement medium that the US cannot touch. Physical gold, stored domestically and tokenised on a permissioned ledger, provides exactly that capability.

The private sector is also anticipating this shift. Tether, the issuer of the world’s largest stablecoin (USDT), accumulated approximately 27 tonnes of gold in Q4 2025, valued at $12.9 billion. The move aligns with Hong Kong’s strategic initiative to establish a 2,000-tonne gold storage facility to support digital asset backing.

The convergence of stablecoins and gold reserves hints at a future where private digital currencies are backed not by US Treasury bills (as is currently the case) but by gold. This would further drain liquidity from the US bond market and channel it into the bullion market, creating a “digital gold standard” running parallel to the fiat system.

The new gold standard

The synchronised pivot to gold by the world’s central banks is a structural realignment of the global monetary order. It represents a vote of “no confidence” in the current fiat-based financial architecture, specifically the dominance of the US dollar.

The events of 2025 and 2026 have redefined what constitutes a “safe asset.” For fifty years, “safety” was synonymous with US Treasuries, liquid, interest-bearing, and backed by the hegemon. Today, “safety” is defined by sovereignty. An asset is only safe if it cannot be frozen, sanctioned, or debased by a foreign power. Gold is the only asset that meets this criterion. US Treasuries, subject to fiscal dominance and geopolitical weaponisation, do not.

As the US debt spiral continues, $1.1 trillion in interest and growing, and geopolitical fragmentation deepens (Greenland, Ukraine, Taiwan), the demand for gold will likely intensify. The emergence of digital rails like mBridge will operationalise this gold, moving it from the vault to the settlement ledger.

We are witnessing the birth of a de facto Gold Standard. Central banks are building a “gold wall” to protect their economies from the storms of the 21st century. In this new era, gold is the ultimate currency of freedom.

The post Building the global gold wall appeared first on International Finance.

Not only Amodei and Brockman, but Duco van Lanschot and David Schreiber also came into the limelight by creating the business identity verification startup Duna. The start-up recently raised a 30-million-euro Series A to become the best-funded European member of the so-called “Stripe Mafia.”

Based in Germany and the Netherlands, Duna has a rich portfolio of customers, including American financial services company Plaid. Duna helps fintech companies onboard business customers more efficiently, reducing the typical churn associated with corporate ID checks and other fraud prevention measures.

Creating Digital Passports For Companies

According to Duco van Lanschot, Stripe is not a typical customer of Duna, with the fintech giant’s executives understanding the opportunity that the start-up was about to seize in terms of making the process of onboarding business customers simpler and more efficient. What followed was big shots like former Stripe executives David Singleton, Claire Hughes Johnson, and Michael Cocoman getting involved in the funding round as angel investors. Even Stripe rival Adyen participated in the round.

Now, what exactly is the start-up trying to achieve? Apart from going after the long tail of enterprise clients that don’t have huge resources to dedicate to business onboarding, Duna sees its existential future in a world where there will be a network that allows companies to reuse their verified identity information across multiple platforms through a digital passport mechanism.

This goal resonated with Alex Nichols, the general partner who led CapitalG’s investment into the Series A. For Nichols, what sets Duna apart is its decision to generate its own data, rather than trying to aggregate existing data sources that are often lacking.

While Duna has reportedly found a strong business case in helping customers onboard corporate users faster and cheaper, existing investors are further doubling down. Index Ventures, which led Duna’s 10.7-million-euro seed round in May 2025, participated in the Series A, as did Puzzle Ventures and Frank Slootman, chairman of Snowflake.

However, to fulfil the immediate goal of reaching scale, Duna is taking shortcuts by identifying small clusters of companies that already overlap with each other. The start-up calls them “patches of networks.” These include manufacturing companies with shared customers, investment firms with overlapping LPs, or companies in the same small country. In Duco van Lanschot’s opinion, in these tight-knit groups, the ability to reuse verification becomes valuable immediately, even before Duna achieves full network effects.

Instead of replacing these jobs, Duna, through its AI automation, wants to help human professionals save costs and generate revenue even before the network effects kick in. If Duna eventually provides the rails for an identity network, Duco van Lanschot sees a bigger opportunity opening for the start-up, where the venture will enable one-click business onboarding.

The Products

Duna’s “Onboard,” built with the standards of regulated enterprises top of mind, provides compliant onboarding journeys optimised for conversion. The product helps its users access 20-plus ready-made KYB (Know Your Business) modules (including business details, legal representatives, ownership and UBO, AML screening, bank account, and address proof), apart from fine-tuning every data field to fit their enterprise needs.

Through the solution, Duna’s team of engineers and designers takes over their clients’ headache of converting potential leads into sales by dynamically shaping onboarding based on risk scoring, assessing data points in real time, and adapting journeys automatically. Businesses also get to avoid losing customers by asking for basic information at account creation and collecting additional KYC data based on product usage.

Companies can facilitate private interactions with legal representatives and Ultimate Beneficial Owners (UBOs) to collect essential information such as identity verification, source of funds, contract signatures, and more. Most importantly, instead of using separate onboarding platforms for different products, companies can save money by consolidating all solutions and their varying compliance policies under one digital umbrella.

Next is “Decide,” Duna’s automated case management mechanism, which increases compliance quality and reduces costs by cutting out lengthy reviews, manual checks, and endless email back-and-forth. The solution standardises these tedious functions by automatically adapting workflows based on risk signals, customer type, and compliance policies, leveraging AI and various other KYC technologies that verify and extract customer documents.

If a financial company has its pre-set compliance criteria, all it needs to do is feed the details into the automated case management system, after which it will take over the task of approving customer applications as per the established rules.

The solution also scores high on the AML (Anti-Money Laundering) front by fully automating hits on PEP (Politically Exposed Person), sanctions, and adverse media, with outsourced OSINT (Open-Source Intelligence) investigations. Duna’s automated case management mechanism has already proven its worth through its ongoing stint with some of the trusted names in the global financial industry, including Moody’s, Fourthline, LexisNexis, SurePay, Creditsafe, and IDnow.

Innovation Simplifying Things

Another excellent piece of Duna’s innovation is “Lifecycle,” which manages compliance throughout the customer lifecycle. Regulation meets retention with perpetual KYC, daily screening, re-KYC, policy versioning, and management of legal agreements.

Lifecycle is special because it automatically monitors Politically Exposed Persons (PEPs), sanctions, and adverse media related to business customers, individuals, and affiliated organisations. In addition, it tracks changes in registry data, such as legal names, addresses, and representatives. Lifecycle initiates re-Know Your Customer (KYC) processes based on real-time insights from registries, media, and open-source data. It also establishes re-verification frequencies tailored to the risk levels and timeframes of client companies.

The solution addresses evolving compliance requirements through a single interface that allows for the rollout of updated policies across various products, embedded finance partners, and jurisdictions. It implements ongoing changes based on regulations, product developments, and risk appetite, while also applying different policies according to regulatory jurisdictions. Additionally, it streamlines policy requirements across the financial partners of the client’s business.

The post Start-up of the Week: Duna targets one-click business onboarding appeared first on International Finance.

In the coming days, as the US Treasury Department’s sanctions start taking their full financial toll on the Russia’s largest oil companies, Rosneft and Lukoil, which together account for around 3 million barrels per day (nearly half of the country’s seaborne oil exports), all eyes will be on Moscow’s next moves, which till now managed to keep its war machine going by rerouting much of its crude through a “shadow fleet,” non-Western insurance, and non-dollar payment systems. However, buyers will face growing compliance risks under the latest American sanctions.

Talking about sanctions, whenever the word comes into our mind, we immediately think about the economic warfare mechanism, which starves aggressor nations of the revenue needed to finance conflict and oppression.

What was celebrated by Western capitals as an essential and powerful instrument of statecraft has recently been revealed to be nearly ineffective. The ongoing conflict in Ukraine has demonstrated that, beyond a poorly enforced system of voluntary compliance, sanctions are merely a hollow facade built on geopolitical self-deception.

The brutal reality is that while diplomats issued stern warnings and legislators passed sweeping restrictions, the essential infrastructure of Western finance, specifically the shadowy world of maritime insurance, actively functioned to undermine those very sanctions for the sake of profit, ensuring that billions of dollars continued to flow unimpeded into the coffers of Moscow and Tehran.

As per veteran Reuters journalist Paul Carsten, this shocking failure of oversight centres on a single, unassuming company, Maritime Mutual (MMIA), an insurer based in a peripheral jurisdiction, New Zealand, which became the indispensable white-collar architect of the shadow fleet, providing the critical license to operate for the world’s most illicit energy cargoes.

“The profound paradox at the heart of this scandal lies in its geography, a quiet insurance firm operating from a nondescript Auckland office, led by 75-year-old Briton Paul Rankin and his family, somehow managed to inject unprecedented instability into global security. This small, seemingly isolated entity emerged as a crucial nexus, a “major power player” in the illicit global oil market, confirming that sanctions evasion is not managed from the dusty corners of pariah states but is facilitated by sophisticated financial mechanisms rooted deeply within democratic, sanction-compliant nations,” Carsten remarked.

Maritime Mutual provided essential protection and indemnity (P&I) coverage, the non-profit mutual insurance for third-party liabilities required by all major ports and trading partners worldwide, a form of cover that is necessary for any ship to go to sea, including the vessels making up the so-called shadow fleet.

Without valid P&I insurance, these tankers, which rely on false documentation and opaque ownership structures to conceal their identities and cargoes, would be instantly barred from international waters and ports, rendering the entire illicit operation financially and physically impossible. Maritime Mutual facilitated this trade and provided the very lifeblood necessary for this massive, systematic evasion to survive and thrive.

The financial scale of this betrayal is devastating, serving as irrefutable proof of a catastrophic lapse in both corporate responsibility and regulatory enforcement, figures that cannot be sanitised or dismissed as minor compliance hiccups.

Since 2018, vessels insured by Maritime Mutual have been identified carrying oil and petroleum products valued at least $18.2 billion from Iran and a staggering $16.7 billion from Russia, a combined trade flow totalling nearly $35 billion, capital that has directly financed the geopolitical objectives and the military machines of both regimes.

“To grasp the depth of MMIA’s involvement, one must look at its market saturation in the illicit sector. Investigations found that this single New Zealand insurer covered nearly one-sixth of all sanctioned shadow fleet tankers globally, confirming its role not as a marginal participant but as a deliberate and systemic enabler of sanctions evasion on a grand scale,” Carsten noted.

Specific voyages highlight the calculated nature of this business, confirming that this was not a case of isolated oversight but continuous, high-volume trade. Reports detailed one tanker, the Yug, departing the Chinese port of Qingdao after offloading sanctioned Iranian oil around Christmas, another vessel ferrying Russian crude through treacherous Arctic waters on its way to India, and yet a third offloading Iranian oil off the coast of Malaysia, all sharing that defining, necessary link, insurance provided by Maritime Mutual.

The calculated exploitation of New Zealand’s relative obscurity by a British-led entity strongly suggests a deliberate strategy of regulatory arbitrage, choosing a smaller, less scrutinised jurisdiction to conduct high-risk, geopolitical business precisely because the scrutiny applied to financial centres like London, New York, or Frankfurt is immediate and intense.

The sheer volume of the trade, $35 billion worth of risk being underwritten by a firm in a market the size of New Zealand, indicates that MMIA’s jurisdictional choice was a strategic attempt to find regulatory refuge while profiting immensely from the demand for P&I coverage in the non-compliant energy sector.

The fundamental question that must be asked is how the financial gatekeepers, those who provide the necessary capital and risk protection, were permitted to leave this critical choke point in the global sanctions framework so brazenly open for profit.

Unmasking the loophole

The exposure of Maritime Mutual’s role quickly escalates the argument beyond a case of regional mismanagement, revealing an indictment of the entire global risk-transfer mechanism, proving that sanctions evasion was enabled and effectively subsidised by the world’s most elite financial institutions.

Maritime Mutual based its claim to legitimacy on its structure, operating like an International Group P&I Club where risk is shared amongst members, a model that historically affords a degree of regulatory comfort.

“Yet, crucially, MMIA simultaneously relied on external credibility, stating that its security was backed by a quality reinsurance programme provided by specialist Lloyd’s Syndicates and highly rated London Market insurance companies, meaning MMIA was never operating in isolation; its risk was validated and ultimately underwritten by the core of global finance. This is the heart of the scandal, the mechanism that allowed illicit liabilities to be absorbed and legitimised by the wider financial system,” Carsten said.

The evidence of this institutional complicity is quantitative and cannot be refuted by claims of accident or oversight, demonstrating a systematic failure of due diligence among the major global players.

Of the 231 vessels Maritime Mutual insured between 2018 and the time of the investigation, at least 130 were found to have transported sanctioned Iranian or Russian oil, with 97 of those tankers later being formally added to sanctions lists imposed by the United States, the European Union, or the United Kingdom.
This trajectory confirms that MMIA’s risk pool was actively providing coverage to ships that were either currently or imminently violating international sanctions, essentially providing a financial guarantee for criminal activity.

This investigation is a devastating exposure of the entire reinsurance market, which provided the ultimate financial architecture necessary for the shadow fleet to achieve global operability.

The list of those allegedly backing Maritime Mutual’s risk pool includes the titans of the reinsurance market, companies that profess adherence to the most rigorous global compliance standards, but whose financial machinery enabled this vast evasion. Specifically, this includes Germany’s Munich Re Group, one of the largest reinsurers in the world, its German counterpart Hannover Re, and significant British insurance firms like MS Amlin and Atrium.

These giants were receiving premiums derived directly from the illicit transport of sanctioned oil, meaning their profit motive tragically corrupted the fundamental need for stringent due diligence, suggesting a systemic failure of Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations at the absolute highest level of global risk management.

Furthermore, the sophisticated nature of this operation required the engagement of professional intermediaries, major British-American and American brokerage firms such as Aon and Lockton, which acted as key facilitators, placing the high-risk MMIA coverage with global reinsurers.

This involvement directly links the failure back to the powerful compliance jurisdictions of London and the US, demonstrating that major market players, those expected to maintain the highest standards of financial integrity, provided the brokerage bridge that connected the peripheral New Zealand operation to the world’s capital markets.

Entities like Atrium and Aon confirmed their working relationships with Maritime Mutual, solidifying the chain of financial complicity and confirming that the world’s sophisticated markets deliberately provided the vital capital necessary for the shadow fleet to operate globally.

The inherent complexity of the P&I mutual structure, combined with outsourced management often seen in non-International Group clubs, is revealed here as an intentional feature that facilitates compliance failure because it creates significant opacity and distance.

When the processes of management and ownership are separated, and risk is mutualised, accountability is diluted, making it easier for risk pools to accept dubious clients while the sophisticated reinsurers who provide security maintain plausible deniability regarding day-to-day underwriting decisions.

The brokers, Aon and Lockton, while connecting the insurer to the reinsurers, must also face scrutiny for their due diligence failures, which allowed these high-risk placements to proceed unchecked across global financial markets.

The financial integrity demanded by regulatory bodies around the world rests on the premise that these institutions act as responsible gatekeepers, yet the exposure of the MMIA network proves that this gatekeeping function was abandoned when faced with the lure of billions of dollars in premium revenue.

The shadow fleet marches on

The systemic failure laid bare by the Maritime Mutual scandal is ultimately a failure of state-level policy and regulation, where geopolitical strategy was fatally undermined by bureaucratic negligence and corporate complacency, demonstrating how regulatory divergence creates the exact operational cracks needed by sophisticated evasion networks.

The global sanctions landscape has been defined by both close coordination among the US, UK, and EU, and significant policy divergence, a combination that makes it exceedingly difficult for companies to navigate overlapping and sometimes contradictory rules, often leading to the selection of the most profitable, yet least compliant, path.

Tellingly, the EU and UK have continually prioritised new measures against Russian entities following the invasion of Ukraine, while the US, through the Office of Foreign Assets Control (OFAC), has simultaneously intensified its focus on enforcing restrictions against Iranian oil exports.

MMIA, with its global insurance reach, successfully facilitated trade for both regimes, deftly exploiting the enforcement capacity limitations and the inherent complexity of navigating multiple, jurisdiction-specific sanctions lists.

For years, experts have demanded deeper, enhanced upstream due diligence across complex supply chains and counterparties to detect concealed links to sanctioned entities, but the scale of the MMIA scandal proves that financial institutions either consciously disregarded these critical warnings or intentionally failed to resource their compliance departments adequately. The consequences of this structural negligence are evident in the sheer amount of sanctioned oil moved and the operational freedom granted to the shadow fleet.

The regulatory response has been characterised by a tragic lack of foresight, a reactive posture where regulators consistently play catch-up with criminals and evaders, allowing billions in revenue to leak through the system before corrective measures are finally instituted.

It took until April 2025 for the US Treasury’s OFAC to issue a new, decisive maritime sanctions advisory that explicitly broadened the enforcement net beyond simple vessel owners and operators to include the crucial enablers, such as insurers, financial institutions, and brokers.

“This official acknowledgement, while necessary, confirms that the regulatory framework was structurally inadequate for years, failing to recognise that the financial guarantee provided by P&I insurance was the most critical choke point available for enforcing maritime sanctions,” Carsten observed.

The Trump administration’s ongoing intensification of sanctions against Iran, targeting over 50 individuals and entities, as well as nearly two dozen shadow fleet vessels, represents a desperate attempt to undermine Iran’s cash flow. This essential effort has been repeatedly undermined by systemic failures, such as those exemplified by Maritime Mutual.

The disturbing reality that a small insurer based in New Zealand could become a linchpin in global geopolitical conflicts exposes a profound structural blindness where regulatory attention is disproportionately fixed on traditional financial centres, allowing vital ancillary services like P&I to operate with effective impunity from peripheral jurisdictions.

When faced with international scrutiny involving New Zealand, the US, the UK, and Australia, Maritime Mutual executed a textbook corporate manoeuvre of evasion, denying any wrongdoing and maintaining that it held a “zero-tolerance policy” on sanctions breaches.

However, the firm’s subsequent actions are a far more truthful commentary on its operations than its public relations statements, because MMIA was quickly forced to announce that it would cease insuring vessels identified as part of the shadow fleet and those carrying Russian oil.

This strategic retreat is an admission of guilt disguised as prudent business practice, yet their justification for this change is perhaps the most revealing indictment of all, citing the “disproportionate compliance burden” as their reason for withdrawal.

This claim is a contemptible justification. For a sophisticated financial firm, the burden of compliance is the mandatory cost of legally operating in a complex global market. It is not an excuse for actively facilitating $35 billion in illicit trade, proving definitively that profit motives superseded every ethical, legal, and geopolitical obligation required of them.

The fact that the burden only became “disproportionate” after the investigation shone a light on their activities strongly suggests that operating outside the law was vastly more profitable than operating within it, a perverse economic signal sent by weak regulatory oversight that persisted for years.

Adding further context to this regulatory environment, New Zealand itself has struggled with significant systemic weaknesses within its financial sector, illustrated by the recent $19.5 million penalty imposed on IAG New Zealand Limited for widespread historical system failures, miscalculations, and false representations.

This pattern of regulatory lapse and underinvestment in core compliance infrastructure within the jurisdiction suggests a local regulatory environment uniquely vulnerable to large-scale, sophisticated compliance failures, a vulnerability that shrewd global players like the British-led MMIA were clearly ready and able to exploit. The success of the shadow fleet, fuelled by MMIA’s insurance, injects continuous and significant volatility into the global oil market, undermining price stability and energy security globally.

The untraceable flow of billions of dollars of discounted, illicit oil complicates efforts to predict supply and demand, distorting accurate financial forecasting and forcing established, legitimate corporate entities, such as Lukoil, to rapidly restructure or sell assets due to constrained operations. The cost of this structural failure is borne by governments as well as every legitimate oil and gas company striving for transparent and predictable market conditions.

Finding the corrective measures

The exposure of Maritime Mutual’s central role in the shadow fleet is far more than an isolated case of insurance fraud; it stands as a damning, global symbol of Western financial hypocrisy, proving that the pursuit of short-term profits routinely triumphs over the collective security and the stated foreign policy goals of democratic nations.

This failure represented a profound moral dereliction of duty, perpetrated not just by the directors in the unassuming Auckland office but by the sophisticated brokers in London and New York, and the senior executives at the powerful reinsurance giants in Germany, all of whom accepted revenue derived directly from state-sponsored tyranny and global instability.

Every sanctioned ship insured by MMIA, every billion dollars of oil moved, translates directly into tangible, operational support for war, human rights abuses, and geopolitical destabilisation, confirming that this is a financial transaction with undeniable human consequences that can never be dismissed as a simple administrative oversight.

The final denial of wrongdoing, the insistence on rigorous standards immediately followed by the admission that monitoring those standards was too commercially burdensome, constitutes an act of evasion, not accountability, demanding a punitive response that far exceeds the cost of a routine regulatory fine.

To prevent the recurrence of this catastrophic structural failure, regulatory bodies must cease their perpetual game of catch-up and immediately implement an integrated, mandatory, and non-negotiable compliance system that directly links P&I coverage to rigorous, real-time sanctions compliance checks across all jurisdictions.

This system must be global in scope, ensuring there are no regulatory safe havens left for arbitrage. Crucially, there must be direct and punitive action taken against the major global reinsurers Munich Re Group, Hannover Re, the Lloyd’s syndicates, and others that provided the ultimate security and legitimacy for MMIA’s illicit risk pool, because their fundamental failure of due diligence enabled the entire $35 billion scheme to function. These institutions profited from the corruption of the sanctions regime, and they must now bear the cost of the structural cleanup.

The P&I mutual structure, a model intended for shared protection, has been demonstrably corrupted into an instrument of systemic risk and sanctions evasion, requiring an immediate and radical overhaul of its oversight, potentially placing all non-International Group P&I clubs under mandatory, intensified scrutiny from powerful regulators like OFAC and the UK’s OFSI.

Furthermore, the regulators in New Zealand, including the FMA, must conclusively prove their capacity and willingness to regulate sophisticated global players operating on their soil, demonstrating that their jurisdiction will not continue to serve as a convenient and under-policed base for global financial arbitrage.

Until the true enablers are subjected to the same ruthless enforcement pressure and sanctions as the vessels themselves, economic sanctions will remain nothing more than political theatre, an ineffective tool ensuring that financial integrity remains the most profound lie at the heart of global trade.

The post Inside the hidden engine of sanctions 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.

Tensions between Saudi Arabia and the UAE flared in December 2025 over a decade-long conflict in Yemen, when a UAE-aligned group seized territory from the Saudi-backed government. The crisis triggered the biggest split in decades between the former close allies. And on January 3rd, the United States captured Venezuelan President Nicolas Maduro, with Donald Trump announcing Washington’s move to take control of the Latin American country’s oil resources. While Venezuela has the world’s largest oil reserves, bigger even than those of OPEC’s leader, Saudi Arabia, its production has plummeted due to years of mismanagement and sanctions.

“Right now, oil markets are being driven less by supply–demand fundamentals and more by political uncertainty. And OPEC+ is clearly prioritising stability over action,” said Jorge Leon, head of geopolitical analysis at Rystad Energy and a former OPEC official, while interacting with Reuters.

The eight OPEC+ members, Saudi Arabia, Russia, the UAE, Kazakhstan, Kuwait, Iraq, Algeria and Oman, raised oil output targets by around 2.9 million barrels per day in 2025, equal to almost 3% of world oil demand, to regain market share.

“The eight members agreed in November 2025 to pause output hikes for January, February and March 2026 due to relatively low demand in the northern hemisphere winter. Sunday’s (January 4) brief online meeting affirmed that policy and did not discuss Venezuela,” one OPEC+ delegate said.

“The eight countries will next meet on February 1,” the source stated.

While the Saudi-UAE and Venezuela episodes will likely dominate OPEC’s 2026 agenda, at some point in time, the group has in the past managed to overcome many internal rifts, such as the Iran–Iraq War, by prioritising market management over political disputes.

Yet the group is facing other crises, with Russian oil exports falling due to American sanctions over its war in Ukraine, apart from Iran facing protests and possible American intervention. Analysts said it is unlikely to see any meaningful boost to crude output for years, even if American oil majors do invest billions of dollars in Venezuela in 2026.

The post In its first meeting of 2026, OPEC+ keeps oil output steady amid geopolitical turmoil 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.

The post Oil prices dip as Novorossiysk Port resumes loadings appeared first on International Finance.

Referencing the July 2024 advisory opinion by the International Court of Justice (ICJ), these nations argue that it is incompatible with EU commitments in international law to maintain economic relations with settlements.

In July 2024, the ICJ rendered a historic advisory opinion declaring that Israel’s occupation and settlement exercises in Palestinian lands are illegal. Significantly, the Court held that third states should desist from recognition, assistance, or facilitation of this unlawful occupation. Though advisory in character, the opinion has legal and moral significance, infusing non-binding United Nations stances with an added coat of juridical legitimacy.

This EU letter explicitly points to the ICJ’s stance that, in the absence of concrete suggestions from the Commission, member states remain unclear about the measures required to halt trade benefiting these settlements.

Trade Magnitude: Why It Matters

Israel’s economy is still heavily linked to the European Union (EU) markets. In 2023, trade between the EU and Israel reached a record 42.6 billion euro (around USD 49 billion), equivalent to about one-third of Israel’s total goods trade.

Although settlement origin data are not available, even a small percentage would account for enormous revenue streams potentially used to construct and expand settlements, which is a central issue quoted by the ICJ.

The latest action also represents a turning point in policymaking at the EU. By calling on the European Commission to table specific (not blanket) trade sanctions, the letter demonstrates a calculated effort to weigh economic relations with Israel against legal and normative constraints.

It is a subtle but purposeful approach: rather than demanding a wholesale boycott, attention is focused on trade related to illegal settlements. This indicates strategic sophistication, seeking to isolate deviation from international law without disabling wider cooperation.

At the same time, the initiative tests the cohesion of the European Union. There is no guarantee of consensus. Some member states fear the diplomatic fallout of such a stance, particularly those with close economic or strategic ties to Israel. Others support the moral imperative, viewing this as a necessary step to ensure that EU trade policies are aligned with international law and human rights.

Belgium’s Foreign Minister, Maxime Prévot, summarised this perspective by declaring, “Trade cannot be disconnected from our legal and moral responsibilities.” The drive to decouple EU trade from illegal settlements is part of a broader adjustment: one in which moral calculus can start to take precedence over diplomatic expediency.

The timing of the letter is also important. It arrived just before a Council of Foreign Ministers gathering slated for June 23 in Brussels. The agenda features a consideration of Israel’s fulfilment of the human-rights article in the EU-Israel association agreement, a legal article that paves the way for punitive measures should breaches be established. The timing of the letter in proximity to this session implies strategic planning, perhaps intended to shape the Council’s tone or direction.

Thus far, Israel’s mission to the EU has been conspicuously quiet. Whether this is a strategic delay or an indication of inner doubt is uncertain. But the silence itself is significant. At a period of escalating international attention, silence can be more than nothing; it can be a strategy. Or it can be immobility. Either way, it contributes to the tension of the moment, particularly if the EU moves toward steps that might officially change the relationship.

At the core of this endeavour is a compelling legal-ethical conundrum. Can the EU have intense economic activity with Israel while also presenting itself as being opposed to its settlement enterprise in occupied land? For most of the signatory nations, this is not a matter of commerce; it is a challenge of legal credibility.

They contend that withholding settlement goods is not a punitive act, but a targeted readjustment that safeguards the EU’s institutional integrity. Not everyone is so sure. They fear that such actions, unless applied transparently and strictly, will placate critics while failing to achieve tangible transformation.

This is more than an intra-European debate; it is a reckoning. When global legal norms, such as those that enjoy the backing of the International Court of Justice, seem at odds with geopolitical or economic interests, which road will the EU follow? Will it stand up for its adherence to the rules-based order or fall back into pragmatism?

If the EU does go ahead, it will probably employ a combination of policy instruments. Compulsory labelling regulations would make products from settlements unmistakably recognisable in the European market. This would potentially inform consumers as well as exert reputational pressure.

Stronger measures would be restrictions on imports or complete prohibitions on settlement products. A third option is legal compliance toolkits (basically instructions that can assist European enterprises and financial institutions in their auditing of supply chains and exclusion from illegal settlement involvement). Together, these tools might tip the cost-benefit equation of firms operating in contested areas.

The implications run well beyond trade policy. For Palestinians, the step (if taken) would enhance the international legal position against settlements and might alter the economic dynamics that facilitate their expansion.

For Israel, it might put pressure on its relations with one of its biggest trading partners and drive diplomatic efforts into more fraught territory. And for liberal democracies everywhere, the EU decision will be scrutinised closely as a test case on whether values-based governance is resilient enough to withstand the demands of realpolitik.

In the end, the letter is more than a plea. It is an ultimatum: to the European Union, to Israel, and to an international system faced ever more with the divide between its principles and its practices.

Internal EU Dynamics

The correspondence brings attention to a new rift within the European Union regarding the management of the problem of Israeli settlements. There is one bloc that is pro-restrictions, which consists of nations focused on legal harmonization with international law, even at the risk of diplomatic strain with Israel. They hold the view that maintaining the European Union’s declared values on human rights and international legality must outweigh political convenience.

Opposed to this is a more conservative group of states. These member states are not willing to lead on imposing strict trade sanctions out of fear of hurting their own domestic industries, Israel’s strategic alignments, or other possible retaliations across the wider Middle East. For them, stability in the economy and inter-regional diplomacy may take precedence over legal or ethical issues.

Despite these conflicting stances, the tide seems to be turning. With nine nations openly spearheading the initiative, pressure is building within the union to come up with a more unified and principled approach. This could eventually result in a readjustment of the European Union’s internal solidarity, pitting its external values against the practical imperatives of realpolitik.

Challenges Ahead

Perhaps the most pressing problem that confronts the European Union in the imposition of trade bans is the absence of tangible statistics regarding settlement-related trade. Without precise figures that determine the goods coming from illegal settlements, it is not easy to craft viable policies or implement them uniformly across member nations. Such transparency plays a hindrance to compliance and monitoring schemes.

Compounding the challenge is the legal aspect. Any limits imposed by the EU need to be crafted with care to meet World Trade Organisation (WTO) norms. Formulating flawless dispute-proof laws calls for exacting legal language and strong justification, particularly in light of potential international court challenges from Israel or other trading nations.

Politically, the EU likewise stands to face serious backlash. Israel could retaliate with counter-measures, whether in the shape of economic sanctions, diminished diplomatic involvement, or increased lobbying pressure within EU institutions. This response might strain overall EU-Israel relations and stimulate divisions among the member states.

Last but not least, there are economic consequences for European companies. Businesses in or trading with Israel may be subject to legal ambiguity or reputational damage. Certain companies might struggle to inspect their supply chains, revise financial projections, or introduce additional compliance structures, all of which could involve additional expense. To prevent disruption, the EU might need to contemplate providing guidance or assistance to businesses affected.

If done intelligently, this exercise may be a new paradigm of normative foreign policy, where firm global legal opinions are made into graduated economic penalties. It would show that EU foreign policy is not merely rhetoric but implemented in action.

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