Europe has growing concerns about Chinese "unfair trade practices" that are threatening large parts of European industry. Many European leaders argue that the EU must take action to protect its industries. This is the argument made by Thorsten Benner, co-founder and director of the Global Public Policy Institute (GPPi) in Berlin, in an article published in Foreign Affairs on July 161. Benner argues that “an all-out trade war with China is becoming a real possibility”. He is not alone in blaming China for the challenges facing European industries. This comes despite the fact that European economies have long benefited from their own competitive advantages elsewhere in the world, where they have held the upper hand and often framed it as “free market competition.” So is China really to blame for the EU’s trade imbalances? And is China truly the reason European countries lost their competitive edge? Let’s look at it.

1. Where is the EU investing in?

The European Commission unveiled earlier this month a €1.98 trillion blueprint for spending over the period 2028–2034. Alongside security and defence, competitiveness emerged as one of the budget’s top priorities. To make funds more accessible, the Commission created a €409 billion competitiveness fund, exceeding the expectations of many stakeholders. The fund is designed to strengthen the bloc’s industrial base and help it compete with China, with the largest share allocated to strategic technologies.

On paper, the figure is significant. But it still falls well short of what Mario Draghi’s landmark competitiveness report2 argued Brussels actually needs: an additional €750–800 billion annually, roughly 4.4–4.7% of the EU’s GDP, simply to keep pace with the United States and China in research and innovation.

Draghi argued that the bloc needs deeper capital market integration so that European savings, which currently often end up financing American innovation rather than European companies, remain in Europe and generate growth at home. Without fixing that financial infrastructure, even a well-funded programme like the new competitiveness fund risks working against the tide. And that tide has been moving in the wrong direction for some time. Available figures3, show that investment growth in the euro area and the EU has lagged behind that of its main peers and competitors. The slowdown can be explained by several factors: limited access to finance, a shortage of profitable investment opportunities, and a lack of appropriately trained workers. At the same time, Europe is increasing military spending, driven largely by Russia’s invasion of Ukraine in 2022. EU defence spending rose from €218 billion in 2021 to an estimated €381 billion in 2025, according to the European Defence Agency, a 75% increase in just four years.

The EU’s ReArm Europe Plan aims to unlock €800 billion in defence investment, with the European Commission raising up to €150 billion on capital markets through a new instrument called SAFE, the Security Action for Europe. The irony is that this €800 billion figure matches the amount Draghi said Europe needs every year to improve its competitiveness.

Will this surge in defence spending crowd out industrial investment in Europe, or will it ultimately strengthen it? That is the more relevant question, not whether China alone is to blame.

2- Where is China investing in?

While Brussels debates how to spend, Beijing has spent the past two decades building the industrial capacity that is now putting pressure on European industries from the outside. The scale gap alone tells part of the story. China’s overall trade volume surpassed the EU’s by 14% in 2024, with exports 28% larger, meaning China’s trade surplus was 510% bigger than the EU’s. China has become the largest trading partner for more than 120 countries, and its influence is built not only on cheaper goods, but also on control over critical infrastructure such as ports and digital networks, as well as access to vital raw materials4.

That dominance did not happen by accident.

After joining the WTO in 2001, China’s private sector expanded rapidly, accounting for around 70% of GDP by 2005. At the same time, the government pursued an aggressive industrial policy built around subsidies, tax incentives, technology requirements, and state-backed investment funds targeting sectors such as electric vehicles, robotics, aerospace, and semiconductors. These efforts were eventually consolidated under the banner of Made in China 2025.

The results are visible in critical supply chains. China now processes roughly 99% of the rare earths entering the EU, 92% of the world’s graphite, and 90% of refined rare earths globally. It also controls more than 75% of global battery cell production and over 80% of key solar panel components. In other words, Europe’s own green transition runs through Beijing, whether European policymakers like it or not(4)... And this strategy is not being abandoned. It is being incorporated into China’s next development roadmap. The country’s newly adopted 15th Five-Year Plan (2026–2030)5 doubles down on what officials call "new quality productive forces", with explicit targets to increase the share of core digital industries to 12.5% of GDP and maintain annual R&D growth above 7%. Beijing's 2026 budget alone allocates nearly RMB 1.3 trillion to national science and technology spending, a 7.1% increase, even as broader government spending grows only marginally6. Gene Ma of the Institute of International Finance put the European anxiety plainly

“The real issue with China isn’t that it exports more, it’s that it exports more of what Europe also produces”.

China's financial strategy also reflects a different economic model from Europe's. As Westpac's Elliot Clarke noted, while the United States has focused on controlling trade flows in an effort to encourage more domestic production and investment, China has pursued a different path, attracting investment at home while supporting export growth. The result has been a trade surplus averaging $88 billion per month in 2026, after reaching around $99 billion per month in 2025.7.

3-Free trade for me, protection for them: double standard?

Strip away the diplomatic language, and a trade war is ultimately a rejection of the very principles that free-market liberalism claims to uphold.

Economic liberalism rests on several core ideas: open trade, where countries exchange goods without excessive barriers; competition, where prices are shaped by supply and demand rather than government intervention; and efficiency, where countries specialise in what they do best so consumers benefit globally. This is theoretically.

Protectionism reverses that logic. It uses tariffs to shield domestic industries, introduces barriers that limit foreign competition, and invites retaliation as other countries respond with their own restrictions. This is precisely the language European leaders use when defending their own markets. Chinese subsidies are described as “unfair”, Chinese overcapacity as “distorting”, and a potential “trade war” with Beijing is presented as a reluctant but necessary defensive measure.

Yet Europe’s own toolkit looks remarkably similar when viewed from the other side of the mirror. The EU has introduced tariffs on Chinese electric vehicles. It has created a €409 billion competitiveness fund explicitly designed to protect European industry from “international rivals such as China”. It is also accelerating the Critical Raw Materials Act, which sets targets aimed at reducing dependence on external suppliers.

None of this is free-market competition in the textbook sense. It is industrial policy, framed as strategic self-defence. But the contradiction goes beyond tariffs. When China secures long-term access to African cobalt, Latin American lithium, or Central Asian energy corridors through the Belt and Road Initiative, European criticism often focuses on debt-trap diplomacy and extractive influence. That criticism may be justified. But Europe’s own historical and ongoing relationship with the Global South was also shaped by extractive dynamics, often on a much larger scale and over a much longer period. Today, Europe’s effort to secure critical mineral supply chains represents the same type of strategic hedging that China is often criticised for, albeit arriving later and with different messaging.

To end…

None of this means China’s practices are beyond criticism, or that European industries facing real job losses don’t deserve a policy response. But the question posed at the start of this piece: is it China that the EU should blame for its trade imbalances? China built a machine. Europe spent the equivalent money on defence, subsidies, and stopgap competitiveness funds while blaming Beijing for outcompeting it. Both things can be true. Only one of them is something the EU actually controls.

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Open doors. Music that never stops. A life marked by real hardship and real scarcity — but also by an inner peace I don’t quite know how to explain. People are tired. People are poor. Some are angry, some demand more from their government, some think about leaving. But no one wants their country occupied. No one wants to be handed “freedom” on the barrel of an American gun.

This isn’t a romantic portrait of a revolution. It’s what I saw with my own eyes.

Cuba has held on since 1959. Every left-wing government around it has fallen, risen, and fallen again, across Latin America and beyond. The Soviet Union collapsed. The American blockade never let up. And yet the revolution passes from one generation to the next. Something in Cuba is different. Something worth understanding, not dismantling.

But Washington doesn’t want to understand. It wants to destroy.

Trump administration officials openly boast about sabotaging Cuba and violating its sovereignty, while the administration floats the possibility of military action against the island. One can understand - without excusing - the logic behind American hostility toward other states: China is a strategic rival challenging US dominance. Russia is a historic geopolitical adversary. Iran is a regional power operating outside Western control. Venezuela has oil and geography. These are imperial calculations — comprehensible in their logic, even if indefensible in their morality.

But Cuba?

If Cuba is - as the West claims - a failed and collapsing model, why does that model warrant such enormous resources to bring it down? Why is medicine blocked? Why are remittances criminalized? Why are children punished for their government’s choices? Why, in the name of freedom, is an entire people being forced into a model they never chose?

The answer isn’t in what Cuba has. It’s in what Cuba represents: living proof - despite every blockade - that another way is possible. And that, apparently, is unforgivable.

To talk about Cuba today - its economy, its resilience, and its place in a changing world —-I spoke with political analyst and writer Pawel Wargan1.

L: Why is it the right time to talk about Cuba?

P: The United States has been playing this game of unpredictability recently, but it looks like they’re maneuvering for an attack, and my colleagues think it could come at any moment. They’re (the Americans) moving serious military assets into the area, so it’s tricky. And there isn’t that much that can be done to prevent a U.S. attack right now. Now, there are some dangers, of course. First of all, they could get bogged down in, or in some ways humiliated in, a kind of Bay of Pigs–type scenario. The other concern is escalation with Russia, because there are Russian assets and ships in the region, so there is a danger there. They are war-gaming it, but it would make sense for them to launch an invasion or an attack because of how humiliated they were in Iran, and they may need a victory. From their perspective, Cuba seems like an easier target than Iran. I don’t fully know what Cuba’s defense capabilities are; I don’t think they’re very sophisticated, given how suffocated they’ve been. However, the people are ready to sacrifice themselves in a movement of resistance.

L: How does this compare to other moments of the siege?

P: If you listen to Cubans - as with Palestinians talking about the latest developments in the genocide - this is all part of a long-term continuum. The Cubans have been under an economic siege for the entirety of their revolutionary history. That embargo has tightened again and again, and, in a sense, its tightening has always been a reaction to developments or shifts in the international situation. A very concrete example is the collapse of the Soviet Union, when Cuba lost the vast majority of its export markets, as well as its main import sources for things like fertilizer. This forced a major reorientation of its agricultural policy. The country that would eventually step in, to an extent, was Venezuela. The so-called “maximum pressure” campaign later implemented against Venezuela was also designed, in part, to suffocate Cuba. Similarly, recent pressure on Mexico to stop oil exports to Cuba was also aimed at strangling the island. So the policies have been tightening, and they have worsened year after year. For a time, Mexico and Venezuela were the main supporters of the Cuban economy, and that support is now largely gone. You are left with a situation where the only significant energy deliveries Cuba has received since December last year was a Russian ship that arrived recently. And I suspect that is not -as the White House suggests - simply a matter of goodwill or permission to pass. It is because Russian deliveries were - I suppose - backed by Russian warships and potentially submarines.

We also need to understand that one of the most serious escalations was when Cuba was designated a state sponsor of terrorism2, then removed, and then added again. That designation has the effect of preventing any financial institution dealing in U.S. dollars from conducting transactions with the island. To the point that even sending a small amount of money to Cuba from the U.S. can trigger account blocks and investigations. That has been going on for a very long time. Despite the tremendous suffering, what Cuba has shown is a huge degree of resilience, a revolutionary resilience. People remain mobilized. Amid blackouts, thousands have taken to the streets to support the state against U.S. pressure, which is why there is now a pivot toward possible military action. It is similar to Iran: when economic pressure fails to overturn a state, the political terrain expands toward possible military confrontation. We are therefore in a very dangerous situation, because we have an imperialism that is no longer able to wield the hegemonic and economic power it once had. The only tool left is brute force, and it is deploying it across multiple theaters.

L: There are people also protesting against the government and against its policies. How is the revolutionary spirit holding up?

P: It’s a good question. You will always find some people who oppose the government. If you look at these protests that have taken place against the government in recent years, they have never been very large, and a lot of the time Western narratives have tended to make them seem bigger and more prominent than they were.

There were several waves of anti-government protests in the last few years, and they were always met by large popular mobilizations that were much bigger than the protests themselves. What imperialism is very good at doing is generating popular grievances. For example, by creating a situation where people do not have access to food, energy, healthcare, transport, or even basic services like waste collection in Havana and other major cities, due to lack of fuel and resources. Imperialism produces real and legitimate grievances. People need food, water, transportation, schools, these are basic needs that the Cuban revolution has historically guarantee. The U.S. is almost certainly hoping - this has been an explicit objective - to generate hunger, poverty, and widespread disaffection with the government in order to provoke its collapse. This has been part of State Department discourse since the early 1960s. However, this has not succeeded, largely due to what the Cuban Revolution has built over decades and its deep bond with the population. There are revolutionary committees across neighborhoods and communities that still play a role in state processes. For example, in reforms like the family code and other national policy discussions, these structures have engaged large segments of the population at times more than 50%. There were around 80,000 community meetings organized through these grassroots structures to deliberate on policies. So there remains a revolutionary legacy, and a state model established under Fidel.

L: But some people criticize the lack of equality and the existence of a privileged class within the regime that has become wealthy at the expense of the rest of society

P: Whenever you have a communist state, you encounter this kind of criticism. Of course, in any political system there are forms of clientelism and privilege that do not always translate directly into monetary terms. Generally speaking, these communist projects have produced significant levels of income equality. The perception of mass inequality has often been used as an ideological weapon against them, ironically by the United States, which is arguably one of the most unequal societies in history. You may find individuals who manage to enrich themselves, but I am not sure how much weight those claims should carry as a general characterization. For a fact, in Havana, you do not see wealthy enclaves, gated neighborhoods, private security, or extreme displays of luxury next to deprivation in the way you might in many capitalist cities. Whatever inequality exists there is arguably far less extreme than in most capitalist states. This critique often functions as a way of attributing to socialism the very inequalities produced by capitalism itself. What is true is that Cuba, despite everything, still maintains free universal healthcare and free, high-quality education. Even today, these remain in place, although there have been closures and shortages in hospitals and schools due to resource constraints. However, these problems are framed as consequences of the siege imposed by the United States rather than failures of the system itself.

L: Is everything Cubans are living through due to sanctions and the siege, or are there problems caused by internal policies?

P: I do not necessarily agree with how the question is framed. Are there internal policies that could be improved? Yes, like in any country. But domestic policy is deeply distorted by the effects of the siege. To implement policy as a state, you need state revenue and productive capacity. If you want to guarantee housing, you need the ability to build homes. At one point, Havana reportedly built around 50,000 homes a year. Now it builds closer to 3,000 because it lacks access to construction materials. So you are operating with a fraction of the resources required, and you must prioritize policy within extremely constrained material conditions. Mistakes are inevitable in that context. All states make mistakes, but here those mistakes occur under conditions of severe economic strangulation. If overnight a country lost 95% of its income, lost access to banking systems, international transactions, and energy imports, it would collapse very quickly. Cuba has survived for more than 60 years under these conditions, which suggests a significant degree of resilience.

L: What is the most underreported dimension of the humanitarian collapse in Cuba?

P: I mean, underreported by whom? It is broadly underreported, especially in Western countries. There are accounts from U.S. medical personnel who visited Cuba in the early 1990s describing shortages in cancer treatment support medication, including drugs to reduce nausea from chemotherapy. In some cases, children undergoing cancer treatment were reportedly unable to access basic supportive medications due to sanctions-related supply restrictions. Children were vomiting 28 times a day! This is basically torture against children, all because Cuba was denied access to financing and to medicals imports. These are the kinds of everyday consequences that often go unnoticed, yesterday and today. It is not a single issue but the cumulative effect of sanctions and economic restrictions over decades. The aim, in this view, is to exert maximum pressure on the country’s ability to function, including access to medicine and infrastructure. That is the scale of the humanitarian impact that is often not fully reflected in mainstream reporting.

L: What specifically does the U.S. gain from destroying Cuba in 2026? Why didn’t they do it before?

P: They have tried many times and in many different ways. The long-standing policy objective has been to defeat the Castro regime, as it has been for successive U.S. administrations since the 1960s. Cuba is seen not only as a geopolitical challenge but also as an ideological one, because it has demonstrated that it is possible to deliver strong social outcomes with far fewer resources than wealthier capitalist states. Cuba has been presented as a case where socialism has achieved certain social indicators that rival or exceed those in much richer countries. It has one of the highest sustainable development indices anywhere in the world. And It has also played a significant role internationally, supporting anti-colonial and revolutionary movements, and sending doctors and teachers abroad. From this perspective, Cuba represents both an example and a symbol of alternative political organization, including international solidarity. There is also a strategic dimension: pressure increases when the U.S. sees an opportunity to prevent Cuba from reducing its dependence on imported energy and from shifting toward renewables as it has been investing so much in solar energy with China’s support. So it becomes a kind of race against time between economic strangulation and internal restructuring.

L: Is Secretary of State, Marco Rubio really a reason to intensify the pressure?

P: Yes, I think so. He has been a prominent figure in what is often referred to as the “Gusano movement”3. He has long expressed the goal of overthrowing these political systems, particularly in Venezuela and Cuba. So he is certainly part of that political current.

L: Is there a connection between the U.S.–China rivalry and the increased pressure on Cuba?

P: I think there is. From the Venezuelan perspective - which I find somewhat persuasive - the attack of the 3rd of January and U.S. actions in the region are interconnected across different theaters and time periods. The broader argument is that interventions in one country often serve as preparation or precedent for actions elsewhere. Especially after controlling now Venezuelan oil sales. Usually when imperialism wages war against Global South, it doesn’t happen for one single goal. One of them is to “punish” states for resisting imperialism. In this view, Cuba becomes a laboratory for maximum-pressure strategies: economic restriction, energy denial, and financial isolation. Because Cuba cannot easily respond in kind and the international system does not counterbalance the pressure, it becomes a testing ground for these approaches. More broadly, what we are seeing might be aimed at a kind of preparation for a much broader systemic confrontation with China in the long run.

L: The empire is tightening its grip on the world…

P: It is trying to, but I think it has also failed in important respects.

For example, in Iran, the assumption that pressure would produce compliance did not fully hold. Instead, it produced counter-moves that altered the regional balance. Iran has turned the tables by playing the Hormuz card, controlling the flow of oil in the region, imposing a kind of reverse sanctions on the international economy, so they achieved an effective new economic arrangement backed by the threat of rockets and missiles. If Iran manages to suppress imperialist expansion, then what chance does U.S. has against China, which is probably more technologically advanced in its military capabilities and certainly more advanced in its productive capacities than the U.S.?

L: You mentioned that the Russian oil tanker to Cuba might have been supported by the Navy. Why didn’t they send it earlier? And how meaningful is Russian and Chinese support to Cuba in practice? Is it enough or mostly symbolic?

P: There is a tendency in some parts of the left to over-attribute responsibility for these dynamics to China and Russia, rather than focusing on the underlying source of pressure, which is imperialism itself. China today operates very differently from the Soviet Union era. The kind of intervention that China’s been making, especially over the past decade, has been to build that kind of global infrastructure, a community with a shared future for humanity. Its global role has largely focused on infrastructure development and economic initiatives such as the Belt and Road and the Global Development Initiative. These programs aim to build transport, energy, and industrial capacity in countries that have historically lacked such infrastructure or had it structured for extraction under colonialism. This has shifted the balance of the international system over time, contributing to a relative decline in U.S. dominance. We are in a new global order shaped in part by China’s rise and Russia’s role in constraining NATO expansion and Western military capacity through the Ukraine conflict. As for Cuba, expectations that Russia should regularly supply oil or that China should intervene more directly do not fully account for current geopolitical constraints. Russia is heavily engaged elsewhere, and China is cautious about escalating conflicts that could trigger wider confrontation, for example in relation to Taiwan. However, their actions still contribute to structural shifts in the international system. The wars and genocides that have been brought back to the table by imperialism are one of the symptoms of its inability to deal with those transitions. Therefore, I don’t subscribe to the idea that China and Russia are not doing enough.

L: We understand that China and Russia may not want direct confrontation with the U.S., but why don’t we see more coordinated action to help the Global South, especially in cases like Venezuela, Cuba, or Palestine?

P: Cuba, China, Russia - and especially China - these states are generally trying to position themselves as reliable partners within the existing international system. They tend to operate through international law and established diplomatic frameworks, even while recognizing that those frameworks were historically shaped by imperial powers. China in particular is building alternative forms of cooperation through infrastructure and economic coordination.

You made the point that if you allow something to happen in one place, you open the door to a habit in other places. Do you want Chinese special forces to land a helicopter in New York and liberate Maduro? That’s not going to happen. So what do you do beyond condemnations? Do you want them to impose sanctions on the U.S.? Direct intervention is extremely limited by geopolitical risks. If one proposes extreme countermeasures - such as military intervention or retaliatory sanctions - the practical consequences would likely be global economic destabilization. So it’s not at all straightforward to think about how we unwind these things in a way that doesn’t collapse the international economy and cost billions of people into misery.

L: This doesn’t mean that the U.S., whenever it feels its existence is threatened, can do whatever it takes to strengthen its imperial position?

P: It seems, however, that the U.S. is in fact weakening its imperial position through its own policies. For example, the economic consequences of severing ties with Russian energy have significantly affected European economies, while also impacting Russia. The overall management of these risks has not been effective, and has produced broad economic and social costs.

L: What does effective solidarity actually look like today, and how can we really help Cuba?

P: Maybe some of my colleagues disagree with me, but I think there is a tendency in parts of the international left to respond to crises with a kind of panic and urgency, justified by what is going on. While solidarity matters, it is not sufficient on its own. Symbolic support, like in the case of Cuba, can provide moral encouragement and visibility, show Cuban that they have supporters all around the world… but it cannot replace material and political capacity. In the long run, as the crises intensify - and they will intensify - as the war spreads, we need the kind of revolutionary resilience that we’re seeing in Cuba and in Iran, where masses of people, despite tremendous pressure, are able to come to the streets, even under bombardment, with raised fists. What matters most here is the development of political movements capable of organizing people and building power within their own societies. Unfortunately, we’re very far from that in many countries. Real solidarity ultimately means building movements that can engage politically, challenge existing power structures, and develop the capacity to act collectively. As Che Guevara suggested when he spoke of “creating two, three, many Vietnams”,4 the idea is not symbolic repetition but the multiplication of political forces capable of resisting imperial power. Without that, symbolic gestures remain limited. If such movements are not built, other political forces - often reactionary or authoritarian - will fill the vacuum instead. So the priority is long-term political organization oriented toward power and structural change.

The article I published on May 14th, regarding Banque du Liban Governor Karim Soueid’s use of the mandatory reserve (composed of depositors dollars) to purchase foreign securities of undisclosed nature, sparked debate and discussion in Lebanon. Some considered that Soueid had made a “smart” investment decision with no risk, aimed at generating additional foreign currency revenues. Others argued that Soueid - even if acting in good faith - does not reflect the role of a central bank so much as the management style closer to an investment portfolio, in the absence of a clear monetary policy in a country facing an unprecedented liquidity and confidence crisis.

5 billion dollars were invested in purchasing securities, at the very same time that Lebanon and its central bank governor are requesting aid, grants, and loans from countries and international institutions, citing exceptional circumstances to justify austerity and the lack of investment in infrastructure and public sector salary increases. The issue is not merely about whether investing part of the reserves is permissible or not, and how to invest them, but rather about the operational framework and the management of the central bank’s portfolio: the level of transparency, accountability mechanisms, and the absence of a comprehensive monetary policy that defines the purpose of these funds and the limits of their use. And between requesting monetary aid on one hand and using available cash for investment on the other, the contradiction is no longer merely formal. We are facing a clear equation: a state requesting immediate liquidity to survive and fund its basic functions, and a central bank transferring a substantial portion of its reserves abroad into financial instruments, without any transparent public debate about priorities: is the priority to strengthen domestic liquidity at a moment when external assistance is being sought? Or to convert part of this liquidity into external financial instruments under the banner of hedging and yield?

Banque du Liban’s Response

Following the publication of the article, a call was received from an official at Banque du Liban addressing a number of key points, which are noted below:

1. Upon the appointment of Governor Karim Soueid on March 27, 2025, he decided that it would be preferable to invest part of the funds that Banque du Liban had deposited with foreign banks in short-term US Treasury Bills (T-Bills), in order to protect these funds from any crisis that might affect the global banking sector. The decision was made without any internal opposition within BDL’s Central Council.

2. At the same time, we shipped cash dollars from Lebanon abroad to earn returns on them, either by placing them in banks in exchange for interest or by purchasing US Treasury Bills, in order to diversify our portfolio and avoid leaving cash amounts idle and unexploited.

3. The “Banque du Liban Investment Committee,” established on June 17, 2025 to manage and oversee the investment of foreign reserves, securities, gold, real estate, and other financial assets… has not yet been formed. The circular was issued based on a recommendation from the International Monetary Fund (IMF) that such a committee is required at central banks to manage investments effectively.

4. One of the objectives of the Governor’s visit to the United States is to request financial and social support so that the state can continue to function and ensure domestic stability, through the allocation of grants to public institutions.

Do Short-Term US Treasury Bills Protect Against Risk?

Short-term US Treasury Bills are typically presented as low-risk, high-liquidity instruments. They are debt instruments issued by the US government, purchased at a discount from their face value, with the full value repaid at maturity, thereby generating the return for the investor. This means that if BDL purchases Treasury Bills worth $96.5 million, it will receive $100 million from the US government upon the bill’s maturity.

Banque du Liban chose short-term Treasury Bills because they are easy to convert to cash and carry a low degree of risk. However, it must also be noted that if BDL suddenly needs liquidity and decides to sell these bills early on the market, before their maturity, their price may fall depending on global interest rates at that time. In this case, the central bank may incur losses instead of realizing the full expected return. Therefore, they are not without risk. Rather, they are managed within a different type of risk, one linked to the market and liquidity. Thus, when the Banque du Liban official states that one of the objectives of purchasing US Treasury Bills was to protect cash from a crisis that might affect the global banking sector, he is not presenting the full picture. There is indeed a risk of bank bankruptcy. However, the market risks associated with securities - that the value of a purchased bond may fall if BDL needs to sell it before its maturity date - also exist. In the Lebanese case, an additional layer of risk can be added: jurisdictional risk. US bonds mean that the funds are held within the American financial system. Any American political decision (sanctions, freezing, restrictions) can cut off access to them. The current political situation and the existential threats facing the country from the United States and “Israel” make this risk real rather than hypothetical.

An “Investment” State That Requests Grants

BDL has therefore decided to invest $5 billion of its foreign currency reserves in US government Treasury Bills, and expects to generate (theoretically) annual returns of approximately $175 million. The declared profits were calculated on the assumption that BDL holds the Treasury Bills until their maturity date and receives their full value from the US government. Of the 5 billion dollars, 2 billion were physically shipped in cash from Lebanon abroad to purchase the bonds, while 3 billion were drawn from BDL’s accounts at foreign banks. According to figures up to March 31, 2026, only approximately $500 million in cash remains at the central bank.

It is worth noting here that in December of last year, “Scap”, a company specializing in money transfers in Lebanon, undertook the shipment of banknotes from Banque du Liban’s vaults. The central bank justified this by stating that there was no longer sufficient space to store these banknotes at the bank, which was losing out by stockpiling them without putting them to work and earning interest. The amounts at the time ranged between $1.7 and $1.8 billion.

There is a contradiction in the logic of state management itself. On one hand, Lebanon is presented as a country in urgent need of external financial support to avert social collapse, while on the other, its reserves are managed in a way that suggests a liquidity surplus permitting foreign investment.

On May 3rd, Governor Karim Saïd published an article in the British newspaper the Financial Times, calling on the international community to “support a reform government now, or face a more turbulent reality.” This support includes requests for monetary assistance. This was preceded by his recent visit to Washington to request financial grants.

In April, the Lebanese government opened negotiations with the IMF for an emergency loan of one billion dollars, framed as financing for the consequences of the war. The request for external financing to compensate for the war shock was repeated with the World Bank, when Lebanon - through the Ministry of Finance - sought additional financing ranging between $300 and $500 million, alongside an agreement signed at the time for $200 million to support social protection programs.

Three years ago, when Lebanon was attempting to sign a loan agreement with the IMF worth between $2.5 and $3 billion, the IMF announced the allocation of $860 million to Lebanon within a program worth $650 billion distributed across 190 countries, as part of a plan to increase the Fund’s reserves through Special Drawing Rights known as “SDRs”. A cycle feeding on loan requests and the allocation of public funds to service debt interest. It is common for states to borrow. However, debt carries a political identity that reflects its purpose: is it to carry out investment projects that improve society’s standard of living and generate returns, or to service a rentier model that benefits a small group, as has been the case in Lebanon at least since the “reconstruction” era? Most critically today, the public sector account at BDL holds approximately $4.5 billion in “fresh” dollars available for use, capable of financing part of the urgent needs without directly resorting to external borrowing or requesting grants, and without the need for this exaggerated austerity and the pride taken in it.

What Is the Fate of Depositors’ Money?

The investment of foreign funds is occurring at a time when Lebanon is supposedly in a phase whose core should be financial and banking restructuring, and the passage of a financial gap law that remains stalled, not only because of the war, but as a result of the ongoing conflict between the central bank and the commercial banks on one side (and their allies within the state) regarding the issue of writing down bank capital in the first phase, and their opposition to this to avoid declaring the bankruptcy of all Lebanese banks, and the IMF on the other side, which conditions the start of reform on precisely this point.

Therefore, the issue of reserve management cannot be separated from the future trajectory of loss distribution, and the matter cannot be confined solely to achieving a short-term investment return. The central bank is not merely an investment body seeking to maximize returns, but an institution whose core function is supposed to revolve around protecting monetary stability, ensuring liquidity in the worst of circumstances, and restoring confidence in the financial system. Accordingly, the evaluation of any investment decision must encompass the institutional framework in which it was made and the related political choice.

Within this context, what sources inside BDL have revealed appears alarming: that under current conditions, and following the war’s exceptional measures and financial pressures, the ceiling of repaying $100,000 per depositor - paid in cash dollars over four years - is no longer seen as a viable option. Discussion has begun around lowering this ceiling to a maximum of $75,000, unless “the Lebanese state decides to bear a large portion of the cost of deposits and contribute directly to resolving the banking sector crisis”, according to the source, who states that this matter was discussed with the IMF, which did not express objection to the approach.

This detail is not marginal. Because it means practically that the country is simultaneously discussing reducing what depositors may receive in the future, while billions of dollars from the reserves are being managed through external investments under the banner of hedging and yield maximization. It also reveals that the attempts to transfer the losses caused by the policies of Banque du Liban under the leadership of Riad Salameh, and the actions of the banks, onto the current and future generations continue unabated.

The central bank in this equation is not merely a financial entity seeking to improve returns, but a fundamental party in the redistribution of losses within the financial system. Every decision related to reserve management is, in effect, a decision that directly or indirectly affects the shape of the coming settlement, the restructuring of the banking sector, and who ultimately bears the final cost of the collapse.

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The Governor of the Banque du Liban, Karim Soueid, is using the mandatory reserve — composed of depositors’ dollars held in banks — to purchase foreign securities whose nature remains unknown. This step carries high risks: if the value of these securities declines later on, it will turn into a real economic loss. It is a gamble undertaken by Soueid at a time when people in Lebanon are being deprived of public spending that could improve their quality of life, as well as a solution to the banking sector crisis.

Before explaining the details of what is happening inside the Banque du Liban, it is necessary to revisit Lebanese Finance Minister Yassine Jaber’s interview with the newspaper Al-Akhbar on April 24 in order to understand how officials in the Lebanese state think, and the connection between this mindset and the central bank’s policies. In that interview, Jaber announced that he is not prepared “to pay 800 million dollars per year to finance the salary increases for public sector employees approved by the Council of Ministers because the decision to pay is wrong today”. The minister openly contradicted the Council of Ministers’ decision taken in February to grant 6 additional salaries to public sector employees, to be financed through increasing the gasoline tax by 300,000 Lebanese pounds (around $3.35) per canister and raising VAT by 1% to 12%. He justified this by saying: “I was enthusiastic about paying, but we are now working to prevent the exchange rate from shaking”.

The minister and his colleagues may have been enthusiastic about paying, but public sector employees and the population forced to bear these measures were not enthusiastic about paying more taxes imposed in such an absurd manner. People objected, and a large segment demanded fair and purposeful taxation. The minister forgets that he is not paying out of his own pocket; rather, he and the Council of Ministers decided to force people to pay new taxes so that the collected money would be used to finance salary increases, and nothing else. The Lebanese state ignored public objections, as well as analyses by experts and economists who warned against this measure, and insisted on unfair taxes, presenting them as though they were the only solution for increasing salaries without exposing the exchange rate and public finances to new shocks. Until it became clear that the decision was deceptive and turned into a governmental violation. It should be noted that the Finance Minister mentioned that 35 million dollars per month has been collected since the taxes were imposed in February, and that without these sums, the situation would have been even more catastrophic in terms of registering a budget deficit.

So, if the sums collected by the state from the population, along with depositors’ money in banks and the Banque du Liban, are considered extremely precious and cannot be spent on infrastructure projects, electricity, transportation, hospitals, or salary increases, and instead must pile up in the public treasury’s account at the Banque du Liban to generate a surplus and create the impression that the situation is good, then why is it considered acceptable to expose people’s money to financial market risks, especially when it is being managed in a non-transparent manner?

Banque du Liban’s Investment Committee

The story officially began around two months after Karim Soueid assumed his duties as Governor of the Banque du Liban. On June 17, 2025, a memorandum signed in Soueid’s name was issued announcing the establishment of the “Banque du Liban Investment Committee” in order to manage and supervise the investment of foreign reserves, securities, gold, real estate, and other financial assets. The committee’s membership is divided into two sections. The first consists of members with voting rights: the central bank governor, a deputy governor, and two “independent” external members. The second consists of non-voting members: the Head of Foreign Exchange and International Relations, the Head of Real Estate and Financial Assets, the Head of Statistics and Economic Research, and the Head of Risk Management (after its establishment). The memorandum was amended on May 7 to include two deputy governors instead of one. According to information available, one of the “independent” members is the Secretary-General of the Economic Bodies Nicolas Chammas.

The committee holds broad powers:

• Setting investment policies, reviewing them annually, and presenting them to the Central Council.

• Deciding how reserves, foreign assets, securities, maturities, and levels of risk exposure are distributed.

• Actively contributing to the formulation of reserve investment strategy.

• Monitoring risks and market developments, and adjusting strategies accordingly.

• Reviewing the performance of the Banque du Liban’s foreign asset portfolio.

• Selecting external asset managers. This means the committee can appoint external financial institutions or portfolio managers to manage the assets it owns.

What do we understand from all this?

The memorandum explicitly mentions “improving returns”. This means that the mandatory reserve will also be used for investment purposes in financial markets, and its management could be entrusted to international financial entities whose identities, instruments, and risks will remain unknown to depositors and citizens. Although the memorandum refers to internal oversight of the committee’s work, it says nothing about public transparency, especially since it will invest and gamble with money that does not belong to the Banque du Liban.

This memorandum therefore proves that the reserves are not being held in cash but are instead being used to generate returns. It is common for central banks around the world to use “their money” rather than hold large quantities of cash. However, in the Lebanese case, where these reserves constitute the only “safety valve” regarding foreign currencies, where their use was previously rejected for financing fuel purchases and supporting food and medicine prices, and where they are supposed to be used to resolve the banking sector crisis, this raises many questions, foremost among them transparency and the absence of trust in these officials and the system.

Banque du Liban Figures

The table below shows changes in the volume of foreign currencies on the Banque du Liban’s balance sheet, most of which consist of mandatory reserves. The amount declined from 10.681 billion US dollars at the end of March 2025 to 6.797 billion dollars at the end of February 2026, a decrease of 3.883 billion dollars over 11 months.

Meanwhile, the foreign currency securities portfolio increased from 168.7 million dollars at the end of March 2025 to 5.204 billion dollars at the end of February 2026, an increase of 5.036 billion dollars in less than a year. To clarify, foreign securities are financial instruments purchased in international markets or external investments, such as foreign government bonds or other investment assets. They differ from foreign currency debt bonds issued by the Lebanese state, which appear under another item on the balance sheet.

What happens if the assets lose value?

Central banks generally prefer investing in short-term, low-risk instruments. Even if the assets appear “safe”, timing also matters. For example, if the Banque du Liban purchases foreign bonds with a 10-year maturity and later needs to liquidate them immediately, it would be forced to sell the assets early, possibly at a loss. This is exactly what happened during certain banking crises when bond portfolios lost value due to rising interest rates, resulting in unrealized losses.

If the value of these securities - whose nature, we emphasize, remains unknown - declines, this will lead to losses in reserves that cannot be quickly absorbed because Lebanon is already in a state of collapse, suffering from enormous financial losses, weak public finances, and most importantly a crisis of credibility and trust in the banking sector.

If these investments fail to generate any return, then the Banque du Liban would have gambled by investing the funds and assuming market risks without achieving any meaningful profit.

Why Central Banks invest in foreign assets?

There are several reasons why central banks invest in foreign assets:

• Generating income instead of leaving dollars idle.

• Strengthening foreign reserves.

• Delaying the disclosure of real losses or creating the impression that the financial situation is more stable, especially if funds become distributed within investments and structures that are difficult to clearly track.

The issue is not only that Karim Soueid is using the mandatory reserve to purchase foreign assets whose value may collapse or that may prove difficult to liquidate into cash. The issue also lies in the lack of transparency regarding the nature of these financial instruments. What are their maturities? Are they high-risk? Are they profitable? Are they counted as part of the reserves? Can their profits be used to repay deposits and resolve the crisis? In the absence of these answers, Lebanon is facing a new layer of collapse. It is also facing a new era at the Banque du Liban in which the governor acts like an investment manager seeking returns through the use of depositors’ money during an extremely sensitive phase. Imagine a family whose savings were frozen after a financial collapse. Then the person responsible for managing the remaining funds begins investing them in markets without informing the family where the money is going or what risks are involved. This is what Karim Soueid is doing with the mandatory reserve.

Recommendations

Karim Soueid came to the governorship of the Banque du Liban from managing a company specialized in alternative asset management and investment in private companies in the Arab world. Even if he has not yet managed to separate his background as a portfolio manager from his duties as a central bank governor, there is nothing preventing the consideration of the following:

1. Full transparency by informing the public about the composition of assets, credit ratings, custodial entities, and valuation methods.

2. External auditing of the committee’s work and investments - not merely internal oversight - including reserve management, unrealized losses, and compliance with investment policy.

3. Prioritizing rapid access to immediate liquidity and favoring short-term assets over maximizing returns, while ensuring that what is taking place is not a means of concealing losses.

4. No mandatory reserves should be exposed to vague investment decisions without oversight.

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This move is a political and economic shock, no less significant than the ongoing war in West Asia and its global consequences.

Within less than 24 hours of the announcement, hundreds of insightful analyses were published. Some framed the decision as part of a “soft” (and not-so-soft) rivalry between Saudi Arabia and the UAE. Others linked it to the war on Iran and restrictions on trade through the Strait of Hormuz. Some even saw it as coordinated with the United States for various reasons, including the UAE’s desire for greater “oil independence”.

Before touching on these factors, we should ask: what does this decision mean for the rest of the world, especially those in the Global South? Will weakening this oil cartel benefit us? Will oil prices fall?
Will it ease inflation (the indicator showing if we are buying fewer goods at higher costs)? Where do we stand in this growing geo-economic competition?

What is OPEC?

OPEC was founded in Baghdad in 1960 by Saudi Arabia, Iraq, Kuwait, Iran, and Venezuela. Abu Dhabi joined in 1967, and its membership later became that of the United Arab Emirates after the country’s formation in 1971. Over time, other countries joined, including Algeria, Libya, Nigeria, Congo, Equatorial Guinea, and Gabon. Before the UAE’s withdrawal, Angola, Qatar, Ecuador, and Indonesia had already left the organization.

OPEC’s stated goals:

• Coordinate oil policies among member states

• Ensure stability in oil markets

• Secure efficient and regular oil supply

• Provide stable income for producers

• Guarantee returns for investors in the oil industry

You might ask: why was “OPEC+” created instead of simply expanding OPEC?

OPEC+ was established in 2016 because OPEC alone could no longer control the oil market, especially after the price collapse between 2014 and 2016 due to overproduction. There was a need to include major producers outside the organization, such as Russia, to help regulate supply and stabilize the market.

At the time, Saudi-Russian rapprochement (particularly after the rise of Crown Prince Mohammed bin Salman) made this cooperation possible. However, Russia did not join OPEC formally, preferring to maintain flexibility in setting its production levels and avoid being bound by an organization largely influenced by Saudi Arabia. Instead, Russia chose to act as a strong partner with some political flexibility, rather than a fully committed member. This led to the OPEC+ arrangement, formed during a meeting in Vienna on December 10, 2016 bringing together OPEC and non-OPEC producers such as Russia, Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Sudan, and South Sudan.

(Photo: CNBC)

Is OPEC an oil cartel?

Although OPEC does not fully control global markets - due to major producers outside it like the United States, and partial non-compliance by countries like Russia - it still fits the definition of a cartel.

Technically, it is a group of countries with shared oil interests that set production quotas for each member. By doing so, they indirectly influence prices. OPEC does not directly set oil prices. It does not announce daily prices for buying and selling oil. Instead, it controls supply. Why? To prevent price drops and maintain profits, allowing member states to fund their budgets. It resembles what Soviet leader Vladimir Lenin described as a “friendly division of markets”.

When the United States - particularly under Donald Trump - criticizes OPEC as a monopoly cartel, it is because production cuts and artificially high prices harm American consumers, strengthen non-allied states, and shift power balances. For Washington, weakening or controlling such alliances is a strategic priority.

Between Politics and Economics

Since its creation, OPEC has been presented as a stabilizing force in the global oil system. Some anti-imperialist countries tried to use it as a financial tool to support growth and development, and as a way to challenge global dominance.

This image was reinforced by Iran remaining in the organization after its Islamic Revolution, and by Venezuelan President Hugo Chávez defending OPEC as a balance of power—not simply a capitalist cartel.

In an article published by Phenomenal World, Giuliano Garavini and Rafael Ramírez explain that OPEC has always faced tension between two identities:

“A political organization representing Global South interests, and an economic body focused on maximizing member revenues. This contradiction became clear in 2007, when a “political bloc” led by Venezuela and Iran clashed with an “economic bloc” led by Gulf monarchies. At the 2007 OPEC summit in Riyadh, Chávez strongly argued for strengthening OPEC’s political role. He highlighted its role in fighting poverty in developing countries and questioned the dominance of the US dollar in global markets. The political bloc even proposed using a basket of currencies instead of the dollar for oil pricing. However, this idea was ultimately rejected due to opposition from the Gulf-led economic bloc, particularly Saudi Arabia”.

Despite all this, OPEC has remained primarily a tool for securing the interests of major oil producers. It has not significantly strengthened Global South political power or broken US dominance, especially since the US itself is a major oil producer.

Why did the UAE make this decision?

So, how can we read UAE’s move? The country sees the war on Iran and disruptions in the Strait of Hormuz as the perfect moment to withdraw and to send a message to Saudi Arabia: economic dependency is over. It is time to “benefit” from the war and reshape the system. And we can’t deny that it is another chapter in the intense rivalry between the two Gulf states, which has already been visible in places like Yemen.

The UAE is now pursuing its own interests independently of Saudi Arabia and the Gulf Cooperation Council. This is a strategic repositioning.

However, in the short term, leaving OPEC will not allow the UAE to significantly increase exports. The main obstacle remains transport through Hormuz.

The Habshan–Fujairah pipeline (the only route bypassing the Strait) has a capacity of 1.5 million barrels per day, expandable to 1.8 million in emergencies. Yet even now, it is used at less than 70% capacity. Another planned pipeline (Jebel Dhanna–Fujairah), which could carry 1.5 million barrels daily, has not yet been built.

So in the short and medium term, the UAE cannot flood the market or threaten Saudi-led alliances. But this move is long-term and strategic.

Once alternative infrastructure is completed and Hormuz is reopened, the UAE plans to maximize oil production to fund investments in technology, artificial intelligence, and renewable energy. It also anticipates that ongoing global crises will push countries toward alternative energy sources. The UAE does not want its oil to become stranded, unused assets underground.

Most importantly, according to CNBC Arabia quoting Landon Derentz of the Atlantic Council’s Global Energy Center:

“maintaining strong production capacity gives the UAE flexibility, and could strengthen its role as a strategic partner for the United States, particularly in managing strategic oil reserves”.

Does the end of the cartel benefit society?

Returning to our main question: will weakening the oil cartel improve conditions for people?

At first glance, it seems logical: Less monopoly → more competition → higher supply → lower oil prices → cheaper transport → lower food prices → reduced inflation.

In theory, this makes sense. But the global energy system is undergoing major changes, and we are entering a new oil conflict whose shape is not yet clear. The end of OPEC - or even Gulf coordination - does not guarantee stability or solve deeper structural issues. Countries affected by this shift will not remain passive. We are likely moving from coordinated control to a more unpredictable system, with higher volatility, more aggressive actors, and increased geopolitical shocks. While weakening OPEC might benefit consumers in the short term, it does not eliminate the power of capital and monopolies, it simply redistributes it in favor of new centers of power, not societies.

For countries in the Global South this creates a difficult landscape. A unified position is unlikely given their conflicting interests. However, states must recognize that we are entering a more dangerous and unstable phase. It is not about choosing sides, or thinking tactically. Gas and oil must be treated as a matter of national security, not just economics in an increasingly unstable world.

How do you read this move? Is this the beginning of a new oil order or another cycle of power shifts?

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After Tehran announced the opening of the strait to ships, specifically after Lebanon was included in the ceasefire agreement, it later tightened its restrictions according to standards and routes set by the Revolutionary Guard, in response to the American blockade imposed on it.

So what did the United States gain from this naval escalation? And did it actually succeed in opening the Strait of Hormuz or easing the crisis it imposes on the world?

We will answer this question in this report, but first it should be noted that when a country with the military, economic, and political power of the United States imposes sanctions or a blockade on another country, it will certainly cause huge disruptions within the targeted society, whether in securing people’s daily needs, improving quality of life, or ensuring access to opportunities for growth and progress. The economy will be shocked, and markets will react negatively. This is often accompanied by political unrest. But will sanctions and blockade achieve the results the United States wants? In other words, will they force the targeted country to make concessions or create changes in the structure of the ruling regime?

In their book “How Sanctions Work: Iran and the Impact of Economic Warfare”, researchers Narges Bajoghli, Vali Nasr, Djavad Salehi-Isfahani, and Ali Vaez answer this question by saying:

“Let us take Iran as an example, as it is the most sanctioned country in the world. Comprehensive sanctions aim to trigger uprisings or apply pressure that leads to a change in the behavior of the ruling system or weakens its grip on power. But after four decades, Iran has proven exactly the opposite. In fact, despite periodic protests, sanctions have strengthened the Islamic Republic, weakened its people and made them poorer, and increased Iran’s military power in confronting the United States and its allies in the region. Not only does the Islamic Republic still stand despite harsh sanctions, more importantly, Iran has become a more aggressive state as a result of increasing American sanctions”.

The book was published in 2024, before the June 2025 war, and before the current war that has been ongoing for more than 50 days. Not much has changed. Sanctions and blockade still cause severe damage to society without leading people to rise up against their state. Logically, today, the Iranian regime after losing many of its key leadership figures, the assassination of Supreme Leader Ali Khamenei, and being subjected to military strikes, has become weaker than before, and “easier” for opponents (who previously did not lack the courage to fill the streets and demand their rights) to organize themselves and pressure for the overthrow of the system. However, this has not happened so far, for several reasons that this article is not the right place to discuss. Therefore, once again, it is valid to ask: did escalation and blockade lead to opening the Strait of Hormuz or easing the crisis it imposes on the world?

Returning to Hormuz…

On April 21, the Iranian leadership refused to send a delegation to continue negotiations with the Americans before lifting the blockade on its ports. The position was also influenced by the United States seizing a ship flying the Iranian flag near Hormuz. In response, the Iranian Foreign Ministry spokesperson, Esmail Baghaei, said in a press conference last Monday that “the seizure of a ship flying the Iranian flag and the continuation of the American blockade on Iranian ports constitute a violation of the ceasefire agreement”. The seized ship, “Tosca,” is accused by the United States of supplying Tehran with materials for its ballistic missile program. The incident was the first since the blockade began on April 13.

On Wednesday, April 22, Iran announced the detention of three ships that tried to cross the Strait of Hormuz and escorted them to Iranian shores. According to the spokesperson for the Iranian Parliament’s National Security and Foreign Policy Committee, Ebrahim Rezaei: “An eye for an eye, and an oil tanker for an oil tanker”.

It is clear that the Iranian strategy is not about retreat or making concessions, but rather responding to escalation with escalation. We have to note that it has not yet been shown that military and naval dominance is enough to disable Iran’s modest naval power in front of the United States. Washington is trying to inflict economic damage on Tehran by causing losses in exports, increasing pressure on the local currency, raising prices domestically, and creating shortages in essential supplies. However, in practice, the blockade has not completely cut off Iran’s export and import lines. On the contrary, the situation is still causing disruptions to the GCC countries, which are U.S. allies.

The American newspaper The Washington Post published a report on April 17 based on satellite images and data from the “TankerTrackers” website, which tracks oil tankers, stating that five empty oil tankers arrived at Iranian ports in the Arabian Gulf in recent days and began loading millions of barrels of oil. In the Gulf of Oman, on the other side of the Strait of Hormuz, “five tankers that were anchored outside Iran’s easternmost port disappeared from satellite images late this week”. The newspaper quoted a U.S. official saying the ships left the Gulf hours before the blockade took effect, “but they were pursued under related restrictions (...) we are using geography to our advantage”. However, it does not seem that oil flows have stopped. This means the blockade has not succeeded in stopping Iranian exports, nor in imposing full control over oil movement through the strait.

Data from “TankerTrackers” shows that three Iranian oil tankers docked at Kharg Island, where most Iranian oil is stored before export, “together loaded a total of 5 million barrels of crude oil”. An oil tanker was spotted at the port of Bandar Mahshahr loading fuel oil, and another ship flying the Panamanian flag was loading naphtha. Estimates indicate that some ships send inaccurate coordinates to hide their locations and bypass the blockade, allowing them to move to and from Iranian ports or Kharg Island.

So, the blockade neither stopped the oil nor opened the strait. What did it actually change?

It is certain that the new measures will have an impact on Iran, especially in terms of forced slowdown in production due to storage filling up if exports are restricted, and the disruption of supply chains with delays in oil tankers, contract disruptions, and a significant rise in insurance costs. However, there are indications that the United States does not aim only to pressure Iran to extract concessions.

The continued flow of Iranian oil, even partially or unofficially, would not have been possible without the presence of a main buyer willing to take the risks of sanctions, foremost among them China. Before the outbreak of the war, Beijing was taking about 95% of Iranian crude oil exports, which were transported through complex networks of sanctioned tankers and intermediary traders. Preventing China from obtaining energy sources at low prices aims to strike its vital interests and remove the competitive advantage of its industry. It is true that China does not rely excessively on oil in its energy mix, as it does not exceed about 18%, and investment in alternative energy sources has increased, but this does not eliminate the sensitivity of its economy to price fluctuations and supply chain disruptions, especially in manufacturing and transportation sectors. Therefore, the main problem is not the availability of oil itself, but the cost of obtaining it and the stability of its flow.

For this reason, Beijing has worked in recent years to reduce these risks by building strategic reserves, diversifying import sources, and accelerating the shift toward alternative energy. However, these measures, despite their importance, do not mean that China is ready to abandon Iranian oil; on the contrary, they give it a wider margin to continue importing it even during crises.

In this sense, the Strait of Hormuz shifts from being a pressure point on Iran to a tool in a broader conflict with China, centered on energy security and supply chains. The United States is trying to impose new maritime realities, not only to control Iran, but to redraw the limits of movement of its biggest rival. Nevertheless, facts so far show that this strategy has not broken either side. Iran still holds the strait from within, and China still finds its way to oil, making the blockade a costly escalation that opens an additional front without deciding the outcome of the main battle.

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The two bombs are: first, the Iranian people, who have not shown interest in being used as fuel to topple the regime or dismantle the republic. Despite Western intelligence efforts, no large-scale demonstrations calling for the overthrow of the regime emerged, and no serious movements by separatist groups serving the American–Israeli agenda were recorded during the war. The Washington–“Tel Aviv” alliance had bet that the assassination of the Supreme Leader, Ali Khamenei, would mark the starting point for the collapse of Iranian institutions and the appointment of leadership aligned with the United States, thus ending the battle within days. Instead, the result was a cohesive leadership that moved quickly to absorb the shock. The delay in confirming the news of the Leader’s death, and the conflicting reports regarding his health, may have been intentional, aimed at sending a message internally and externally that the Islamic Republic continues to implement its strategy even in the absence of its leader. The people, up to this moment, have remained committed to their unity, drawing a clear line between their internal struggle with the regime to secure more civil and political rights, and being used in divisive projects that would affect the “land of Persia.”

The second bomb, no less significant than the first, is the Strait of Hormuz. A narrow passage linking Oman and Iran, connecting the Arabian Gulf to the Gulf of Oman and the Arabian Sea. It is considered the most important oil waterway in the world. A total of 38% of crude oil supplies pass through it, 19% of liquefied natural gas supplies, 19% of refined petroleum products, 13% of chemicals including fertilizers, 3% of containers, and 3% of various goods, according to figures from the United Nations Conference on Trade and Development.

This strait has now come under the control of the naval forces of the Islamic Revolutionary Guard Corps. Movement is restricted, and no vessel is allowed to pass without coordination with the Iranians. On March 24, the Lebanese channel “Al Mayadeen” citing Iranian sources, reported that one of Iran’s conditions for ending the war and negotiating with the United States is:

This appears to reflect Iran’s recognition of the importance of the Strait of Hormuz as a pressure card on global energy and living security.

Discussion of the importance of the Strait of Hormuz to global trade is not new. During the 12-day war launched by the United States and “Israel” against Iran in June 2025, several reports highlighted how this waterway could turn into a geopolitical flashpoint with serious repercussions for energy security, regional power dynamics, and global economic stability. In the current round of war, shipping has indeed been disrupted, affecting energy markets, maritime transport, and global supply chains. These restrictions on vessel movement have also led to rising costs of energy, fertilizers, and transport, including shipping fees, marine fuel prices, and insurance premiums. Among the indirect effects will be increased food prices and intensified cost-of-living pressures, particularly on the most vulnerable populations.

However, what the Strait of Hormuz reveals after being used as an Iranian deterrence tool goes beyond commercial and economic realities, striking at the concept of “control of the seas”. A key strength of the United States has been its control over all oceans and waterways, achieved by raising the cost for other states to build naval fleets. The United States allowed both adversaries and allies access to the seas and to trade without feeling the need to build their own navies. It held the “stick of the seas”, and when necessary, would exhaust enemies in land confrontations, forcing them to drain their military and financial resources, thus preventing them from later developing naval fleets.

The idea of controlling the seas as a foundation for global dominance was originally developed by the modern naval strategist Alfred Mahan. The American Mahan argued that naval power is not only about having warships, but also about the ability to control maritime routes, secure trade, isolate the enemy, and impose blockades.

On this basis, the United States built its naval strategy. It continued to establish maritime and trade rules after the fall of the Soviet Union and the absence of any competitor, until the rise of China, which began to be viewed as a strategic threat to American influence.

Michael Roberts, in an article published in Forbes titled “Restoring American Sea Power,” considers that China represents “the greatest challenge to U.S. global leadership since the Soviet Union. It has made control of both the military maritime domain and commercial maritime domain a central element of its strategy, unlike the Soviet Union (…) Chinese shipyards deliver roughly three ships to its naval fleet for every one ship delivered by American shipyards to the U.S. Navy.”

It may not be surprising that China is developing its naval fleet and challenging American dominance of the seas. However, what the current war on Iran has shown is that states do not need massive fleets and large ships to impose their equation.

Iran’s deterrent power consists of a combination of small submarines, fast attack boats, ordinary civilian vessels, drones, missiles, and naval mines—most of them domestically manufactured. Each year, joint naval exercises are held between Russia, China, and Iran in the Strait of Hormuz, indicating an exchange of expertise among the three powers.

Iran has built a naval force while recognizing that it is fighting on an unequal front. Today, it is the adversaries who are raising the maritime cost by disrupting freedom of movement in the Strait of Hormuz, just as the Houthis previously disrupted navigation in Bab al-Mandeb.

How can the United States confront the “Hormuz bomb”? And will it accept Iran’s transformation from a state overlooking the strait into one that issues transit permits for ships? There is talk of Washington rushing to send mine-countermeasure vessels to the Arabian Gulf and the Strait of Hormuz to dismantle Iran’s disruptive capability, while also seeking to turn the issue into a matter of global maritime security.

The United States may decide to carry out military strikes against Iran’s naval forces, or to engage the Islamic Republic in ground incursions in the hope of exhausting it and breaking its control over the strait. However, the most dangerous challenge Washington may face is asymmetric attrition. Iran does not need more than to keep the strait threatened and maritime insurance costly to generate a global crisis that it can use as leverage in negotiations.

Engaging in a prolonged war of attrition to secure “freedom of passage” in the strait implies an acknowledgment that Iran - under sanctions since 1979, and whose key leaders have been assassinated within months - has managed to break the American monopoly over maritime security and confront an advanced global system through a low-cost model.

What, then, are the most likely scenarios?

1. The first scenario: an agreement or indirect understanding based on reducing strikes and a gradual return of navigation, as part of a broader deal to end the war.

2. The second scenario: the United States may succeed in imposing military passage for ships, but remains stuck for weeks or months clearing mines, protecting convoys, and responding to scattered attacks. Press reports have spoken of a battle that could last weeks to fully reopen Hormuz.

3. The third scenario: consumer and producer countries move toward expanding alternative pipelines and ports outside Hormuz. This path will not materialize within weeks, but it effectively means the beginning of a reduction in the strait’s importance.

In the end, what the United States is being tested on in Hormuz is not only its ability to protect passageways, but its ability to maintain its very definition of power in a world no longer measured solely by the size of fleets.

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Data from the Saudi “Tadawul” exchange, up to March 12, showed that Saudi investors contributed to the rise of the Saudi market after two weeks of the American–Israeli war on Iran, and Iran’s response by targeting American bases in the Arabian Gulf region. The Saudi “TASI” index recorded an increase of 1.7%.

The news is “positive”, giving the impression that despite the state of war, the markets are resilient and capable of absorbing shocks. However, the data contains a small detail whose presence indicates the beginning of a shift in market trends and investor behavior.

Who is buying these stocks? And what does this slight change mean? The figures from March 12 show that 85.95% of investors are Saudis, compared to 12.54% foreigners, and 1.51% Gulf investors. Before the outbreak of the war, on February 26, the percentages were as follows:

• Saudis: 85.65%

• Foreigners: 12.81%

• Gulf investors: 1.55%

The numbers show that the share of foreign investors buying stocks in the Saudi market had been trending upward before the war put the brakes on it.

What do we understand from this movement?

Some consider this market response as evidence of the ability of local investors to move quickly to compensate for or ward off any investment shock. However, it can also be viewed differently: that the “economy of confidence” that characterizes the Gulf states is not isolated from its surroundings, as some of these capitals tried to promote in recent years, during which they built “global cities” that serve as centers for growth, development, and services. One of the narratives accompanying this phase was that being in a region of war and insecurity would not affect growth, provided there was a policy of distancing from contentious issues, or even aligning with dominant powers.

In practice, the data does not reveal radical changes between February 26 and March 12; it can be considered within normal market fluctuations. At the same time, it may indicate the beginning of a shift. When this Gulf confidence was tested, capital behaved in a traditional manner: it retreated, observed, calculated, before determining its next move. In wealthy countries such as the Gulf states, local capital steps in to fill this gap: the market becomes more dependent on them. The “TASI” index and the distribution of investors in the Saudi market lead us to the broader picture, namely the Gulf model that has been built over decades, and which now appears to have been shaken by the recent war. It was not expected that Iran would respond so quickly to American bases in the Gulf countries. Even though its targets were defined, the Iranian strikes disrupted activity in some sectors and complicated it in others, leaving scars on the economic, social, and investment levels.

The Gulf states - especially the UAE, Saudi Arabia, and Qatar - have long been presented as a different model in the region: political stability, economic openness, and an attractive investment environment. Strong leadership rule, imposing an equation on society and the foreign labor force: do not speak about politics, stay away from advocating causes, and focus on work. Added to this equation is intelligence and military cooperation with the United States, which culminated in normalization agreements with “Israel”, accompanied by commercial, economic, military, and security agreements. The Gulf states wanted these two relationships to serve as additional pillars in their effort to build a stable model in a turbulent environment. And they succeeded in doing so, at least at the level of branding.

As a result, a segment of Arab public opinion - especially in countries confronting the Israeli enemy - came to desire the application of the Gulf model, which seeks to distance their countries from conflicts and focus on business and investment. Although many of them realize that every social, economic, commercial, cultural, artistic, or sporting decision is fundamentally a political decision (politics is not only partisan activity), they turn a blind eye to this and insist on convincing everyone to isolate themselves from what is happening in their surroundings and directly affecting them, and reject politics. But is that not, in itself, a political decision?

Anyway, the current war has imposed a question: How capable is this model of continuing when its surrounding environment changes? The issue is not only about military shocks, but also about the transformation of what had been presented for years as a protective factor - the close relationship with the United States - into a source of direct exposure. The presence of military bases, which was understood as a guarantee of stability, has become part of the theater of conflict itself. Yesterday, “Israel” announced the bombing of the large gas facility in Bushehr inside Iran, in coordination and with the approval of the United States. This step appeared as a decision within the context of igniting the entire region and further entangling the Gulf states in the war, perhaps in the hope of drawing them into direct military engagement.

The Islamic Republic had previously threatened that any targeting of Iranian infrastructure would be met with targeting all American companies operating Gulf oil and gas. Indeed, following the Israeli - American strike, Iranian television broadcast a warning calling on residents and employees of certain oil facilities in Saudi Arabia, Qatar, and the UAE to evacuate them. The Gulf states are aware of the danger of what Washington and “Tel Aviv” are trying to drag them into, as reflected in a statement by the spokesperson for the Qatari Foreign Ministry, who said that “Israel’s targeting of the Pars field facilities in Iran, which extends to the North Field gas in Qatar, is a dangerous step. This is a threat to global energy security, to the peoples of the region, and to the environment”. It is worth noting that an Iranian military source told “Iran Now” that Saudi Arabia and the UAE were among the countries that participated in the attack on the Pars gas field.

This latest targeting, which constitutes an escalation, will worsen the situation for the Gulf states and the “dream model” they have built over decades. The investor, tourist, visitor, and worker do not flee only from high risks, but from risks that cannot be priced. From risks whose trajectory, duration, and limits cannot be predicted, as long as they have no defined objectives. Even if the war stops today, its repercussions will continue for weeks and months. Concerns will arise such as: was what happened an exception, or the beginning of a new pattern? Questions in themselves sufficient to reassess any mid and long-term investment.

Indicators (although it is still too early to rely on them to determine the long-term trajectory) have begun to appear: global banks evacuating their offices and asking employees to work remotely; disruption of the aviation and transit sector after these countries had been a global hub; several technology companies evacuating their offices; suspension or reduction of gas and oil production; disruption of supplies of essential minerals and raw materials used in electronics manufacturing, pushing countries such as South Korea to seek alternative supply lines, even of lower quality but at least sustainable; cancellation of tourism bookings for at least six months; threats to desalination plants, raising the specter of a humanitarian catastrophe; businesspeople and investors beginning to consider transferring their capital to other countries such as Singapore and Switzerland; rising storage and inventory costs for importers and exporters due to disrupted transport routes…

What these countries sold to the world was not only infrastructure or investment opportunities, but a complete image of stability: the city of the future, the city of opportunities, a city where one can live and work without being part of the region’s conflicts. This image has become part of the economy itself, not merely a reflection of it. And when it cracks - even partially - preserving it becomes a challenge in itself.

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Friday, March 6, 7:00 PM. Beirut, Lebanon.

Another war-torn evening passes over this small country in the eastern Mediterranean. Hundreds of thousands of people have been displaced within their own country. Dozens of airstrikes target towns in the South, the Bekaa Valley, and Beirut’s southern suburbs. Yet this does not mean that the rest of Lebanon is entirely safe or untouched by the war. Israeli strikes can reach anywhere in the country.

What is unfolding is not simply a war confined to one region or directed at one political actor. It is a war that concerns Lebanon as a whole.

The image shows one of the Israeli raids on Beirut’s southern suburbs. Reuters

The objectives of this renewed war are often presented in narrow terms: disarming the resistance, establishing a “buffer zone” along the border with occupied Palestine, and restoring what is described as security for Israel’s northern front. But the reality is more complex. Wars in this region rarely unfold in isolation from broader geopolitical and economic dynamics.

Behind the immediate military objectives lie deeper questions about Lebanon’s future, the regional balance of power, and the position of smaller states within an increasingly unstable international order. These are questions we will explore in this space.

Following the daily events of war and attempting to make sense of them is different when you are living inside the geography of the conflict. You are not simply presenting information, figures, or analytical frameworks about economics, politics, geopolitics, or global affairs. You are part of the very system that absorbs the consequences of global decisions.

Writing about power from Beirut is therefore not the same as writing about it from Washington, London, or Brussels.

This does not mean that critical voices are absent from the Global South. Across Asia, Africa, Latin America, and the Middle East, journalists, researchers, and thinkers work to document and explain the transformations shaping their societies. Yet much of the global conversation about politics, economics, and geopolitics still originates from institutions located in the Global North.

Even scholars who offer powerful critiques of global inequality and imperial power often work within universities, research centers, and media institutions based in Europe or North America. This does not invalidate their work. But it inevitably shapes the vantage point from which the world is interpreted.

From the perspective of the Global South, the international system often appears very different. Instability is not an exception to the global order but frequently one of its structural features. Wars are not distant events but recurring realities. Economic crises are not occasional disruptions but persistent pressures shaping the lives of entire societies.

This newsletter begins from that vantage point.

Peripheral Vision is an attempt to explore the structures behind the headlines: power, political economy, technological transformation, and the global dynamics shaping societies on the periphery of the international system.

Wars, supply chains, financial crises, technological shifts, and struggles over resources are not separate stories. They are interconnected expressions of a global system that distributes power, wealth, and vulnerability unevenly across the world.

Understanding that system requires looking not only from its centers, but also from its edges.

Sometimes, it is from the periphery that the clearest signals emerge.

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