Countering the High-Denomination Currency Funding Militancy in Pakistan

Krishna Sharma

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Executive Summary:Terrorist groups in Pakistan frequently use high-denomination currency to finance their operations. Permitting a large number of high-value notes to be in circulation makes it easy for bad actors to transfer considerable amounts of money without a digital footprint, making illicit activities easier to conduct.

The relatively high availability of such bills in circulation in Pakistan is due to the country’s underutilization of electronic payment systems.

India previously faced similar issues, which were resolved in November 2016 by a sudden and unannounced elimination of 86 percent of the country’s currency in circulation. While not carried out to address terrorist financing alone, this move was found to have significantly contributed to the decrease in terrorist-related incidents in India.

Militant groups in Pakistan are intensifying multipronged, coordinated attacks against government security forces and foreigners. One contributor to the violence is the ease with which terrorist groups can finance their operations, particularly through so-called “faceless kings,” a term given specifically to high-denomination currency. Permitting a large number of high-value notes to be in circulation makes it easy for bad actors to transfer considerable amounts of money without a digital footprint. This makes any number of illicit activities easier to conduct, including drug smuggling and terrorism financing.

This financing method contributes to the destabilization of the country. Unless this vulnerability is addressed, Pakistan will continue to be imperiled by, in particular, jihadist violence from groups such as the Tehreek-e-Taliban (TTP), also known as the “Pakistani Taliban.” Thus, it may become imperative for Islamabad to consider demonetizing high-denomination currency and promote digital transactions in order to develop financial transparency.

Dangers of the ‘Faceless Kings’

Data from the Pakistan-based Center for Research and Security Studies indicates that Pakistani jihadist groups no longer “hibernate” during the winter before launching attacks in the spring and summer. The number of terrorist attacks in Pakistan has spiked fourfold in the last four years, with fatalities tripling over the same span (PAK Institute for Peace Studies, January 3). Notably, militant groups in the western provinces of Balochistan and Khyber Pakhtunkhwa, such as the Baloch Liberation Army (BLA), the TTP, and Islamic State in Khorasan Province (ISKP) have been responsible for a spike in violence (Al Jazeera, December 21, 2023). These groups utilize guerrilla tactics and modern military equipment, which depend on funding from both domestic and international supporters. In January, members of an Islamic State (IS) suicide squad trained in Pakistan killed at least 95 people at a gathering in Kerman, Iran. This twin bombing was the deadliest terrorist attack in Iran for decades and occurred during the observation of the fourth anniversary of the death of Iranian military officer Qasem Soleimani (Dawn, January 4).

China defies Trump’s trade war by setting ambitious 5% growth target, vows to ‘prevail over any difficulty’

Simone McCarthy and Nectar Gan

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China has set an ambitious target of “around 5%” growth for 2025, in a defiant show of confidence as it braces for the fallout from escalating American tariffs on its export-driven economy.

The target “underscores our resolve to meet difficulties head-on and strive hard to deliver,” Premier Li Qiang, China’s No. 2 official, said on Wednesday as he delivered the government work report at the opening session of the National People’s Congress (NPC), the country’s rubber-stamp legislature.

Li gave his state-of-the-union-like speech shortly before US President Donald Trump began his first address to Congress in his second term, a split-screen moment between the two great power rivals, with both leaders laying out what they each see as the best way forward to solidify their country’s position atop the global economy.

Inside Beijing’s cavernous Great Hall of the People, the picture was of tightly controlled unity. Xi and his top leadership paraded into the main auditorium to a standing ovation, while Li’s speech was punctuated with unanimous applause — a sharp contrast to the scene at the US capitol, where several Democratic lawmakers walked out in protest and a longstanding member of Congress was removed for protesting Trump’s address.

TikTok: A Threat to US National Security

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Issue: TikTok is a powerful tool for manipulating mass sentiment in the hands of a company that actively cooperates with and is subject to the coercive power of the Chinese Communist Party (CCP). The CCP has the intent and capability to, as well as a history of, manipulating information on a mass scale. The Party’s ability to leverage TikTok directly for its own ends distinguishes the platform from the platform’s US-based social media rivals. TikTok and its parent company, ByteDance, have no practical means, legal or otherwise, to resist the CCP’s pressure. Only solutions that separate the company from the CCP will protect US national security.

Key Points:ByteDance is a company domiciled in the People’s Republic of China (PRC) with its own party committee and is tied to the party-army-state, to which it has a host of obligations and is subject to strong coercive state power.

The CCP has the intent and capability to, as well as a history of, trying to manipulate narratives and information to undermine adversaries and achieve strategic advantages.

TikTok is responsible for and capable of manipulating sentiment on a mass scale. The social media platform—and conceivably other PRC apps, including mobile games and e-commerce platforms—can be used to intentionally manipulate how people feel. This could influence US citizens’ views on topics based on the CCP’s preferences.

TikTok may have acted illegally in its handling of users’ data and conducted other malicious activities, such as tracking journalists. Leaks have highlighted the lack of separation between ByteDance and TikTok at the operational level.

ByteDance actively collaborates with and is closely tied to the CCP’s security apparatus. Both PRC law and the CCP’s extralegal coercion compel cooperation with the government. ByteDance operates under the stringent whole-of-society surveillance and control mechanisms imposed by the Party, which are manifested through laws that enforce cooperation with state intelligence operations.ByteDance has signed a strategic cooperation agreement with the Ministry of Public Security. TikTok’s parent company has committed to helping improve content planning to provide specialized support for public security accounts. This effort is designed to strengthen the influence and credibility of public security communications, including by maximizing the reach of public security-related content.[1] ByteDance has been involved in such activities in Xinjiang.[2]

China Brief VOLUME 25 ISSUE 4 FEBRUARY 28, 2025

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If Beijing senses the rumblings of tectonic shifts in the global order, it is because it has been preparing for them for decades. At the turn of the millennium, former U.S. government official Michael Pillsbury argued that the Chinese Communist Party (CCP) since 1986 “has had an almost unchanging assessment of an ‘inevitable’ multipolar future,” and surveyed contemporary Chinese scholars who made parallels to the Warring States period (Pillsbury, 2000). At the United Nations in February, People’s Republic of China (PRC) Foreign Minister Wang Yi (王毅) made the remarkable comment that “the past 80 years is a period of accelerated advancement in world multipolarity”—in other words, the entire postwar has been trending in this direction (FMPRC, February 19). Today, it seems, Beijing is more confident than ever in its analysis that it has correctly called the “changes unseen in a century” (百年变局) and that it is uniquely positioned to shape an emerging international order. 

A growing number of voices in the West appear to be coming around to Beijing’s thinking. The new U.S. Secretary of State, Marco Rubio, recently concurred that the United States now faces a multipolar world (U.S. Department of State, January 30). Meanwhile, the theme of this year’s Munich Security Conference was “multipolarization,” with its accompanying report stating that “we already live in a world shaped by ‘multipolarization’” (Munich Security Conference, February 14). The PRC has followed these developments closely. Articles on the PRC internet purr that the Munich report “considers China to be an outstanding and strong supporter of the multipolar international order” (认为中国是多极化国际秩序的杰出、有力支持 者), and that the conference showed that Europeans “often put China in the position of a superpower on a par with the United States” (常把中国放在与美国比肩的超级大国位置上) while businesses and academics “generally recognize that China’s rise is unstoppable” (普遍承认中国崛起势不可挡) (Aisixiang, February 24, February 27).

Xi Seeks to Woo Foreign and Domestic Business

Willy Wo-Lap Lam

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Executive Summary:President Xi Jinping unveiled the “2025 Action Plan to Stabilize Foreign Investment” and met with leading entrepreneurs for the first time in seven years, in an effort to reinvigorate the private sector and court foreign investment.

The plan seeks foreign investment in sectors Beijing sees as strategic, such as biotechnology, telecommunications, education, and healthcare.

Xi’s photo opportunity with industry leaders seems intended to show that the country’s industrial policies are bearing fruit for favored firms who, while nominally private, have deep ties to the party-state.

The leadership of the People’s Republic of China (PRC) has taken advantage of U.S. President Donald Trump’s relatively measured approach to the Chinese Communist Party (CCP) regime by announcing moves to resuscitate pro-market policies. Trump has raised the possibility of a spring tête-à-tête with his counterpart, CCP General Secretary and commander-in-chief Xi Jinping. Washington also is yet to object to the PRC playing some role in ongoing Ukraine peace talks and to boost its influence in the European Union in general (Reuters, February 20; Associated Press, February 25). Additionally, the new President has slapped only a 10 percent tariff on PRC imports—lower than the 25 percent imposed on goods from Canada and Mexico and well below the “60 percent or higher” omnibus rate for PRC exports to the United States that Trump had threatened while running for office (The White House, February 1; CNN, February 4, 2024; USA Customs Clearance, February 10).

Plan to Attract Investment

The Egyptian plan for postwar Gaza is a good starting point—but it needs changes

Thomas S. Warrick

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Who will govern Gaza? This has always been the most difficult question that must be answered to end the fighting between Israel and Hamas and see the return of the hostages taken on October 7, 2023. At a March 4 summit in Cairo, Arab leaders endorsed an Egyptian plan, which is more detailed than any previous Arab plan for Gaza, that aims to answer this important question. While Israel will not accept some key elements and the Trump administration immediately criticized it, Egypt’s proposal is useful as the basis for further negotiations that will lead to a plan that Israel, Palestinians, and other governments—including the United States and Arab partners—could make work. The Trump administration should take the lead and build on what the Egyptians have proposed in order to move negotiations forward.

The Egyptian plan fulfills two central requirements: it excludes Hamas from governing Gaza and it takes off the table any thought that Gaza’s residents could be relocated. Instead, Gaza would be governed for six months by a technocratic council of Palestinians under the auspices, but presumably not the control, of the Palestinian Authority (PA) in Ramallah. United Nations (UN) peacekeepers would be invited in by the PA to both Gaza and the West Bank. An international contact group would oversee the effort. Arab governments would contribute to Gaza’s physical reconstruction.

There are many reasons why Israel will not accept this plan in its present form. Israel has reason to be wary of putting unnamed Palestinians in charge of Gaza—though Arab capitals and Jerusalem could reach an agreement in secret negotiations over who would be on the council.

The COVID-Era Smearing – and Resurrection – of Trump NIH Appointee Dr. Jay Bhattacharya

Paul D. Thacker

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Jay Bhattacharya was in pretty terrible shape five years ago. He was losing sleep and weight, not because of the COVID-19 virus but in response to the efforts of his colleagues at Stanford University and the larger medical community to shut down his research, which questioned much of the government’s response to the pandemic.

Some of his Stanford colleagues leaked false and damaging information to reporters. The university’s head of medicine ordered him to stop speaking to the press. Top leaders at the National Institutes of Health, Anthony Fauci and Francis Collins, dialed up the attacks, dismissing him and his colleagues as what Collins termed “fringe epidemiologists” while their acolytes threw mud from a slew of publications, including the Washington Post, The Nation, and the prestigious medical journal BMJ.

In the years since, many of Bhattacharya’s scientific concerns about the efficacy of lockdowns and mask mandates have been corroborated. Fauci, meanwhile, accepted a pardon from President Biden, protecting him from COVID-related offenses dating back to 2014, the year he started funding research at a Wuhan, China, lab that U.S. intelligence agencies now believe probably started the pandemic. And this week, Bhattacharya looks set to achieve surprising vindication as the Senate holds a hearing on his nomination to head the NIH, in a Department of Health and Human Services run by science nonconformist Robert F. Kennedy Jr.

Combatant commands to get new generative AI tech for operational planning, wargaming

Jon Harper

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The U.S. military’s Indo-Pacific Command and European Command are first in line to receive new generative artificial intelligence capabilities delivered by Scale AI and its industry partners via the Thunderforge initiative, the Defense Innovation Unit announced Wednesday.

DIU — a Silicon Valley-headquartered organization which has embedded personnel at Indo-Pacom and Eucom to help tackle some of the combatant commands’ tech-related challenges.

On Wednesday, DIU announced that Scale AI was awarded a prototype contract for the new Thunderforge capability, which will include the company’s agentic applications, Anduril’s Lattice software platform and Microsoft’s large language model technology.

“The Thunderforge technology solution will provide AI-assisted planning capabilities, decision support tools, and automated workflows, enabling military planners to navigate evolving operational environments. By leveraging advanced large language models (LLMs), AI-driven simulations, and interactive agent-based wargaming, Thunderforge will enhance how the U.S. military prepares for and executes operations,” the unit said in a release.

DIU issued a solicitation for the program last year via its commercial solutions opening contracting mechanism.

Cyber Defense Not Cyberwarfare Is the Correct Response to Salt Typhoon

Mark Raymond & Typhaine Joffe

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The ongoing Salt Typhoon cyberattack, affecting some of the United States’ largest telecoms companies, has galvanised a trend toward more assertive U.S. engagement in the cyber domain.

This is the wrong lesson to take.

Instead, the U.S. should prioritise investments in cyber defence and reconsider its commitment to persistent engagement, a strategic move away from earlier U.S. approaches based on restraint and deterrence. The attack underscores the risks of an increasingly permissive cyber environment: one in which large-scale cyber operations are normalised, restraint is eroded and investments in cyber defence are insufficient.

In November 2024, reports began spreading that the Salt Typhoon group had penetrated several major U.S. telecommunications networks. These operations compromised sensitive data, including call metadata of U.S. citizens and communications vital to national security agencies. The U.S. government says the Chinese government is behind the attack.

What makes it so concerning is that it exploited long-standing vulnerabilities in obsolete and unpatched network infrastructures. Telecommunications companies, including Verizon, AT&T and T-Mobile, failed to secure network devices, with some systems still operating without multi-factor authentication. Active for more than a year before its detection, the breach highlights the need for additional investments in cyber defence, while also demonstrating the potential consequences of underestimating evolving digital espionage.

Why Donald Trump Can’t Have Peace In Ukraine and Gaza

Lawrence J. Haas

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The United States is no stranger to peace-making, and in recent decades, Washington has played the vital role of an honest broker in bringing lasting peace to the Middle East, the Balkans, Northern Ireland, and elsewhere.

Where Washington succeeded, it did not impose peace from the outside but instead coaxed it out of warring parties that were ready for it. That was true with Israel and Egypt in 1979, Israel and Jordan in 1994, Serbia and Bosnia in 1995, Northern Ireland in 1998, and Israel and other Arab nations in 2020.

However, for different reasons in each case, the parties committed themselves to peace because they concluded that they would gain more from it than from continued bloodshed. Egypt’s Anwar Sadat sought peace to regain land lost in war and attract U.S. economic aid. The parties to the conflict in Northern Ireland were exhausted by three decades of “troubles.” The Abraham Accords came about largely because the parties involved decided to align themselves against a more dangerous foe in Tehran.

But U.S. peace-making without willing parties—as we see today with Russia and Ukraine, and with Israel and Hamas—is sure to backfire, tarnishing America’s global image while planting the seeds for more war. In fact, a Washington that seems too eager for peace, even a hollow peace that provides only a short respite before the fighting returns, could make war likelier in other places as well.

Rwanda and Congo Clash as Major War Brews in Central Africa

Dylan Motin

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The fall of Goma, the administrative center of the Democratic Republic of the Congo’s (DRC) North Kivu Province, to the Rwanda-backed M23 rebels in late January has significantly upped the ante in the country’s longstanding unrest. What had until now been a localized civil war between the Kinshasa government and a pro-Rwandese rebellion threatens to set ablaze the region.

By taking Goma, the M23 and Rwanda crossed a Rubicon, as Kinshasa’s leaders cannot brook an all-out invasion of North and South Kivu without a response. The two provinces counted prewar over 15 million inhabitants and are home to fabulous natural resources. After the fall of Goma, angry Congolese rioters descended upon Kinshasa to ask for an international reaction against the Rwanda-M23 challenge. These people are unlikely to tolerate government inaction for much longer. That the Alliance Fleuve Congo, the political arm of the M23, vowed to march on Kinshasa renders the status quo all the more untenable for Congolese president Félix Tshisekedi. Even if government forces managed to contain the M23 in the Kivu, the region might become an enclave from which a nationwide offensive might start at a later date. One recalls the fate of the Assad regime, recently crushed by a rebellion long confined to Syria’s northwest and believed to pose no serious threat. For all these reasons, Kinshasa has little option other than to mount a massive military response to retake its eastern borders.

Even After Zelensky Spat, Trump Is Europe's Best Chance for Peace | Opinion

Nikodem Rachoń

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European elites are caught in a dangerous cycle of self-fulfilling prophecy. They claim U.S. President Donald Trump is abandoning NATO and Ukraine in the face of Russian aggression. In doing so, they actively undermine the authority necessary for effective execution of his central foreign policy promise: to bring Russia and Ukraine to the table and end the war. Worse still, they risk pushing the United States further away from Europe, putting the entire security architecture of Europe in danger. This dysfunction is more than counterproductive; it is a dereliction of leadership at a moment when global stability demands serious strategy and leaders truly equipped and positioned to deliver a real change.

The latest diplomatic spat between President Trump and Ukrainian President Volodymyr Zelensky has sent European leaders into a predictable frenzy of performative outrage. After Friday's tense Oval Office exchange, EU foreign policy chief Kaja Kallas declared that "the free world needs a new leader," suggesting that Europe should step up. A number of European figures, from French President Emmanuel Macron to soon-to-be German Chancellor Friedrich Merz and Poland's Donald Tusk, eagerly lined up behind Zelensky—not to craft a pragmatic strategy, but to broadcast their moral superiority. German media suggested that European countries reconsider military equipment procurement plans and redirect their focus from the U.S. to German and French industry.

Has Trump flipped Ukraine … for Russia?

Steven Pifer

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Ukrainian President Volodymyr Zelensky’s Friday visit to the White House turned into disaster. Vice President J.D. Vance provoked a fight in front of the press that poisoned the meeting and left US-Ukraine relations reeling. This comes after three weeks of President Donald Trump making concessions to Vladimir Putin, for which the United States received nothing in return.

February 28 will go down as a bad day for Ukraine and a good one for the Kremlin. It will also go down as a bad day for US security interests. If Ukraine loses the war—on the battlefield or as result of a shoddy peace deal—the Russian threat to Europe and the United States will grow.

European leaders met with Zelensky on Sunday to discuss how to move forward and hopefully reengage Washington. They also should be contemplating how they will proceed if Trump is unwilling to do so and ends US assistance for Ukraine.

Ukraine Without America

Andriy Zagorodnyuk

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Last week, the world witnessed a contentious, on-camera Oval Office confrontation between Ukrainian President Volodymyr Zelensky, U.S. President Donald Trump, and U.S. Vice President JD Vance. What began as a relatively standard exchange quickly escalated into an unprecedented public dispute. Yet when stripped of emotion, these core disagreements have been clear for some time: Must Ukraine accept ending the war no matter the terms, or does it have the ability to influence them? Can it expect any long-term security commitments to guard against future Russian aggression, or does it have no option but to unconditionally halt its operations? And if Kyiv refuses to comply and the United States withdraws support—as the Trump administration has reportedly begun doing this week—can Ukraine survive on its own?

Even before the meeting, the White House had made clear its position: Ukraine has no leverage and therefore no ability to set conditions. Zelensky, of course, has firmly rejected this conclusion. For Ukrainians, ending the war is undoubtedly a welcome goal. And after three years of brutal fighting, previous strategies—including those pursued by prior administrations—have failed to open a clear path to peace. While Western assistance has been crucial to Ukraine’s survival, restrictions on the range and use of weapons have led to an infantry-centric war of attrition that has severely strained Ukrainian forces and offered no clear route to victory.

Unpacking TSMC’s $100 Billion Investment in the United States

David Sacks and Adam Segal

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On Monday, March 3, U.S. President Donald Trump announced that Taiwan Semiconductor Manufacturing Company (TSMC) would invest an additional $100 billion to expand its advanced semiconductor manufacturing operations in Arizona. This money will be put toward three new fabrication plants (or fabs), two advanced packaging facilities, and a major research and design (R&D) center. TSMC touted this as the largest single foreign direct investment in U.S. history, bringing its total investment to $165 billion and doubling its planned manufacturing plants from three to six.

President Trump’s focus on semiconductors, and in particular Taiwan’s outsized role in the production of these tiny chips that enable modern life, is not new. He has repeatedly accused Taiwan, which produces around 90 percent of the world’s most advanced semiconductors, of stealing the U.S. chip industry. Trump has threatened to impose tariffs between 25 and 100 percent on all chips entering the United States to force companies to establish a manufacturing presence in the country.

Trump is not alone in worrying about U.S. overreliance on chips made in Taiwan, which are not only needed for smartphones and washing machines but also for most modern weapons systems. In 2022, President Joe Biden signed into law the CHIPS and Science Act, which was intended to incentivize companies to build fabs in the United States. TSMC received $6.6 billion in direct funding and $5 billion in low-cost loans through the CHIPS Act to build a foundry in Arizona. Trump, though, has criticized this as a “ridiculous program,” stating, “we don’t want to give them billions of dollars.”

Full Speed Ahead: Integrating Kinetic Drones into the Combined-Arms Battalion

Lieutenant Colonel Michael B. Kim, USA

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Introduction

Kinetic drone (KD) strikes (dropped or loitering munitions), as observed in open-source media, have hit more vehicles than any other type of weapon system in the Russo-Ukrainian War.[1] The National Ground Intelligence Center (NGIC), which collates this data from open-source feeds, states that from 24 February 2022 to 31 July 2024, KD strikes accounted for 42.47 percent of all combat damaged vehicles where the weapon could be identified, followed by artillery at 24.28 percent; armored fighting vehicle main gun/cannon accounted for only 1.09 percent of vehicle hits.[2] The dawn of tactical drone warfare is here. Keen observers during the Russo-Japanese War (1904–1905) foresaw the advent of trench warfare that would come to fruition a mere decade later in World War I. The Russo-Ukrainian War clearly displays the advent of KD warfare, and it behooves the U.S. Army to make critical changes today. The U.S. Army must lead this effort and integrate tactical KDs at scale before the next major conflict. This paper serves to use the Japanese Navy’s transition from the battleship to the aircraft carrier (in the Kidō Butai) as an analogical case study; to consider current drone technologies, capabilities and usage (primarily in Ukraine); and to provide recommendations for the integration of KDs into the combined-arms battalion (CAB).

A New and More Deadly Drone on Russia’s Battlefields

David Kirichenko

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“There’s been a huge surge in their drone numbers lately, and so many different ‘birds’ in the air, including a lot of fiber-optic drones that you can’t jam,” said Anatoliy, the commander of a mortar battery from Ukraine’s 92nd Separate Assault Brigade, who was transferred from Kharkiv to Kursk to help counter relentless Russian assaults.

“We’ve already lost a lot of equipment,” he said. “They’re constantly dropping KABs [guided aerial bombs] and launching a ton of first-person view (FPV) drones.”

Amid intense fighting, the battle for Russia’s Kursk Oblast has become a proving ground for new technologies and a center for drone warfare innovation. Ukraine’s General Staff has reported nearly 40,000 Russian casualties in six months, including more than 16,000 killed, along with the capture of over 900 enemy combatants.

Alongside the drones, “they’re throwing waves of meat at us,” Anatoliy said. Kursk is also where Moscow deployed troops lent by North Korea, showing how desperate Russian President Vladimir Putin is to reclaim Ukrainian-occupied territory.

Russia started using fiber-optic drones in Ukraine in the spring of 2024. At first, Kyiv did not see them as necessary for the battlefield but, as technology became increasingly effective at disrupting standard drone communications, they realized the need to adapt. Now Ukraine is aggressively developing its own to counter the enemy’s growing use of them.

Initially, drones relied on wireless signals, prompting both sides to deploy electronic warfare systems to jam them. Now, the shift to fiber-optic has become the latest front in the ongoing battle for superiority.

An Inflection Point: The Military Situation in Ukraine

Robert E. Hamilton

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While the military situation in Ukraine continues apace, with grinding Russian assaults gaining ground daily, but at a reduced pace and increasing rate of casualties, the diplomatic situation is changing rapidly. A flurry of US diplomatic activity aimed at ending the war has unnerved Ukrainians and America’s allies, who fear the US is preparing to cut a deal with Russia over their heads.

This activity includes a bilateral meeting between the US and Russia in Saudi Arabia that excluded America’s NATO Allies and Ukraine itself, a series of confusing and contradictory statements from US officials, and an escalating war of words between the US and Ukrainian presidents. To help us make sense of both the military and political situations, Konrad Muzyka, who recently returned from Ukraine, joins Bob Hamilton on this episode of Chain Reaction.

For more military analysis of the Russian invasion of Ukraine check out Konrad’s Ukraine Conflict Monitor.

Trump’s tariffs unleash ‘existential fight’ for Canada

Megha Bahree

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United States President Donald Trump has been true to his threats.

On Tuesday, the Trump administration unleashed 25 percent blanket tariffs on Canadian imports, excluding energy, which was hit with 10 percent.

Trump also slapped a 25 percent tariff on Mexico, and doubled China’s tariffs to 20 percent.

Royal Bank of Canada economists Francis Donald and Cynthia Leach have called this the largest trade shock to Canada in nearly a hundred years.

Vina Nadjibulla, vice president of research and strategy at the Asia Pacific Foundation of Canada, referred to the tariffs as an “existential fight” for Canada.

Whatever the impact, economist all agree that a trade war between the US and Canada has begun.

Canada announced 25 percent tariffs on 30 billion Canadian dollars ($21bn) worth of US imports in retaliation, and has said it will target another 125 billion Canadian dollars ($87bn) in goods in 21 days if needed.

Mexico has promised to retaliate but has held off on any action until Sunday.

China has announced the imposition of tariffs of 10 to 15 percent on certain US imports from March 10, and has also laid out a series of new export restrictions for designated US entities.

Georgia Remains Target of Attempted Russian Influence

Zaal Anjaparidze

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Executive Summary:Georgian Prime Minister Irakli Kobakhidze acknowledged challenges in Georgia-EU relations in early February, citing bureaucratic obstacles, while reaffirming Georgia’s pro-European stance despite concerns that the current ruling party is leading the country toward Russia and undermining democratic principles.

Political turbulence in Georgia following its October 2024 parliamentary elections provides Russia with more resources to impede Georgia’s integration with the West.

Moscow is leveraging economic, political, and ideological pressure to expand its influence in Georgia. This includes strengthening economic ties, exploiting Orthodox unity, and supporting pro-Russian narratives.

Georgia remains economically reliant on Russia in terms of trade, gas imports, and investments. This dependence grants Moscow significant political leverage, creating vulnerabilities to Russian pressure.

Western sanctions on Georgia risk fueling anti-Western sentiment and pushing the country further into Russia’s orbit. Georgia’s integration with the West, particularly with the European Union, will remain in jeopardy as long as the political status quo is maintained.

In a February 6 interview with Euronews, Prime Minister of Georgia Irakli Kobakhidze admitted to complicated relations between Georgia and the European Union, attributing this to “significant challenges with the European bureaucracy” (Euronews, February 6). Kobakhidze still expressed optimism, however, about Georgia’s prospects for EU membership and reaffirmed the unshakable pro-European orientation of Georgia and its government. In the same interview, he vehemently excluded the possibility of restoration of diplomatic relations with Russia until the latter withdrew its recognition of Georgia’s secessionist regions Abkhazia, which recently held presidential elections, and South Ossetia as independent states (Euronews, February 6; see EDM, February 12). These statements were a response to reprimands from the West that Georgia is deviating from its former European trajectory. There remains a growing perception in both Georgia and Europe that the former is drifting away from the West and democracy in favor of growing closer to Russia (1tv.ge, January 18; Civil.ge; PACE, January 29; Eeas.europa, February 7).

Russia Experiences Reverse Industrialization as Economy Deteriorates

Hlib Parfonov

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Executive Summary:The Russian economy appears to be experiencing “reverse industrialization,” shifting from the development of high-technology industries to labor-intensive sectors. This trend is negatively impacting Russia’s industrial output and economic development.

Russia’s industrial growth is uneven, with the military-industrial complex showing the most growth while civilian sectors stagnate. Russia’s ongoing full-scale invasion of Ukraine is draining the workforce, particularly as conscription is expanded.

There are more job vacancies than skilled employees in Russia due to the surplus of graduates in subjects such as humanities and social sciences and the shortage of technical and specialist graduates.

Kremlin reforms that attempt to align the education system with labor market demands are raising concerns from students and families about fairness and quality of training. These changes are reshaping Russia’s economic and social landscape in ways that may be difficult to reverse.

On February 6, Russian President Vladimir Putin stated that it is necessary to limit student enrollment in unproductive specialties. At a meeting of the Council for Science and Education, Putin argued that the recruitment for specialties that do not fulfill demands in the economy and the labor market must be reduced. Preventing non-specialist educational institutions from teaching specialist courses is also important, according to Putin, in order to avoid low training standards (Kremlin.ru, February 6). This development is the result of “reverse industrialization” (обратная индустриализация, obratnaya industrializatsiya), a trend that has been unfolding in Russia for a few years now. Reverse industrialization refers to economic development that departs from the production of high-technology and reverts instead to the growth of labor-intensive sectors (RIA Novosti, April 21, 2022). This phenomenon is associated with a reduction in the share of high-tech industries and an increase in employment in sectors that demand low-skilled manual labor. According to analysts from the Bank of Russia, after an initial downturn in production and gross value added, a “reverse industrialization” phase may follow, characterized by the development of less advanced technologies and partial import substitution. Such products’ technical and economic efficiency, however, may be inferior to that of modern counterparts (RIA Novosti, April 21, 2022).

Russia Capitalizes on Development of Artificial Intelligence in its Military Strategy

Sergey Sukhankin

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Executive Summary:Russia has significantly increased its investment in artificial intelligence (AI), allocating a substantial portion of its state budget toward AI-driven military research. This funding aims to enhance Russia’s technological edge in modern warfare, particularly in AI-enabled military applications.

Russia’s full-scale invasion of Ukraine marked the first major conflict with widespread AI use. Ukraine, supported by U.S. AI firms, successfully countered Russian forces, prompting Russia to accelerate AI integration in command systems, drones, and air defense networks.

Russia’s focus and rapid development of AI has given it an advantage against Western weaponry regardless of the outcome of its invasion of Ukraine.

Russia’s AI development traces back to early Soviet experiments in the 1960s. It was not after its illegal annexation of Crimea in 2014, however, that Russia’s military AI development accelerated.

On February 12, the leading European defense technology company, Helsing, based in Germany, announced that 6,000 HX-2 strike drones will be delivered to Ukraine (Helsing.ai, February 12). The drones are powered by onboard artificial intelligence (AI), rendering HX-2 immune to electronic warfare (EW) measures with its ability to search for, re-identify, and engage targets without a signal or a continuous data connection. The delivery of these drones follows a previous order of 4,000 HF-1 strike drones which are currently being delivered to Ukraine. Prior to this, Dmitry Chernyshenko, the Deputy Prime Minister of Russia, announced massive investment of 5 percent of the state budget allocated to funding scientific research in AI and of 15 percent to other areas of research with the use of AI tools (Tsargrad.tv, January 31). One of the main purposes of this funding is to use AI technologies to solve applied military problems (Government of Russia, January 31). With technology taking a central role in Russia’s full-scale invasion of Ukraine, some Russian and foreign military experts referred to the growing use of AI as an upcoming “revolution in military affairs,” where Russia could become one of the world’s leading powers given its hands-on experience in its invasion of Ukraine (Discred.ru, January 14, 2024; Kommersant.ru, September 15, 2021; Focus.ua, May 26, 2023; Army.ric.mil.ru, January 10, 2022).

Lessons From the World’s First Full-Scale Cyberwar

David Kirichenko

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When Russia launched its full-scale invasion of Ukraine in February 2022, it also ushered in a new era of warfare – one where cyberattacks were no longer a supporting act but a core component of battlefield operations. This was the world’s first full-scale cyberwar, where digital operations were synchronized with kinetic strikes to disrupt, disable, and disorient the enemy. For three years, Ukraine has defended itself not only on the battlefield but also in cyberspace, repelling relentless Russian cyberattacks targeting critical infrastructure, telecommunications, and military systems.

From the outset, Russia’s cyber offensive sought to cripple Ukraine’s essential services and disrupt military communications. Russian hackers launched large-scale attacks against Ukraine’s power grid, government networks, and telecom providers. One of the most damaging strikes came in the early hours of the invasion, when they targeted Viasat’s KA-SAT satellite network, aiming to disrupt Ukraine’s command and control systems. The attack had a spillover effect, impacting thousands of civilians across Ukraine and Europe, knocking out internet access.

AI Is Fighting Modern Slavery, for Better or Worse

Louise Donovan

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When Santander U.K.’s artificial intelligence technology flagged unusual activity on a customer’s account last year, the bank’s staff had no idea it would lead to a human trafficking network being uncovered.

On their own, the transactions didn’t look like much. A 34-year-old man was making regular payments to budget airlines, mobile phone providers, and Vivastreet and Gumtree, websites that can be used to advertise genuine adult services but also to sell cars, computers, and more.

Planes are having their GPS hacked. Could new clocks keep them safe?

Pallab Ghosh

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As a Ryanair flight from London approached Vilnius, Lithuania, on 17 January, its descent was suddenly aborted. Just minutes from touching down, the aircraft's essential Global Positioning System (GPS) suffered an unexplained interference, triggering an emergency diversion.

The Boeing 737 MAX 8-200 had already descended to around 850ft (259m) when the disruption occurred. Instead of landing, the plane was forced to climb back into the sky and divert nearly 400km (250 miles) south to Warsaw, Poland. Lithuanian air authorities later confirmed the aircraft had been affected by "GPS signal interference".

This was not an isolated incident. Over the last three months of 2024, more than 800 cases of GPS interference were recorded in Lithuanian airspace. Estonia and Finland have also raised concerns, accusing Russia of deploying technology to jam satellite navigation signals near Nato's eastern flank – though the country has denied that. Last March the then Defence Secretary, Grant Shapps, was on a plane that had its GPS signal jammed while flying close to Russian territory.

The threat of GPS jamming extends beyond aviation. Without GPS, our lives would grind to a halt: in 2017, a government report stated that systematic GPS jamming could bring the UK's financial, electricity and communications systems to a standstill.