Negotiations between Iran and Oman on delineating a shipping route through the Strait of Hormuz have reached the final stage, the Iranian Foreign Ministry confirmed on Wednesday.

The shipping lane would primarily lie within Iranian territorial waters, with parts extending into Omani waters.

Foreign Ministry spokesperson Esmaeil Baqaei told journalists that “the geographical coordinates of the proposed maritime route have been agreed upon by both sides,” adding that the bilateral process was “professional” and “forward-moving.”

U.S. President Donald Trump announced last weekend that Tehran had asked Washington to hold off any attack on Iran due to the pending agreement on the strait. “This would include the Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT, and an end to Iran’s nuclear threat,” Trump wrote on Truth Social.

The U.S. reimposed a naval blockade on Iranian ports on July 14 after hostilities between the two countries resumed. The blockade has since become one of the main sticking points in ceasefire negotiations, with Tehran insisting it must be lifted as part of any broader agreement.

The strait remains closed as a result of the military strikes launched by the U.S. and Israel, Baqaei maintained in his remarks.

LONDON — Andy Burnham entered Downing Street with a promise to give hard-pressed voters “breathing space” on the cost of living. Now he must show he can deliver. 

At the top of his list is finding a way to reduce stubbornly high energy bills — even as the Iran-U.S. war forces up prices and ministers are under pressure to cut their own departmental budgets. The new prime minister knows any intervention must make a real impact for voters if he is to turn Labour’s fortunes around. 

“You need to make an emotional connection with people,” said one senior government official, granted anonymity to talk candidly about Whitehall thinking. 

Britain’s new prime minister has already made one bid to show voters he is serious about tackling the problem: Removing VAT from household electricity bills, something he announced on his first day in No. 10. 

The move will knock less than £4 off the average monthly bill, ends after one year, and comes with a price tag of £850 million. Downing Street said it will be paid for through so-far unspecified Whitehall savings. 

But Burnham and his new Energy Secretary, Miatta Fahnbulleh, promised that the intervention is just a start. Cutting VAT is a “down payment” ahead of the winter, Fahnbulleh said. 

That means ministers have just weeks before Burnham’s first budget this fall to figure out what, if anything, can really ease the burden — and how to pay for it. 

Salami slicing 

“The fiscal space is going to be a challenge, and that is the case for any government,” said Sam Alvis, associate director for environment, energy security, and nature at the Labour-aligned Institute for Public Policy Research think tank. 

That’s because any intervention to bring down energy bills will have to be funded from already under-pressure Whitehall departments. 

“This government is going to have a look at the budget. Whether it chooses to do some priorities differently — that is an open question,” Alvis said. 

One option for Burnham is to slice more charges from electricity bills, as he did with VAT. But any savings could be quickly wiped out if, as expected, the Middle East crisis pushes up wholesale gas prices.

Forecasters at Cornwall Insight predict that average annual household bills will rise by two percent this fall, even after the VAT intervention. 

That leaves Burnham facing the same problems as the man he replaced, Keir Starmer. 

Starmer cut £150 off yearly bills last November by shifting some so-called green levies, used to fund a clean energy scheme, onto general taxation. By the summer, that cut had been swallowed up by higher prices driven by the Strait of Hormuz crisis. 

Nonetheless, Alvis said, this approach remains Burnham’s most realistic option. 

“We are now in a bit of a scenario of salami slicing, where you’re aggregating lots and lots of smaller bits,” he said. “There’s no one big thing that you can do that’s going to take over £100 off bills. So, it’s about accumulating all those things that you think you could possibly do in one go, so it becomes sizable and noticeable.” 

Decisions, decisions 

One of those options, proposed by the think tank Nesta and reportedly being considered by Burnham, involves shifting further green levies from electricity bills onto tax.  

It identified another £42 of savings from a yearly bill, costing the Treasury £1.7 billion per year for a decade. 

Every small cut helps consumers, insists Andrew Sissons, Nesta’s director of sustainable futures. The think tank has also proposed knocking £22 a year off bills by shifting the standing charge on gas — currently a fixed daily fee — onto the unit rate, which changes depending on how much energy a home uses. That would take a year to implement and would not cost the government a penny, Nesta says. 

But such moves must be accompanied by larger interventions if voters are to feel the benefit, he added. 

“The amount you’d need to cut people’s energy bills … for it to feel like a real difference is quite substantial,” he said. The government, he argued, should aim for a “big package.”  

If the government aims for larger changes, they would come with even greater costs.  

Nesta has suggested a one-off move to wipe out electricity debt, removing some bailout costs currently funded through bills, taking total annual bill savings to £130. But the Treasury would have to find £2.7 billion to fund that. 

“[We] shouldn’t ignore the fact that there are fiscal trade-offs. But if the government wants to prioritize energy bills, then this is the kind of step it needs to take,” Sissons added, pointing to their proposed levy change alongside the VAT cut.  

Things take time  

Net-zero policies will, ministers hope, bring down bills for good. But large-scale changes take years to implement. 

“Realistically, the only way to deeply, deeply help people is to get them solar panels, is to get them an EV [electric vehicle], potentially heat pumps in some houses as well,” said Alvis. 

This is another reason to opt for “salami slicing”, he said: To “alter the balance of electricity and gas prices, so that those clean technologies stack up and save people even more money.”  

Alex Bevan, a research fellow at the Future Governance Forum, agreed that big savings attached to the shift to green energy were still a way off.  

“There aren’t quick workarounds on whichever form of energy you choose to generate and deploy,” he said. But government must nonetheless “lock in the benefits [of clean energy],” he argued. 

The same official quoted above stressed that no decision had yet been made on how the government would intervene on bills. Asked whether the government favored a series of small policies or one big intervention, they said: “It doesn’t have to be binary. … It doesn’t have to be one or the other.”  

A Department for Energy Security and Net Zero spokesperson said: “The energy secretary’s focus is bringing bills down for good. We will tackle the cost of living to make life’s essentials affordable again and bring back hope.”

For now, Alvis insisted, Burnham has one thing going for him: He can operate in the knowledge voters accept international issues are pushing up costs. 

“The political point I would make is: By doing your best effort, you give yourself the space to have a conversation with the public,” he said. 

Italy will use extra leeway from the EU to spend billions of euros on energy and defense, Finance Minister Giancarlo Giorgetti told members of the country’s parliament on Wednesday.

Rome is set to boost its expenditure on green energy and defense over the coming three years, said Giorgetti following a relaxation of rules from Brussels, which allows the additional spending to be exempted from the EU’s strict spending targets and waived from Rome’s deficit figures.

Italy is poised to issue a formal request to the European Commission — laying out the investments it intends to undertake with the extra flexibility — by a mid-August deadline.

Giorgetti said Italy will request to spend an additional 0.6 percent of gross domestic product on green energy investments and 0.9 percent on defense — the full amount that is envisaged under the new fiscal guidelines.

The additional defense spending will “include both new multi-year investment programs and proposals to reallocate resources already provided for under current legislation,” Giorgetti told MPs. Italy’s parliament is expected to approve Giorgetti’s request to the Commission on Wednesday.

The extra flexibility is aimed at reducing dependence on fossil fuels and moving toward NATO’s target to spend 5 percent of GDP on defense. With 2 percent of GDP allocated to defense in 2025, Italy is among the alliance’s spending laggards.

However, the decision to raise military spending is set to inflame political tensions within the country ahead of a crucial election year that will see incumbent Prime Minister Giorgia Meloni seek a second mandate.

The governing coalition is split on the issue, and the right-wing League party — from which Giorgetti himself hails — has repeatedly campaigned against spending more money to counter the Russian threat.

In a further constraint, the government is under heavy pressure from the right-wing, Russia-friendly National Future party led by former Gen. Roberto Vannacci, which is eating into support for the other governing parties, according to the polls.  

More leeway

In June, the Commission gave EU countries suffering from the ongoing energy crisis more fiscal breathing room by exempting some green investments from public spending rules.

The goal was to allow heavily indebted governments to mobilize resources for green expenditure, including subsidies for electric vehicles, geothermal and solar energy to reduce dependence on fossil fuels. Italy lobbied the EU to offer this concession after the war in the Middle East fueled a surge in oil prices.

However, Giorgetti failed to lay out which green investments will be included in Italy’s request to the Commission.

In another gaping omission, he did not reveal whether Italy will tap into the EU’s cheap loans for defense — another divisive issue within the government coalition.

Rome had initially earmarked €15 billion under the Security Action for Europe (SAFE) program, prompting defense companies to factor in those investments.

Italian Foreign Minister Antonio Tajani recently suggested that Rome will use the SAFE money, but said the exact amount will be decided later in the year.

Jacopo Barigazzi contributed to this report.

Europe wants to kick its U.S. tech habit, but it’s struggling to detangle itself from American data analytics firm Palantir. 

The problem is, the company’s tools are already deeply embedded in critical sectors across the bloc like policing, national defense and health systems. A report released today also shows that the tech firm has found ways to pay minimal taxes in Europe. On the show, hosts Zoya Sheftalovich and Ian Wishart discuss European alternatives and why detaching is easier said than done.

Next, our colleague Seb Starcevic has interviewed Mediterranean Commissioner Dubravka Šuica. The role that was originally thought to be low profile has instead thrust the Croatian official into the limelight as various crises hit the Middle East and the Mediterranean.

Plus: Three new foods are being added to the EU’s list of products with geographic indicators. These are the labels given to products that can only be made in a specific region, like Champagne or … yes, you guessed it, halloumi.

Questions? Comments? Get in touch! You can message us or send a voice message to our WhatsApp here or at +32 491 05 06 29.

The surge of migrants into the Spanish exclaves of Ceuta and Melilla last week has thrown Madrid onto the defensive over the status of its two autonomous cities in northern Africa — and Morocco’s long-standing claim to them.

The ease with which tens of thousands of migrants penetrated the border has ramped up a sense of vulnerability to hybrid attack. And that alarm has only been amplified by a fear that traditional NATO allies in the U.S. and the EU are no longer fully dependable because of their political feuds with Socialist Prime Minister Pedro Sánchez.

Buoyed by an increasingly warm relationship with U.S. President Donald Trump, Rabat is seizing the moment and doubling down on its claims to Ceuta and Melilla, which it sees as occupied territory, in Morocco’s state-aligned press.

But, more alarmingly for Madrid, that argument is no longer coming exclusively from Rabat. Questions over Spain’s centuries-old control of the fortress cities have also been raised in a U.S. Congress report, and by Israel’s ambassador to the U.N.

It is a sign of the level of concern in Madrid that the government is now having to make public declarations on a point of international law that — only a week ago — it would have thought was self evident.

“Ceuta and Melilla are not to be touched,” Defense Minister Margarita Robles said during a press conference on Monday. “Everyone must be very clear that Spanish territorial integrity and sovereignty are not up for debate.”

The government’s rejection of Morocco’s claims has done little to reduce worries in Spain over what would happen if Rabat dials up the pressure. This week, national newspapers have been filled with columns expressing fears of a “Green March 2.0” — pointing out the parallels with Morocco’s use of a mass popular mobilization to take over the province of Spanish Sahara in 1975.

José Manuel García-Margallo, who served as Spain’s foreign minister between 2011 and 2014 and is a member of the center-right People’s Party, said it was vital for Spain to show its control over the cities is not negotiable.

“Do you think the British would have allowed 60,000 Spaniards to enter Gibraltar?” he asked. “I’d encourage this government to be a little bit more British.”

“We should aim to be friends with Morocco,” he added. “But it’s important to ensure that even your friends understand that there are red lines that simply cannot be crossed.”

Imperial legacies

Ceuta and Melilla are among the few remaining vestiges of the vast Spanish Empire. They have been under Madrid’s rule since 1668 and 1497, respectively, and are fully-integrated parts of Spain — and the European Union.

But since gaining independence from France in 1956, Morocco has consistently claimed sovereignty over both settlements, which it characterizes as “colonies” that are “occupied” by Spain. And those territorial aspirations have been underscored in the country’s largely state-aligned press following last week’s events.

“The central question is no longer whether these cities will be reintegrated into their natural environment, Morocco, but how long it will take and how many human tragedies will have to be endured in the meantime,” wrote Le360, a publication considered close to the Moroccan royal household.

Morocco’s claims on Ceuta and Melilla have lately been boosted by Rabat’s international allies — among them, a prominent Republican politician in the U.S.

In an interview with Spanish newspaper El Español in April, U.S. Congressman Mario Díaz-Balart, who serves on the powerful Committee on Appropriations, stated “Ceuta and Melilla are in Moroccan territory” and questioned whether the autonomous cities “are part of Spain or should be part of Morocco.”

He also noted that while Spanish Prime Minister Sánchez was “jeopardizing” the alliance between the U.S. and Spain by opposing the war in Iran, Rabat had been Washington’s steadfast ally.

Weeks later, as U.S. lawmakers prepared an appropriations bill that included a proposal to allocate $40 million to Morocco for defense and security expenditures, Díaz-Balart submitted a congressional report noting “the Spanish-administered cities of Ceuta and Melilla are located in Moroccan territory and remain the subject of Morocco’s longstanding claim.”

The document additionally expressed support for “diplomatic engagement” on “the future status” of the autonomous cities.

Speaking to POLITICO, Díaz-Balart denied the congressional report had been intended to signal a major shift on Ceuta and Melilla.

“It’s been an issue of dispute for some time. Morocco has been a strong ally of the United States — it was the first country to recognize the United States. And we’ve had good ties with Spain over the years. All we were asking is for Secretary [of State Marco] Rubio to keep an eye on this and be sure that both sides are talking about this issue,” he said.

But the congressman’s willingness to give a platform to Rabat’s claims on Ceuta and Melilla reflects how close Morocco and the United States have become since 2020. That year, Trump took the landmark step of recognizing Rabat’s claim to the disputed territory of Western Sahara in exchange for the normalization of relations between Morocco and Israel. 

Last week, Trump reaffirmed that recognition in a statement issued by the U.S. Embassy in Rabat at the same moment as the migrants surged into Ceuta. Rabat showed its pleasure with this decision by announcing that it had renamed a major highway after the president.

Adding to Spain’s concerns about its territories in North Africa, Israeli Ambassador to the United Nations Danny Danon reacted to the images of last week’s migrant influx by hitting back against Madrid’s criticism of the war in Gaza and challenging Spain’s presence in Ceuta and Melilla.

“Maybe before it continues lecturing us, it’s time it explained to the world why it still maintains colonial enclaves in Africa,” he wrote on X.

Israel’s head of mission in Madrid, Dana Erlich, later clarified that Danon’s comments did not represent an official position.

García-Margallo said the problems with Díaz-Balart and Danon were a consequence of Sánchez’s foreign policy.

“I’m also not surprised that those claims are being amplified in other parts of the globe … The current government’s relations with the Trump administration and with the government of Israel have deteriorated tremendously in recent times,” he said. “When you make a point of showing you’re against specific countries, consequences are to be expected.”

The specter of the ‘Green March’

For Spaniards, the idea that Morocco could engineer a situation to annex territory is far from theoretical speculation. Many still remember Morocco’s 1975 “Green March,” an operation that forced the handover of Spanish Sahara.

“Rabat deployed tens of thousands of civilians to overwhelm border posts in Spanish Sahara in 1975 as dictator Francisco Franco lay dying,” said José Luis Rodríguez Jiménez, history professor at Madrid’s Rey Juan Carlos University and author of a book on the fall of Spanish Sahara.

“At the time, it wasn’t clear who was running — or would run — Spain, and Morocco took advantage of the weakness of the Spanish state to take over the province,” he said.

Half a century later, he said, Morocco’s King Mohammed VI had detected similar weakness in Sánchez, whose minority government is unable to pass major legislation and whose inner circle is caught in web of embarrassing corruption scandals.

As former Foreign Minister García-Margallo put it: “I don’t have the slightest doubt that the current government’s weakness has contributed to this crisis.”

Historian Rodríguez Jiménez said Rabat had sporadically tested Madrid’s willingness to defend its territories in northern Africa.

In 2002, a squad of Moroccan marines launched an “invasion” of Perejil Island, an uninhabited Spanish islet off the coast of Ceuta, sparking a week-long crisis that only concluded when Spanish special forces were deployed to evict them.

And in a strikingly similar incident to last week’s massive influx of migrants into Ceuta, in 2021 some 8,000 people surged into the autonomous city after Morocco abruptly withdrew its gendarmes from the border.

Rodríguez Jiménez argued Sánchez had blundered by responding to that incident by reversing Spain’s historic support of Western Sahara’s self-determination and accepting Morocco’s bid to control the disputed territory.

“The government opted to placate Rabat, failing to understand that this was seen as a sign of weakness in Morocco, a country which is not our friend, and which has every interest in exploiting our vulnerabilities,” he said.

“What happened last week was a dress rehearsal for an eventual invasion,” he added. “And Rabat has noted Madrid’s complete inability to repulse that attack.”

Spanishness ‘beyond all doubt’

Spanish officials reject the accusation that the Ceuta crisis has made Madrid look weak, with Interior Minister Fernando Grande-Marlaska on Tuesday insisting the crisis showed the country to be a “strong” and respected regional player.

That ability to project strength to Rabat is increasingly important as NATO’s commitment to defending Ceuta and Melilla appears less certain than it once did. Back in 2022, then-Secretary General Jens Stoltenberg specifically listed the North African cities as falling under the alliance’s aegis.

But things have changed since then. Trump has cast doubt on NATO’s commitment to common defense and his relationship with Spain, which he has repeatedly lambasted for its lackluster defense spending and failure to support the Iran war, is particularly rocky.

When asked about NATO’s position now, an official said: “We don’t speculate on hypothetical scenarios,” while adding the alliance was “ready and well-postured to protect and defend all allies.”

García-Margallo said that NATO’s common defense commitment is only as strong as “our allies’ willingness to support us … the interpretation of the terms of any treaty is ultimately a political decision.”

POLITICO asked the Spanish foreign ministry what measures the government had taken to address concerns about the international conversation over Ceuta and Melilla, especially in relation to Díaz-Balart’s congressional report.

The ministry did not answer the questions directly, but hit back at any assertion that the cities’ sovereignty could be negotiable.

“The Spanishness of Ceuta and Melilla is beyond all doubt and is recognized as such by international law and the entire world,” a spokesperson said.

Eric Bazail-Eimil contributed reporting from Washington. Victor Jack contributed reporting from Brussels.