President Donald Trump dropped a political bombshell on the Korean peninsula this week.

But security officials say the president’s threats to curtail a major military exercise with South Korea will do little to undermine the detente between Seoul and Pyongyang.

Trump’s declaration Sunday that he would instruct the Pentagon to cut back on annual drills sent Seoul’s leaders scrambling to repair the damage. But the president appears more focused on pushing for investment from the country than trying to upend defenses against North Korea’s nuclear threat. And that means security on the world’s most militarized border hasn’t significantly changed.

The U.S. has more than 28,000 troops stationed on the peninsula, along with thick layers of air defenses. It has worked hand in glove with the Korean military for decades, a powerful joint force that works closely at every level. The border between a nuclear-armed North Korea and the U.S. ally to its south is a case study in mutually assured destruction. And top commanders in Seoul and Washington remain in tight contact.

“I don’t think this is cataclysmic,” said Sydney Seiler, former national intelligence officer for North Korea at the National Intelligence Council.

Defense officials were tight-lipped about what Trump’s announcement would mean in terms of concrete changes to military exercises. The Pentagon would only say that it is “is actively working on executing the commander-in-chief’s directive.”

Trump’s order, and his praise of dictator North Korean leader Kim Jong Un’s “unthreatening and respectful” behavior, came days after the secretive nation launched its second ballistic missile test in a week. It flew over 430 miles before landing just outside Japan’s exclusive economic zone.

Some American lawmakers said the optics were horrible, particularly Trump’s seeming desire to appease a totalitarian regime.

“Kim Jong Un has won a propaganda victory and South Korea, one of our strongest allies, has been punished for no reason beyond Trump’s ego,” said Sen. Jack Reed of Rhode Island, the top Democrat on the Senate Armed Services Committee. “China and Russia are watching how easily this president abandons America’s allies, and they will remember it the next time they test us.”

The order affects a major exercise, Ulchi Freedom Shield, a staple of the alliance since it was first held in 1976. The drills this year were scheduled to begin Monday and encompass 14 different exercises over 11 days, ranging from cyber warfare to defending against drone attacks and GPS jamming. Officials are especially worried that North Korea received Russian technologies and know-how about electronic jamming after it sent tens of thousands of troops to help Russia’s war against Ukraine.

“The alliance will manage through, [although] this is clearly a rough patch,” said Victor Cha, a former National Security Council official during the George W. Bush administration and now Korea chair at the Center for Strategic and International Studies.

Trump’s criticism of South Korea is particularly surprising because it’s a departure from comments by top Pentagon officials, who have repeatedly praised Seoul for increasing defense spending.

Pentagon policy chief Elbridge Colby called South Korea “a model ally” in a January speech in Seoul, and lauded its commitment to the alliance. Defense Secretary Pete Hegseth also praised the relationship several times this year, including when his South Korean counterpart visited the Pentagon in May.

South Korean President Lee Jae Myung on Tuesday sought to soothe concerns over a rift. He said in a Cabinet meeting that “a strong alliance makes the foundation of security stronger, and strengthening our own capabilities increases our value and necessity as an ally.”

Many officials remain puzzled about why Trump would abruptly curtail an annual exercise that has taken place reliably for 50 years. There’s some precedent. He had railed against expensive exercises in South Korea during his first term and the Pentagon did scale back some large joint operations. But Ulchi Freedom Shield is a cornerstone of the military-to-military relationship.

The effort — a combination of a tabletop, virtual event and physical exercises — will continue in some form. But U.S. officials indicated that military leadership is trying to find ways to modify the event to meet the president’s demands. And the announcement underscores that American support remains at the whim of an unpredictable president.

Some of the president’s motivation is likely financial. South Korea pledged last year to invest $350 billion in the U.S., but Trump officials believe its government is slow-walking its commitment, POLITICO has reported.

“The thing about Trump is it’s all very transactional,” said Cha. “So if they announce a first tranche of investments, he’ll be fine, right?”

But Asian allies are closely watching whether the distancing from traditional backers will continue, particularly movement of some critical American military assets out of the Pacific region. The USS George Washington aircraft carrier left port in Tokyo this month and is heading west. It will presumably go to the Middle East and replace the beleaguered USS Abraham Lincoln aircraft carrier, which is on the ninth month of an extended deployment.

The Pentagon relocated some elements of the THAAD missile defense system earlier this year from South Korea as part of a wider shift to the Middle East.

Lawmakers are also watching warily. Congress voted last year to restrict the Pentagon from reducing troop levels on the Korean peninsula below 28,500 unless the Pentagon certifies doing so is in the national interest and conducted after consultation with South Korea and other allies.

Lawmakers appear poised to extend those restrictions again in the 2027 National Defense Authorization Act.

“Reduced training hurts American preparedness too,” said Rep. Don Bacon (R-Neb.). “If we have moral clarity, then we’d treat [South Korea] as our ally and know North Korea is a dictatorship and slave labor state. … The president is wrong here.”

Conor O’Brien and Leo Shane contributed to this report.

President Donald Trump is waiting for Iran to cave to his economic pressure. Tehran may be willing to wait even longer.

Even as Treasury Secretary Scott Bessent promises a level of economic isolation “never seen before,” former Trump administration officials, U.S. ambassadors and other Middle East experts are skeptical that tightening the economic vise will force Iran to relinquish its desire to toll ships passing through the State of Hormuz and make the other concessions Trump is demanding to bring an end to the war.

“It’s an attrition campaign, and I am sure Treasury tweaks this or that to fill gaps or expand coverage of sanctions,” said James Jeffrey, a former ambassador who served in the Middle East during three presidential administrations, including Trump’s first term. “But, it’s hard to believe [there will be] something decisive after 20 years of U.S. sanctions and Iranian experience of going around them.”

It’s an acknowledgement that underscores the asymmetry of the situation. The Trump administration is staring down a consequential midterm election amid an unpopular war that has sent oil prices back up to roughly $90 a barrel and helped push long-term borrowing costs to their highest level in nearly two decades as hope dims that a peace deal is near.

Iran’s leaders, meanwhile, see the conflict as existential, giving Tehran reason to absorb the extraordinary economic pain rather than accept terms it believes could imperil the regime — especially as U.S. inflation remains elevated and treasuries sell off.

The yield on 30-year U.S. government bonds, a figure Trump has in the past been attuned to, jumped on Tuesday to its highest level since just before the global financial crisis.

The increase in the yield to its highest level in nearly two decades isn’t solely because of the six-month war; global fuel shortages and broader instability have kept energy prices higher for longer, increasing the threat of persistent inflation. And that’s heaped even more risk on global bond markets that have repeatedly blanched at Trump-related shocks.

“We are in a situation where we’re spending more and more to finance more and more,” said Julia Coronado, founder of MacroPolicy Perspectives. And the war has created “a riskier world full of more frictions, full of more supply shocks.”

Iran’s outsized incentive to muscle through the pain is partly why some former administration officials doubt that the naval blockade, while unprecedented in its scale in the modern era or whatever new strategies Bessent may unveil, will change Iran’s calculus.

“I think the economic pressure would need to hit them in new ways we haven’t seen so far to change the mindset of the regime,” said one former Trump administration official, granted anonymity to candidly assess the impact of the U.S.’s economic pressure campaign.

The administration has yet to indicate what further action it plans to take, but options include going after major Chinese banks that facilitate Iran’s oil trade, expand secondary sanctions on countries doing business with Iran and confiscating Iranian assets under U.S. jurisdiction instead of just freezing them.

Iranian leaders publicly mocked U.S. efforts to sanction them into submission.

“Americans think squeezing Iran harder will win concessions that were never part of the agreement,” Mohammad Bagher Ghalibaf, the speaker of Iran’s parliament, posted on X Tuesday.

“Bessent and [Defense Secretary Pete] Hegseth are way out of their league,” he wrote. “Stop waiting for the clown crew to pull a rabbit out of their hat and clean up the mess you made.”

White House aides, however, continue to contend that the leverage is on its side.

“The crushing sanctions and one of the most successful blockades that have crippled Iran’s economy and has left Iran completely broke,” said one administration official, granted anonymity to share the U.S.’s thinking. “There are many levers the president can crank harder in the weeks and months ahead.”

In the half-year since the Iran war began, the president has deployed an array of pressure tactics to choke Iran economically, including physically preventing the country from selling its most important export — oil — as part of an ongoing naval blockade of Iranian ports. The administration has also sanctioned foreign buyers of Iranian oil, targeted the country’s shadow fleet of ships that ferries it and sought to cut the country off from the financial networks it uses to move money.

That economic pressure has sent Iran’s economy, which was already troubled before the war, into a deeper tailspin. Now, Iran is grappling with year-over-year inflation of 88 percent, long lines and rationing at gas pumps and food prices that have more than doubled.

But those who have worked on previous Iran negotiations say that’s far from enough to get the regime to cave, especially after six months of U.S. bombing that has killed, by Tehran’s own measure, more than 3,000 Iranians.

“It’s undeniable that there is economic pressure. The question is whether there is a breaking point, and I would say for a regime that is fighting for its life and has never hesitated to transfer economic pain to its population, there is no breaking point,” said Ali Vaez, the International Crisis Group’s Iran project director, who helped work to bridge differences between Iran and world powers during negotiations over the 2015 nuclear agreement.

Yet Trump continued to project patience on Tuesday, signaling that he was prepared to let the pressure campaign play out.

“There are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran. The Naval Blockade remains in full force and effect. The Hormuz Strait is open and operating. All water mines have been removed or detonated. Thank you for your attention to this matter!” Trump wrote on Truth Social.

A senior White House official, granted anonymity to discuss the situation in Iran, insisted that Iran will cave long before the pain in the U.S. or world markets become intolerable.

“Ultimately we want a deal, but in the interim, the Iranian economy is tanking … people are lining up for gas, just for a half gallon of gas. And there’s a lot of civil unrest going on in Iran, that’s not being played on the news for whatever reason,” the official said late last week. “We’re fine if that’s the route they want to take.”

Still, there are signs inside the White House that the economic impacts are a growing concern. Vice President JD Vance last week said on Fox News that the administration’s first goal in the Iran war was to “keep oil and gas cheap for Americans all over the country.” The president, meanwhile, has repeatedly insisted voters will bear the pain of higher gas prices for an end to Iran’s nuclear ambitions.

The voters have a more dyspeptic view. A Reuters/Ipsos survey released this week showed Trump’s approval rating at 33 percent, the lowest level of his presidency. Roughly 80 percent of Americans — 87 percent of Democrats and 71 percent of Republicans — think U.S. involvement in Iran “will go on for an extended period of time,” the poll found.

But some former Trump administration officials, however, are holding out hope that patience will be rewarded and that the administration’s economic pressure campaign will work, in part because they see the other options on the table, including putting U.S. boots on the ground in Iran, as politically untenable.

Fred Fleitz, Trump’s former National Security Council chief of staff and vice chair of the American First Policy Institute’s American Security, predicted that the U.S. could be “dealing with a different Iran” in 30 to 60 days.

“I think patience is the best approach,” Fleitz said. “I don’t believe that a large-scale military attack right now is going to make a difference in changing the regime’s position, and I strongly oppose the idea of seizing Kharg Island or sending in American troops. The American people don’t want that. That would really bog us down in a quagmire.”

Wer regiert die Welt – und was treibt sie an? In unserem regelmäßigen Machthaber-Spezial geht es um die mächtigsten und umstrittensten Politikerinnen und Politiker unserer Zeit. Wir zeigen, wie sie denken, entscheiden – und was das für uns bedeutet. Eine Politikerin oder Politiker, ein Blick hinter die Kulissen der Macht.

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Israeli Prime Minister Benjamin Netanyahu this week publicly rejected President Donald Trump’s latest Gaza peace plan.

The Trump administration can live with it — for now.

The administration says it’s less concerned with what Netanyahu says than what the Israeli Defense Forces do. A U.S. official, who, like others in the story, was granted anonymity to discuss internal thinking, said that the administration was initially “disappointed” that Israel responded to the 15-point peace proposal by ramping up attacks in Gaza — but is pleased that it has since eased its assault.

Now, the administration is willing to give the Israeli prime minister some leeway to message the peace plan in the way he needs to, the official said. There is broad understanding that he is two months from a tough reelection — and needs to please his own hard-right allies to win. Few expected the president’s roadmap to be wholesale embraced, even as Trump on Truth Social trumpeted it as a “major milestone” in the conflict.

“We recognize the complexities that come from the Israeli elections, and we’re obviously going to give Bibi a space to try and navigate that,” the official said. But in turn, “they need to give us a little bit of space in terms of no targeted killings in order to allow us to try to get to the next phase, so there’s a lot more challenges to go to get there.”

U.S. officials and Hamas negotiated the latest peace framework separately, with help from Middle East allies. The proposal, announced last month, called for Hamas to disarm and relinquish governance in Gaza and Israel to withdraw its military from the territory. The plan stalled when Hamas said it would not disarm until Israel withdrew, and Israel said it would not withdraw until Hamas disarmed.

Even as skeptics of the Trump plan criticized the president for overhyping its achievement, U.S. officials believed that they needed to go public once Hamas was on board to lock in its pledge to disarm. Despite the president’s public confidence, administration officials privately expected that the proposal would likely face pushback from Netanyahu but that talks could continue with Israel.

Still, they considered the roadmap a significant win.

“Nobody’s ever gotten to this point where they got Hamas to agree to this, so that’s a necessary step before actually disarming it,” the U.S. official said.

And there are signs that Israel is preparing for the possibility of withdrawal anyway, with Israeli media reporting Israel’s defense establishment began weighing contingencies to do so in the days after Netanyahu’s public rejection.

Another administration official said the Board of Peace, a 27-country initiative formed as part of Trump’s deal last year to end the war between Israel and Hamas in the Gaza Strip, has been “getting good cooperation on the ground of late.”

“That’s what’s important,” the administration official said.

And it’s not just Trump administration officials hailing the framework as a step in the right direction. Former ambassadors and administration officials, including some who served in the Biden and Obama administrations, see the recent commitment the U.S. secured from Hamas to disarm — a monthslong sticking point in the peace process — as a small, but meaningful step, even as doubts remain whether Hamas will follow through. A member of the Hamas political bureau, according to the Associated Press, said this week that Hamas remains “committed to the roadmap.”

“For Netanyahu, his primary objective, of course, is getting through his election so he’s going to at least voice rejection even while he may allow some aspects of it to move forward,” said Dan Shapiro, a U.S. ambassador to Israel during the Obama administration. “It looks like Trump is tolerating the Netanyahu two-step. These two have done a dance like this before and as long as certain elements of it are moving forward … Trump seems to be willing to tolerate Netanyahu’s stated rejection.”

Even Trump appeared in little hurry Monday to escalate the dispute with Netanyahu, insisting to reporters in the Oval Office that he had a “good relationship” with the Israeli prime minister despite the very public rejection of his peace proposal.

The White House referred requests for comment to the Board of Peace.

A Board of Peace official added that “separate discussions with Israel are continuing.”

“The objective remains the full decommissioning of weapons and ensuring Gaza can never again pose the kind of threat Israel faced on October 7,” the official said. “Plans are moving forward in this regard. We have seen important elements of cooperation in recent days and we are intensifying our efforts to accelerate progress.”

The U.S. official added that Israel remains skeptical that Hamas will follow through on their commitments, while noting the country was similarly skeptical that Hamas would release the Israeli hostages.

“We basically have built a lot of credit with them. And I think that they’re willing to give us more of a shot to see if we can get to the next phase,” the official said. “We’re in an uncomfortable position for everyone, but I think that there’s a pathway to get through it.”

The idea that Israeli troops are at least planning to withdraw — especially if that withdrawal goes to the yellow line in Gaza, a key point of the plan the Board of Peace proposed — is giving Trump allies hope that Netanyahu’s words are meant for a domestic audience, while his actions are meant to demonstrate he might consider a deal in the future.

“Netanyahu’s playing a fairly tricky tightrope, where on the one hand he flexes his muscle for domestic audiences, given his situation at election eve, and on the other hand, he’s doing some baby steps in the direction of the 15-point plan — testing the tolerance of the American or Board of Peace team,” said Nimrod Novik, who served as senior diplomatic adviser to former Israeli Prime Minister Shimon Peres.

James Jeffrey, a former ambassador who served in the Middle East during three presidential administrations, including Trump’s first term, said that “of course it’s a win” to get Hamas to agree to disarm. And, behind the scenes, he said there continues to be movement between the U.S and Israel.

“Slowly we and Israel are moving forward on both Lebanon and Gaza even in the face of Israeli elections,” Jeffrey said.

Still, the incremental movement leaves fundamental questions, which have repeatedly stymied efforts to create a lasting peace between Israel and Gaza. U.S. allies are also concerned that Netanyahu’s public rejection of the latest peace plan is undermining confidence in the Board of Peace and the broader Middle East peace efforts.

Hamas’ willingness to disarm is conditioned on Israel withdrawing from Gaza, leaving unresolved how — and in what order — either side would carry out its commitments.

Hamas is supposed to turn over its weapons to a United Nations-created body responsible for governing the day-to-day operation in Gaza, and that governing authority is supposed to eventually run the territory, supervised by the Board of Peace, though the timeline for leadership handover remains uncertain. And Israel, meanwhile, has not agreed to the withdrawal in the plan, even as its military is preparing for the possibility.

But administration allies don’t really expect some big peace ceremony at Camp David or in Geneva. They’ll settle for dialogue, however tenuous.

“You have to judge these things incrementally in the Middle East,” a person familiar with the White House’s discussions around the peace process said.

Jerry Wu and Daniella Cheslow contributed to this report.

Wer regiert die Welt – und was treibt sie an? In unserem regelmäßigen Machthaber-Spezial geht es um die mächtigsten und umstrittensten Politikerinnen und Politiker unserer Zeit. Wir zeigen, wie sie denken, entscheiden – und was das für uns bedeutet. Eine Politikerin oder Politiker, ein Blick hinter die Kulissen der Macht.

Das Berlin Playbook als Podcast gibt es jeden Morgen ab 5 Uhr. Gordon Repinski und das POLITICO-Team liefern Politik zum Hören – kompakt, international, hintergründig. Für alle Hauptstadt-Profis: Der Berlin Playbook-Newsletter bietet jeden Morgen die wichtigsten Themen und Einordnungen. ⁠Jetzt kostenlos abonnieren.⁠

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Geschäftsführer: Carolin Hulshoff Pol, Mathias Sanchez Luna

U.S. allies see Israeli Prime Minister Benjamin Netanyahu’s rejection of Washington’s 15-point plan for Gaza as undermining confidence in the Board of Peace — and in the Trump administration’s ability to influence the Middle East more broadly.

It increasingly appears that the U.S. either doesn’t have — or isn’t willing to exercise — the leverage needed to deliver on Gaza, a number of diplomats and others familiar with U.S. strategy in the region told POLITICO. And that has them concerned about U.S. efforts at negotiations across the region.

“Netanyahu’s rejection of the peace plan carries significant implications for long-term regional stability and Israeli security,” said an Arab diplomat familiar with U.S. policy in the Middle East. “President Trump is the only one to have the potential to influence this situation, as he could seek to reassert his political relevance by pressuring Netanyahu to reconsider his position.”

Netanyahu’s defiance adds to the growing list of woes Washington faces as it struggles to reshape the Middle East, from ending the Iran war to winding down the conflict between Israel and Hezbollah in Lebanon.

The Arab diplomat warned: “Arab and regional leaders may find themselves in a complex position, needing to balance their interests amid these evolving dynamics.”

Netanyahu disavowed the White House-backed peace plan for Gaza on Sunday, declaring that Israel requires Hamas to have “genuinely disarmed” before it withdraws its troops from the territory. That hard line could further threaten the viability of Trump’s Board of Peace, a 27-country initiative formed as part of Trump’s deal last year to end the war between Israel and Hamas in the Gaza Strip.

“The Board of Peace has a distinct limp to its gait at the moment,” said Robert Jordan, who served as U.S. ambassador to Saudi Arabia during the George W. Bush administration.

“It never appeared to be a broadly based, highly viable substitute for the United Nations,” he added, referring to Trump’s assertions in January that the board could be used as an alternative to the world body. “That’s compounded by the political situation in Israel at the moment.”

The Board of Peace declined to comment, but an official with the organization insisted that work is continuing apace, with Israel’s buy-in. The official pointed to a logistical support area under construction that is meant to serve hundreds of troops expected to deploy to Gaza as part of the international stabilization force envisioned by the board.

“The roadmap is between the Board of Peace and Hamas,” said the board official. “Separate discussions with Israel are continuing. Israel is not being asked to rely on trust or to make irreversible moves before verified steps are taken on the ground.”

The official, like others, was granted anonymity because of the sensitivity of the negotiation process.

A Western diplomat familiar with Middle East policy argued Netanyahu’s action is a sign that U.S. strategy toward Israel is misguided.

“This latest rejection once again shows that appeasing Israel only leads to more maximalist demands,” the diplomat said. “I don’t think it kills the [Board of Peace] but what it does do is once again show that Israel remains one of the obstacles to a viable two-state solution.”

Trump has avoided clashing publicly with Netanyahu over the roadmap, telling reporters Monday that he had a “good relationship” with the Israeli prime minister even though Netanyahu rejected the U.S. proposal. The White House declined to comment further on Israel’s rejection of the deal.

A Trump administration official, granted anonymity because they were not authorized to discuss the issue publicly, said the White House doesn’t see Netanyahu’s action as derailing the peace process at all.

“Broadly speaking, we see this as election-posturing by Bibi for a domestic audience,” the official said. “The [Board of Peace] has actually been getting good cooperation on the ground as of late. So that’s what’s important.”

Netanyahu’s rejection of the road map comes as his popularity has been eroding in Israel ahead of an October parliamentary vote that could lead to his unseating.

In Europe, some governments are still holding out hope that the Board of Peace can rescue the Gaza peace process.

“I extremely appreciate the work of chief negotiator [Nickolay] Mladenov on behalf of the Board of Peace, his achievements in the 15-point plan are absolutely substantial,” said Hildegard Bentele, a center-right German lawmaker in the European Parliament. He said he was confident the U.S.-led effort would make progress “if re-submitted after Israeli elections and targeting the core point of full weapons’ decommissioning.”

Others with experience in the region said that Netanyahu appeared to be successfully pushing the Board of Peace in a direction more favorable to Israel.

Netanyahu’s actions are “testing the tolerance of the American or Board of Peace team,” said Nimrod Novik, who served as senior diplomatic adviser to former Israeli Prime Minister Shimon Peres and is now a fellow at the New York-based Israel Policy Forum.

“It’s really a Trump personal enterprise,” said Zaha Hassan, who advised the Palestinian negotiating team during its bid for U.N. membership from 2010 to 2012 and is now a fellow at the Carnegie Endowment for International Peace. “So if it can’t get Israel to stand down in Gaza, to withdraw, to allow the Board of Peace to do its work, how can any other regional actor believe that the U.S. can restrain Israel in their neighborhood?”

A European diplomat said the disillusionment with Trump’s sway in the Middle East was already evident in his failure to wrap up the war in Iran quickly.

“The solution is not as close as anticipated or as Trump told us at some point. I think Trump is losing credibility,” said the diplomat, granted anonymity because they weren’t authorized to discuss the issue publicly. “Everything seems to be in limbo and in a high degree of uncertainty that affects us all.”

Jerry Wu, Megan Messerly, Myah Ward and Nicholas Vinocur contributed to this report.

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.

U.S. President Donald Trump said late Saturday that he was canceling planned strikes on Iran pending a rapid agreement with Tehran to end the conflict in the Middle East.

“We have just been asked by Iran, and other Middle Eastern Countries, to hold off any attack in that the perimeters of a deal has been agreed to,” Trump announced in a post on Truth Social.

He said the agreement would include the “Immediate, Complete, and Total OPENING OF THE HORMUZ STRAIT” and “an end to Iran’s nuclear threat.” Trump added that Israel supported his commitment to pause strikes, contingent on “being able to rapidly make a DEAL.”

The announcement came after reports in U.S. media that Washington had been preparing new, intense strikes on Iran over the weekend, including on the country’s energy infrastructure. On Saturday the U.S. government urged Americans across the Middle East to remain alert and prepare for possible evacuations “should there be escalation” in the region.

Iran has not yet responded to Trump’s announcement and has not confirmed that a deal with Washington has been reached.

Iran’s Foreign Minister Abbas Araghchi held calls Saturday night with counterparts in Pakistan, Saudi Arabia and Turkey, according to posts on his Telegram channel. The country’s acting defense minister, Majid Ibn al-Reza, said Sunday that Tehran would “neither be caught off guard nor remain passive,” according to state media.

Saudi Arabia, meanwhile, called for diplomacy to ease tensions. Crown Prince Mohammed bin Salman told Trump in a phone call that dialogue should be prioritized to “de-escalate tensions” in the Middle East, Saudi state media reported Sunday.