In this month’s edition of Around the World with Academy Securities, our Geopolitical Intelligence Group (GIG) focuses on the following geopolitical tensions that we are monitoring:

1. U.S. Announces Ceasefire Between Iran and Israel
2. Status of Gaza Ceasefire Talks
3. Ukraine Ceasefire Discussions
4. Trade Deal with China

We kick off this month’s ATW with an update on the events in the Middle East that took place over the past two weeks. Following the end of the 60-day negotiation window concerning Iran’s nuclear program, Israel took matters into its own hands and began striking Iranian military and nuclear targets. While Iran responded with missile attacks into Israel, the country was able to effectively defend itself once again with help from the United States. The conflict culminated with U.S. strikes on Iran’s three main nuclear facilities over the weekend, followed by an Iranian missile attack on the U.S. air base in Qatar. Our GIG will be monitoring the ceasefire that is now in effect, for signs of what will come next with respect to diplomatic efforts and a path forward. In addition, we report on Gaza and the state of the ceasefire discussions, which have been on hold following Israel’s attacks on Iran. Our GIG opines on why the two parties are so far apart in the negotiations. We also report on the war in Ukraine and the stalled ceasefire negotiations there following Ukraine’s spectacular drone attack earlier this month on Russian strategic bombers. The technology being employed by Ukraine (and in some instances Russia) has been transformative and will likely be informing the U.S. (and potentially our adversaries) around the use of low-cost devices and their effectiveness against more complex and expensive weapons systems. Finally, we address the trade deal between the U.S. and China. However, tensions still exist in the Pacific following China’s exercises with its two operational carriers that took place last week outside the second island chain.

Please reach out to your Academy coverage officer with any questions and we would be happy to engage.

Front and Center: U.S. Announces Ceasefire Between Iran and Israel

The events in the Middle East over the past two weeks have been truly unprecedented (see our SITREPs). On June 12^th, it became apparent that Israel was fully prepared to commence military strikes on Iran. The 60-day clock for U.S./Iran discussions had run out, and there was very little real progress made around the demand that Iran cease its uranium enrichment program. Later that day, Israel launched hundreds of warplanes that attacked dozens of targets in Iran, including its nuclear program directly. The following day, Iran began its retaliatory strikes on Israeli civilian and military targets, but much like the attacks in April and October of last year, the ballistic missiles were intercepted at a ~90% accuracy level, with help from U.S. forces in the region. These back and forth strikes lasted for a week as the U.S. debated how and when it might get involved in helping Israel destroy Iran’s 3 key nuclear facilities at Fordow, Natanz, and Isfahan. Then, on Saturday evening, the U.S. launched 7 B-2 bombers carrying the GBU-57 Massive Ordinance Penetrator (bunker buster bombs), which were dropped on the sites. While the battle damage assessment is still in progress, it appears all three facilities were significantly damaged. In response, on Monday Iran launched a ballistic missile attack on the U.S. air base in Qatar. The strike was highly telegraphed, and no casualties were reported. President Trump then announced a ceasefire between Iran and Israel. While both sides appeared to violate the agreement shortly after it went into effect, tensions have significantly cooled in the region and all eyes will be on what happens next with respect to Iran’s nuclear program.

“There is an old adage that history doesn’t necessarily repeat itself, but it does rhyme. In the context of the conflict with Iran, it may be helpful to look at the decision calculus of the first Iranian Supreme Leader, Ayatollah Ruhollah Khomeini, in 1988, that led to a ceasefire after eight years of war with Iraq. While eight years of war between Iraq and Iran is much different from the single unprecedented year of exchanges with Israel, there are parallels. The risk equation in 1988 that led to a ceasefire was described by Khomeini as tantamount to ‘drinking from a poison chalice.’ In 1988 the Ayatollah weighed the cumulative impact of casualties, economic pressure, military degradation/capabilities limits, as well as geopolitical isolation. The decision in 1988 was made to save the Theocratic Regime. So will Iran’s Supreme Leader Ayatollah Ali Hosseini Khamenei bend under the current pressure that includes all the pressure points of 1988 along with the loss of key proxies/partners (Hamas, Hezbollah, and Syria), the severe degradation of their nuclear program, and the extensive campaign of targeted assassinations by Israel. The Iranian leadership’s tolerance for pain is high because they don’t suffer; it’s the Iranian people who suffer. We are in a period of unprecedented exchanges between Israel, Iran, and now the U.S. Previous red lines have been crossed, and everything appears to be on the table. After Iran’s first strike against Israel in April 2024, subsequent strikes by both sides were more likely. Deterrence however must be viewed from Tehran – what do they value, what must they protect, and how do they measure risk as it relates to counterstrikes. Is the Iranian Supreme Leader deterred? Probably not yet (we saw this play out in the strikes against U.S. facilities in Qatar – Iran’s only quasi-ally in the region in what may have be a token and highly orchestrated strike). Nevertheless, the battle damage assessment is still ongoing, and Iran appears to have moved material from the Fordow site prior to the strike (what exactly was moved is unknown). Key questions surround the future path of the Iranian nuclear program. Does the Supreme Leader abide by the ceasefire and a near-term diplomatic solution, or does he reverse the fatwa from 2003 and double down, moving remaining components of its nuclear program to a possible remote site and pursuing a nuclear weapon, or does he do both?” – General Robert Ashley

“The question now is whether or not any future conflict is just between Iran and Israel, or is the U.S. now part of a long-term war? President Trump and Secretary of Defense Hegseth said this was a one-time strike and the U.S. is now ready to negotiate with Iran. Iran has been severely weakened by Israel’s Operation Rising Lion. While the U.S. strike was successful it will not play well with the Iranian people. Most of the population does not support the regime, but they don’t view the U.S. as an honest broker after breaking what they see as its commitment to conduct peaceful negotiations. They receive very little information from outside of the regime due to state control. It is easier for the regime to spread Islamic nationalism through information control than the people getting it through other means. The Iranian regime was willing to absorb the attack and not negotiate, expecting that they will survive to fight another day. They did execute a few face-saving attacks on U.S. forces in the region. That is how the Middle East works. However, Iran will now try to isolate Israel from the United States. This is a religious struggle that they believe they can win by wearing Israel down over time due to Israel’s small size and Iran’s Islamic fervor. In the 1980s they were willing to fight an eight-year war against Sunni-led Iraq and suffered between 500,000 and 750,000 soldiers killed. The regime believes they need a nuclear bomb to survive in the violent Middle East, and the current situation hardens them more. That position outweighs any move towards joining President Trump’s vision for a prosperous Middle East.” – General Robert Walsh

“I was not surprised to see the Trump administration take action, but admit that it came sooner than I had expected. The timing of the weekend strikes was probably predicated on the widespread reporting of the movement of strategic assets (B-2s, tanker bridge, Nimitz CSG, etc.) into the region. General Kurilla and his team have long held multiple strike options ready for execution. This may have seemed hurried, but it was well planned, rehearsed and executed. Iran responded with their usual rhetoric and a weak missile attack. Comments from the Supreme Leader extolling ‘everlasting consequences’ and ‘irreparable damage’ to the U.S. hold little water. Iran’s air force, ballistic missile launchers, and formidable integrated air defense systems have all been decimated. Ground forces, cyber actors, and limited proxies around the globe can cause limited damage, but Iran faces few other response options. The Ayatollah’s recalcitrance is born of religious zealotry and a real belief that his is a just cause. For this reason, I believe an internal coup is growing more likely. I would be surprised to see Khamenei sue for peace even to protect his fragile hold on power and preserve the regime. As members of Congress are opining, largely along partisan lines, there is an urgency for the administration to better communicate next actions should Iran fail to meet U.S./Israeli demands on nuclear enrichment. The larger consequences globally (for China, Russia, and North Korea) are a realization that Trump will not hesitate to use military force – unilaterally – if he believes the situation requires it. This will no doubt change the decision calculus for both Russia and China in their spheres of influence. As President Trump attends the NATO Summit this week, he will seek approval and support for his actions from world leaders who have all asked for restraint and de-escalation. In the soft language of diplomacy, nearly all allied world leaders reiterated that Iran cannot possess a nuclear weapon (signaling tacit approval for the U.S. strikes). Only the usual suspects (China, Russian, Venezuela, and the like) outright condemned the action. It will be an interesting week in the Netherlands and regrettably, while Ukraine should take center stage for discussion, conversation will abound about Iran and Middle East stability.” – General John Evans

“With respect to a follow-on strategy, if Iran’s nuclear facilities were damaged, its military leadership was decapitated, and its enrichment efforts were disrupted, that forces Tehran into a permanent state of caution. With air superiority established over Iran, Israel has already secured the means to pursue intermittent precision attacks when necessary. This strategy also keeps Israel’s alternatives open. Tehran must now reconstitute under threat. Any new effort to enrich uranium or build covert facilities is done under the shadow of Israeli (and U.S.) air attacks—a fact that imposes a degree of strategic control over Iran.” – General David Deptula

“The last four U.S. administrations have proclaimed that their foreign policies will include a ‘pivot to the Pacific,’ or the use of other words to describe a prioritization of China as our ‘pacing threat’ (militarily) and ‘primary and long-term challenge’ (economically, geopolitically). Yet all four have been unable to overcome the gravitational pull back to the Middle East. It is still early in Trump 2.0, but the significance of Israel’s recent unilateral action – and the potential for further U.S. involvement – is huge. Iran will be at the top of the agenda for the President’s Daily Briefing for the foreseeable future, distracting national security bandwidth away from our primary challenge.” – Admiral Bill Byrne

“Iran could further respond by doing nothing, but the more likely approach will be to do something less attributable to them through a cyber-attack against the U.S. power grid, financial system, and/or government institutions. We will see if we over or underestimated their cyber capabilities and how good we are at defensive cyber operations. Expect some minor disruptions in our critical infrastructure as a possible retaliatory measure.” – General KK Chinn

“Winston Churchill famously quipped: ‘there is only one thing worse than fighting with allies, and that is fighting without them.’ Tehran is discovering the truth of that statement. Its proxy forces, including Hezbollah, the Houthis, and Hamas, are in such weakened states that they cannot respond effectively. Russia and China are not coming to Tehran’s aid, despite Iran’s stance as a preferred arms and oil exporter. Any diplomatic moves from Moscow and Beijing will be about trying to preserve or establish their role as world players, not about Iranian well-being. Neighboring Arab countries, who have no love for Iran, are remaining largely silent, suggesting that Israeli normalization of relations is far from a hopeless cause. Despite being war weary and stretched thin, most Israelis accepted Prime Minister Netanyahu’s decision to attack now because they see a nuclear Iran as a truly existential threat. In April, a reputable poll showed roughly half of the country supported a unilateral strike against Iran. Since that poll, Iran continued to threaten Israel and stated its intention to increase enrichment. Netanyahu is in this to win it, not just to set Iran back temporarily. Israeli opposition leader and former defense minister Benny Gantz said Friday, Israelis are ‘all united behind the political and military echelons in this mission that guarantee Israel’s security for decades to come.’ Bottom line — Tehran will have to blink because Jerusalem won’t.” – Linda Weissgold, Former CIA Deputy Director for Analysis

“My sense is that Iran will prioritize regime survival over more serious retaliation and things will quiet down for a while. One question which will occupy Israel and the U.S. in the near and mid-term will be precisely determining the status of Iran’s nuclear program. The dust will need to settle a bit before we’re likely to get a good sense of what does or doesn’t remain, and whether more action will be required. This will be particularly the case in getting a confident accounting of the quantity, enrichment level, and disposition of the material which Iran has already produced, and will be a major line of effort in any negotiations. Whatever happens, stepping back a bit, Iran is in a far weaker position than it was 2 years ago. Their nuclear materials program has been extensively damaged and, with it, their ability to play nuclear break-out cat and mouse. Their air and air defense forces have been significantly degraded. Their ballistic missile stockpiles are significantly depleted and, reportedly, their missile production infrastructure has been damaged. Iran has no real allies. Iran’s proxy network, once a major concern, has been eliminated or sidelined to the extent where it played almost no role in the current conflict.” – Neil Wiley, Former Principal Executive, Office of the Director of National Intelligence

Status of Gaza Ceasefire Talks

Following the ceasefire announcement between Iran and Israel, the expectation is that attention will turn back to the war in Gaza and the fate of the remaining hostages. Following the return to fighting in Gaza in March, the IDF has moved thousands of troops into the enclave to fully occupy the strip and eliminate the remaining Hamas combat brigades. However, that task has proven to be likely impossible to achieve, and Hamas continues to replenish its numbers. By some accounts, it has reconstituted its number of fighters to a level similar to what it possessed in October of 2023 when the attack on Israel took place. Prior to the Israel/Iran strikes, Hamas balked as a U.S. proposal that would have seen a release of some of the hostages and a 60-day ceasefire take place. Hamas is pushing for further guarantees that the IDF will abide by the ceasefire and enter into negotiations for a permanent end to the fighting. Bottom line from our GIG is that in the 20 or so year track record of Hamas, they have held hostages as a core strategy almost the entire time, and there is no way they will agree to release all of the hostages until there is a permanent ceasefire and the IDF leaves Gaza, two events that are unlikely to happen in the near-term.

“The Israeli/Iranian conflict’s escalation took the world’s eyes off Gaza. Who controls Gaza after a permanent ceasefire is an obstruction to any agreement. Israel demands that Hamas return the hostages, de-arm, and step aside or relocate in exile. No one is stepping forward to take over governance post-conflict due to security concerns. Hamas insists that the IDF must fully withdraw from Gaza, leaving Hamas in place to retain their influence. Israel sees an unnamed Palestinian entity outside of the Palestinian Authority as their solution. Without a viable plan and no state or organization stepping up to enforce a potential ceasefire, the likelihood of a long-term Israeli occupation increases. Israel’s war aims increased beyond securing the hostages to occupying Gaza without a viable solution to who will govern Gaza after Hamas is defeated. This puts Israel on a path to be responsible for Gaza’s security, basic services, and humanitarian aid. A concerted effort to solve post-war governance by the U.S., Egypt, Jordan, or the Gulf Arab countries is needed.” – General Robert Walsh

“Hamas’s strategic partner (Iran) has been humiliated, and the world is distracted while Israel takes any necessary advantages in Gaza. The intelligence collection from Hamas chatter on the Iranian strikes will have been useful. Operational advantages will be advanced. This is an opportunity for Israel to shape a regional security outcome, including (by agreement in an Iranian ‘peace deal’) severing the relationship between Iran and Hamas and allowing regional aid to flow in a controlled manner. Netanyahu must consider his legacy.” – Admiral Sir George Zambellas

“To many in Israel the whole population of Gaza is complicit in supporting Hamas, and a deal with the terrorists is therefore increasingly unlikely. Their destruction means occupying the territory. It is moving that way now, and given the wider moves in the region providing both a distraction and a bigger prize, and the inability of international diplomacy to influence Israeli actions, it is likely to be achievable. A ceasefire happens when Gaza is secured. In the short term it is important not to overlook how this will affect Jewish and Muslim tensions outside the region, particularly in European countries. The two-state solution remains key in the medium term, and as attention moves to the West Bank, it might be part of a peaceful future but more likely it remains a (reinvigorated) focus for Palestinian resistance.” – General Sir Nick Parker

“The attacks in Iran will consume news coverage for days to come. Israel has given no indication that it has shifted its Gaza operations or its goals versus Hamas. Since 2006, Hamas has held living hostages or remains for all but 18 months; therefore, Hamas will hold its hostages until it is destroyed or it convinces Israel to accept a permanent ceasefire, which is unlikely.” – General Rick Waddell

“In terms of Hamas releasing Israeli hostages in return for a ceasefire of some kind, keep in mind that Hamas was founded on resistance to Israel, not the well-being of the Palestinian people. The hostages remain their principal bargaining chip with Israel. While Hamas may consider giving up a small number in return for significant concessions by Israel (concessions Israel is similarly loath to provide), they will not be inclined to surrender all of them for the foreseeable future.” – General Karen Gibson

“Events in Iran have a direct, and potentially positive effect on the trajectory of Gaza. Should Tehran surrender, Hamas may feel even less secure and perhaps more willing to make a hostage deal. With a chastened Iran, Israel may be more inclined to improve the humanitarian situation in Gaza to further the prospects of normalization with its Arab neighbors.” – Linda Weissgold, Former CIA Deputy Director for Analysis

Ukraine Ceasefire Discussions

Even with efforts to move peace talks along, we are still no closer to a ceasefire in Ukraine. In fact, as the U.S. has been distracted by the conflict in the Middle East for the past two weeks, Russia has taken the initiative and increased the pace of their strikes on Ukraine. However, the Ukrainians this month have demonstrated some significant ingenuity starting with Operation Spider’s Web where drones were launched from deep inside of Russia near strategic air bases thousands of miles from the border damaging or destroying 20 Russian bombers. In addition, a sea drone attack on the Kerch Bridge connecting Russia to Crimea did significant damage. In the comments from our GIG below, we will look at some of the technological innovations Ukraine (and in some cases Russia) have deployed in the conflict and what that can teach the U.S. and its allies about creative thinking and the use of low-cost systems to defeat much more expensive platforms. At the NATO summit in the Netherlands this week that President Trump is attending, discussions around the future of the Iranian nuclear program and next steps post the ceasefire announcement will likely be key agenda topics, but the focus will begin to return to the conflict in Ukraine. Also on the agenda at the NATO summit will be President Trump’s ask for NATO countries to increase defense spending from 2% of their gross domestic product to 5% by 2035, which was agreed to by member nations today.

“Ukraine’s June 1st drone operation codenamed ‘Spider’s Web’ that attacked Russia’s long-range bombers deep inside of Russia was daring like Israel’s pager attacks on Hezbollah’s leadership. Both demonstrated the evolving technology in modern warfare. Being able to rapidly integrate new technology from the private sector and scale it in rapid fire upgrades is changing how warfare systems are acquired. The new approach is different from previous slowly developed programs of record. Ukraine has built a thriving entrepreneurial domestic drone industry that is pumping out millions of drones from across 500 companies. This new character of warfare with kill-chain acceleration is challenging Russia’s mighty army in ways never thought possible. It isn’t replacing conventional warfare, but it is unexpectedly complementing it. Russia is also learning from Iran’s Shahed drones and mass producing their own. Both sides are now using fiber optic threads connected from the controller to the drone making them un-jammable. The next areas of growth are autonomy, swarming, and automatic target recognition, all areas the U.S. is leading in development. AI-driven software integrates hardware systems expanding battlefield autonomy and reducing manpower that is critical for Ukraine to battle the much larger Russian forces. Autonomous navigation also significantly increases the survivability of drones reducing procurement costs. Ukraine’s naval drones have forced Russia’s Black Sea Fleet to pull back from Crimea. Unmanned systems using affordable mass principles are here to stay.” – General Robert Walsh

“The Russians will have watched Israel’s unfolding operational design with horror and fascination. Horror, because it exemplifies their own utter operational inadequacy in Ukraine (from start to finish). Fascination, because they have neither the means nor the agility to design and execute something similar. Indeed, Ukraine is more akin to Israel than it is to NATO – the direct product of a national existential (rather than regional) threat.” – Admiral Sir George Zambellas

“To judge how Russia will continue to prosecute its invasion of Ukraine, we should watch the NATO summit closely. The key is Alliance cohesion, and this requires clear alignment between the U.S. and Europe. This is not just about individual European countries’ long-term commitment to defense spending, but the degree to which it is recognized that NATO remains dependent on ‘lead nation’ support from the U.S. and whether it has urgent plans to transform. A short communiqué that avoids controversy is unlikely to enhance operational credibility and the ability to deter and pressure potential adversaries.” – General Sir Nick Parker

“The Ukraine conflict has settled into a stalemate largely because of massive drone fleets with tactical ranges. What we should learn from Ukraine is how they’ve adapted and weaponized existing designs, created new designs, and networked them with frontline units. The other lesson is how they’ve scaled their production while under attack to thousands of cheap, but effective drones per day.” – General Rick Waddell

“While Operation Spider’s Web (the Ukrainian attack on Russian infrastructure and war-generating capacity) was impressive, other Ukrainian successes, while newsworthy, remain limited. Ukraine continues to leverage off-the-shelf and ‘garage manufacturing’ solutions at scale in a way that is encouraging even western militaries to further explore low-cost, highly replicable, expendable weapons systems. We’re seeing the manifestations of this approach play out in the U.S. defense acquisition space where the military services are making broad changes to some legacy programs of record supported by large original equipment manufacturers (OEMs) in favor of smaller, more agile, tech savvy firms. Russia continues to advance autonomous systems in the air, land, and sea, but manufacturing limitations (parts and labor) and a less agile mindset limit their ability to respond to Ukraine’s creative approach. Russia is still committed to an attrition warfare approach despite casualties approaching 1,200 men a day while achieving only limited territorial gains. Putin’s reluctance to admit that the conflict is in a persistent stalemate will ensure the fighting continues and is unlikely to bring the Russians back to the negotiating table prior to the winter fighting season.” – General John Evans

“An aspect critical to warfare is the ‘will of the people’ and we have seen this play out across the Russia/Ukraine and the Israel/Iran engagements. When a people’s existence is threatened, there is no limit to what they will do to survive. Ukraine implements a proactive use of tech as a necessity to do what they can to ensure their survival as a people. Russia implements a reactive use of tech to combat the savvy Ukraine forces. One of Russia’s main sources for drones (Iran) is busy with their own problems now and can’t sit back and support Russia as effectively. I can see Russia engaging China for support again and wouldn’t be surprised to see both Xi and Putin meeting publicly in the near future. Outside of Russia’s cyber capabilities, I believe there is a significant tech capability mismatch between the countries with Ukraine being the better. Russia would like to increase their use of tech, but that skill is outsourced, and I don’t believe you’ll see anything more significant than what you’ve already seen. They will revert always to attrition warfare by continuing to launch a lot of missiles with the hope Ukraine will dwindle down to nothing and capitulate.” – General Brian Cavanaugh

“Any forecast on this conflict has been wrong since the Feb 2022 ‘Russian victory parade in Kiev in 5 days’ assessment, much less the first invasion of Crimea in 2014, and plausibly started wrong with the Budapest Memorandum of 1993/4. The Russian economy is increasingly optimized for conflict-making which comes at direct cost to Russian quality of life. The casualty counts get bigger and worse. Progress on the ground may have turned the corner, but each and every kilometer comes at an increasingly compounding cost. A truism attributed to former SECDEF Mattis is that ‘war is over when the enemy says so.’ Ukraine, as the Russians define as the enemy, seems very far away from saying so. As to innovation and technology, it seems the Ukrainians have much to teach us.” – Admiral TJ White

“Don’t count on the NATO summit in The Hague to restrain, even temporarily, Putin’s behavior in Ukraine. He felt no compunction to dial back during the G-7 meeting. That doesn’t mean that he won’t be watching the debate. The agreement to allow Spain to opt out of a proposal requiring members to spend 5% of GDP on defense may have saved the summit, but there is a good chance that the Kremlin will still see NATO as a diminishing bulwark. If discussions on uranium overshadow discussions on Ukraine, Moscow will be thrilled. What may temper Moscow’s operations is a reduction in Iranian equipment flowing towards the fight.” – Linda Weissgold, Former CIA Deputy Director for Analysis

“I agree that the conflict is unlikely to resolve itself in 2025, nor is either side likely to make any serious concessions unless militarily compelled to do so. Despite high-profile Ukrainian attacks, I do not see the fundamental trajectory of the conflict changing, and Russia will eventually grind down the Ukrainian army. With respect to tech employment, Ukraine has generally been the innovator for ‘asymmetric’ or non-traditional capabilities, for which they, unlike Russia, perceived a greater need. The early, and very effective, use of FPV drones along the line of contact, or the rapid adoption of commercial communications technology, are good examples of this. Ukraine is sort of like an edgy start-up. Russia is more like a major industry. Monopolies on technological innovation don’t last long in the Russia-Ukraine War, though. Technological developments which have practical merit are usually adopted by the other side within a few months. Russia now, for example, at least matches (and probably far exceeds) Ukraine in all drone production and combat employment. Russia does occasionally innovate first. If memory serves, jamming-resistant fiber-optic controlled drones were a Russian innovation subsequently adopted by Ukraine. Russia is also very strong in electronic warfare and tends to lead in the jamming game. Iran bailed out Russia’s drone program early on in the war and the PRC, despite denials, almost certainly provides crucial electronic and machine components. Ukraine, for its part, has a whole raft of third-party government and commercial supporters to the extent that it’s unclear to me how much Ukrainian innovation is actually homegrown. Looking forward, I think Ukraine will continue to press “asymmetric” operations to achieve military or political effect. This will, I think, accelerate as Ukraine’s battlefield position worsens. Not all of these activities will be ‘high tech’ – blowing up bridges and assassinating people have been favorites for centuries – but technology will certainly figure in. My sense is that drone technology will probably be central to these operations, wherever they occur. We might see, for example, sea-based drone attacks against shipping carrying Russian oil or yet another attack on the Kerch Bridge this time using an AUV.” – Neil Wiley, Former Principal Executive, Office of the Director of National Intelligence

Trade Deal with China

As addressed last month as well, some of the direct tensions between the U.S. and China have been reduced following the progress on the trade deal. While all of the specifics have not been finalized in the agreement, lower tariff rates were agreed to, and a rare earths deal was included as well when President Trump announced the deal was “done” on June 11th. However, tensions are still elevated in the region. The Chinese Navy recently conducted its first-ever simultaneous drills with both of its operational aircraft carriers, the Liaoning and Shandong, in the Pacific Ocean, beyond the second island chain. However, shortly after these exercises took place, the Japan Coast Guard held a joint exercise with counterparts from the United States and the Philippines, as the three nations increase defense cooperation in the face of China’s expanding maritime activities.

“The U.S and NATO found themselves behind in arming Ukraine when Russia invaded. The lessons learned from Ukraine are putting strategic operating concepts and acquisition plans in place to support Taiwan and deter China from invading. Xi Jinping also learned from Putin’s stalled invasion and told his military to prepare to overwhelm Taiwan in a rapid invasion across the Taiwan Strait that avoids a protracted conflict like Ukraine. INDOPACOM’s unmanned Hellscape concept and DOD’s supporting Replicator program create an asymmetric layered defense that is an affordable answer to deter or delay the PLA’s invasion force in taking Taiwan until the U.S. and partnered military forces arrive on scene. Hellscape and Replicator are aimed at deploying thousands of autonomous swarming unmanned air, sea, and sub drones acting together in a kill web that overwhelms the PLA’s ability to conduct an amphibious assault. Replicator tackles the affordable mass challenge that the U.S. Navy is experiencing against the Houthi rebels. It leverages commercial off-the-shelf technology provided by innovative software companies that incrementally integrate hardware systems into the kill web in an open systems approach. China’s continued military aggression against Taiwan is causing the U.S. to put at risk its long-term policy of ‘Strategic Ambiguity’ towards Taiwan adding to friction between the world’s two superpowers. Hellscape turns Taiwan into a ‘porcupine’ capable of throwing its quills that causes even lions to back off.” – General Robert Walsh

“The Chinese must also have watched Israel’s unfolding operational design with horror and fascination. Horror, because it exemplifies their own utterly mechanical approach to warfare, exemplified by non-adaptive operational leadership. Fascination, because they now see that Taiwan will behave more like Ukraine and Israel – the direct product of creative preparation for a national existential threat. There will be no early appetite for Chinese adventurism, except for the continuation of existing hard and soft power expansion. The opportunity for a ‘dangerous regional incident’ to occur remains, but all parties are ready to manage and downplay that. A trade deal seems very sensible.” – Admiral Sir George Zambellas

“When the trade agreement is finalized, the key will be to assess the impacts against the expectations. Assessment of effects is generally a weak point for any policy. As China develops its navy, we should not be surprised that they extend beyond the First Island Chain. In any conflict scenario, the Chinese People’s Liberation Army Navy (PLAN) will seek to interdict any intervention forces as far away from Taiwan as they can to isolate the combat zone. As for tech lessons learned from Russia vs. Ukraine, Taiwan will surely be looking at cyber offense and defense, resilient and redundant networks, and the need for early indicators and warnings.” – General Rick Waddell

“While China continues to produce ships at a rate that exceeds the U.S. and its western allies, they still lack the experience and depth to mature their gray water navy to the blue water worldwide maritime force to which they aspire. However, with two aircraft carriers now deployed they have importantly extended their reach to support denial operations should they move on Taiwan. They are no doubt watching Ukraine’s operations in the Black Sea and taking copious notes on how to leverage emerging asymmetric autonomous technology to lower risk to force, deny detection of their actions, and extend stand-off with U.S. and allied naval forces. Finally, as China adapts fiscal policy (weakening the yuan) and their marketing approach to offset losses from the current tariff challenges with the U.S., they desperately need a deal to sustain current production/export levels (to keep the workforce engaged) and offset their continuing housing crisis which persists despite a significant reduction in the building of apartments across China. Some experts say that there may be as many as 70 million unfinished or unoccupied dwellings in China.” – General John Evans

“China gets about 16% of its seaborne crude from Iran and they have been exporting about 1.7 million barrels of crude a day, less than 2% of global demand, and over 90% of that crude goes to China, mostly to small Chinese ‘teapot’ refineries clustered in the Shandong region that operate independently from state-owned oil companies. They switched to illicit Iranian oil en masse in 2022 to protect their margins. Most countries won’t touch Iran’s sanctioned crude, so Tehran is forced to sell at a discount and find covert ways to get it onto the market. It uses a ‘dark fleet’ of tankers that sail with their transponders turned off to ship Iranian oil. If Israel’s goal is to seek regime change in Iran, it may feel tempted to cut off Tehran’s oil funds. A strike on Kharg Island in the Persian Gulf, where most of Iran’s tankers set sail from, would stop the flow of oil to China. But it could create an artificial shock to the oil market that would raise prices. This shock would be artificial and temporary. Saudi Arabia and the United Arab Emirates combined have more than four million barrels of daily capacity in reserve, and they could easily make up any perceived shortfall in 30 days. If China loses this 16% of its daily crude imports, it could have a significant impact on the country, since it imports well over 85% of its energy.” – Admiral Mark Heinrich

“China’s decision to send 74 warplanes toward Taiwan last Thursday and Friday, more than 60 of which crossed into Taiwan-claimed territory, demonstrates both its power and its insecurity. The harsh reaction appears to be a direct result of a visit from a bipartisan U.S. Congressional delegation, and British and Japanese freedom of navigation operations in the Taiwan Strait. The decision to take such provocative action suggests little concern from Beijing that the tariff discussions will be impacted by Taiwan policy. That can’t be a comforting thought for Taipei.” – Linda Weissgold, Former CIA Deputy Director for Analysis

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