ELIAMEP

This edited volume is the outcome of a scholarly initiative examining the impact of recent geopolitical transformations on the evolution of Turkish foreign policy. At a time when the liberal international order is increasingly contested, great-power rivalry is intensifying, and regional conflicts are reshaping global politics, Turkey has emerged as one of the consequential middle powers in its neighbourhood. The contributions brought together in this collection explore both the regional and sectoral dimensions of Turkish foreign policy, offering a multifaceted assessment of the challenges and opportunities confronting Ankara as it seeks to navigate an increasingly fragmented and uncertain international environment. The essays included in this volume were first presented and discussed in two roundtables organized by Turkey’s International Relations Council (Uluslararası İlişkiler Konseyi – UİK) and convened by Prof. Sinem Akgül Açıkmeşe at the 67th Annual Convention of the International Studies Association (ISA), held in Columbus, Ohio, from 22 to 25 March 2026.

The contemporary transformation of the international system, marked by the erosion of the liberal international order, the relative decline of U.S. hegemony, and the proliferation of regional conflicts, has elevated the strategic importance of middle powers. Turkey, situated at the intersection of Europe, the Middle East, and Eurasia, has been particularly affected by the wars in Ukraine, Gaza, and Iran, all of which pose significant challenges to its security, economic, and diplomatic interests. Bringing together contributions from leading scholars of Turkish foreign policy, the collection explores both the regional and sectoral dimensions of Turkey’s evolving international role to an increasingly fragmented and multipolar international environment. Several chapters focus on the regional aspects of Turkish foreign policy, analyzing Turkey’s relations with Iran, Russia, the Gulf states, the broader Middle East and North Africa (MENA) region, and the Eastern Mediterranean. Other contributions examine key sectoral issues, including the implications of the Iran war for Turkey’s energy policy, defence industry, strategic posture, and mediation capabilities. Taken together, the chapters highlight the opportunities and constraints facing Turkey as it seeks to navigate an increasingly unstable regional and international landscape. The volume argues that Turkey’s future influence will depend on its ability to balance intensifying great-power competition with efforts to promote regional stability, diplomacy, and institutional cooperation. In doing so, it offers broader insights into the evolving role of middle powers in a rapidly changing global order.

Read here the Working paper.

As European Council President Antonio Costa reiterated during his visit to Sarajevo, enlargement is no longer simply an institutional process. It is a geostrategic investment in Europe’s peace, stability and security. Today’s EU–Western Balkans Summit in Tivat, Montenegro, offers an opportunity to move beyond a narrative that focuses exclusively on what the region must do for the European Union and instead recognise what the Western Balkans already contribute to Europe’s future.

The debate on enlargement is often framed around reforms, conditionality and accession benchmarks. These remain important as enlargement is a process governed by rules including democracy, rule of law, human rights and freedom of press and media among others. Yet the changing geopolitical environment requires a broader perspective. The Western Balkans should increasingly be understood not as passive recipients of European support, but as active contributors to European security, defence readiness, economic resilience and strategic autonomy.

ELIAMEP‘s recent work through the think nea – New Narratives of EU Integration initiative demonstrates that the case for enlargement is no longer solely political. It is also strategic, economic and security-driven.

The Western Balkans Are Already Contributing to Europe’s Security

Europe’s debate on enlargement has remained largely disconnected from its debate on defence. Yet the two can no longer be treated separately. The Western Balkans are increasingly evolving from security consumers into security contributors.

Key trends include:

• Defence spending across the region is rising, with most countries meeting or exceeding NATO benchmarks.
• Western Balkan states are modernising their armed forces and increasing interoperability with European and NATO partners.
• The region has provided meaningful support to Ukraine, including military equipment, ammunition and other forms of assistance.
• Western Balkan personnel continue to contribute to EU, NATO and UN missions through specialised units, trainers, medical teams and peacekeepers.

At a time when Europe faces unprecedented security challenges, these contributions demonstrate political commitment, operational reliability and strategic alignment.

Europe’s Defence Readiness Requires the Western Balkans

The war in Ukraine exposed Europe’s shortages in ammunition production, defence-industrial capacity and supply-chain resilience. The Western Balkans offer concrete solutions.

The region hosts approximately 200 defence-related companies and retains significant industrial capacities inherited from the former Yugoslav defence-industrial complex. Bosnia and Herzegovina and Serbia remain major producers of ammunition and military equipment, while Albania, North Macedonia and others are rebuilding defence-industrial capabilities.

Several strategic advantages stand out:

• Bosnia and Herzegovina possesses substantial artillery shell production capacity with potential for further expansion.
• Regional industries can produce both NATO and Soviet-standard ammunition.
• Production costs are often lower than within the EU.
• Existing facilities can contribute to addressing Europe’s urgent defence-production gaps.

At the same time, non-EU actors are increasingly investing in these sectors. Without stronger European engagement, the EU risks missing an opportunity to integrate the region into its emerging defence ecosystem.

Geography Matters

The Western Balkans are not located on the margins of Europe. They sit at the centre of several critical European transport and security corridors.

The region functions as:

• A land bridge connecting Central Europe, the Eastern flank, Ukraine and the Eastern Mediterranean.
• A key route for military mobility and logistics.
• An important contributor to supply-chain resilience.

In an era where infrastructure, connectivity and mobility have become security issues, the strategic relevance of the Western Balkans has increased significantly.

The Western Balkans Can Strengthen Europe’s Economic Security

The strategic importance of the region extends beyond defence. The Western Balkans possess substantial reserves of critical and strategic raw materials, including copper, aluminium, nickel, antimony, lithium, magnesium, cobalt and rare earth elements. These resources are increasingly important for Europe’s green transition, industrial competitiveness, defence production and economic security.

Yet the current situation reveals a strategic imbalance:

• Raw materials are often exported to China for processing.
• Higher-value products subsequently enter European markets.
• Local value creation remains limited.
• European strategic autonomy remains vulnerable to external dependencies.

A more integrated approach would allow Europe to strengthen supply-chain resilience while supporting economic convergence and industrial development in the region.

Enlargement and Strategic Integration Must Advance Together

The central conclusion emerging from ELIAMEP’s work is straightforward: Europe’s enlargement agenda and Europe’s strategic priorities increasingly overlap.

Whether the issue is defence readiness, military mobility, industrial resilience, critical raw materials, support to Ukraine or supply-chain security, the Western Balkans are already part of the solution. The challenge for the European Union is therefore not whether the region matters strategically, but how quickly existing policies can reflect this reality.

Today’s EU–Western Balkans Summit should reinforce a simple message: enlargement is not only about preparing the Western Balkans for the European Union. It is also about preparing the European Union for the geopolitical realities it faces.

The Western Balkans are not Europe’s periphery. They are an increasingly important part of Europe’s security, resilience and future prosperity. Recognising this reality is essential if enlargement is to fulfil its strategic purpose.

In the fourth policy paper of the collection The Iran reckoning: Essays on a war the West was not ready for, Dr. Andréas C. Hatzidiakos examines the possible post-war trajectories of Iran following the current conflict and assesses their implications for regional stability, European security, and the evolving global balance of power.

Executive Summary

• There was never a plan for the morning after. The decision to strike Iran without a transition framework was not an oversight; it was a deliberate political choice consistent with the “America First” rejection of nation-building. The cost will not be borne by Washington – it is being externalised onto Europe, the Gulf, and the Iranian population itself.
• The four-scenario framing itself is a category error. What follows Operation Economic Fury will not be one of four discrete futures. It will be a messy hybrid in which slow institutional rot, IRGC-led consolidation, accelerated nuclear breakout, and territorial fragmentation play out simultaneously and selectively over a 15- to 20-year horizon, possibly longer. Policy planning organised around clean alternatives produces false confidence and missed thresholds.
• The eastern security vacuum is the most underestimated risk. Iran has been the principal regional suppressor of Sunni jihadism for two decades. The collapse of that capacity – alongside ISIS-Khorasan’s documented operational reach across the Iran-Afghanistan-Pakistan corridor – produces the largest counter-terrorism inversion since the 2003 dissolution of the Iraqi Ba’ath. The threat returns in two channels at once: hybrid operations on European soil, and a resurgence of jihadist radicalisation that the 2017 territorial defeat of ISIS was meant to have settled.
• China is becoming the centerpiece of this post-war order, not a peripheral actor. Beijing is absorbing the war’s costs as a calculated short-term loss in exchange for status power, energy security through reconstruction contracts, and a double defence and industrial window opened by the depletion of US precision-munitions stocks – a weak US presence in the Indo-Pacific and enough time to step up the quality of their defence industry.
• Europe has the largest exposure and the smallest voice. The post-war architecture is being decided without European representation. The question is no longer how to be present at the table – that opportunity has passed – but how to act from outside it. France has begun to articulate the lead: the forward deterrence doctrine, the Strait of Hormuz maritime navigation initiative, and President Macron’ s Athens address of 25 April 2026 – in which he explicitly called for the operationalisation of Article 42.7 TEU, describing the mutual defence clause as unambiguous and legally stronger than NATO’s Article 5 – collectively signal a strategic shift toward European ownership of continental security and defence. Whether that lead can be converted into a coherent European posture is the open question.

Read here the Policy paper in pdf.

The previous policy papers of the collection:

The bill will come due: The short, medium and long-term consequences of the Iran war

Implications of the Iran crisis for Greece’s defence policy

The strategy Iran built for forty years – and the war the West still doesn’t understand

Introduction: there is no morning, and there has been no peace

On 5 May 2026, POTUS told an interviewer that there had been no war with Iran. By that point, American and Israeli aircraft had been striking Iranian territory for 66 days, the Strait of Hormuz had been partially mined for over two months, Brent crude was trading above $110 per barrel, and thousands of Iranian civilians were dead. The denial was not a slip of phrasing. It was being repeated, with discipline, across the US administration’s communication[1]. 

The administration has chosen to externalise the cost of ending the war by denying there ever was one.

The denial is the architecture of what comes next. A war that did not officially happen requires no formal authorisation to start, no negotiated settlement, no commitment to reconstruction, no plan for a transition. The constitutional question – that the US was at war for 66 days without congressional authorisation, in clear excess of the 60-day clock under the 1973 War Powers Resolution[2] – is being managed the same way: by the rhetorical refusal to accept that the conflict had the legal character every external observer agrees it had. The administration has chosen to externalise the cost of ending the war by denying there ever was one.

This paper is an argument with the framing that has dominated Western policy commentary in the weeks since 5 May: that we have entered the morning after; that the strategic question is now what shape the new Iran will take; and that Europe’s role in answering it, is residual. None of those propositions are correct. There is no morning, because the strikes have not stopped – they have merely been reclassified and paused. There is no settled trajectory for the new Iran, because the regime’s succession has so far consolidated rather than fractured and the post-war architecture has not been negotiated. And Europe’s role is anything but residual: Europe will pay the bill. First on its own soil, in higher energy prices and a heavier modified security architecture. Then again in reconstruction. And the only open question is whether the bill will be converted into political leverage over conditionality, sanctions sequencing and proliferation containment. The recurring pattern of European Middle East policy (substantial financing, peripheral political influence, surprise at the outcome) is poised to repeat itself with a higher bill and a smaller seat than ever before.

In the next 18 months, the political shape of the post-war Iranian state will be set. What must be avoided is European money flowing into it with residual political return – as it has into Iraq, as it has into Afghanistan, as it has into Libya, as it threatens to flow now into a country whose strategic shape is being determined elsewhere. The morning after is not coming. This is a fifteen to twenty-and-counting-year process whose first 18 months will determine its shape. Europe will pay for it. The only open question is whether Europe will pay for an order it has helped to set, or for one it has been billed to underwrite.

The absence of a plan was the plan

The absence of a plan was not an oversight; it was the architecture. 

The conventional critique of the Trump-Netanyahu campaign – that it lacked a coherent plan for the political phase that would follow military operations – is descriptively correct yet analytically inadequate. The absence of a plan was not an oversight; it was the architecture.

Bomb and (try to) leave is not a failure of strategic vision. It is the strategic vision.

The “America First” doctrine, articulated across the 2024 presidential campaign and the 2025 National Security Strategy, rests on three propositions: that prolonged American military engagement abroad has produced poor returns on investment; that nation-building is a category in which the US has demonstrated systematic incompetence[3]; and that the proper use of American military power is the focused, judicious strike at minimum political cost[4]. The doctrine does not merely tolerate the absence of a transition plan. It requires it. Bomb and (try to) leave is not a failure of strategic vision. It is the strategic vision.

…the apparent expectation was that Iran would respond like Venezuela, that the population would receive American bombs as liberation, and that a short, sharp operation would not only be feasible, but would generate domestic and international acclaim.

There is no doubt that Trump was briefed in detail by his military planners. As George W. Bush was briefed in 2003. The US national security apparatus does not leave presidents uninformed about the consequences of major military action. And yet the decision appears to have been made by a very small circle, with reasoning closer to political theatre than strategic and military calculation; the apparent expectation was that Iran would respond like Venezuela, that the population would receive American bombs as liberation, and that a short, sharp operation would not only be feasible, but would generate domestic and international acclaim[5]. It is difficult to avoid the conclusion that Trump was, to a significant degree, maneuvered into the decision by Benjamin Netanyahu, who had every incentive to lock in direct American military engagement against Iran[6]. Whether the historical record ultimately confirms this judgment, the operational logic is striking: the primary strategic beneficiary of US military engagement is Israel, and the US entered the conflict without a coherent exit strategy.

The consequences of this calculus are externalised.

The consequences of this calculus are not borne by its authors. They are externalised. The Gulf monarchies, which absorbed approximately 83% of Iran’s retaliatory missile and drone strikes during the war (against 17% launched against Israel)[7], will also absorb the diplomatic burden of managing whatever emerges in Tehran. Europe, which had no operational role in the campaign, will be expected to underwrite financial reconstruction. The Iranian population, on whose behalf no transition framework has been negotiated, will live within whatever order the IRGC or the surviving security services impose. This is a deliberate transfer of strategic costs from the actor responsible for them to the actors unable to refuse them.

…the “CIA playbook” requires three things to work, and all three were absent . First, a military in disarray.[…] Second, an isolated leader with no institutional base. […] Third, a credible political alternative.

The decision to authorise Operation Epic Fury will occupy historians for decades. To those who mistake symptoms for causes, the conditions seemed aligned: mass protests across Iranian cities; an economy in freefall; an exile opposition with a recognisable figurehead in Reza Pahlavi; and a population exhausted by decades of misrule. The pattern looked familiar – the kind of operation US covert and overt action has run before, from Iran 1953[8] to Guatemala 1954[9] to Chile 1973[10]. But the “CIA playbook” requires three things to work, and all three were absent[11]. First, a military in disarray: the IRGC did not fracture – it held, and it mobilised. Second, an isolated leader with no institutional base: the Islamic Republic is a deep, layered system with billions of dollars of economic interests embedded inside it. Third, a credible political alternative. Reza Pahlavi commands real visibility in the diaspora, but the son of the former Shah is relatively unknown inside Iran, his actual domestic support is uncertain[12], and the opposition remains fragmented with no unified political horizon[13]. When the bombs fell, even citizens who despised their government closed ranks. Not necessarily behind the regime, but to survive. The regime absorbed the strikes and converted them into precisely the narrative it has been selling for forty years: America does not want to free Iran; it wants to destroy it. 

There is one further problem that deserves to be named directly: the information war – not only the one waged between Washington and Tehran, but the one conducted within the alliance itself. In a conflict of this magnitude, allies should at minimum be told the truth. Western publics and governments should not be placed in the position of having to evaluate whether the operational claims made by Washington – about strikes, casualties, the state of the Strait, the negotiations – are accurate or theatrical. The systematic blurring of domestic political messaging and wartime operational reality has, at times, rendered Washington’s narrative so indiscernible from Tehran’s, that allied governments find themselves in the indefensible position of not knowing whose account to credit. The situation has reached a peculiar inversion: when Iranian state media amplifies claims that would ordinarily be dismissed as crude propaganda, the reflex is no longer automatic – because Washington’s own conduct has made the implausible seem plausible. Trump’s erratic communication has, paradoxically, lent Tehran a degree of credibility it does not deserve. This is corrosive: it degrades alliance cohesion, undermines intelligence sharing, and weakens the very coalition any credible endgame requires. In wartime, truth is not optional. It is a strategic asset – and right now, it is being squandered.

Four futures, simultaneously: a two-axis reframing

The standard analytical move is to present a menu of four scenarios – negotiated transformation, regime survival, accelerated nuclear breakout, territorial fragmentation. The format is familiar, yet misleading. These are not alternatives among which the post-war Iranian state will resolve. They are processes that will play out simultaneously, in different regions, on different timelines. One cannot keep doing the same thing and expect different results. A more honest framing organises the future around two axes: whether the regime survives or falls, and whether central authority is maintained or breaks down. The four resulting quadrants are not destinations. They are the corners of the space within which Iran will move, possibly visiting several over the next 15 to 20 years – and based on the Libyan or Lebanese precedents, possibly longer.

Source: author’s elaboration 

Regime survives, central authority maintained – the “hardened succession” outcome (Q1). Empirically the most probable near-term configuration. Mojtaba Khamenei’s confirmation and survival (as the living vessel of a succession narrative), IRGC operational continuity, and the absence of mass protests during the bombing, all suggest institutional resilience. The configuration is not stable. A successor that has lost its founding leader, watched its conventional military take catastrophic losses, and absorbed the operational lesson that nuclear ambiguity invited an attack rather than deterred it, will rebuild on a different basis. The assessment is that the strikes may have strengthened the political case for weaponisation within Iran – and, arguably, elsewhere as well – capturing the irony of the outcome[14]. The regime survives – and accelerates the very capability the operation was designed to prevent. The North Korean precedent has been studied closely in Tehran.

Regime survives, central authority degrades – the “slow rot” outcome (Q2). Historically the most common trajectory. Tehran continues to govern formally and maintain coercive authority in the major cities, but its capacity to project authority into Sistan-Baluchistan, the Kurdish provinces, Khuzestan, and the eastern frontier with Afghanistan progressively erodes. Local IRGC and Basij units, no longer reliably paid, begin to operate as autonomous regional networks rather than instruments of central command. The state does not collapse; it hollows. Each stage of degradation falls below the threshold for international action, and the cumulative damage is largest precisely for that reason.

Regime falls, central authority maintained – the “IRGC consolidation” outcome (Q3). A constitutional regime change in which the clerical superstructure is dismantled but the IRGC remains as the operational core. The model is approximately Pakistani: a military-technocratic authority retaining nuclear capability, conducting foreign policy with greater pragmatism, dropping the most ideologically maximalist commitments. Rhetorically less alarming than its alternatives, but operationally more dangerous in one respect: a post-clerical IRGC state is more legible to international diplomacy, more capable of negotiating credible commitments, and consequently more likely to receive the recognition and reconstruction support that consolidates its (nuclear) position. Europe should be careful what it wishes for.

Regime falls, central authority breaks down – the “fragmentation” outcome (Q4). The configuration most often invoked, most often misunderstood, and most often modelled on the wrong analogy. Libya is the wrong frame: Libya’s pre-war population was approximately 6.4 million (2010), predominantly Arab-Berber in composition; Iran’s is approximately 92 million across at least seven significant ethnic groupings[15]. Libya’s institutional legacy was the absence of any genuine state structure[16]; Iran’s institutional skeleton – civil service, judiciary, central bank, tax administration – is qualitatively more sophisticated and more durable. The right comparison is the Soviet Union of 1991: a multi-ethnic, multi-confessional, nuclear-armed state whose central authority disaggregated into successor entities of varying legitimacy. That comparison opens onto a question no one is asking – whether a Nunn-Lugar-style cooperative threat reduction architecture[17] is being prepared for the fissile-material control problem a fragmenting Iran would generate[18]. The honest answer is that it is not. Iran possesses approximately 408 kilograms of 60% enriched uranium of which the IAEA has lost continuity of knowledge[19], sufficient for several weapons within weeks of further enrichment. There is no Belarus, no Kazakhstan, no Ukraine to consolidate the material to. There is no Russia to receive it.

A nuclear breakout in the centre, slow rot in the east, IRGC consolidation in the security apparatus, and pockets of fragmentation in Sistan-Baluchistan are not mutually exclusive. 

A nuclear breakout in the centre, slow rot in the east, IRGC consolidation in the security apparatus, and pockets of fragmentation in Sistan-Baluchistan are not mutually exclusive – they are the most plausible composite outcome.

The eastern vacuum: the inversion no one is naming

For the better part of two decades, Iran has functioned as a significant – if self-interested – regional force in suppressing Sunni jihadism directed at Shia communities and Iranian state interests[20]. The Quds Force deployed to Iraq from June 2014 and played a central operational role in the fight against the Islamic State[21]. In Syria, Iran’s sustained military support for the Assad government served multiple objectives: preserving the land corridor to Hezbollah, maintaining a forward position against Israel, and – as a secondary effect – denying ISIS the territorial contiguity its proto-state required[22]. The IRGC has conducted repeated operations against Jaish ul-Adl in Sistan-Baluchistan, a Sunni Baluch militant group designated as a terrorist organisation by both Iran and the US[23].

If that capacity is degraded – by the war, by the succession, by the fiscal pressure of reconstruction, or by all three – the suppression collapses. ISIS-Khorasan Province (ISKP) does not need to conquer Iran. It needs Iran to be unable to police its own eastern frontier. The UN Analytical Support and Sanctions Monitoring Team has assessed ISKP as posing “the greatest extraregional terrorist threat” in its current configuration[24], with documented operational reach into Iran, Russia, and Western Europe[25]. The 3 January 2024 Kerman bombing against a Soleimani commemoration was conducted by ISKP Tajik nationals[26]. The Crocus City Hall attack in Moscow in March 2024 was the same operational network[27]. As of late 2025, ISKP is assessed as a resilient and still operationally potent affiliate, raising concerns about its potential to conduct high‑impact attacks in Asia or Europe in 2026[28].

The destruction of the IRGC’s external operational capacity produces a vacuum that ISKP, Jaish ul-Adl, Tehrik-e-Taliban Pakistan (TTP) and the constellation of Sunni jihadist networks across the Iran-Afghanistan-Pakistan corridor are already organised to occupy. The principal beneficiary of a degraded IRGC is the actor that has spent the past years rebuilding the operational infrastructure that the 2017 territorial defeat of ISIS was meant to have settled definitively.

Europe risks inheriting Iran-backed hybrid operations on European soil and a resurgence of jihadist radicalisation in its own neighbourhood simultaneously.

For European security services, the threat geometry is about to change in two channels at once. MI5 disrupted over forty Iran-backed plots in the UK between January 2022 and October 2025[29]. Successive Europol TE‑SAT reports document a pattern of jihadist plots in Belgium, France, Germany and Austria, with several transnational networks linked to the Islamic State and ISKP[30]. Iran-backed plots may, under fiscal pressure, become marginally less capable; ISKP networks, freed from their principal regional adversary, will become more so. Europe risks inheriting Iran-backed hybrid operations on European soil and a resurgence of jihadist radicalisation in its own neighbourhood simultaneously – the very combination of state‑assisted hybrid attacks and homegrown jihadist activity the 2017 territorial defeat of ISIS was supposed to have put an end to.

Reconstruction: the centerpiece is Beijing

The standard treatment of reconstruction proceeds through familiar coordinates: Washington has no appetite; Brussels has financial capacity but lacks operational presence as evidenced by their absence at the negotiation table; the Gulf states have means and proximity but limited will to help the neighbour that attacked them. Each observation is correct. Each is also peripheral, because the actor that will most consequentially shape the architecture is not present in the conventional Western framing at all.

China imported approximately 1.5 million barrels per day of Iranian (sanctioned) crude through 2025[31], accounting for roughly 90% of Iran’s oil exports and 12% of China’s total crude imports[32]. The 2021 Comprehensive Strategic Partnership agreement with Iran commits China to up to $400 billion in Iranian energy, banking, and infrastructure investment over twenty-five years against a discounted Iranian oil supply[33]. When the strikes began on 28 February, Beijing absorbed the immediate cost and is still continuing to do so. The IMF’s April 2026 World Economic Outlook revised China’s 2026 growth forecast downward 0.1% points from January to 4.4% – a modest revision reflecting Chinese strategic stockpiles, diversified sourcing, and overland Russian supply[34]. The cost is real but absorbable.

Beijing’s broader grand strategy of strategic patience: advancing its long-term interests without triggering immediate retaliation or coercive measures from the US or its allies. […] Beijing accumulates three structural gains.

The strategic return on absorbing it is considerable. China has positioned itself, throughout the war, as the calm power: condemning the strikes, calling for de-escalation, blocking US-led UNSC resolutions, and presenting itself as the multilateral interlocutor. This is not a contradiction with simultaneously enabling Iranian sanctions evasion through the Shandong “teapot” refinery network[35] and the shadow tanker fleet; it is the same strategy operating on two timelines. This dual-track approach allows China to reap the strategic benefits of Iranian oil – lower prices, increased leverage over global energy markets, and enhanced bargaining power in negotiations with both Tehran and Washington – while maintaining plausible deniability and limiting direct diplomatic fallout. It reflects Beijing’s broader grand strategy of strategic patience: advancing its long-term interests without triggering immediate retaliation or coercive measures from the US or its allies. In doing so, Beijing accumulates three structural gains.

Sources: IMF, “World Economic Outlook: Global Economy in the Shadow of War”, 04/2026, p. 7; Alicia García-Herrero, “What the war in Iran means for China”, Bruegel, Analysis 06/2026, 17/03/2026; Yukun Zhang and Liz Lee, “China’s factory inflation hits 45-month high on energy price shock”, Reuters, 11/05/2026; Freightos, “Iran war pushing air rates up, and disrupting ocean”, Weekly freight updates, 10/03/2026.

First, status. China is establishing itself as the rising superpower whose conduct during a Middle Eastern crisis is characterised by restraint and adherence to international consensus, in deliberate contrast to the US, which undermines the very rules-based order it claims to defend. This will be the main soft-power win from the post-war moment, achieved without deploying a single military asset.

Second, energy security through reconstruction. Whatever post-war configuration emerges in Tehran, China will be present at the reconstruction table – in some respects, China is the reconstruction table. The infrastructure-for-oil arrangements pre-date the war[36]; they will be expanded after it. Chinese state enterprises will build the airports, refineries, and transport networks any post-war Iranian government will require – and will be paid in crude.

Third – the dimension that should most concern European and Indo-Pacific planners – a defence-industrial window. The Iran war has depleted US precision-munitions stocks at a rate without recent precedent: approximately $1.9 billion per day in operational expenditure in the opening phase, $16.5 billion by Day 12, much of it on interceptors expended against Iranian drone and missile salvoes[37]. As of March 2026, the US was actively transferring elements of THAAD and Patriot air defence batteries from US Forces Korea to the Middle East – effectively leaving the Indo-Pacific flank exposed and vulnerable to Chinese coercion, precisely when Washington lacks the long-range munitions, air defense systems, and interceptors needed to deter or fight a protracted war with China[38]. The 2025 National Security Strategy had identified Indo-Pacific deterrence – and specifically the prospect of conflict with China over Taiwan – as the principal organising priority of US force posture[39]. What the Iran war has produced is not a deferral of that priority by political choice, but by material constraint. Replenishing US’ depleted stocks will take years. European defence-industrial timelines are similar. China’s relative position improves not by its own action but by the involuntary slowdown in Western output, and the time gained will allow to close the qualitative gaps that remain in some Chinese platforms.

The Gulf will also play a role, but a different one than is commonly assumed. Saudi Arabia and the UAE have the financial means and the proximity to engage substantively. The UAE’s posture, articulated through the closure of its Tehran embassy, its withdrawal from OPEC+, and accelerated bilateral defence cooperation with Israel, is to harden against post-war Iran[40]; Saudi Arabia, having maintained its Tehran channel and joined the quadrilateral mediation effort with Egypt, Turkey, and Pakistan, is positioning to manage rather than confront[41]. The Gulf reconstruction contribution will be real but politically conditional, sectorally specific, and unlikely to operate through a unified GCC framework given the documented Saudi-UAE divergence on Yemen, Sudan, and now Iran.

Where Europe still has leverage, and where it has already lost it

Europe was not at the table at the Islamabad talks of 12 April 2026. The negotiations that collapsed after 21 hours involved the US and Iran, mediated by Pakistan; the six countries whose airports, energy infrastructure and civilian neighbourhoods had been struck during the preceding 40 days were not formally consulted, nor was any European country or EU institution. Nor were they in the subsequent phases. That window has closed. The leverage Europeans hold from this point onward is not the leverage of presence at the negotiating architecture, but the leverage of structural positions they still hold outside it. Three remain: procedural-political (sanctions), technical (verification), and economic (reconstruction inputs). The first two leverages are still exercisable; the third is a residual hold that China is methodically substituting on a deliberate long timeline. All three are structural positions Europeans have, in similar past circumstances, forfeited by default.

The first is the sanctions architecture. The September 2025 snapback of UN sanctions[42], invoked by France, Germany and the United Kingdom (the “E3”) under UNSC Resolution 2231, restored the pre-2015 sanctions regime against Iran[43]. Unlike bilateral US sanctions, the UN architecture cannot be lifted unilaterally by Washington. Any reconstruction trajectory that requires sanctions relief must, at the UN level, pass through the “E3”. At the EU level, the same is true through its autonomous proliferation-related sanctions architecture it reimposed in parallel with the snapback, through Council regulations[44]. This second layer is purely European, modifiable only by the Council, meaning that any comprehensive economic component of an Iran settlement must also pass through European political scrutiny. This is the most concentrated point of European influence in the post-war period and yet the most easily traded away or disregarded – as evidenced in the current negotiations, the Trump administration has proceeded as though the EU/UN sanctions architecture were a mere administrative formality, a footnote to be inserted in the final deal. Any decision to support sanctions relief without commensurate political conditionality (verified IAEA re-access, operational dismantling of the IRGC’s external operations apparatus, specific commitments on the proxy network) converts this leverage into a one-time gift. The precedent of Iraq, Afghanistan and Libya, where European reconstruction commitments were extended without strategic conditionality, suggests this is the default trajectory unless a deliberate decision is taken otherwise.

The second is the verification and export control infrastructure. The IAEA has explicitly acknowledged that it has lost continuity of knowledge over Iran’s enriched material[45]. Any post-war re-establishment of inspector access will rest on technical infrastructure in which the EU holds a distinct institutional position. The European Commission’s Joint Research Centre operates the principal non-US supporting infrastructure for IAEA environmental sample analysis in 3 different locations[46]. These are EU institutional assets structurally integrated into the IAEA’s safeguards verification system. The multilateral export-control architecture through which Iranian reintegration into the global nuclear economy must pass – the Nuclear Suppliers Group, Missile Technology Control Regime, Wassenaar Arrangement – operates by consensus[47]: a settlement that bypasses these regimes does not deliver reintegration, and one that goes through them goes necessarily through European votes.

The third position is hybrid: a residual leverage today, but a structural advantage China is methodically working to substitute. The EU and its Member States currently hold, at the technical and regulatory frontier of reconstruction, inputs no other actor can replace in the near term – euro-clearing and the European banking system through which any non-Chinese/Asian component of sanctions relief must operate[48]; the energy-services expertise of TotalEnergies, Eni, and Shell; the EU dual-use export control regime[49]; and a significant share of the estimated $100 billion Iranian frozen funds globally, whose release is a European political decision. None of these is replicable by Beijing in 2026. But each is being progressively eroded along a trajectory China has been deliberately constructing since the 2018 US withdrawal from the JCPOA. In the Iran-China bilateral channel, yuan settlement is now operational and growing through China’s Cross-Border Interbank Payment System (CIPS), though the system remains a fallback rather than a substitute at scale[50]. The European banking system continues to chokepoint Iran’s trade with non-Chinese/Asian partners [51] but no longer chokepoints the Iran-China channel itself. The technical lead of European oil majors – exposed between 2018 and 2019 when CNPC inherited TotalEnergies’ operatorship on South Pars Phase 11 and then withdrew without delivering[52] – is being closed through Chinese involvement in sanctioned Iranian and Russian projects. Chinese-based procurement networks have substantially eroded the enforcement reach of the EU dual-use regime since 2018 by serving as transshipment hubs and front-company intermediaries that route US, European, and Japanese-origin components to Iranian missile, drone, and other military programmes; the European regulatory architecture still nominally governs export licensing but is increasingly defeated at the implementation layer. Frozen assets remain a uniquely European hold on past Iranian holdings, but future reserves placed in yuan and Chinese banking infrastructure route around this leverage entirely.

China will invest in infrastructure, energy, and logistics, setting the technical standards and accepting zero conditionality on governance.

The implication for European reconstruction planning is therefore not what the conventional Western reading suggests. Europe will pay (substantially, on humanitarian assistance, refugee management, civil society and judicial reconstruction, transitional justice), by “normative-power reflex”, and because these are the categories that translate least into political influence and that Beijing is content to leave to others. China will invest in infrastructure, energy, and logistics, setting the technical standards and accepting zero conditionality on governance. Europeans risk watching the strategic shape of the country they are helping to feed be determined elsewhere. This is the recurring pattern of European Middle East and Sahel policy: in Iraq, European reconstruction commitments since 2003 have produced little political weight in Baghdad; in the Sahel, two decades of European development and security investment did not prevent the active expulsion of EU CSDP missions between 2022 and 2024, and European actors are now perceived primarily through the very colonial register the investments were meant to displace. What distinguishes Iran from these precedents is the time horizon. The European inputs are real today; their Chinese substitution is a project of years for some categories and decades for others. The window in which European reconstruction conditionality could be exercised as leverage, is open. But it is narrow, and it is closing.

…the relevant question is therefore no longer whether the EU has a leader but which capital is best placed to lead.

The emerging architecture. What no structural position can substitute for is the political agency to exercise it. France has begun to construct that agency on three fronts, each whose translation into European leverage is contingent on partners following. The “dissuasion avancée” doctrine presented by President Macron at Île Longue on 2 March 2026 opened a Franco-European nuclear dialogue with eight partners[53] and was framed against a deteriorating strategic environment shaped by Russian coercion, uncertainty over U.S. extended deterrence, and the wider fallout of the Iran conflict[54]. The Strait of Hormuz maritime navigation initiative co-chaired by Macron and Prime Minister Starmer on 17 April 2026 assembled 49 non-belligerent states around an instrument explicitly designed to be more agile than EU consensus permits[55], and notably without US participation[56]. Macron’s Athens visit on 25 April 2026 extended the 2021 Franco-Greek Strategic Partnership Agreement and used the occasion to elevate Article 42.7 TEU – the EU’s mutual assistance clause, used only once by France itself – as the operative legal architecture for European collective defence, described by Macron as “reinforced concrete” (béton armé) and “stronger” than NATO Article 5[57]. The recent joint Franco-Greek response (even without activation of article 42.7 TEU) to the drone attack on the British airbase at Akrotiri (Cyprus) during the US-Israel strikes on Iran was cited as evidentiary proof that the clause operates as a binding commitment rather than a symbolic gesture. The relevant strategic actor in these initiatives is France leading the way with whatever partners can be assembled. Whether Berlin, Rome, Madrid, Warsaw, and other capitals convert these initiatives into a sustained European posture will determine whether the structural leverage outlined above is translated into operational leverage in the coming decade. Either path settles a question European strategic discourse has long preferred to leave ambiguous. In the first, partners step up and the EU institutional framework absorbs what France has begun, giving the architecture the appearance of multilateral/European cohesion. In the second, partners do not step up, and the post-war moment formalises what the recurring pattern of European foreign and security policy (from the “E3” on Iran to the Normandy format on Ukraine, from Operation IRINI in the Mediterranean to the Indo-Pacific strategy) has already been making increasingly difficult to deny: that the EU does not lead in the sense the term is usually understood. European leverage, as exercised, depends on lead states willing to act ahead of consensus, and the relevant question is therefore no longer whether the EU has a leader but which capital is best placed to lead on which file (and the depth of the lead). The two paths are not equally probable; the empirical record of EU CFSP/CSDP overwhelmingly favours the lead-state model.

What is missing is not capacity. It is political will to convert capacity into coordinated action before the reconstruction trajectory institutionalises around configurations that no longer admit European conditionality. The window is approximately the next eighteen months.

Conclusion: the cost of strategic absence

The war that didn’t start, did not, in any meaningful sense, stop.

The war that didn’t start, did not, in any meaningful sense, stop. The Iranian state continues under economic siege, partial territorial fragmentation in its eastern provinces, accelerating nuclear ambition, an external proxy network in operational uncertainty, and a reconstruction landscape whose principal financier is a power whose strategic interests are not aligned with any European preference. The morning after is not a moment. It is a 15 to 20-year process whose first eighteen months will determine its shape.

The recurring pattern of European Middle East policy – absent at the political architecture, present at the financing, surprised at the outcome – has been remarked upon for the better part of three decades. What the 2026 conflict has done is render the pattern’s costs immediate rather than deferred. Migration flows from a fragmenting Iran will not terminate at the EU’s external border; the proliferation cascade will not respect the Mediterranean; the ISKP operational tempo will not pause for European institutional consensus; the reconstruction investments shaped by Beijing will not be re-shaped by Brussels after the fact.

The choice now facing European institutions is not whether to be involved in post-war Iran. The choice is whether the involvement will be strategic or supplementary.

The choice now facing European institutions is not whether to be involved in post-war Iran. The choice is whether the involvement will be strategic or supplementary. The institutional and political prerequisites for strategic involvement are achievable on the 18-month timeline the war has imposed. They are not, on current evidence, being assembled. The bill for the Iran war will, as the previous paper in this series argued, come due over years rather than weeks. The bill for European strategic absence will come due faster.

Policy recommendations

• European institutions must condition all reconstruction financing on verifiable political outcomes – IAEA re-access to Iranian nuclear material, dismantling of the IRGC’s external operations apparatus, and substantive commitments on proxy networks. Conditionality requires institutional unity across the “E3” and substantive coordination with the EU institutions; it cannot be assembled bilaterally after the fact.

• The E3 should treat the snapback sanctions architecture as a strategic asset rather than a bargaining chip. Any sanctions relief negotiated through the post-war process must be sequenced against verified political and proliferation outcomes, not bundled into a single grand bargain.

• European defence, intelligence and counter-terrorism services should prepare urgently for the inversion of the regional Sunni-jihadist threat geometry. The degradation of IRGC counter-jihadist capacity, combined with ISKP’s documented operational reach, will produce simultaneous changes in both Iran-backed hybrid operations on European soil and Sunni jihadist threat profiles. The institutional reflex to treat the two threats as separate categories must be replaced by an integrated framework.

• The EU and its member states must build a Nunn-Lugar-equivalent fissile material control architecture for the contingency of Iranian central authority degradation. Approximately 408 kilograms of 60% enriched uranium, of which the IAEA has lost continuity of knowledge, is unaccounted for in any current planning framework. The institutional and technical lead time for cooperative threat reduction architectures is measured in years, not months. It must begin now.
• Europe must convert the French initiatives – forward deterrence, the Strait of Hormuz initiative, the TEU’s 42.7 article – into a sustained European posture. The relevant lead actor is not the EU as an institution but Europe broadly conceived, led by capitals capable of action and capable of federating other countries. Aggregating European money with Chinese capital on equivalent political terms is the worst of available options; the alternative is to act through the channels Europe controls, on the conditions Europe sets.

[1] Operation Epic Fury was declared concluded on 5 May 2026 in a brief statement by US Secretary of State Marco Rubio. See US Department of State, “Statement by Secretary of State Marco Rubio on the conclusion of Operation Epic Fury”, 5 May 2026.

[2] War Powers Resolution of 1973 (Public Law 93-148), Section 5(b): the President must terminate the introduction of US armed forces into hostilities within sixty calendar days unless Congress has declared war or extended the period by law. See also Congressional Research Service, “The War Powers Resolution: Concepts and Practice”, Report R42699, 03/08/2019.

[3] The White House, “National Security Strategy of the United States of America 2025”, Washington, DC: Executive Office of the President, 04/12/2025.

[4] US Department of War, “2026 National Defense Strategy”, 23/01/2026.

[5] Stephen Pomper, “One man’s war”, Foreign Affairs, 03/03/2026; for the documented MAGA split, see Molly Ball, “Can Trump bomb Iran and still be ‘America First’?”, Wall Street Journal/ABC News Daily, 26/06/2025.

[6] Dahlia Scheindlin, “Kill or Die: How Israel’s Netanyahu Has Waged War on Diplomacy for Decades”, Haaretz, 20/03/2026.

[7] Stefanie Hausheer Ali, “’They have been exposed’: The Iran war upends Gulf states’ security and business model”, Atlantic Council, 20/04/2026.

[8] Scott Koch, “The Road to Covert Action in Iran, 1953”, Studies in Intelligence, Vol. 48, No. 2, pp. 33-44.

[9] CIA History Staff Analysis Gerald Haines, “CIA and Guatemala Assassination Proposals 1952-1954”, CIA Historical Review Program, Released as sanitised, 1997.

[10] Directorate of Intelligence, “Chile: Pinochet and the Military [redacted]”, CIA, Declassified and approved for release 07/2000. See also Select Committee to study governmental operations with respect to intelligence activities, “Staff Report: Covert Action in Chile 1963-1973”, United States Senate, 1975.

[11] There is no single canonical “playbook” document. The pattern is reconstructed from operational records. See notably CRS, “Covert Action and Clandestine Activities of the Intelligence Community: Selected Definitions”, Report R45175, 29/11/2022.

[12] Eldar Mamedov, “The Pahlavi Mirage”, Foreign Policy in Focus, 19/02/2026

[13] For the Mojahedin-e-Khalq or MEK’s lack of domestic legitimacy, see CRS, “The Mojahedin-e-Khalq (MEK) or People’s Mojahedin Organization of Iran (PMOI)”, Report R48433, 25/02/2025.

[14] See previous policy paper “The strategy Iran built for forty years – and the war the West still doesn’t understand”, ELIAMEP, Policy paper #204, 05/2026; See also Arms Control Association, “U.S. War with Iran: New and Lingering Nuclear Risks”, Issue Briefs, Vol. 18, Issue 4, 10/03/2026; See Georgia Cole, “The Iran War Risks Triggering a New Wave of Nuclear Proliferation”, Chatham House, 30/03/2026.

[15] See Minority Rights Group, “Iran” country profile, 2024. Persian-share estimates range from 61 to 65%; the variance reflects the absence of authoritative ethnic census data since 1979.

[16] For a deeper dive into Libya’s structure, an excellent read: Peter Cole and Brian McQuinn (eds.), “The Libyan Revolution and Its Aftermath”, Hurst, 02/2015.

[17] The Nunn-Lugar Cooperative Threat Reduction (CTR) programme, established by the U.S. Congress in 1991 (sponsored by Senators Sam Nunn and Richard Lugar), provided funding and technical expertise to secure, consolidate, and dismantle nuclear, chemical, and biological weapons inherited by successor states following the Soviet collapse. It oversaw the denuclearisation of Belarus, Kazakhstan, and Ukraine, and the securing of fissile material across Russia. No comparable multilateral architecture currently exists for a potential Iranian fragmentation scenario. See Center for Arms Control and Non-proliferation, “Factsheet: The Nunn-Lugar Cooperative Threat Reduction Program”, 29/03/2022.

[18] The Soviet collapse left ~30,000 nuclear weapons across four successor states; the architecture took over a decade to consolidate. For more information, see Jason Ellis and Todd Perry (eds.), “Nunn-Lugar’s Unfinished Agenda”, Arms Control Today, 10/1997, republished by the Belfer Center for Science and International Affairs, Harvard Kennedy School.

[19] IAEA, “Verification and Monitoring in the Islamic Republic of Iran in light of UN Security Council resolution 2231 (2015)”, 31/05/2025, pp. 3 and 9; see also “IAEA Director General Grossi’s Statement to UNSC on Situation in Iran”, Vienna, 20/06/2025.

[20] Of note: this counter-jihadist posture, however, coexists with a deliberate and well-documented exception: Iran has consistently financed and armed Hamas and Palestinian Islamic Jihad – both Sunni organisations – on the basis of shared anti-Israel strategic objectives, irrespective of the Sunni-Shia theological divide (Erik Skare, “Iran, Hamas, and Islamic Jihad: A Marriage of Convenience”, European Council on Foreign Relations, 18/12/2023). The IRGC’s regional role is thus best characterised not as a principled counter-jihadist architecture, but as a selectively applied instrument of Iranian geopolitical interest.

[21] With Major General Qasem Soleimani personally coordinating the Iranian-backed Popular Mobilisation Forces. For a deeper dive on the implications of the rise of ISIS in Iran’s immediate neighbourhood for Tehran’s policies in Syria and Iraq, see Dina Esfandiary and Ariane Tabatabai, “Iran’s ISIS Policy”, International Affairs, Vol. 91, Issue 1, 01/2015.

[22] See the CTC Sentinel, “Special Issue”, Vol. 6, Issue 8, 08/2013 and in particular the following article: Karim Sadjadpour, “Iran’s Unwavering Support to Assad’s Syria”, pp. 11-13.

[23] Janatan Sayeh, “Jaish al-Adl Claims Responsibility for Twin Attacks in Iran’s Sistan and Baluchistan”, Long War Journal, 01/10/2024.

[24] UNSC, “Thirty-fifth report of the Analytical Support and Sanctions Monitoring Team submitted pursuant to resolution 2734 (2024) concerning ISIL (Da’esh), Al-Qaida and associated individuals and entities”, S/2025/71, 06/02/2025.

[25] Soufan Center, “Nearing the End of 2025, what is the State of the Islamic State?”, Intelbrief, 19/12/2025.

[26] National Counterterrorism Center, “ISIS-Khorasan (ISIS-K)”, Terrorist Groups, Counter Terrorism Guide, 03/2025. For more information on the development of the terrorist threat in Central Asia, see Brianne Todd, “Assessing the Terror Threat Landscape in South and Central Asia and Examining Opportunities for Cooperation”, statement before the Subcommittee on South and Central Asia, Committee on Foreign Affairs, U.S. House of Representatives, 119th Cong., 26/06/2025.

[27] Jessica Rawnsley, “Nineteen jailed over deadly Moscow concert attack”, BBC, 12/03/2026.

[28] Soufan Center, op. cit.

[29] 20 Iran-backed plots between January 2022 and October 2024 and another 20 between October 2024 and October 2025. Sir Ken McCallum (MI5 Director General), Annual Threat Updates of 8 October 2024 and 16 October 2025.

[30] Europol, “European Union Terrorism Situation and Trend Report (TE-SAT)”, 2024 (pp. 11-14) and 2025 (pp. 23-24) editions.

[31] China imported a record-high 11.6 million barrels per day of crude oil in 2025, including sanctioned crude from Iran and Venezuela. Low oil prices, geopolitical risks, and global oversupply made it strategically advantageous to stockpile Iranian crude as part of China’s energy security strategy, given its heavy reliance on imported oil (over 70% of consumption, 90% seaborne). See Erica Downs, “Where China Gets Its Oil: Crude Imports in 2025 Reveal Stockpiling and Changing Fortunes of Certain Suppliers, Including Those Sanctioned”, Center on Global Energy Policy, Columbia University, SIPA, 29/01/2026. According to China’s General Administration of Customs (GAC), no oil imports have been made from Iran since 2022 – it is generally rebranded as Malaysian. See also Erica Downs, “Implications of the Conflict in the Middle East for China’s Energy Security”, Center on Global Energy Policy, Columbia University, SIPA, 04/03/2026.

[32] US-China Economic and Security Review Commission, “China-Iran Fact Sheet”, 16/03/2026, pp. 4-5.

[33] Ibid., p. 4. See also Austin Ramzy, “Why China Is Doing So Little to Help a Friend under Fire”, Wall Street Journal, 03/03/2026.

[34] International Monetary Fund, “World Economic Outlook”, 04/2026, p. 11.

[35] The term “teapot refineries” refers to independent, smaller-scale Chinese refineries that were historically regional and processed mostly domestic crude oil. In the 2010s, the Chinese government granted them the right to import crude oil, which transformed them into key players in China’s refining sector. Today, teapot refineries play a crucial role in importing sanctioned oil from Iran, Venezuela, and Russia, leveraging their operational flexibility and connections to sanctions-evasion networks while avoiding the stricter geopolitical constraints faced by China’s major state-owned oil companies (such as Sinopec or CNPC – China National Petroleum Company). They rely on sophisticated sanctions-evasion networks involving shadow tankers, ship-to-ship transfers at sea, falsified shipping documentation, and complex financial transactions to obscure the origin of the crude.

[36] The Comprehensive Strategic Partnership agreement signed in Tehran on 27/03/2021.

[37] Mark Cancian and Chris Park, “Iran War Cost Estimate Update”, Center for Strategic and International Studies, 13/03/2026.

[38] Seth G. Jones, “Is the United States prepared for a war with China?”, Center for Strategic Studies, CSIS Brief, 05/2026.

[39] The White House, National Security Strategy of the United States of America 2025, Washington, DC: Executive Office of the President, 04/12/2025, pp. 20 and 23. See also Congressional Research Service (written by Daniel J. Longo), “U.S.-South Korea Alliance: Background and issues for Congress”, Report R48877, 05/03/2026, pp. 14-17.

[40] Javad Heiran-Nia and Hessam Habibi Doroh, “Iran Applies Different Postwar Approaches to the Persian Gulf Arab States”, Stimson Center, 07/05/2026.

[41] Eric Alter, “What Gulf states need in a US-Iran deal”, Atlantic Council, 07/05/2026.

[42] United Nations Security Council, “Resolution 2231”, S/RES/2231, 20/07/2015.

[43] Congressional Research Service (written by Paul Kerr), “Iran”s Nuclear Program and UN Sanctions Reimposition”, Report IF11583, 06/04/2026.

[44] Council Regulation (EU) 2025/1975 of 29 September 2025 amending Regulation (EU) No 267/2012, sectoral measures; Council Implementing Regulation (EU) 2025/1980 of 29 September 2025, reinstating EU autonomous asset-freeze designations; Council Implementing Regulation (EU) 2025/1982 of 29 September 2025, reinstating UN-mandated designations in Annex VIII. All three amend the consolidated framework of Council Council Regulation (EU) 267/2012 of 23 March 2012 concerning restrictive measures against Iran. For a complete overview and timeline, see Council of the European Union, “Iran sanctions snapback: Council reimposes restrictive measures”, press release, 29/09/2025 and Council of the European Union, “Timeline – EU Sanctions against Iran”.

[45] IAEA, “Verification and Monitoring […]”, p. 3, op. cit.

[46] JRC-Karlsruhe (Germany) is an accredited NWAL (IAEA’s Network of Analytical Laboratories (NWAL) for particle analysis) laboratory for particle analysis, see European Commission, “Environmental sample analysis”, Joint Research Center (JRC); JRC-Geel (Belgium) supplies the certified reference materials and interlaboratory comparison programme against which NWAL measurements are calibrated, see IAEA, “The IAEA Safeguards Analytical Laboratories”, Information series, 12-4278/Factsheets/October 2012/E; the EURATOM on-site laboratory at La Hague (France) provides direct measurement capability inside a reprocessing facility, see European Commission, “Operating the Euratom on-site Laboratory”, JRC.

[47] On the consensus rule and membership: Nuclear Suppliers Group, “NSG at a Glance”, Arms Control Association (48 participating governments; all decisions by consensus); Missile Technology Control Regime, “Frequently Asked Questions” (35 partners; informal arrangement; consensus decisions); and Wassenaar Arrangement, “About us” (42 participating states; all Plenary decisions by consensus). On the binding character of European votes in past supply-architecture decisions, see the 2008 NSG waiver for India, in which consensus (admittedly, under US pressure) had to be actively secured from several European holdouts; for analysis, see Mark Hibbs, “Will India and Pakistan Ever Join the Nuclear Suppliers Group?”, Arms Control Today, 11/2024.

[48] The euro is the dominant non-dollar settlement currency, and euro-clearing runs through eurozone infrastructure (notably TARGET2, operated by the Eurosystem) under European regulatory supervision. The INSTEX experience (2019-2023) demonstrated that formal sanctions relief produces no economic effect if European banks decline to process transactions: sustained European banking cooperation is therefore a separate political decision from sanctions removal. See Jack Percival, “The INSTEX project: why did Europe’s ambitious financial vehicle fail, and what next?”, Foreign Affairs Review.

[49] Regulation (EU) 2021/821, 20/05/2021, establishing a Union regime for the control of exports, brokering, technical assistance, transit, and transfer of dual-use items.

[50] Launched by the People’s Bank of China in 2015, CIPS connected 1,683 financial institutions across the globe by May 2025 (with the majority being indirect participants) and processed an annual transaction volume of approximately 175,49 trillion yuan ($24,45 trillion), a 43% year-over-year increase. Daily transaction volume rose to approximately $134 billion in March 2026 – which is not to be read as proof of Iranian oil payments solely, but rather as a sign of broader growth. The system remains nonetheless, for the moment, a “dollar bypass” rather than a substitute at scale: yuan’s share of global SWIFT payments stood at 3% in February 2026, against 24% for the euro and 48% for the dollar. For more information, see Alisha Chhangani, “Inside Tehran’s toll booth”, Atlantic Council, 02/04/2026; see also Joe Baker, “Is China’s cross-border payments network on the rise?”, FXC Intelligence, 04/07/2025.

[51] The EU and its Member states, UK, Japan, South Korea, India, Türkiye, the Gulf states.

[52] In July 2017, Total SA (renamed TotalEnergies in 2021) signed a $4.8 billion contract with NIOC (National Iranian Oil Company) and CNPC to develop South Pars Phase 11 (Total 50.1% as operator, CNPC 30%, Petropars 19.9% as subsidiary of NIOC). Total withdrew in August 2018 following the US reimposition of secondary sanctions; NIOC reassigned the operatorship to CNPC in November 2018, but CNPC withdrew on 6 October 2019 without delivering meaningful development. Petropars became sole developer. The episode is the clearest documented test case of Chinese substitution for a European international oil major in Iranian energy development; the substitution was attempted and abandoned, primarily reflecting Chinese reluctance to defy US secondary sanctions.

[53] The United Kingdom, Germany, Poland, the Netherlands, Belgium, Greece, Sweden, and Denmark.

[54] Élysée, “Discours du Président de la République sur la dissuasion nucléaire de la France”, Île Longue, 02/03/2026; see also Héloïse Fayet, “France has a new nuclear doctrine of ‘forward deterrence’ for Europe. What does it mean?”, Bulletin of the Atomic Scientists, 05/03/2026.

[55] Hereby recognising that the unanimity requirement of EU foreign and security policy is incompatible with the operational tempo of the post-war moment.

[56] Élysée, “Strait of Hormuz maritime navigation initiative”, 17/04/2026; “France-UK joint statement on the Strait of Hormuz”, 17/04/2026.

[57] Élysée and Hellenic Republic Prime Minister’s Office, joint communiqué, Athens, 25 April 2026; on Macron’s elevation of Article 42.7 TEU, see “Mitsotakis-Macron reinforce mutual defense pact as ‘reinforced concrete’ commitment”, Athens Times, 26/04/2026. On the legal architecture itself, see EEAS, “Article 42(7) TEU – The EU’s mutual assistance clause”, 06/10/2022. Of note is also the 2021 Franco-Greek Strategic Partnership on Defence and Security Cooperation which was, at the time of signature, the first bilateral mutual defence pact between two NATO members; Article 2 commits the parties to mutual military assistance “by the use of armed force” in the event of armed aggression, pursuant to Article 51 of the UN Charter – a commitment legally separate from and additional to both NATO Article 5 and Article 42.7 TEU. For a deeper dive, see Bruno Tertrais, “Reassurance and Deterrence in the Mediterranean: the Franco-Greek Defense Deal”, Institut Montaigne, 17/11/2021.

The policy brief argues that Greece should re-establish a substantial bilateral development aid programme, as its current contribution remains particularly low compared both to its international commitments and to pre-crisis levels. Development aid is not only as an act of solidarity, but also an instrument of foreign policy, security, and public diplomacy.

• Greek official development assistance remains very low (0.14% of Gross National Income in 2024), far below the country’s international commitments.
• The crises in Ukraine, Gaza, and Sudan require increased humanitarian assistance and reconstruction support.
• Development aid is an instrument of foreign policy, security, and public diplomacy. It is an investment in stability and international credibility. If Greece wishes to play a role in its broader geopolitical region and participate actively in major European Union initiatives, like the Global Gateway, it must develop a bilateral aid programme.

Read here (in Greek) the Policy brief by Asteris Huliaras, Professor, Department of Political Science and International Relations, University of the Peloponnese; Member of the Advisory Board of ELIAMEP.

The policy brief authored by Dr. Ana Krstinovska, Senior Research Fellow, think nea – New Narratives of EU Integration & Research Fellow, Wider Europe Programme, ELIAMEP titled: “From Raw Ores to Strategic Autonomy: The Western Balkans in Europe’s Critical Raw Materials Strategy”, is an expansion of the finding of the thematic report “Raw Materials for a Resilient Europe: The EU’s Strategic Partnership with the Western Balkans” (authored by Dr. A. Krstinovska and Dr. A. Wolf) and it examines the strategic importance of the Western Balkans for Europe’s critical raw materials security and industrial resilience. The brief is part of think nea – New Narratives of EU Integration, an initiative implemented by the Hellenic Foundation for European & Foreign Policy (ELIAMEP) and supported by the Open Society Foundations – Western Balkans.

Against the backdrop of the EU Critical Raw Materials Act (CRMA) and growing geopolitical competition over access to strategic resources, the brief analyses how the Western Balkans have emerged as a significant, yet underutilized, component of Europe’s raw materials ecosystem. It highlights the region’s deposits of copper, lithium, aluminium, nickel, antimony, and rare earth elements, while examining the geopolitical and economic implications of existing extraction and trade patterns.

The analysis demonstrates how current value chains often channel raw ores and concentrates from the Western Balkans towards China, while processed goods flow to EU markets, reinforcing Europe’s strategic vulnerabilities and limiting regional industrial development. The paper also explores the growing role of non-EU actors in the region’s extractive industries, the lack of local refining and processing capacities, and the governance, environmental, and social challenges associated with major mining projects.

Drawing on these findings, the brief argues that the EU should move beyond a narrowly extractive approach and embed raw materials cooperation within the enlargement process itself. It proposes a strategy centred on value-chain upgrading, regional industrial integration, investment in processing and recycling capacities, updated geological mapping, and stronger governance conditionality linked to EU accession chapters.

The paper concludes that the Western Balkans can contribute substantially to Europe’s strategic autonomy if integrated into EU industrial and regulatory frameworks in a credible and sustainable manner. In this sense, the brief presents raw materials cooperation not only as an economic necessity, but also as a geopolitical and enlargement opportunity capable of strengthening both European resilience and the EU accession perspective of the region.

You can read the policy brief here.

Ino Afentouli, Senior Policy Advisor; Head of the Observatory of Geopolitics and Diplomacy, ELIAMEP

The Xi–Trump summit brings together two vastly different personalities who serve as the primary architects of their countries’ strategic policies. The first, a scion of the Party elite, embodies the Chinese perception of the ‘Middle Kingdom’—of China as the realm between heaven and earth. In this view, China does not need to keep pace with time; instead, time is seen as an asset that works in its favour. Trump, by contrast, is operating on a far more constrained timeline, with only two years remaining of his presidency. His penchant for taking decisions on his own often leads to choices detrimental to his country’s interests, as evidenced by the course of the war in Iran. There can be no doubt that the Chinese leadership has taken note of the mistakes the US has made in its handling of the crisis.

Trump’s personality makes it more likely that the US, rather than China, will fall into the so-called Thucydides Trap. As an ascending power, and true to its strategic tradition of defeating an opponent without engaging in battle, China has the luxury of patience. This is something Trump’s America lacks. The US has to preserve the hegemony it has constructed over eight decades, underpinned by its strategic partnerships across Europe and Asia. But Trump is allergic to alliances; under his presidency, the US risks forfeiting the strategic added value that has enabled American primacy in both continents.

China’s approach to establishing spheres of influence, not only within its own periphery but also on a broader international scale, will be crucial to the emerging balance of power. Chinese strategy over recent decades has prioritized economic penetration as a primary vehicle for exerting political influence. During his 15 years in power, Xi has combined economic power with military might. Huge investments have been made in the armed forces; furthermore, the recent purges—which effectively decapitated virtually the entire military high command—underscore that establishing military primacy remains among his highest strategic priorities. Will this primacy be projected defensively or offensively? The answer to this question will determine the global equilibrium in the years ahead. Xi could exploit the vulnerabilities in Trump’s character, manoeuvring him towards Thucydides’ trap. Possessing strategic patience, Xi is capable of ensnaring Trump in the logic of war through actions that do not jeopardize China’s own security. In this light, the debacle in Iran assumes far greater proportions for the US than a mere military failure. One can only hope the Chinese leader does not pursue such a course while Trump is in office.

Eleni Ekmetsioglou, Non-Resident Fellow, ELIAMEP; Senior Fellow, British American Security Information Council (BASIC)

The Xi-Trump meeting happens at a very unfavorable moment for the US. As many analysts have argued, with the US trapped in the Middle East, China seems to have the upper hand on most of the agenda items. Whereas tariffs, technology and probably Taiwan will dominate the discussions, it  might, nevertheless, be the right moment for the US to try and press on other -equally important and highly consequential- issues such as nuclear risk reduction measures. Given that US pundits and official intelligence reports make ominous speculations about the future trajectory of China’s nuclear arsenal, it is in US interests to push for an institutionalized track 1 dialogue for both parties to work towards a better mutual understanding on nuclear issues that might lead to tangible risk reduction measures such as the establishment of a formal missile launch notification regime, for instance. With the quantitative increase in China’s nuclear arsenal, the US has been feeling that its current nuclear modernization might not be fit for purpose in a world with two peer competitors, Russia and China. After the expiration of the New Start treaty last February, the US is not bound by restrictions over the numbers of its deployed warheads. With both countries investing in their nuclear arsenals for quantitative and qualitative improvements, the nuclear component inevitably plays a bigger role in the relationship creating a dangerous dynamic where even a minor crisis between the two powers will have the potential of turning into a nuclear crisis with unprecedented consequences for the region and the whole planet. The Biden administration scored a major success when the two parties agreed to always include a human in the loop for nuclear decision making. AI and nuclear command and control was the low hanging fruit for the Biden administration but it could mark a great starting point towards a more diverse dialogue on precise risk reduction measures in order to  boost crisis stability between the two countries. Hopefully, the Trump administration will be prepared to press Xi on this deeply consequential aspect of the bilateral relationship and continue the positive trend that the Biden administration kicked off in San Francisco back in 2023. 

George Tzogopoulos, Senior Research Fellow, ELIAMEP; European Institute of Nice, Centre international de formation européenne (CIFE)

Understanding China remains an extremely complex undertaking in the West. For instance, while US think tanks and media assess that President Trump will not hold the upper hand in his meeting with Chinese President Xi Jinping, Beijing does not operate within this Western paradigm. From a Chinese perspective, it matters little where the White House is occupied by Donald Trump, Joe Biden or anyone else. The web of Sino-American relations is so intricate that a single summit—regardless of its gravity—cannot be expected to yield a definitive breakthrough. China predicates its success on its own strategic choices, negotiating only to secure a measure of relative stability in its relations with Washington. While stability serves the interests of both nations, the path forward is arduous—a reality consistent with historical precedent. Although Sino-American competition is set to intensify, it remains within the power of both states to mitigate the risk of catastrophic consequences. The United States will remain the sole superpower, yet China—as the world’s second-largest economy—will command an amplified voice in global economic and geopolitical affairs. It is this very dynamic that is causing tremors in the international system, as the United States is forced to adapt to a reality far removed from the unipolar era it enjoyed for two decades following the Cold War.

Dimitris Tsarouhas, Senior Research Fellow, ELIAMEP; Professor, Center for European and Transatlantic Studies (CEUTS) at Virginia Tech

Measured tones and muted expectations

In a normal political and economic climate, a meeting between a US President and his Chinese counterpart would be front-page news here in Washington, sparking a deluge of analysis aimed at gauging Beijing’s intentions. However, the current climate is anything but normal—at least for Donald Trump.

With inflation hitting 3.8%, its highest level in nearly three years, the gap between the President’s campaign promises and the economic reality has reignited public frustration with the administration’s fiscal direction. Pledges to shield Americans from an unstable global environment are being belied on the ground. Not only is the US embroiled in yet another conflict in the Middle East at great economic and political cost, the administration’s tariff regime—aimed largely at Chinese imports—is also faltering amidst judicial scrutiny and bureaucratic deadlock.

Against this backdrop, the shift since their last October 2025 summit could not be clearer: it is now President Xi who holds the stronger hand (to echo Trump’s infamous remark to his Ukrainian counterpart). Even as the US is being forced into a de facto capitulation in its undeclared—yet very real—trade war with China, Beijing continues to dictate the terms of the broader geopolitical game. It does so by imposing unilateral export restrictions on its rare earth minerals and by bolstering the Russian war machine on the Ukrainian front. And while the blockade of the Strait of Hormuz undoubtedly burdens the Chinese economy as well, officials in Beijing remain optimistic. They anticipate that their recurring tactic—promising multi-billion-dollar commodity purchases—will appease President Trump and pave the way for ‘constructive’ talks. In practice, this means negotiations that bypass the core of Chinese ambitions: namely, the status of Taiwan and the subjugation of neighbouring states’ rights in the South China Sea, where Beijing continues to assert a unilateral right of intervention. Against this backdrop, Washington harbours few illusions regarding the outcome of this meeting—and rightfully so.

Turkey–Iran relations are generally characterized as managed rivalry. After the October 2023 Hamas attack and Israel’s war on Gaza, the region had entered a new era of escalating conflicts and Iran’s network of proxies has been significantly weakened. In February 2026, the US and Israel waged war on Iran, which in turn prompted Iran’s attack on the Gulf countries. The new era of conflict had evolved into an era of war. This paper explores the pressures for change emanating from the global and regional levels on this managed rivalry. With that purpose, the paper first maps out the different dimensions of the bilateral relations, noting the resilient and challenging aspects. Then, the paper looks at developments over the last two years at the global and regional level and how they impacted both bilateral relations and the two countries’ positioning within their regions—the Middle East mostly, but also South Caucasus. Finally, the paper assesses the potentials and limits of managed rivalry and Turkey’s statecraft by identifying stress tests that lie ahead under war and post-conflict conditions. Turkey’s economic statecraft toward Iran, as well as increased geopolitical rivalry, reveal the conditions under which middle-power geoeconomic and diplomatic tools hit a ceiling, demonstrating that middle-power economic statecraft operates within, not outside, the structures set by global politics and regional security dynamics.

Read here in pdf the Working paper by Dr Derya Göçer, Associate Professor, Middle East Technical University, Area Studies Programme.

Introduction

The Gaza war 2023 and the fall of the Assad regime in 2024 opened a new era of increased conflict in Middle Eastern regional politics. Israel’s attacks on Iran’s proxies—Hamas and Hezbollah—as well as Iran itself; Houthi attack on maritime trade in the Red Sea; Druze and Kurds fighting Damascus forces in Syria on different occasions, as well as violence against Alawites in the coastal regions; UAE-backed separatist forces rapidly seizing most of southern Yemen, provoking Saudi airstrikes and forcing the UAE to withdraw its military personnel in 2025 are a few episodes from this era of conflict. This momentum, centred around increased Israeli aggression in the region and friction with Iran’s proxies, culminated first in the June 2025 attacks on Iran, which were joined by the US. In February 2026, the US president, together with Israel, declared ‘special combat operations’ on Iran to eliminate any nuclear threat, destroy the country’s ballistic missile programme and bring about regime-change in Iran.

This new era in the region coincides with the weakening of the norms-based international order and the growing resort to armed force at the global level. There is an ongoing debate over whether there is a transition to a new order at both the regional and international levels, or whether they constitute a rupture whose aftermath cannot yet be foreseen. In either case, the depth and scale of the changes are undeniable, and with change on this scale comes stress tests for seemingly resilient relationships in the region. Turkey–Iran relations are generally regarded as just a such resilient relationship—one fraught with tensions which do not escalate into confrontation, and with some degree of cooperation in important domains, such as energy.

Türkiye-Iran relations are generally framed as a managed rivalry: both are pragmatic and cautious, eager to contain each other’s regional activism, yet insistent on avoiding confrontation with each other. Historical episodes are transformed into myths in support of both these rivalry (Ottoman-Safavid wars, WWI attacks) and management (long-standing border agreements) elements. This paper explores whether this relationship can withstand the pressures of change and war emanating from the global and regional levels. Answering this question requires an examination of the existing dimensions of the bilateral relationship, along with both states’ positioning within the new regional and global politics; only then can we identify the actual and potential stress tests those dimensions will need to withstand.

The core argument of this paper is as follows: Turkey–Iran bilateral relations are, in essence, a managed rivalry with increasingly intensifying limitations. In recent years, Turkey has increased the potency of its diplomatic and economic statecraft across the region, achieving a deepening of its relationship with Iraq and normalization with key Arab states. Iran, by contrast, has weakened in terms of both regional influence and domestic stability; as of March 2026, it is also weakened in terms of both military capabilities and civilian infrastructure (logistics, industrial, health and energy sectors). However, Iran is not necessarily defeated and has demonstrated significant strategic leverage over both the Gulf region and the world economy and global connectivity. It is not yet certain when—or how—the 2026 war will end, but if Iran comes out of the war with sanctions lifted and the Strait of Hormuz under its partial control, there might be path ahead for reconstruction. Bilateral relations in the 2020s exhibit a structural ceiling which has constrained Turkey’s statecraft—a ceiling whose principal sources are the international sanctions regime and the stances of the United States and Israel towards Iran. Although both Ankara and Tehran demonstrate a commitment to preserving the bilateral relationship, the “maximum pressures” cascading from the global level, coupled with the fluidity of the regional environment, are testing that commitment in unprecedented ways.

Dimensions of Turkey–Iran Bilateral Relations in the 21st Century

The Border

The Turkey–Iran border is one of the oldest settled boundaries in the Middle East. It is also the first dimension of what scholars have called a managed rivalry. The origins of this stability are conventionally traced to the Kasr-i Shirin Agreement of 1639 between the Ottomans and Safavid Iran. Four centuries of interaction across this frontier, which at times endured conflict, occupation and turmoil in the life of frontier communities, culminated in the finalization of the boundary during the First World War, with the final treaty settling all remaining disputes signed in 1937. As Turkey’s Ministry of Foreign Affairs puts it: “Iran is an important neighbour with whom we share a 560 km border that has remained unchanged for nearly 400 years.” This is Turkey’s second longest land border, after the Syrian border. In a region marked by civil wars, external interventions and territorial disintegration, the durability of this border has been a focal point of current bilateral affairs. Despite high volumes of irregular migrant crossings facilitated by smuggling networks, neither side has allowed border disputes to destabilize the relationship. The narrative of an unchanging boundary, though a myth, has itself become a political resource, repeatedly invoked by both states to affirm the mutual recognition on which their modern statehood rests.

Yet the length of this border, with its many potential crossing points, is also a shared vulnerability. Turkey in particular fears mass migration in a prolonged war scenario on its eastern flank. The start of the war prompted the suspension of day trips to Turkey. Even in the absence of armed conflict, irregular migration through this border, especially by Afghan nationals, is deeply intertwined with Turkey’s domestic politics. The issue has become especially salient in the context of rising secular nationalist politics, where an anti-migration agenda has gained significant traction. It is also a topic addressed in bilateral discussions during official visits. As Foreign Minister Fidan acknowledged, the two countries “have fallen somewhat behind on connectivity, transport and logistics,” noting the need to increase the number of border crossings and improve their efficiency, while also addressing joint efforts to combat irregular migration originating from Afghanistan. So, while the border is a point of strength in peaceful times, it may turn out to be a crucial vulnerability during times of war and in a post-conflict economic crisis. It is also a dimension amenable to further improvement via greater control over the border and by increasing border crossings to facilitate the flow of goods and people in times of peace. The depth of the border as a problem will be partially determined by the length of the 2026 war and the destruction it causes. As of April 2026, number of border crossings have not risen to alarming levels.

Pragmatism

The restraint that Turkey and Iran have shown towards one another, particularly at moments of domestic, regional and global crisis, constitutes the second dimension of the bilateral relationship. Scholars have framed this restraint in different ways: as “compartmentalization”, as “managed rivalry”, or as a product of contending but coexisting “strategic depths” (Şen 2024). What all these framings share is an emphasis on pragmatism. Turkey and Iran’s foreign policy establishments have consistently demonstrated the ability to prevent tensions in one domain, such as opposing positions in the Syrian civil war, from spilling over into another, such as energy relations. The success of the management part of this relationship can be best observed in economic relations. Table 1 shows the bilateral trade over the last four years, with Turkish exports remaining at around the same value while Iranian exports, have been reduced somewhat. That reduction has improved the asymmetry in trade relations, with the trade balance favouring Turkey since 2023.

Table 1: Turkey–Iran Bilateral Trade, 2022–2025 (USD billions)

2022 2023 2024 2025* Turkey’s exports to Iran 3.07 3.31 3.23 2.80 Turkey’s imports from Iran 3.35 2.18 2.45 2.30 Total trade volume 6.42 5.49 5.68 5.10 Trade balance –0.28 +1.13 +0.78 +0.50

Source: Turkish Statistical Institute (TurkStat). *2025 figures cover January–November.

Despite a lack of progress in trade volumes, the Turkish business community insisted on keeping its options open regarding investment and trade with Iran. This trend continued even under structural constraints that will be detailed in the next section. Both Turkey’s Ministry of Trade and the Presidential Office supported this push, arguing that two major regional powers should cooperate more closely with regard to investment, trade, construction and tourism—these being the four factors that are always underlined in official speeches during visits and at forums. Erdoğan himself declared in 2024, at the Joint Business Forum convened in Ankara, that, despite the sanctions, both governments intended to proceed with deepening economic relations, since Ankara did not adhere to the principle of unilateral sanctions. This bore some results, including an increase in product diversity (from 700 to 1,383 items), but was not consequential overall. Iran supplies energy, Turkey supplies manufactured goods; there has been little structural deepening, and the main asymmetry remains, whereby exports to Turkey are important for Iran, but Iran ranks low among Turkey’s export destinations.

There is one bilateral factor that impacts economic relations as negatively at both global and regional levels, if not as structurally, and that is the prominence of the Islamic Revolutionary Guards Corps (IRGC) in the Iranian economy, and how that can sometimes impede economic relations. In the mid-2000s, two major Turkish investment bids in Iran—TAV’s contract to operate Imam Khomeini International Airport (IKA) and Turkcell’s licence to become Iran’s first private mobile operator—were derailed by conservative forces within the Iranian system. Most dramatically, in May 2004, the IRGC physically seized IKA just hours after it opened to air traffic, deploying vehicles on the runways and diverting an incoming passenger jet with a fighter escort on the pretext that TAV’s Turkish partners had links to Israel. Akdevelioğlu argues that the primary driver was not anti-Turkish sentiment but rather the intra-regime struggle between Reformists favouring economic liberalisation and Conservatives—with the IRGC at their core—defending Iran’s state-capitalist model and their own commercial interests, given that an IRGC-affiliated consortium had lost the airport bid to TAV. This episode is an example of national level factors preventing the deepening of economic relations.

Three forthcoming developments will serve as stress tests for the durability of bilateral economic ties and the political will underpinning them. The first is the renewal of the Iran–Turkey gas deal, which is due in 2026. In 2024, Iranian and Russian gas constituted 20 % and 45 % respectively of Turkey’s long-term contract imports. Turkey has already started its pivot to LNG purchases from US companies, with reduced Russian imports. Whether Turkey opts to renew, renegotiate, or allow the Iranian contract to lapse will reveal much about the limits of Ankara’s realignment with Washington, both globally and in the Middle East and South Caucasus. Energy agreements, alongside trade frameworks, remain among the most deliberately managed components of the bilateral rivalry.

The second test concerns the future of proclaimed agreements, most notably the Maku Free Trade Zone on Iran’s northwestern border. First discussed in 2014 at the Turkey–Iran Economic Commission following the signing of the Preferential Trade Agreement, the Maku MoU was only finalized a decade later, in January 2024, during Raisi’s visit to Ankara—one of ten agreements signed on that occasion. In principle, a functioning cross-border free zone would boost bilateral connectivity and position both countries along the China–Europe transit corridor. In practice, progress has been so incremental as to resemble a declaration of intent rather than an actionable programme: Iranian officials themselves have acknowledged the slow pace, urging their own stakeholders to accelerate implementation. The project exemplifies a broader pattern: genuine economic complementarity that cannot be realised under the weight of prevailing global and regional constraints. These constraints have now been intensified immensely by the war, and will remain so during any immediate ceasefire period.

Connectivity corridor competition represents the third stress test for the geoeconomics of the Turkey–Iran rivalry. Whether it will be a zero-sum game will depend on how well the rivalry is managed, and whether there is stability in the Middle East and South Caucasus. Turkey is pursuing multiple routes to position itself as a transit hub: the Development Road Project linking Basra to Europe via Turkey, the Middle Corridor across the Caspian, which is attracting growing but still modest EU investment, and the US-backed TRIPP route through Armenia. Iran, for its part, is anchoring its connectivity ambitions in the International North–South Transport Corridor (INSTC)—a 7,200-kilometre route that is approximately 75 % complete and saw freight volumes rise 19 % in 2024. However, the constant postponement of the completion of the Rasht–Astara railway segment has led China to route shipments via the Trans-Caspian instead. Tehran is also pursuing the Shalamcheh–Basra railway link to Iraq. In addition, in the wake of the June 2025 war, an Iranian company has proposed a full share acquisition of the Russian Astrakhan port to secure its northern corridor access. Notably, both countries find themselves excluded from the India–Middle East–Europe Economic Corridor (IMEC), which was stalled by the Gaza war and the June 2025 Israel–Iran conflict, but has shown signs of revival following the Trump–Modi announcement in February 2025 and the EU–India FTA agreed in January 2026. Iran’s Chamber of Commerce has publicly acknowledged that the country has been “practically ignored” in major connectivity initiatives in recognition of the fact that sanctions and geopolitical isolation are eroding Iran’s transit relevance with regards to new infrastructural investment. Turkey’s corridor portfolio is broader and has attracted more international backing, but its constituent corridors each face significant implementation risks, ranging from Iraqi political fragmentation to unresolved regional conflicts. Crucially, the two countries’ networks are not inherently incompatible: both share an interest in border infrastructure that could complement rather than undercut their respective corridor strategies, provided the political will exists to coordinate rather than compete.

The war on Iran, and Iran using the Strait of Hormoz as leverage in its retaliation against US and Israel attacks, has only increased the importance of the issue of corridors for Turkey, Iran and the regional and global economy. Turkey’s proposed corridors—the Development Road and Middle Corridor—have gained traction. Yet, if the war spills over to Iraq, and even to the Caspian Sea, no regional corridor is totally safe for trade transit. Additionally, the Development Road was going to be financed by Qatar and the UAE, two GCC countries which will need to rebuild their own infrastructure and revitalize their economies, both of which have been severely damaged in the war. So, while in principle all of Turkey’s alternative corridors have gained in prominence, their financing will need to be rethought. Multilateral Development Banks such as AIIB and EBRD constitute a large financial pool of institutions capable of doing so, but hostilities would need to end for them to invest.

Maximum Pressure and an Increasingly Fluid Region

The third dimension of Turkey–Iran relations is the consistent influence of global-level developments on bilateral economic and political relations and on managed rivalry dynamics in the region. Such developments, including the recent Iran war, increase and intensify the rivalry. Some argue that nature of the change at other levels has augmented this influence: what was once a largely compartmentalized rivalry, in which competition in one arena did not necessarily spill over into another, has transformed into a multilayered and interconnected contest spanning the Middle East and the South Caucasus (Azizi 2025). In the 2020s, global- and regional-level developments interacted in such a way as to intensify the rivalry.

Globally

At the global level, as we witnessed with Iran’s recent firing of missiles at Turkey, Turkey’s anchors in NATO and its bilateral relations with the US are the primary frame within which Turkey and Iran managed their relationship. These anchors translate to Turkey complying with the sanctions regime enforced by EU, and most notably US, actors in peace time. Turkey does so with some frictions. The maximum pressure campaigns of the first and second term Trump administrations, and increased military pressure in 2025 and early 2026, highlight this issue further. NATO air defence systems dealt with the missiles that Turkey declared to have come from Iran’s territory but Iran denied firing, arguing that this was provocation by third parties. Turkey and Iran managed this military tension in a manner consistent with the managed rivalry approach, but it was a test that will weigh on the future of their relationship.

Russia’s preoccupation with its war against Ukraine and withdrawal from Syria is another global-level development that has affected Turkey–Iran relations. Iran’s Shahed drones were used by Russia in the Ukraine conflict, while Turkey supplied military assistance to Ukraine, creating a proxy military tension. Ukraine’s new military deals with GCC countries to counter Iran’s attacks highlight the regionalization of this global tension.

Turkey’s compliance with the Western sanctions has had a direct and measurable impact on bilateral Iran-Turkey economic relations. Şen provides a detailed account of how successive rounds of sanctions have constrained mutual investment and trade, narrowing the scope of bilateral commerce to a handful of exempted sectors such as food, agricultural products, and medical supplies. The 2018 US withdrawal from the JCPOA triggered a sharp contraction in Turkey–Iran trade, which fell by nearly half within a single year. The Halkbank prosecution further disciplined Turkish actors, with business associations explicitly committing to operating within the boundaries of international sanctions.

Turkey’s sanctions compliance is not a single isolated issue; rather, it is part of the two actors’ global positioning, whereby Turkey is still comfortable following US visions for the regions while simultaneously seeking to increase its strategic autonomy and revise the international order through narratives such as “the world is bigger than five”. The main point of contention between Turkey and the US was the latter’s support in Syria for the SDF, which Turkey viewed as a threat to its national security. This tension has mostly resolved in this new era, especially since the fall of Asad and in parallel with domestic processes including the domestic reset vis-à-vis the Kurdish issue. Turkey is also adamant about finding itself a place in the Gulf-based regional order.

After some very turbulent years in its engagement with the Middle East regions, Turkey has entered a phase of normalization with Arab states in the region, most notably Saudi Arabia, the UAE and Egypt. This normalization period underlines the coming together of geopolitics and geoeconomics in Turkey’s statecraft vis-à-vis the region and the opportunities it creates. In the 2020s, Turkey has also substantially increased its political, security and economic footprint in Iraq through bilateral agreements and regular joint permanent committee meetings. In addition, 2025 saw the signing of a water deal—a crucial component in regional politics in an age of water scarcity. In 2024, the Development Road Project also made headway, with Qatar and UAE also co-signing the project together with Turkey and Iraq. Turkey also seems to be quelling most of its security concerns in Syria. The 29 January 2026 deal between Damascus and the SDF seems to be a step in the right direction for Turkey in terms of post-conflict settlements in Syria. Through these bilateral—and, in the case of the Development Road Project, quadrilateral—agreements, Turkey has developed a distinctive model of middle-power economic statecraft (whose features include the capacity to align state institutions, capital groups, and infrastructure investment toward strategic ends) which is most fully demonstrated in Turkey–Iraq relations. This statecraft facilitated Turkey’s deepening of relations with Saudi Arabia in particular, and also multilateral ventures such as the recent discussions on Pakistan–Saudi Arabia–Turkey defence cooperation.

In contrast to Turkey’s realignment with the US and normalization with the Arab states, Iran objects to the US presence in the region and has been a revisionist actor in terms of the international order. At the regional level, Iran had embarked on a diplomatic and economic rapprochement with Saudi Arabia and the larger Gulf region. If the Gaza war had not brought this rapprochement to a halt, there could perhaps have been a deepening of relations, but any relational depth is now prevented by the larger existential threats confronting Iran. It can thus be seen that Turkey and Iran both attempted normalizations, but with diverging outcomes.

The 28 February US and Israeli attack on Iran and Iran’s retaliatory attacks on GCC countries, of which the heaviest hit was the UAE, changed the normalization dynamics between Iran and the Gulf countries, most notably the UAE and to some extent Saudi Arabia. Qatar and Oman are attempting a more neutral approach in the conflict. Turkey’s normalization path brought it ever closer to Saudi Arabia, as explained above, and the recent Iran war has intensified Iran and Turkey’s divergence vis-à-vis the Gulf countries. Turkey has participated in joint declarations and meetings in Saudi Arabia, with Minister of Foreign Affairs Hakan Fidan being vocal and active in regional de-escalation efforts. Here de-escalation is a large and ambiguous agenda item, as the post-conflict positions of various Gulf countries and Turkey vis-à-vis Iran will diverge.

Overall, the two countries’ global and regional positioning are divergent and there are structural constraints imposed by the global level. Together, these two trends have served to intensify the managed rivalry, making its management more of a challenge.

Regional intensification of rivalry

The 2003 Iraq war and 2011 Arab Uprisings had the effect of extending Iran’s network in the region, especially in Iraq and Syria. This expansion increased the threat perception of Iran among policy makers in Turkey, and even more so in GCC countries such as Saudi Arabia. It also increased bilateral rivalry, as the two states positioned themselves on opposing sides in the Syrian civil war. The 2020s brought new regional challenges that intensified this rivalry. In that regard, what Şen argues with regard to the 2010s is equally valid for the 2020s: ‘‘The Turkish–Iranian rivalry intensified as states in their vicinity—Syria and Iraq—got weaker and more penetrable with institutional, political, and territorial fragmentation.’’ In that regard, both the fall of Assad in 2024 in Syria, which bolstered Turkey’s influence in Syrian affairs, and the current governmental transition in Iraq, which is to be finalized in 2026, are current developments that will test the delicate management of this rivalry. When Iran had to withdraw from Syria, it rendered its influence over Iraq even more crucial for its survival. Turkey’s own dual-track relations with the KRG and Baghdad, along with Ankara’s realignment with the US over Syria and Iraq, has been simultaneous with Iran weakening in Syria and attempting to retain its influence in Iraq. As a result, issues such as the future of the PMF in Iraq or the new Iraqi president cease to simply be Iraqi domestic issues and become issues of rivalry between Turkey and Iraq. This is especially true given increased US pressure to eliminate Maliki’s presidential candidacy and Iranian elements from Iraq. That Turkey has sought to support the attempts to disarm PMF and establish communications with them are evidence both of that rivalry and of Turkey’s managing of it.

However, Israel’s increased military aggression in the region, including the unprecedented attack on Qatar, a US ally, in 2025 as well as the 2026 attack on Iran, is another regional-level development that has reshaped bilateral and regional affairs, leaving Iran weakened military, but perhaps emboldened strategically. While it has an immediate defence need against Iran, Israel’s posturing in the region creates a need for balancing. Israel has emerged as a shared but asymmetric threat for Iran the most but also Turkey and even less so some Gulf countries such as Oman and Qatar. In that regard, Turkey has attempted to play a role it persistently pursues: that of a mediator between US and Iran in collaboration with Arab counterparts, especially Qatar, Oman and Saudi Arabia. Turkey explicitly opposed the US military action against Iran. In January 2026, when the widespread protests in Iran were being suppressed in a bloody military crackdown, Fidan stated: “We are against a military intervention against Iran. Iran needs to solve its authentic internal problems on its own”. Erdoğan was also vocal, calling Iranians their brothers: ‘‘By prioritizing dialogue and diplomacy, we believe our Iranian brothers will overcome this trap-filled period.” Tensions with Israel also surfaced in statements over Turkey’s positioning towards Iran: AKP spokesperson Çelik explicitly named Israel as instrumentalizing protests. Following several bilateral meetings and consultations with the US, Turkey proposed Istanbul as the venue for US-Iran talks; however, the talks shifted to Oman at Iran’s insistence. This insistence underlines the presence of rivalry and mistrust in bilateral relations, and both states’ intolerance towards increased activism on the part of the other. In April 2026, the ceasefire negotiations were mediated by Pakistan; although they were supported by Turkey, it is another instance of the limits of the managed rivalry approach.

The bilateral meetings between Iran and Turkey through January 2026 were presented by Turkey as an attempt to prevent regional destabilization. War on Turkey’s eastern border may trigger refugee flows; the collapse of the Iranian state would create a vacuum with consequences far worse than managed rivalry. By attempting to mediate, Turkey has increased its geopolitical capital as a mediator and is potentially protecting its economic interests (gas contract, trade, exposure to secondary sanctions) in the near future, should the tensions ease. The January 2026 negotiations and March 2026 de-escalation diplomacy were the diplomatic track of Turkey’s revised statecraft towards the Middle East and were in alignment with the managed rivalry approach. Turkey did gain from the normalization with the region achieved by its economic and diplomatic statecraft over the last five years. However, a prolonged and broad US attack on Iran jeopardizes bilateral relations and border security, and affects those achievements in the region negatively. Turkey’s approach to the region hinges on a relative absence of conflict and on the security of larger borders, infrastructure, trade routes and investment platforms. A region that is continuously being intervened in militarily by great powers and having to allocate funds to reconstruction is not conducive to such statecraft. The war rendered the delicate balance that Turkey needs to perform between the US, the Gulf countries and Iran even more difficult, but not impossible.

Conclusion: Turkey’s Statecraft

Turkey–Iran relations, despite several achievements in the 21st century, have exposed the limits of Turkey’s revised statecraft towards, and engagements with, the Middle East. The geoeconomic tools that Turkey deploys effectively in Iraq, but also with Qatar and Saudia Arabia (trade-led investment penetration, construction sector expansion, corridor development, defence sector deals, institutional committee structures) are structurally constrained in the Iranian case. The constraints do not originate primarily at the bilateral level, where more potential for economic complementarity exists and the Turkish side has shown itself willing; rather, the constraints mostly originate from the global and regional levels. At the global level, the limitations stem from a multilayered sanctions architecture including US and EU sanctions, as well as from the military conflict itself. As of January 2026, the already slow trade trend was slowing down due to Trump administration policies. “Trade with Iran has become extremely difficult due to intensifying US pressure and the ongoing protests,” a member of the Turkish Exporters Assembly (TİM) stated during the January protests in 2026.

At the regional level the factors range from corridor competition in the South Caucasus, which is now facing the potential threat of Iranian attacks; proxy conflicts in the Middle East; Israel’s disruptive role in the region; Iraq’s domestic political and military tensions in the wake of national elections in 2025; and Syria’s contested reconstruction. These limitations constrain the ‘management’ of Turkish–Iranian rivalry and stress the rivalry aspect between two actors in the Middle East and South Caucasus.

Turkey’s economic statecraft over the last couple of years vis-à-vis the Middle East underline the benefits of merging economic statecraft with military posturing. However, Turkey’s economic statecraft toward Iran also increased the nations’ geopolitical rivalry, revealing the conditions under which middle-power geoeconomic tools hit a ceiling. Turkey–Iran relations demonstrate that middle-power economic statecraft operates within not outside the structures set by global politics and regional security dynamics. The 2026 war only highlighted this ceiling further. US pressure on Iraq to reduce its dependence on Iran may open space for Turkey, while US pressure on Iran itself threatens Turkey’s interests. The same power, the US, has opposing effect on Turkey’s relations with its neighbours. This structural ceiling on Turkey’s statecraft stemming from the US and Israel’s position on the Middle East also underline Turkey’s reliance on regional stability, which it needs if it is to perform as a trading, connecting, constructing middle power at bilateral and regional levels. Returning to the broader discussion on the changing international order, in which middle powers are expected to play an enlarged role, Turkey–Iran relations illustrate the limits of middle-power statecraft in fostering interdependence and stability. Both the military action launched against Iran by Israel’s Netanyahu government and the Trump administration, and the mobilisation of Turkey and Gulf states to avert and then end it, expose new potentials and constraints in middle-power activism—Turkey’s, but also that of other aspiring regional middle powers, such as Saudi Arabia.

 

 

The policy brief by Frauke Seebass (Research Fellow, Wider Europe Programme – ELIAMEP & Researcher, think nea – New Narratives of EU Integration), “Europe at a Crossroads: Setting the Course for a Resilient Continent”, was prepared in the framework of ELIAMEP’s initiative think nea – New Narratives of EU Integration, supported by the Open Society Foundations – Western Balkans.

This policy brief explores how the European Union can reconcile internal reform with geopolitical enlargement in an increasingly unstable global environment. It argues that the EU must adopt a more strategic and integrated approach to enlargement, security, competitiveness, and democratic resilience in order to strengthen its strategic autonomy and global relevance.

The brief highlights the untapped potential of enlargement countries—particularly the Western Balkans, Ukraine, and Moldova—in areas such as defense, infrastructure, critical raw materials, and supply chains. At the same time, it stresses the importance of safeguarding democratic values, improving institutional effectiveness, and involving citizens more directly in shaping Europe’s future. Ultimately, it argues that closer cooperation with candidate countries and like-minded partners is essential for building a more resilient, united, and future-proof Europe.

You can read the policy brief here.

This policy brief was profoundly informed by Europe at a Crossroads, a two-day high-level dialogue to explore forward-looking strategies for Europe’s future held by ELIAMEP on 19 and 20 February 2026, with the kind support of Konrad Adenauer Foundation Greece & Cyprus and Wilfried Martens Centre for European Studies.

Ino Afentouli, Senior Policy Adviser and Head of the Geopolitics and Diplomacy Observatory, ELIAMEP

Against a grim international backdrop and the uncertainty exacerbated by the ongoing conflict in the Middle East—with no end in sight—and the conflict in Ukraine, which remains, lest we forget, a European conflict, Macron’s visit to Athens and the renewal of the Greek-French strategic partnership agreement can only be assessed positively.

Nonetheless, now that our long-standing bilateral relationship has been reaffirmed, we need to strengthen it further. The agreement provides for enhanced cooperation in key areas including defence, security, technology and innovation.

For Greece, however, the cornerstone of the strategic partnership is the protective shield France could provide in the event of a threat against Greece from a third country. This provision is reciprocal, but the disparity in power between the two countries makes it less likely that our country will have to come to France’s defence. That said, one should not underestimate the fact that the mutual defence provision adds to the existing obligations arising from the two countries’ membership of both NATO and the EU under, respectively, Article 5 (NATO) and Article 42.7 (TEU). The agreement therefore strengthens the convergence between the two countries within these organisations, and should not therefore be interpreted as a purely bilateral arrangement. This is significant, as both organisations have entered a transformative phase regarding their internal balance of power, given the stated intention of the US to reduce its presence on the European continent.

France in turn is playing a leading role—with Germany—in two processes we believe will proceed in parallel: the creation of a European pillar within NATO, and the gradual construction of a European defence. If these processes unfold smoothly—with a ‘amicable divorce’ from the US leading to a gradual decoupling from its responsibility for European defence—it is realistic to expect that, in the foreseeable future, European countries will be able to defend their territory with their own forces. It is equally realistic to predict that the US will not leave Europe without a nuclear umbrella, as this would heighten the threat from non-European nuclear powers. On this front, too, France recently took the bold initiative of extending its own nuclear deterrent to eight additional European countries, including Greece. The Greek-French agreement is therefore fully aligned with the European framework, making it highly beneficial for our country. To deepen this partnership further, Greece could look to the example of Franco-German cooperation, which, based on the Élysée Treaty (1963), provided the driving force for European integration. Since we

find ourselves at a decisive moment for Europe’s future, participating in enhanced cooperation arrangements will serve to amplify the influence of a small country like Greece.

Sophia Clément Mavroudis, Senior Research Fellow, ELIAMEP

For France, the Franco-Greek Agreement represents both a prototype and a blueprint for the ongoing construction of European defence at a political, industrial and geopolitical level. A new model founded upon concrete cooperation between willing states. This innovation places Greek-French cooperation at the heart of the laboratory for European strategic autonomy, and does so in the geostrategically unstable context of the Eastern Mediterranean.

France is seeking to reclaim European strategic leadership from Germany, reaffirming its self-identification as a ‘framework nation’ in European defence. It serves as a guarantor of European security through its industrial and military clout—a force multiplier that decuples its strategic impact. This agreement also serves as a foundation of the European defence architecture emerging within the framework of NATO’s European pillar, to which it is now clearly complementary. This occurs against the backdrop of growing doubt regarding US support in the event of a conflict in Europe, given Washington’s gradual withdrawal and reassessment of its priorities—namely Asia, the management of multiple theatres, and procurement shortfalls.

Greece is part of the European core and the recipient of reliable security guarantees. It is becoming a leading strategic partner, a steadfast and trusted ally, and a European bulwark in the Eastern Mediterranean capable of playing a key defensive role in the region as a politically stable and militarily capable ally.

The meeting demonstrated that France has made an explicit political and military commitment to support Greece politically, diplomatically and militarily in the event of tensions or outright conflict.

The immediate assistance clause provides for immediate bilateral engagement, a targeted strategic partnership, clear political intent, and a credible deterrent effect. This makes it more robust politically and militarily than both the TEU’s Article 42.7—which is legally strong, but operationally weak—and NATO’s Article 5, which is formidable but politically constrained, lacking military immediacy and being both dependent on the US and inapplicable in disputes between two member nations. It acts as a powerful political deterrent, reducing the political ambiguity which the EU and NATO ‘intentionally’ retain—a factor of particular concern to Greece.

The advanced nuclear deterrence proposed by France to eight countries that have requested it does not constitute an official extension of the French nuclear umbrella; rather, it is a political and strategic tool that lends credibility to the bilateral guarantee. As well as serving as a political demonstration of French deterrence, it ensures that Greek security is incorporated into French strategic calculations. It is of crucial strategic importance to Greece that France has made it clear that any destabilisation of Greece would undermine French strategic interests. This deterrence is both diplomatic and military in nature, involving the deployment of conventional forces within the participating countries (frigates, Rafale fighter jets). Greece is thus transitioning from a traditionally conventional national deterrence strategy to a model of indirect, extended deterrence within the French strategic umbrella.

For France, the industrial cooperation foreseen by the agreement supports the development of a European defence ecosystem with an explicit European preference, and thus represents a significant opportunity for its own national defence industry. For Greece, the agreement consolidates bilateral industrial cooperation and will bolster the Greek defence industrial base—on the proviso that strict oversight is maintained over requirements and procurement. It also supports the co-production, development and strengthening of a future sustainable domestic defence industry that will have an economic, political and social impact.

Finally, for Greece, the agreement represents a strong European political guarantee with a long-term structural rationale. Which is why France would expect Greece to manage, and perhaps in future strike a balance between, its multiple alliances with third countries:

– With the US, the complementarity of defence systems within the framework of NATO’s European core and the priority of Europe’s strategic autonomy.

-With Israel, the management of potential future tensions arising from military decisions, as well as the further integration of air defence systems and the interoperability of weapon systems.

This policy paper examines the Heyday Road in Sparta as an emerging example of cultural diplomacy rooted in sport and cultural heritage. Focusing on the revival of the Olympic Truce and the values associated with Olympism, it explores how such initiatives can contribute to social cohesion, intercultural dialogue, and sustainable local development. Through a comparative analysis with the Camino de Santiago, the paper highlights both the opportunities and challenges of heritage-based routes as policy tools and puts forward recommendations for their further development and integration into international policy frameworks.

• The Heyday Road in Sparta revives the ancient Olympic Truce (ekecheiria) as a contemporary cultural and athletic initiative.
• It demonstrates how sport and cultural heritage can function as tools of cultural diplomacy and peace-building.
• The initiative aligns with global frameworks such as the UN 2030 Agenda, Kazan Action Plan and Pact for the Future.
• It represents a bottom-up, community-driven model, emphasizing participation, volunteerism, and local engagement.
• The Camino de Santiago serves as a comparative case, illustrating a highly institutionalized cultural route with global recognition.
• Key differences include:
  • scale and institutionalization
  • degree of community participation
  • underlying values (religious pilgrimage vs Olympic ideals)
• Both routes promote engagement with tangible and intangible cultural heritage.
• The Heyday Road Significance Index (HRSI) offers an innovative framework for assessing cultural impact.
• There is a need for standardized data collection across similar routes to enhance comparative analysis.
• Future potential lies in:
  • network-building among cultural routes
  • global advocacy platforms
  • participation in international policy fora (e.g. COP, MONDIACULT)
• Heritage-based routes can evolve into actors of global cultural governance.

Read here in pdf the Policy paper by Antonia Zervaki, Assistant Professor, Department of Political Science and Public Administration, National and Kapodistrian University of Athens and Athina Fatsea, PhD C., Ionian University; Research Assistant to the Director General, ELIAMEP.

Introduction

The Heyday Road in Sparta constitutes a contemporary cultural initiative that revives an ancient historical narrative through sports and civic participation. Inspired by the legendary route connecting Sparta with Ancient Olympia, the Heyday Road draws on the tradition of the Olympic Truce (‘ekecheiria’),[1] which enabled safe passage for athletes and spectators during the ancient Olympic Games and symbolized the suspension of hostilities in the name of peace. Rooted in archaic Greek practices, the Olympic Truce is widely regarded in classical scholarship as one of the earliest institutionalized mechanisms for the regulation of conflict and the facilitation of interstate mobility in the ancient Greek world. By reactivating this route in the present day, the Heyday Road seeks to reconnect local heritage with global values, positioning culture and sport as vehicles for dialogue, solidarity, and sustainable development.

Historically, Sparta occupies a central place in the establishment of the Olympic Truce, which was formalized in the 9th century BC through a treaty concluded among three kings, Iphitos of Elis, Cleisthenes of Pisa, and Lycurgus of Sparta, highlighting the city’s symbolic role in early peace-building practices in the ancient Greek world.[2] Ancient sources, most notably Pausanias,[3] refer to the truce as a sacred and binding institution, publicly inscribed at Olympia and respected across Greek poleis, while modern historiography has interpreted it as an early form of normative peace practice. The revival of this heritage through the Heyday Road transforms a historical reference into a living cultural experience, where athletic endurance, memory, and collective participation converge. As such, the road functions not merely as a sporting event, but as a cultural route, embedding historical meaning within contemporary social practice.

The Heyday Road also reflects the Olympic ideals and universal values that continue to inform international discourse on peace, cooperation, and mutual respect. These values, revived institutionally through the modern Olympic Movement and the United Nations (UN), align closely with broader global commitments to peace and human dignity. In this context, the Heyday Road contributes to ongoing efforts to translate symbolic principles, such as the Olympic truce, into community-based initiatives that foster intercultural understanding beyond state-level diplomacy. At the policy level, the initiative resonates with international frameworks that recognize the role of sport and culture in sustainable development and peace-building. The UN 2030 Agenda for Sustainable Development identifies sport as an enabler of tolerance, social inclusion, and community empowerment[4], while UNESCO and the United Nations have further reinforced this link through initiatives like the Kazan Action Plan[5] and the Pact for the Future,[6] that will be further explored in this study. By combining cultural heritage, grassroots participation, and international symbolism, the Heyday Road exemplifies a bottom-up approach to cultural diplomacy that complements institutional efforts and local development strategies.

Against a backdrop of global uncertainty, initiatives such as the Heyday Road highlight the continued relevance of participatory models for fostering peace and resilience. By grounding universal values in historically informed and locally embedded practices, the Heyday Road offers a culturally resonant response to contemporary challenges facing peace and international cooperation. This policy paper examines the Heyday Road as a case that illustrates how sporting routes can operate at the intersection of cultural policy, diplomacy, and sustainable local development.

Framework and Key Concepts

Sport may seem trivial in times of tragedy but a growing critical mass of studies, when viewed collectively, provide a sense that sport can, when used in a nuanced culturally informed way, be a tool that can enable cultural and political outcomes. Sport alone will not solve the worlds challenges, but it is a proven pillar of connectivity that has a part to play.

Grant Jarvie[7]

Why reviving the Heyday Road in a world of uncertainty?

We live in a world of polycrisis, marked by interconnected, multifaceted challenges; in an era of existential threats ranging from climate change to the destabilization of the world order as we know it. Long‑established value systems and institutions of the international society are now widely contested or sidelined. The greatest spiritual and political achievements of humanity, including principles and institutions that emerged from centuries of cultural development, collective struggle, reflection and negotiation, now face unprecedented pressures. It is now that these achievements require renewed commitment, endurance and thoughtful stewardship.

Leveraging athleticism towards this aim may seem unrealistic at first sight. However, the long-standing tradition of sports, from antiquity to present day, as well as the enduring values attached to it offer a unique opportunity for intercultural dialogue between individuals and nations at several levels: from the local to the national level, and from the national to the international spheres. Long running events, endurance races, such as the Heyday Road, hold a special place within athletic competitions at all levels. The main feature of these competitions has to do with overcoming one’s limits and unlock human potential, both physical and mental, towards the accomplishment of one’s goals. This human-centered feature of these races enhances understanding, human empowerment and solidarity, since all individuals must face similar challenges and draw on their inner strength that finally unites them in the pursuit of a common goal: to race.

Sports, culture and sustainable development

In 2015 the value of sports and all cultures and civilizations was recognized as a ‘crucial enabler of sustainable development’ in the UN 2030 Agenda. More specifically, the Agenda recognized

‘the growing contribution of sport to the realization of development and peace in its promotion of tolerance and respect and the contributions it makes to the empowerment of women and of young people, individuals and communities as well as to health, education and social inclusion objectives’.

This approach transcends the conceptual silos regarding the role of sports in the 2030 agenda, moving beyond a perception of sports as a tool for the realization of SDG 3, integrating their contribution to various SDGs such as making cities and settlements safe, inclusive and resilient (SDG 11), offering quality education and promoting lifelong learning (SDG 4), building peaceful, inclusive and equitable societies (SDG10), contributing to economic growth and full and productive employment and work (SDG 8), promoting gender equality (SDG 5), ensuring sustainable consumption and production patterns and take urgent actions to combat climate change and its impacts (SDG 12), peace, justice and strong institutions (SDG 16) in line with the 2017 Kazan Action Plan.

In 2018 the UN General Assembly endorsed the Political Declaration adopted in the Nelson Mandela Peace Summit (A/RES/73/1) that underlined that

‘Sports and the arts in particular have the power to change perceptions, prejudices and behaviours, as well as to inspire people, break down racial and political barriers, combat discrimination and defuse conflict’.

With the adoption of the Pact for the Future in September 2024, the UN reaffirmed the above in its Action 11, while the General Assembly in its Resolution A/79/L.10 in November 2024 calls states to adopt policies that use sport as a strategic tool for sustainable development, recalling the significance or the Olympic movement ideals, including the institution of Olympic Truce, and reiterating sport’s role in conflict prevention, post‑conflict recovery, and community resilience.

The concept of Olympic Truce today

The International Olympic Committee revived the ancient Greek tradition of “εκεχειρία”, Olympic Truce, on the occasion of the XXV Olympiad held in Barcelona in 1992 and launched an appeal to all states and international institutions to support the initiative. The UN General Assembly adopted Resolution 48/11 on 1993 through which it

‘urge[d] Member States to observe the Olympic Truce from the seventh day before the opening and the seventh day following the closing of each of the Olympic Games, in accordance with the appeal launched by the International Olympic Committee;

[and noted] the idea of the Olympic Truce, as dedicated in ancient Greece to the spirit of fraternity and understanding between peoples, and urge[d] Member States to take the initiative to abide by the Truce, individually and collectively, and to pursue in conformity with the purposes and principles of the Charter of the United Nations the peaceful settlement of all international conflict’.

The modern concept of Olympic Truce encompasses the same fundamental ideas as ancient counterpart: support of friendship, solidarity, understanding and peace. Of course, the religious character of the ancient notion and practice of truce is absent. The obligation of observing the truce does not stem from peoples’ respect or awe for a deity but from a profound respect for humanity and for the principles of international law. The Olympic ideals, especially the concept of the Olympic Truce, closely resemble those of the UN in seeking peace and understanding among nations and peoples. Thus, members of the contemporary international society of states are called to respect the institution of Olympic Truce in the name of the fundamental goals of the United Nations Charter, namely:[8]

• The maintenance of international peace and security
• The development of friendly relations among nations
• The achievement of international co-operation in solving international problems of an economic, social, cultural or humanitarian character, and in promoting and encouraging respect for human rights and for fundamental freedoms for all without distinction as to race, sex, language, or religion.

According to the UN Secretary-General ‘Olympic ideals are also United Nations ideals: tolerance, equality, fair play and, most of all peace’.[9]

Apart from the affinity between the Olympic ideals and those enshrined in the UN Charter and resolutions, and beyond their symbolic value, emphasis should be given on their practical potential and their implementation in contemporary international relations. The implementation of the Olympic Truce concept today may seem a utopian aspiration. Nevertheless, we should not forget that the UN recognition of the Olympic Truce as a unique instrument for the promotion of global peace has led to the adoption of several diplomatic initiatives that led to concrete results.

Namely, during the 1994 Olympic Games in Lillehammer, Norway, the Olympic Truce was observed in Serajevo (the host city of the 1984 Olympic Winter Games). Cease-fire arrangements permitted the supply of humanitarian aid to the population suffering the deprivation caused by the armed conflicts in Bosnia.

In 1998, the Olympic truce during the Olympic Winter Games in Nagano, gave the opportunity to the UN Secretary General, Kofi Annan, to intervene to seek a diplomatic resolution to the crisis of Iraq. It is true, that apart from the UN resolution, members of the International Olympic Committee were lobbying Washington to refrain from military action against Iraq during the Winter Games. It should be noted that the US was among the countries that signed the General Assembly resolution in support of the Olympic Truce during the Nagano Games.[10]

During the opening ceremony of the Games of the XXVII Olympiad in Sydney in 2000, the South and North Korea delegations marched in the stadium together, under the same flag.

These examples may appear to be only a drop in the ocean of today’s vast humanitarian crises and shifting geopolitical and institutional environment. Yet, they demonstrate the tangible potential of sport‑based initiatives to foster dialogue, alleviate tensions, and promote human dignity or in other words, as granting space for ‘giv[ing] peace a chance’.[11]

Sports as a tool of cultural diplomacy: where do we stand today?

Sports is inextricably linked to cultural heritage and values, since its evolution is based on traditions, social norms and principles that have formulated human societies since antiquity.  Sports, as a bearer of culture, reflects values and practice as expressed across multiple spheres of human activity — social, economic, environmental, and political.

In light of the above, the concept and practice of sports as a manifestation of the broader human culture, falls into the seminal definition of culture provided by UNESCO in 1982, still valid today:

‘that in its widest sense, culture may now be said to be the whole complex of distinctive spiritual, material, intellectual and emotional features that characterize a society or social group. It includes not only the arts and letters, but also modes of life, the fundamental rights of the human being, value systems, traditions and beliefs; that it is culture that gives man the ability to reflect upon himself. It is culture that makes us specifically human, rational beings, endowed with a critical judgement and a sense of moral commitment.

It is through culture that we discern values and make choices. It is through culture that man expresses himself, becomes aware of himself, recognizes his incompleteness, questions his own achievements, seeks untiringly for new meanings and creates works through which he transcends his limitations’.[12]

Sports as a means of cultural diplomacy is not a domain restricted to states and the organization of mega- athletic events. A broadened perception and understanding of cultural diplomacy entail grassroots initiatives and the cultivation of a culture of peace through continuing physical education, promotion of human rights and inclusivity, the empowerment of individuals and the respect of diversity, and the appreciation of tangible and intangible cultural and natural heritage. These initiatives, considerably restricted in scale and political footprint compared to mega-events, may serve twofold: on the one hand, they signal the return to the primordial values of athleticism: participation, fair-play and mutual respect; on the other hand, they offer a unique psychological element since they connect through broad participation, different generations with (local) history and universal values. Finally, they constitute a shift to track III diplomacy, that is citizen’s diplomacy, that may gradually inform official policy-making.

Methodological Approach

This policy paper adopts a qualitative, comparative case study approach in order to examine the Heyday Road in Sparta as a cultural, social, and policy-relevant initiative. Qualitative orientation allows for an in-depth analysis of the symbolic, cultural, and participatory dimensions of the road, focusing on meanings, narratives, and practices. The methodology combines mapping, comparative analysis, and case study research. Mapping is employed both to document the characteristics of the Heyday Road and to situate it within a broader international landscape of comparable cultural roads. These include cultural routes and initiatives that link sport, culture, and community engagement at regional or global levels. Through this mapping process, the study identifies common features, divergences, and policy-relevant patterns across cases.

A comparative perspective is applied to assess how different cultural roads mobilize heritage, participation, and symbolic capital, and how these elements contribute to social impact and sustainability. Heyday Road serves as the primary case study that, compared with other sports routes, allows for focused analysis and enables broader insights relevant to cultural policy and diplomacy.

Overall, this methodological approach is designed to bridge academic analysis and policy relevance. By integrating qualitative inquiry with comparative mapping and structured impact assessment tools, the paper seeks to generate insights that can inform cultural diplomacy strategies, local development policies, and future initiatives linking sport, heritage, and peace.

Heyday Road & Camino de Santiago as a Field of Analysis

Global advocacy (esp. in view of the new UN Development Agenda and the Implementation of the Pact of the Future and the UN 80 initiative).

The Heyday Road and the Camino de Santiago represent two distinct models of heritage-linked routes that engage with cultural memory, mobility, and shared values, yet they differ substantially in scope, organization, and relationships with local society. More specifically, the Camino de Santiago is an extensive network of pilgrimage routes leading to the Cathedral of Santiago de Compostela in Galicia, Spain, where the apostle Saint James is traditionally believed to be buried.[13] These routes span Western Europe, with the Camino Francés being the most frequented trail, attracting hundreds of thousands of walkers and pilgrims annually. Camino’s contemporary revival has turned it into a globally recognized cultural corridor, culminating in its designation as the first Cultural Route of the Council of Europe (1987) and as a UNESCO World Heritage Site (1993).[14]

By contrast, the Heyday Road is a more recent grass-root initiative grounded in the specific classical heritage of Sparta and the Olympic Truce. Its foundational orientation emphasizes the revival of ancient ideals, particularly the Olympic Truce and values associated with classical Olympism, combined with community participation, cultural education, and endurance sport. While participants on the Camino de Santiago are motivated by a mix of spiritual, cultural, personal challenge or recreational reasons, the Heyday Road’s orientation is explicitly directed toward symbolic engagement with universal values and classical heritage through a peace-oriented athletic route.[15]

A notable difference between the two routes concerns local community engagement and volunteerism. The infrastructure supporting the Camino de Santiago, while robust and networked, has been historically shaped by tourism development and regional economies, with varying degrees of formalized volunteering by local associations. In comparison, the Heyday Road’s identity embeds community involvement and volunteer support as integral elements, with activities aimed at strengthening connections between participants and local stakeholders and emphasizing co-creation of cultural memory as part of the event’s impact. Another point of distinction lies in the ideational foundations of the two routes. The Camino de Santiago is deeply rooted in Christian pilgrimage traditions and historical practices of devotional walking. Although many contemporary pilgrims approach the route in secular terms, the historical symbolism remains central to its cultural resonance. The Heyday Road, in contrast, draws on classical antiquity and Olympic heritage, with its spiritual or moral dimension articulated through Olympic ideals and universal values rather than through religious pilgrimage narratives.

Despite these differences, both routes facilitate engagement with material and intangible cultural heritage. Walkers on the Camino de Santiago encounter medieval architecture, religious artefacts, and landscapes laden with centuries of European heritage, creating an immersive cultural experience. Similarly, the Heyday Road invites participants to encounter both tangible heritage (archaeological and natural landscapes) and intangible heritage through narratives, rituals, and symbolic practices connected to classical history and Olympic memory.

Finally, the two cases also highlight contrasting approaches to social responsibility. Camino’s scale and institutional backing have led to sustainability planning and regional coordination that primarily respond to economic development and heritage tourism imperatives. By contrast, Heyday Road positions social responsibility through heritage values and cultural diplomacy, emphasizing not only physical challenge but also the transmission of universal peace-oriented values, intercultural understanding and broader societal engagement.

In summary, while the Camino de Santiago and the Heyday Road share a form of heritage revitalization and experiential engagement with the past, they differ markedly in scale, institutional integration, volunteerism and community engagement, foundational ideals, and modes of cultural mobilization. This comparative perspective underscores how different historical traditions and organizational models shape varied pathways through which cultural heritage informs contemporary practice, community participation, and international cultural exchange.

Conclusions and Recommendations

The comparative examination of the Heyday Road in Sparta and the Camino de Santiago highlights the transformative potential of heritage-based routes as instruments of cultural diplomacy, community building and sustainable development. While differing in scale, historical trajectory, institutional consolidation and ideational foundations, both initiatives demonstrate how historically rooted mobility corridors can be reactivated to foster shared values, intercultural dialogue and transnational engagement.

The Camino de Santiago represents a highly institutionalized and internationally recognized cultural route supported by intergovernmental frameworks such as the Council of Europe’s Cultural Routes programme and UNESCO’s World Heritage List. Over decades, it has developed structured governance mechanisms, systematic data collection and measurable socio-economic impact at local and regional levels. This long-term consolidation provides a benchmark for understanding the potential outcomes of comparable heritage routes.

In parallel, the Heyday Road operates as an innovative community-driven initiative with growing international orientation. This distinction positions the Heyday Road as a laboratory of methodological experimentation and bottom-up diplomacy, with its Heyday Road Significance Index (HRSI) serving as a notable example.[16] The Index constitutes an ambitious attempt to evaluate the cultural and intergenerational impact of heritage routes, integrating qualitative and digital metrics to assess dimensions such as heritage significance, participation, memory transmission, and engagement. While the pilot phase of the HRSI reveals areas for methodological consolidation, it serves as the basis for comprehensive monitoring and assessment of heritage-route impacts moving forward. For the Index to evolve into a robust comparative research instrument, it should be systematically tested against verified and officially provided data from event organizers. Standardized datasets, including participant numbers, local economic impact, demographic diversity and community involvement, would allow for more reliable cross-case comparisons. A meaningful comparative study requires that all participating routes provide harmonized and transparent data under common criteria.

In particular, the degree of local community engagement should become a central evaluative variable. Both the Heyday Road and the Camino de Santiago demonstrate that the creation of a sustained community of participants, including repeat participants who travel across events internationally, amplifies local impact and strengthens transnational networks. The mobility of participants between comparable events may generate not only economic spillovers but also durable cultural linkages. A second step forward involves the selection of a pilot network of routes and organizations willing to share data systematically, potentially on a multicontinental and five-year assessment cycle. Such periodic evaluation would allow for longitudinal analysis and the tracking of cultural, social, and diplomatic impacts over time. The categorization of routes into typologies, such as (a) elite professional athletic events,  (b) sport-centred competitions primarily focused on performance and awards, and (c) hybrid models combining athletic achievement with heritage and cultural diplomacy objectives, would further refine comparative evaluation.

Looking ahead, the strategic question concerns network building and global advocacy. How might heritage-based endurance routes be interconnected into a structured international network? How could such a network articulate common positions on issues of shared concern, including sustainable mobility, community resilience, cultural preservation and peace-building? The creation of a coordinated platform could enable joint participation in major international policy fora, such as United Nations COP forums or UNESCO’s MONDIACULT, thereby amplifying visibility and policy relevance. A shared advocacy framework would also encourage convergence of principles among participating routes, ensuring coherence in the values projected internationally. This could include commitments to inclusivity, sustainability, community participation, and peace-oriented narratives. At the same time, enhanced participant mobility across routes could strengthen the emergence of a global community of engaged citizens, reinforcing cultural diplomacy at the societal level.

In conclusion, comparing the Heyday Road and the Camino de Santiago underscores both the promise and the challenges of heritage-based sporting and cultural routes as vehicles of cultural diplomacy. While the Camino illustrates the long-term institutionalization of such a model, the Heyday Road demonstrates the dynamism of a new-generation initiative that integrates technological innovation, community participation, and peace symbolism. The further development of structured networks, harmonized data collection, and coordinated advocacy could elevate such initiatives from local cultural projects to influential actors within global cultural governance.

Bibliography

Council of Europe, The Routes of Santiago de Compostela. Available at: https://www.coe.int/en/web/cultural-routes/the-routes-of-santiago-de-compostela

Foundation of the Hellenic World, The Truce during the Games. Available at: https://www.fhw.gr/olympics/ancient/gr/204c.html

Heyday Road, Heyday Charter – Our Foundation. Available at: https://www.heydayroad.org/charter

Heyday Road, Code of Conduct. Available at: https://www.heydayroad.org/code-conduct

Heyday Road, Heyday Road Significance Index. Available at: https://www.heydayroad.org/el/node/114

International Olympic Committee, The History of the Olympic Truce. Available at: https://www.olympics.com/ioc/news/the-history-of-the-olympic-truce

Jarvie, G. (2023), Sport, Cultural Relations and Peacekeeping, British Council.

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UNESCO (2017), Kazan Action Plan. Available at: https://unesdoc.unesco.org/ark:/48223/pf0000245581

United Nations (2015), Transforming our world: the 2030 Agenda for Sustainable Development (A/RES/70/1). Available at: https://sdgs.un.org/2030agenda

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[1] Heyday Road. Heyday Charter – Our Foundation. https://www.heydayroad.org/charter

[2] International Olympic Committee. The history of the Olympic Truce. https://www.olympics.com/ioc/news/the-history-of-the-olympic-truce

[3] Foundation of the Hellenic World. The truce during the games. https://www.fhw.gr/olympics/ancient/gr/204c.html

[4] United Nations, Transforming our world: the 2030 Agenda for Sustainable Development, A/RES/70/1 (2015), https://sdgs.un.org/2030agenda

[5] UNESCO, Kazan Action Plan (2017), https://unesdoc.unesco.org/ark:/48223/pf0000245581

[6] United Nations, Pact for the Future, https://www.un.org/en/pact-for-the-future

[7] Grant Jarvie, ‘Sport,Cultural Relations and Peacekeeping’, British Council, 2023, p. 34.

[8] See Charter of the United Nations, Chapter I – Purposes and Principles, Article 1.

[9] Excerpt from Secretary-General Kofi Annan’s message to the Games of the XXVII Olympiad, Sydney, Australia, SG/SM/7523, 31 August 2000.

[10] ‘Building a Peaceful and Better World through Sport and the Olympic Ideal’, A/52/L.23/Rev.1/Add.1, 25 November 1997.

[11] Paraphrasing John Lennon’s famous song ‘Give Peace a Chance’, 1969

[12] Mexico City Declaration on Cultural Policies, World Conference on Cultural Policies Mexico City, 26 July – 6 August 1982.

[13] Council of Europe, Santiago de Compostela Pilgrim Routes , https://www.coe.int/en/web/cultural-routes/the-routes-of-santiago-de-compostela

[14] Ibid.

[15] Heyday Road. Code of Conduct. https://www.heydayroad.org/code-conduct

[16] Heyday Road. Heyday Road Significance Index. https://www.heydayroad.org/el/node/114

Ioannis Alexandris, Research Fellow and Alessandro Ieranò, Research Assistant at the Wider Europe Programme of ELIAMEP explore Hungary’s landmark electoral shift and its broader implications for the European Union. It highlights the key drivers behind Peter Magyar’s victory and assesses how a new political era in Budapest could reshape the country’s relationship with Brussels and the trajectory of EU integration.

Read the ELIAMEP Explainer here.

Europe’s dependence on critical raw materials, deriving mainly from the green and digital transition, is best understood as a problem of asymmetric interdependence rather than a simple trade deficit. The principal vulnerabilities are located in specific chokepoints of the supply chain (refining and conversion, intermediates, logistics corridors, finance, and standards). In the context of an intensifying geopolitical competition and a competitive EU-China relationship, such chokepoints can become instruments of leverage, often exercised through selective trade restrictions.

• Demand is rising for structural reasons. Europe’s energy transition and industrial policies increase mineral demand. International Energy Agency underlines that demand for minerals used in clean energy technologies will more than double by 2040.
• Processing is often the weakest link. Europe is often most exposed not at the mine extraction level, but in processing, conversion, and intermediate products needed for manufacturing.
• China’s leverage derives from scale and policy tools. China’s position is strongest in several processing and intermediate segments. China weaponises tools such as export controls to slow or reshape flows.
• The EU has moved from elaboration to implementation. The Critical Raw Materials Act entered into force on 23 May 2024, and the EU has started to implement it through “Strategic Projects”, including 47 projects inside the EU and 13 in third countries. Further initiatives were developed by late 2025 in the context of RESourceEU.
• Rules can improve resilience, but timing matters. Compared with China’s faster, more coordinated model, Europe risks turning regulatory credibility into a liability.

Read here in pdf the Policy paper by Panagiotis Moumtsakis, DPhil student in Politics, University of Oxford.

In the second policy paper of the collection The Iran reckoning: Essays on a war the West was not ready for, Constantine Capsaskis examines the critical implications of the Iran crisis for Greece’s defence policy.

The ongoing conflict between Iran and the combined forces of the United States and Israel emphatically underlines that we are moving towards a new era of warfare. The mass use of Uncrewed Aerial Vehicles (UAV), first witnessed on the battlegrounds of Ukraine, is set to become the defining instrument of war. The war in the Gulf has also revealed the substantial cost associated with intercepting these UAVs with sophisticated air and missile defence systems, with a single drone often costing just a fraction of the interceptors used to bring it down. Additionally, with stockpiles of these high-end defensive missile systems dwindling due to the protracted conflict, serious questions over their production rates are also being raised. This paper seeks to address these issues in detail and examine how they impact Greece’s defensive planning.

• The battlefields of Ukraine and Iran herald a new age of warfare, often dubbed “Precise Mass”. In this, state and non-state actors can engage in precise strikes en masse, at both short and long range.
• There is a substantial cost asymmetry in intercepting cheap Uncrewed Aerial Vehicles (UAV) using high-end air and missile defence systems, including the United States’ Patriot and Israeli Arrow systems.
• With stockpiles being depleted rapidly in the Gulf, defence industry production lines that were already stressed due to the global increase in defence spending could face delays.
• Exacerbating the situation, core materials used in the production of these defence systems are facing acute shortages, in large part due to the introduction by China of export controls on processed rare earths.
• As Greece rehauls its overall defensive posture, as part of the wider “Agenda 2030” reforms, it must consider the opportunity cost of promoting planned projects, including “Achilles Shield”, to ensure it is not preparing for the wrong war.
• The Hellenic Armed Forces must be able to deal with mass produced one-way attack drones. This means ensuring both an adequate mix of high-low counter-UAV solutions, with an emphasis on cost-effective interceptions being paramount.

Read here in pdf the Policy paper by Constantine Capsaskis, Reasearch Fellow at the Mediterranean Progeamme of ELIAMEP.

The first paper of the collection is available here.

Introduction

On February 28th, the United States and Israel launched operations “Epic Fury” and “Roaring Lion” respectively, jointly striking military, political, and limited economic targets across Iran. In response, Iran retaliated not just by attacking Israel and US military assets in the region but also civilian infrastructure in several neighbouring states, including Qatar, the United Arab Emirates, Oman, and Saudi Arabia. Complementarily, Iran has also sought to leverage the strategic Strait of Hormuz to raise the cost of the conflict, effectively disrupting traffic across a waterway that is critical for global energy security.

At the time of writing, on the fourth week of the conflict, the likely duration of the war remains difficult to predict as there continue to be contradictory messaging and signalling from all parties involved. What is clear is that a return to the status quo ante bellum is unlikely even if the Iranian regime survives, with long-lasting diplomatic and economic ramifications.[1]

Greece, located on the southern flank of both NATO and the European Union, faces several challenges from the war in the Gulf, beyond its relative geographic proximity to the conflict.

Even at this stage, it is important to examine how the conflict impacts Greek security policy. Greece, located on the southern flank of both NATO and the European Union, faces several challenges from the war in the Gulf, beyond its relative geographic proximity to the conflict. Primary among them is that two of its main security partners and defensive suppliers, the United States and Israel, are both primary combatants, whose own defensive stockpiles have been drained.

In the case of prolonged conflict in the Gulf, several of the points raised in this paper will only become more pressing as disruption to key supply lines will be further exacerbated and munitions stockpiles will be further depleted. Additionally, some of the issues covered in this paper can be extrapolated to the wider European Union, but the analysis of problems and recommendations will be tailored to the case of Greece.

Defence Issues

Greece is upgrading its deterrence capabilities at a time where there is mounting evidence that we are entering a new era of warfare, one of technology-enabled mass volume UAV strikes.

The need to replace Greece’s aging air and missile defence systems, which still include several Soviet-era weapons systems, is increasingly pressing as global insecurity has made defensive capabilities a priority in most countries. Additionally, Greece’s main strategic rival continues to expand its domestic ballistic missile and UAV production capabilities, a threat that must be addressed. But it is important to note that Greece is upgrading its deterrence capabilities at a time where there is mounting evidence that we are entering a new era of warfare, one of technology-enabled mass volume UAV strikes, raising the question of whether we are preparing for the wrong war.

The choice of partners in the modernization of the Hellenic Armed Forces is underpinned by wider strategic considerations. Greece’s current three main procurement partners, France, Israel, and the United States, are also the country’s main security partners.

In the case of France, the acquisition by Greece of four of Naval Group’s FDI frigates (with the first, F-601 Kimon, joining the Hellenic Navy in January 2026, and another two expected the same year) helped cement the growing defensive ties between the two countries. Today, France included Greece in its expanded nuclear doctrine,[2] highlighting the interplay between industrial and defence relationships.

The acquisition of Israeli-made systems undeniably has a wider strategic value for Greece beyond their tactical capabilities. However, with the ongoing conflict in the Middle East offering a possible glimpse into what the future of war may look like, several issues are raised, including the threat of shortages, cost asymmetry, and possible production difficulties, that are worth considering when estimating their contribution to the country’s deterrence capabilities.

Finally, defensive rearmament and modernization is increasingly becoming a global feature. Already, this would create important logistical challenges, exacerbated by China’s decision to control the exports of its processed rare earths such gallium and germanium. Demand has shot up, but the ability of the defence industry to increase its production has yet to be proven. Even worse, the rate of usage in the current conflict in the Gulf (indicatively, more Tomahawk missiles have been fired during Epic Fury than any other US campaign)[3] raises serious concerns over the sustainability of the current defence production model, with significant knock-on implications for Greece’s capability to maintain an adaquete defensive stockpile.

Issue #1: “Precise Mass” and cost asymmetry

The battlegrounds of Ukraine, the Middle East, and now the Gulf herald a new age of warfare, often dubbed as the “era of precise mass”.

The battlegrounds of Ukraine, the Middle East, and now the Gulf herald a new age of warfare, often dubbed as the “era of precise mass”.[4] In essence, as defined by the Council of Foreign Relations’ Michael C Horowitz, this means that technological and industrial advances have allowed an increasing number of international actors, even non-state actors rather than just the traditional military superpowers, to field systems that enable them to carry out precise strikes, once considered the purview of only the most advanced militaries. These strikes can be launched en masse at both short and long range, and, critically, at limited cost.[5]

The mass production of OWA drones by other countries with strong defence industrial capacities is, presumably, only a matter of time.

Uncrewed systems are the main harbingers of this new era, with their proliferation being a defining characteristic of the battlefield in both Ukraine and the Gulf. At the heart of both conflicts are the Iranian Shahed drones, arguably the most influential agent of this new “precise mass” doctrine. Both Cold War-era superpowers have now adapted the one-way attack (OWA) Shahed-136 drone (a model developed by Iran’s Shahed Aviation Industries) as part of their arsenals, with Russia manufacturing its own variant (renamed Geran-2) with Iranian assistance[6] and the United States reverse engineering the Iranian drone for their Low-cost Unmanned Combat Attack System (LUCAS).[7] The mass production of OWA drones by other countries with strong defence industrial capacities is, presumably, only a matter of time.

Manufacturing Cost Operational Range Payload Shahed-136 $20,000 – $50,000 2,000 km 88 lbs FLM-136 LUCAS Approx. $35,000 1,500 to 2,000 km 40 lbs GERAN-2 $35,000 – $50,000 2,000 km 88 lbs

 

Figure 1: Comparative manufacturing cost, operational range, and indicative payload for OWA UAV models used by Iran, the USA, and Russia.[8]

This new Shahed-style type of drone has several benefits. Primarily, it is much easier to mass produce efficiently and several orders of magnitude cheaper than a cruise or ballistic missile, with estimations ranging from $20,000 to $50,000 per unit.[9] Their production volume also far outstrips those of widely used interceptors, including those of the US-produced Patriot surface to air system. Indicatively, in 2025 the Institute for the Study of War estimated that Russia was producing upwards of 5,000 Geran-type OWA drones a month,[10] with Ukrainian intelligence services having warned that it seeks to increase capacity to more than 1,000 OWA drones a day.[11] In comparison, the US produces somewhere in the region of 600 to 800 Patriot interceptor missiles a year, even if it has stated that it seeks to expand production to up to 2,000 by 2027.[12]

These production rates have also resulted in an increase of the firing rate of these systems, both in Ukraine and the Gulf. In the former, Russia was capable of launching more than 1,000 drones per week in 2025 while in the case of the latter, during just the first week of the current conflict, drones accounted for 71% of all Iranian strikes in the region, with the United Arab Emirates alone detecting 1,422 such attacks.[13]

OWA drone swarm attacks are very capable of penetrating existing, and costly, multi-layered defence systems despite high levels of recorded drone interception. 

The strategic and tactical benefits of utilizing Shahed-style OWA drones are obvious. On the field, it is clear that OWA drone swarm attacks are very capable of penetrating existing, and costly, multi-layered defence systems despite high levels of recorded drone interception. Drone saturation is increasingly becoming a feature of modern warfare, with the individual success rate of every OWA drone being insignificant as the key objective is the compound effect of potentially hundreds of drones.[14] This is evidenced by both the failure of traditional air defences in Ukraine, as well as Iran’s success in knocking out as many as 10 United States and allied radar stations in the Gulf,[15] even though the vast majority of Iranian drones launched in the region have been intercepted. As a corollary, this is also testament to the attritional warfare capabilities of OWA attack drones as any degradation of detection capabilities will only facilitate a higher success rate in future attacks.

Overall, the inevitable expansion of the use of drone saturation attacks, the increased employment of Artificial Intelligence and autonomous capabilities, and “precise mass” by more actors following the successes observed on the battlefield raises serious tactical implications for the future, particularly when considering the vulnerability of high-value assets to these weapon systems.[16]  Preparing for these must be a key area of planning and investment.

At a strategic level, planners must take also account of the significant cost discrepancy between an OWA drone and the interceptor used to stop it. 

At a strategic level, planners must take also account of the significant cost discrepancy between an OWA drone and the interceptor used to stop it. This cost asymmetry, apparent in both Ukraine and during Operation “Rough Rider” when the US conducted a sustained campaign against Yemen’s Houthis, has once again been a defining feature and one of the key takeaways of the current conflict in the Gulf.

Cost per interceptor Terminal High Altitude Air Defense (THAAD) $12.7 million Patriot PAC-3 $3.7 million Arrow 2 and Arrow 3 $2-3 million David’s Sling Stunner[17] $1 million Barak 8[18] $553,435

 

Figure 2: Cost per interceptor of systems used in the current Gulf crisis, and the Barak MX set to be purchased by Greece.[19]

Several analysts have pointed out how the main interceptors used to bring down Iranian drones, primarily the PAC-3 missile munition of the Patriot system (with estimations of more than 1,600 such munitions having been used in the first 16 days of the conflict),[20] are almost one hundred times more expensive than their usual target.[21] Namely, a Patriot interceptor costs about $4 million to a Shahed’s average of $35,000, while each interceptor of Israel’s Arrow 3 system is also estimated to cost upwards of $2 million.[22]

The cost asymmetry in play in the Gulf has essentially turned the conflict into a war of attrition, regarding the financial cost of the systems being deployed as well as the resilience and industrial capacity of defence production lines.

The key question that must be considered in Greece is whether and how the country can afford to wage a defensive war with a similarly steep cost asymmetry.

The key question that must be considered in Greece is whether and how the country can afford to wage a defensive war with a similarly steep cost asymmetry.

On Monday, March 23rd, Greece’s Government Council on Foreign and Defence Affairs (KYSEA), the highest-level executive council on issues of security, approved the purchase of key elements of a planned multi-layered defence system, dubbed “Achilles Shield” as part of the wider “Agenda 2030” military modernization programme.[23] The goal of this planned defence system, according to the Ministry of National Defence, is to enable “the country to face modern threats”[24], critically by reinforcing the country’s anti-drone, anti-air and anti-missile capabilities.

The current purchase approvals, worth an estimated 3 billion euros, are for three Israeli weapons systems, namely Israel Aerospace Industries’ (IAI) Barak MX and Rafeal’s Spyder and David’s Sling. These three systems are set to complement the country’s existing Patriot batteries to form the backbone of “Achilles Shield”.

Unquestionably, the existence of a multi-layered defence system is a welcome addition to Greece’s deterrence posture in the Aegean and Eastern Mediterranean, particularly against more conventional threats including missiles, aircraft, and medium-altitude long-endurance (MALE) uncrewed aerial vehicles. However, it is also critical to prepare for the next war, not the last one.

The harsh reality is that Greece is unlikely to be able to rely on these defensive systems to sustain a protracted defensive engagement against an enemy equipped with a significant number of OWA UAVs.

The harsh reality is that Greece is unlikely to be able to rely on these defensive systems to sustain a protracted defensive engagement against an enemy equipped with a significant number of OWA UAVs, something that becomes apparent even with the most cursory glance at the rate at which the United States, Israel, and the Gulf states are burning through their interceptor munitions stock and the associated price tag. Indicatively, the cost of interceptors alone over the first sixteen days of the conflict is estimated to exceed $19 billion.[25] While countries with significant defence budgets like the United States, Saudi Arabia, the UAE, and Israel are likely able to absorb the cost asymmetry in the short-run, Greece cannot afford to find itself on the wrong side of the asymmetry curve even if the Israeli systems it is purchasing are cheaper to acquire and operate than their American counterparts.

However, this is only half the picture because, ultimately, a prerequisite to spending billions on interceptors is that they exist in the first place.

Issue #2: Potential difficulties with defence procurement

Conventional military wisdom holds that logistics win wars, resulting in the oft-quoted maxim that “amateurs talk about tactics, but professionals study logistics”.

…in just the first sixteen days of the conflict, the United States, Israel, the Gulf states, and other allies expended more than 11,000 munitions, with several key types rumoured to be near depletion.

Even before the commencement of this latest round of hostilities, US Chairman of the Joint Chiefs of Staff General Dan Caine had expressed his concern over limited stockpiles of critical munitions.[26] Since then, in just the first sixteen days of the conflict, the United States, Israel, the Gulf states, and other allies expended more than 11,000 munitions, with several key types rumoured to be near depletion.[27]

Interceptor Munitions used in first 16 days Inventory prior to current crisis Percentage of stocks depleted Arrow 2 and Arrow 3 122 150 81.33% Patriot PAC-3 1,804 8,500 21.22% David’s Sling Stunner 135 250 54.00% THAAD 340 748 45.45%

Figure 3: Percentage of depletion of commonly used interceptors in the current crisis.[28]

In the report compiled by the Payne Institute for Public Policy, there are several types of estimated munitions shortages that stand out,[29] notably the near total depletion of Israel’s Arrow 2 and Arrow 3 interceptors (Israel denies any interceptor shortage)[30] as well as the high level of depletion (48%) of Terminal High Altitude Area Defence (THAAD) anti-ballistic interceptors across all operators in the region (with each missile costing between $12 and $15 million[31]) . However, the more pressing issues for Greece are the high consumption of PAC-3 interceptors used by the Patriot system by both the US (16.08% depletion) and the Gulf states (32.13% depletion), and Israel having used an estimated 54% of its David’s Sling munitions.[32] In fact, the Israeli Defence Forces have stepped up their use of David’s Sling interceptors to counter Iranian threats, in an effort to conserve the more expensive and difficult to manufacture  Arrow 2 and Arrow 3 munitions (with the attacks on Dimona and Arad being attributed to the failure of the David’s Sling system to successfully neutralize incoming Iranian ballistic missiles).[33] Overall, the report by the Payne Institute notes that it will likely take years to replace the munitions expended by those engaged in the conflict in a matter of weeks.[34]

Even assuming fair-weather conditions for the production of defence system interceptors, it is clear that the existing industrial capacity is incapable of meeting demand. Increased geopolitical instability in recent years, best evidenced by the proliferation of conflict across various theatres of operation following the post-Cold War lull, as well as the aforementioned shift to “precise mass” have both substantially increased demand, straining production.

Industries are unlikely to commit to a massive overhaul of their production lines to meet short-term demand, rather focusing on requirements of militaries during peacetime.

The situation is exacerbated by the chronic inconsistency in demand for munitions, especially prior to 2022 and the global increase in defence spending, as there were limited incentives for businesses to ramp up production during times of limited conflict. Essentially, it is inherent in the very nature of the defence industry that increases in production capacity are only required when stockpiles are running low, usually during an active engagement, a fact which further disincentivizes businesses from committing to long-term investments.[35] Industries are unlikely to commit to a massive overhaul of their production lines to meet short-term demand, rather focusing on requirements of militaries during peacetime.

However, there has also been a clear miscalculation of the operational requirements of protracted engagement by both the United States and Israel regarding the necessary amount of munitions stockpiles.[36] Indicatively, it was only in January of this year that the United States Department of War and Lockheed Martin agreed to quadruple the production capacity of THAAD interceptors from 96 to 400 per annum.[37] Prior to February 28th, the United States military stockpile of these munitions consisted of approximately 500 THAAD interceptors in total, of which just under 200 were expended in just the first sixteen days of the conflict.[38] Similarly, as mentioned above, Israel is reportedly facing an acute shortage of Arrow interceptors.

The issue of limited production capacity is even more pronounced in export-focused defence industries which must juggle domestic demand (especially when the country is at war) without compromising their ability to fulfil orders from international buyers. This dilemma was laid bare on March 26th when the Washington Post reported that the Pentagon was considering diverting purchases made by European NATO members, including PAC-3 and THAAD missiles, through NATO’s Prioritised Ukraine Requirements List (PURL) to the Middle East to deal with dwindling supplies of interceptors in the region.[39]  At the time of writing, Israeli defence companies have a reported backlog of orders for their products worth an estimated $80 billion.[40] While production capacity has been increased significantly over the last three years and there are plans to expand it even further, this remains a time-consuming and costly process.

“To meet demand, companies will have to make structural changes, open new production lines and factories, and perhaps even acquire additional activities”, said Elbit Systems CEO Bezhalel Machlis when discussing the large volume of orders, adding that “this requires rethinking the entire supply chain in order to deliver the goods on time”.[41] And Elbit is not the only Israeli defence company trying to find a way to meet demand. On March 24, it was reported that Rafael Advanced Defence Systems was in negotiations with Volkswagen to convert its Osnabrück auto plant to a production centre for components of the Iron Dome defence system, a process that will likely take up to 18 months.[42] It must be stressed that no Israeli defence company has yet declared force majeure and reneged on its obligations to fulfil its contracts with foreign buyers,[43] nor does this paper seek to suggest that this is likely in the future. However, especially if hostilities with Iran continue, the potential knock-on effect on Greek planning must be taken into account.

Greece may find itself having to compete with other bidders for the limited output of the same industrial lines.

An additional factor worth noting here is that there is a serious risk that Greece finds itself pushed to the back of the line when looking to acquire munitions. Most of the Gulf states, which face an existential risk if their stockpiles continue to deplete at the current rate, are among the wealthiest in the world. Greece may find itself having to compete with other bidders for the limited output of the same industrial lines.

The situation is further exacerbated when shortages of key materials and components are considered, particularly now that rare earths from China and especially those destined for military use are facing export controls.[44] Beijing has been accused of “weaponizing” its stranglehold on the processing of rare earths,[45] and has implemented a policy where licenses must be secured for a list of more than 1,100 dual-use items.[46] Naturally, the United States has undertaken significant efforts to reduce its dependency on Chinese processed rare earths, including the Pax Silica initiative and strong investment in establishing a complete mine-to-magnet supply chain,[47] but it will take years to catch up with the mature supply chains of China.

In the short run, however, this means that the production lines of defensive systems are facing a serious shortage of materials, right at the time that both demand for them has increased and stockpiles are being depleted in the Gulf. They include minerals such as gallium, germanium, tungsten, and items such as neodymium magnets.[48] Just to replace the munitions used in the first 96 hours of the conflict will require approximately 92 tons of copper, 137 kilograms of neodymium, 18 kilograms of gallium, 37 kilograms of tantalum, 7 kilograms of dysprosium, and 600 tons of ammonium perchlorate.[49] This is without addressing the issue of sulphur, whose shipping and processing has been severely disrupted by the war with Iran.[50] Sulphur, a key component in the extraction of copper, has seen its price go up by 25% since the war started, exposing yet another weak point in the supply chain and raising concerns that replenishing used military stockpiles will be more expensive than their original price tag.[51]

…the global defence industry depends on whether Beijing will seek to step up its control of rare earths in a bid to facilitate any potential hostile action against Taiwan.

With China likely doing the “missile math” vis-à-vis future US capabilities in the Pacific following the depletion of several key systems,[52] the global defence industry depends on whether Beijing will seek to step up its control of rare earths in a bid to facilitate any potential hostile action against Taiwan.

Naturally, this means that prices for rare earths not originating from China are significantly higher. For example, dysprosium, a key component of neodymium magnets, processed in North America and the European Union is projected to be eight times more expensive than that offered by China.[53]

Compounded by increased demand from the United States, Israel, and the Gulf States, in order to replenish their exhausted stockpile, it seems likely that prices for interceptors are set to go up.

…upstream, even simpler and cheaper products like ammunition are still competing with other major manufacturing products including missile defence interceptors for materials like tungsten, explosives and propellant.

One possible solution to counter the increased cost and difficulty in manufacturing sophisticated weaponry would be to concentrate on lower-tech and cheaper alternatives. Notably, the Hellenic Navy frigate HS Psara, in the course of its operation in the Red Sea as part of EUNAVFOR Aspides, engaged two Houthi drones and chose to intercept them using its 127mm naval gun.[54] Additionally, both the Phalanx CIWS and its land based C-RAM variant have been successful in intercepting drone attacks on key targets during the current conflict in the Gulf.[55] However, as has been pointed out in an analysis published by the Royal United Services Institute, the supply chain does not differentiate between low-cost ammunition and expensive missile systems.[56] This means that upstream, even simpler and cheaper products like ammunition are still competing with other major manufacturing products including missile defence interceptors for materials like tungsten, explosives and propellant.[57]

The lack of access to readily available processed rare earths seems to be an increasingly pressing vulnerability in the supply chains of US, European, and Israeli defence industries, something that the European Commission has also pointed out. With production lines already stretched thin, Greece must be aware of the potential pitfalls facing its “Agenda 2030” procurement projects. Without strong domestic production capacity, the country is even more vulnerable to international tremors. Even if all projects are delivered on time without delays, it seems inevitable that costs will be higher than anticipated. The question that remains then is who will bear the brunt of these.

 Defence Recommendations

Recommendation #1: “Achilles Shield” and anti-OWA UAV capabilities

Even if you are unable, or unwilling, to field a strike force of “precise mass”, you must be able to defend against it.

We are likely witnessing a new era of warfare, in which one-way attack drones are set to become one of the main weapons in the arsenals of state and non-state actors alike. Even if you are unable, or unwilling, to field a strike force of “precise mass”, you must be able to defend against it.

Admittedly, multi-layered air and missile defence systems will form only one component part of “Achilles Shield”, which is also set to incorporate AI and UAV “soft kill” systems to counter potential threats.[58] Of the latter, the most notable are the domestically produced Centaurus system, which will be discussed in detail, and the still under development Iperion and Telemachus systems.

However, the question is one of priorities. The need to reinforce the country’s defensive posturing, particularly following the decade-long financial crisis that severely impacted defence spending, is understandable and undoubtedly the addition of the air and missile defence systems will bolster the country’s defensive capabilities.

The issue is that of opportunity cost. The government of Greece and the Hellenic Armed Forces have correctly identified the emerging importance of uncrewed weapons systems in their rhetoric and signalling, featuring significantly in both in “Agenda 2030” and the UVEX 1/26 naval exercise.[59]

However, it is interesting that when looking at the numbers this sense of urgency does not seem to have carried over.

However, it is interesting that when looking at the numbers this sense of urgency does not seem to have carried over. Out of the announced government’s €25 billion ten-year plan,[60] approximately €3 billion will be spent on the aforementioned Spyder, Barak MX, and David’s Sling systems. By comparison, according to Pantelis Tzortzakis, CEO of the Hellenic Centre for Defence Innovation (HCDI), approximately 800 million will be invested in defence innovation over the next decade.[61]

It is worth noting that the issue of underfunding domestic research and innovation as well as manufacturing is not a future problem, as it has a direct impact on the current production capacity of Hellenic Aerospace Industry, the producer of the aforementioned domestic counter UAV systems. “HAI is a public company, with its pros and cons,” said HAI CEO Alexandros Diakopoulos, adding that “the advantage is relative job security. The disadvantage is that we cannot offer competitive salaries”.[62] Non-competitive salaries for one of your main domestic producers of UAV and counter UAV weapon systems does not signal that it is a priority. Additionally, it means that highly trained, specialised, and experienced staff will likely be dissuaded from either staying at HAI or signing up in the first place.

…measures it must take measures to ensure that it attracts the best engineers to work on its national security and deterrence capabilities.

If Greece is serious about domestically produced counter UAV measures it must take measures to ensure that it attracts the best engineers to work on its national security and deterrence capabilities, including expanding operations by hiring more staff and offering higher salaries. While Greece has already included further development of the Centaurus and Iperion systems in its application to the European Union’s Security Action For Europe (SAFE) application,[63] a radical overhaul seems to still be required.

Additionally, the entire manufacturing process of the Centaurus system is currently done entirely by HAI, with Diakopoulos not ruling out collaborating with sub-contractors in the future.[64] With concerns having been raised in the past over HAI’s productive output and track record of delayed orders, perhaps involving the private sector in the production of the C-UAV system, following its development by HAI, will also help ramp up production to ensure Greece is ready.[65]

The concern is that by the time the air and missile defence systems of Achilles Shield are operational […] they may already face quick obsolescence. 

The concern is that by the time the air and missile defence systems of Achilles Shield are operational, with the risk of both price hikes and delays due to a possible protracted conflict in the Gulf, they may already face quick obsolescence.  It is paramount that Greece doubles down on the development and production of counter UAV systems, particularly against the threat of drone saturation (against which the Iperion system is being designed) and support their quick scalability.

An easy counterpoint to the above recommendation would be that the funds to follow through with expanding both the R&D and manufacturing of innovative projects do not exist. But it remains an issue of opportunity cost. For example, the David’s Sling system that Greece is set to acquire is Israel’s domestic replacement for the Patriot system, batteries of which Greece already operates and is considered amongst its most advanced and capable missile defence systems. Considering that the cost of acquiring just this Israeli system is, according to rough estimations, approximately the same as the entire budget for defence innovation, it is worth asking if the opportunity cost of essentially doubling up on similar systems was considered and whether these further funds could have been diverted towards domestic defence innovation and manufacturing. Being prepared for the war of tomorrow will always be a good return on investment.

Recommendation #2: Domestic production, cooperation with Ukraine and cost asymmetry

When relying on missile interceptors to do the heavy work, as we are witnessing now in the Middle East, the cost asymmetry will always favour the aggressor rather than the defender.

The Greek defence budget, while significant in relative terms when expressed as a percentage of GDP, remains relatively modest compared to those of its strategic rivals. When relying on missile interceptors to do the heavy work, as we are witnessing now in the Middle East, the cost asymmetry will always favour the aggressor rather than the defender, partly because the technical demands required of such missiles (including high speed, range, and sophisticated guidance components) make them costly.[66] Indicatively, in 2024, US budget documents suggest that interceptor missiles are roughly twice as expensive as their offensive counterparts.[67] To avoid this unfavourable ratio, Greek planners must prioritize high-efficiency but low-cost options to confront possible security threats in the future and ensure that the country has an adequate High-Low mix to respond to possible threats.

This means that Greek planners must ensure that they are in a position to rapidly adopt any significant counter UAV breakthroughs, including laser and microwave technology. Some examples include Lockheed Martin’s High Energy Laser with Integrated Optical-dazzler and Surveillance (HELIOS)[68], Epirus’ Leonidas system,[69] and the under-development DragonFire Laser system.[70] It can also leverage a blossoming domestic defence technology start-up ecosystem. As noted above, the Greek state also has an actively involvement through HAI in the development of several counter UAV weapons systems.

The question is whether Greece can take the risk of finding out what happens if its stockpiles run low without the ability to replenish them.

The Centaurus system, which has already proven that it can be successful, with three confirmed kills against attacking UAVs in the Red Sea during Operation Aspides and has since been integrated into the Israeli Barak MX system,[71] is exactly the type of system that the Hellenic Armed Forces should be focusing on. Beyond its operational value however, it is important for another reason. As discussed already, the current war in the Gulf has also emphasized that this new era of war is one where attrition will once more be one of the primary considerations, in which conflict is also a competition of national industrial capacities. The United States, Israel, and Iran, all possess domestic capacity and are, as a result, in a better position to pursue their military goals. On the other hand, the vulnerability of the Gulf states, whose interceptor stockpiles are already running low, has been underlined, dependant as they are on external defence industries to ensure their security. In this case, the risk for these states is minimal as they are secondary, and very unwilling, participants in the conflict and on the same ‘side’ as their primary suppliers. Additionally, many of them figure among the wealthiest states in the world, giving them options to guarantee that they will have adequate defensive capabilities.  The question is whether Greece can take the risk of finding out what happens if its stockpiles run low without the ability to replenish them.

…much of what we know on how to deal with the threat of OWA UAVs has been learned at the crucible of the Ukrainian frontlines.

To further develop its domestic capabilities in this field, Greece must seek to expand co-operation with Ukraine, particularly on the issue of expanding its counter-UAV capabilities. Even more so as Ukraine has tremendous expertise in low-cost interceptors, each with an estimated cost of $3,000 to $5,000, that are crucial as they have been very successful in mitigating the issue of cost asymmetry while maintaining high rates of operational efficiency in defending Ukrainian airspace from UAV strikes, with Ukraine estimated to have produced more than 100,000 them in 2025.[72] In fact, much of what we know on how to deal with the threat of OWA UAVs has been learned at the crucible of the Ukrainian frontlines.

The incomparable value of the experience of Ukraine’s defence industry, and its drone operators, was emphatically underlined in the first days of the war in the Gulf, when Ukrainian operators were deployed in the Middle East to assist with defending the region from Iranian UAVs.[73] On Thursday, March 27th, President Volodymyr Zelensky visited Saudi Arabia where he held several meetings and stressed that “The key is not only producing new weapons – especially drones – not just technology, but also real experience in using it, and integrating it with radars, aviation, and other air defence systems. We have this experience”.[74] This was followed by the signing of a security agreement in which Ukraine agreed to share its drone defence expertise, underlining the importance of its experience in this new era of war.[75]  The BBC reported that several representatives from Saudi Arabia, Qatar, the United Arab Emirates and Kuwait, have approached Ukrainian manufacturers in an attempt to purchase Ukrainian drone interceptors.

Greece and Ukraine have already signed an agreement to co-produce uncrewed surface vessels at Greek shipyards, providing maritime drones for both the Ukrainian and Greek armed forces.

Greece and Ukraine have already signed an agreement to co-produce uncrewed surface vessels at Greek shipyards, providing maritime drones for both the Ukrainian and Greek armed forces.[76] Expanding this deal to provide a comprehensive framework that will allow for the exchange of technical know-how and field experience must be a priority.

Conclusion

The inclusion of modernized air and missile defence systems will undeniably add to Greece’s defensive posturing in the Eastern Mediterranean and will allow it to counter a wide variety of threats. This is true particularly for more traditional and mechanical instruments of war, including ballistic missiles. However, the war in the Gulf suggests that we are moving forward to the era of “precise mass”, for which these expensive and sophisticated systems are ill equipped.

The main problem is the issue of “mass”. The Patriot and Arrow system are undeniably precise and effective, but they are expensive and hard to produce in volume. Greece must find new and innovative solutions to counter the threat of a high-volume attack. Particularly at a time when there are reasons to be concerned over the viability and sustainability of overstretched supply chains and rising costs.

The fear is that the weapon systems of Achilles Shield will provide a welcome strengthening of Greece’s capabilities, but only in the short term, with the high cost in their acquisition having stymied the opportunity to prepare for the future of warfare.

 

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[1] Rana Foroohar, “Iran war will leave a complex geoeconomic legacy”, The Financial Times, 9/3/2026. https://www.ft.com/content/d2b243b8-0a36-4f48-b431-53101bea9699?ac

[2] Eleni Ekmetsioglou, “The French Doctrine of Forward Defense: Continuity and changes in France’s Nuclear Doctrinal Thinking “, The Hellenic Foundation for European & Foreign Policy, 5/3/2026. https://www.eliamep.gr/en/the-french-doctrine-of-forward-defense-continuity-and-change-s-in-frances-nuclear-doctrinal-thinking-and-the-spill-over-potential-of-epaulement-eliameps-experts-share-th/

[3] Mark F. Cancian, Chris H. Park, “The 850 Tomahawks Launched in Operation Epic Fury Is the Most Fired in a Single Campaign “, Center for Strategic & International Studies, 27/3/2026.

[4] Michael C. Horowitz, “Battles of Precise Mass”, Foreign Affairs, 22/10/2024. https://www.foreignaffairs.com/world/battles-precise-mass-technology-war-horowitz.

[5] Ibid.

[6] Amy McAuliffe, “Russia’s drone pipeline: How Iran helps Moscow produce an ever‑evolving unmanned fleet”, The Conversation, 28/1/2026. https://theconversation.com/russias-drone-pipeline-how-iran-helps-moscow-produce-an-ever-evolving-unmanned-fleet-272016

[7] Haley Britzky, “US sets up one-way attack drone squadron in the Middle East after reverse-engineering Iranian drone”, CNN, 3/12/2025. https://edition.cnn.com/2025/12/03/politics/drones-us-iran-middle-east

[8] Adolfo Arranz, Ally J. Levine, Arathy J Aluckal, Mike Stone, Sudev Kiyada, Han Huang and Travis Hartman, “Cheap drones are reshaping the war in the sky”, Reuters, 17/3/2026. https://www.reuters.com/graphics/IRAN-CRISIS/DRONES/dwpkyamxqpm/

[9] Michael C. Horowitz, Lauren Kahn, “First Ukraine, Now Iran: A New Era of Drone Warfare Takes Hold”, Council on Foreign Relations, 9/3/2026. https://www.cfr.org/articles/the-new-era-of-drone-warfare-takes-root-in-iran

[10] Johanna Moore, “Adversary Entente Cooperation at Russia’s Shahed Factory Threatens Global Security”, Institute for the Study of War, 21/11/2025. https://understandingwar.org/research/adversary-entente/adversary-entente-cooperation-at-russias-shahed-factory-threatens-global-security/

[11] Matthew Low, “Russia is pushing to build 1,000 of its localized Iranian Shahed drones every day, Ukraine’s military chief says”, Business Insider, 19/1/2026. https://www.businessinsider.com/ukraine-oleksandr-syrskyi-russia-1000-shahed-per-day-2026-1

[12] Fareed Zakaria, “Iran and the New Arithmetic of War”, Foreign Policy, 20/3/2026. https://foreignpolicy.com/2026/03/20/iran-drone-war-lessons-fareed-zakaria/

[13] Ibid.

[14] Benjamin Jensen, Yasir Atalan, “Drone Saturation: Russia’s Shahed Campaign”, Center For Strategic & International Studies, 13/5/2025.  https://www.csis.org/analysis/drone-saturation-russias-shahed-campaign

[15] Damir Marusic, “Iran’s cheap, deadly drones have done the U.S. a favor”, Washington Post, March 23, 2026. https://www.washingtonpost.com/opinions/2026/03/23/iran-war-shahed-drone-military/

[16] Chris Kremidas-Courtney, “How to Spend It: European Defence for the age of mass precision”, European Policy Centre, 31/3/2025. https://d1xp398qalq39s.cloudfront.net/content/How_to_Spend_it_Chris_Kremidas-Courtney.pdf

[17] Rt. Hon. Rafael Hernández de Santiago, “The Price of Escalation: Accounting for the Military Costs of the 2025 Israel Iran Conflict”, Gulf Research Centre, 18/6/2025. https://www.grc.net/single-commentary/270

[18] “Missile Interceptors by Cost”, Missile Defense Advocacy Alliance, Accessed 8/4/2026. https://www.missiledefenseadvocacy.org/missile-defense-systems/missile-interceptors-by-cost/

[19] Information from: Ari Cicurel, “Burn Rate: Missile and Interceptor Cost Estimates During the U.S.-Israel-Iran War”, The Jewish Institute for National Security of America, 21/7/2025. https://jinsa.org/wp-content/uploads/2025/07/Cost-Estimates-During-the-U.S.-Israel-Iran-War-07-21-25.pdf

[20] Macdonald Amoah, Morgan D. Bazilian and Lieutenant Colonel Jahara Matisek, “Over 11,000 munitions in 16 Days of the Iran War: ‘Command of the Reload’ Governs Endurance”, Royal United Services Institute, 24/3/2026. https://www.rusi.org/explore-our-research/publications/commentary/over-11000-munitions-16-days-iran-war-command-reload-governs-endurance

[21] Horowitz, Kahn, “First Ukraine, Now Iran”, CFR.

[22] Emanuel Fabian, “David’s Sling system failed to down Iranian ballistic missiles that struck southern towns – IDF”, The Times of Israel, 23/3/2026. https://www.timesofisrael.com/liveblog_entry/davids-sling-system-failed-to-down-iranian-ballistic-missiles-that-struck-southern-towns-idf/

[23] “Greek security council approves purchase of air defense system, upgrade of F-16 jets”, eKathimerini, 23/3/2026. https://www.ekathimerini.com/politics/foreign-policy/1298927/greek-security-council-approves-purchase-of-air-defense-system-upgrade-of-f-16-jets/

[24] “Press Release by the Ministry of National Defence regarding press reports, and replying to questions by journalists on the meeting of Wednesday”, Hellenic Ministry of National Defence, 19/6/2025. https://www.mod.mil.gr/en/press-release-by-the-ministry-of-national-defence-regarding-press/

[25] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[26] John Hudson, “Trump’s top general foresees acute risks in an attack on Iran”, The Washington Post, 23/2/2026. https://www.washingtonpost.com/national-security/2026/02/23/dan-caine-iran-risk-trump/

[27] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[28] Ibid.

[29] Ibid.

[30] Henry Bodkin, “Israel denies ‘running out’ of missile interceptors”, The Telegraph, 15/3/2026. https://www.telegraph.co.uk/world-news/2026/03/15/israel-denies-it-is-running-out-of-missile-interceptors/

[31] Kremidas-Courtney, “How to Spend It”, EPC.

[32] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[33] Fabian, “David’s Sling system failed to down Iranian ballistic missiles”, The Times of Israel.

[34] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[35] Wes Rumbaugh, “The Depleting Missile Defense Interceptor Inventory”, Center for Strategic & International Studies, 5/12/2025. https://www.csis.org/analysis/depleting-missile-defense-interceptor-inventory#h2-anteing-up

[36] Ibid.

[37] “Lockheed Martin and the U.S. Department of War Expand THAAD Interceptor Production”, Lockheed Martin, 29/1/2026. https://www.lockheedmartin.com/en-us/news/features/2026/Lockheed-Martin-and-the-U-S-Department-of-War-Expand-THAAD-Interceptor-Production.html

[38] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[39] Noah Robertson, Ellen Francis, “Pentagon considers diverting Ukraine military aid to the Middle East“, The Washington Post, 26/3/2026. https://www.washingtonpost.com/national-security/2026/03/26/us-iran-war-ukraine-missile-defense/

[40] Shiri Habib-Valdhorn, Meytal Vaizberg, “Israel’s defense companies report record $80 billion backlog as global demand surges”, The Jerusalem Post, 19/3/2026. https://www.jpost.com/defense-and-tech/article-890501

[41] Ibid.

[42] Laura Pitel, Anne-Sylvaine Chassany, Sebastien Ash, “VW in talks with Israel’s Iron Dome maker to shift from cars to missile defence”, The Financial Times, 24/3/2026. https://www.ft.com/content/1e41e6db-792f-4f60-b567-adb6458fb072?syn-25a6b1a6=1

[43] Seth J, Frantzman, “Despite war, Israel’s IAI hits record backlog for orders, sees IPO as ‘essential’: CEO”, Breaking Defense, 19/3/2026. https://breakingdefense.com/2025/03/despite-war-israels-iai-hits-record-backlog-for-orders-sees-ipo-as-essential-ceo/

[44] Gracelin Baskaran, “China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains”, Center for Strategic & International Studies, 9/10/2025. https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

[45] Heidi E. Crebo-Rediker, Mahnaz Khan, “Leapfrogging China’s Critical Minerals Dominance

How Innovation Can Secure U.S. Supply Chain”, Council on Foreign Relations, 2/2026. https://www.cfr.org/reports/leapfrogging-chinas-critical-minerals-dominance

[46] “China imposes export controls on 20 Japanese entities to curb ‘remilitarisation’”, Reuters, 24/2/2026. https://www.reuters.com/world/asia-pacific/china-adds-20-japanese-entities-export-control-list-2026-02-24/

[47] Ibid.

[48] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[49] Macdonald Amoah, Morgan D. Bazilian and Lieutenant Colonel Jahara Matisek, “Over 5,000 Munitions Shot in the First 96 Hours of the Iran War”, Foreign Policy Research Institute, 3/2026. https://www.fpri.org/article/2026/03/over-5000-munitions-shot-in-the-first-96-hours-of-the-iran-war/

[50] Jason Wilson, “West Point analysis warns that strait of Hormuz blockade will strangle US defense industry”, 19/3/2026. https://www.theguardian.com/world/2026/mar/19/west-point-analysis-iran-war-costs

[51] Ibid.

[52] Amoah, Bazilian and Lieutenant Matisek, “Over 5,000 Munitions Shot in the First 96 Hours of the Iran War”, FPRI.

[53] Matthew Bird, “Ex-China rare earths premium to grow, especially for heavies”, Benchmark Minerals, 24/3/2026. https://source.benchmarkminerals.com/article/ex-china-rare-earths-premium-to-grow-especially-for-heavies

[54] Stavros Ioannidis, “Φρεγάτα «Ψαρά»: Η στιγμή της κατάρριψης drone των Χούθι”, Kathimerini, 8/7/2024. https://www.kathimerini.gr/politics/foreign-policy/563115880/fregata-psara-i-stigmi-tis-katarripsi-drone-ton-choythi/

[55] Iain Boyd, “Not just Patriot interceptors: A defense expert explains the various weapons US and allies use to defend against missiles and drones”, The Conversation, 12/3/2026. https://theconversation.com/not-just-patriot-interceptors-a-defense-expert-explains-the-various-weapons-us-and-allies-use-to-defend-against-missiles-and-drones-278047

[56] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[57] Ibid.

[58] Vasilis Nedos, “AI to power Greece’s Achilles’ Shield”, eKathimerini, 13/2/2026. https://www.ekathimerini.com/politics/foreign-policy/1295178/ai-to-power-greeces-achilles-shield/

[59] Vassilis Nedos, “Navy drills test unmanned systems”, eKathimerini, 18/3/2026. https://www.ekathimerini.com/politics/foreign-policy/1298428/navy-drills-test-unmanned-systems/

[60] “Greece to spend 25 billion euros as part of multi-year defence plan”, Reuters, 2/4/2025. https://www.reuters.com/business/aerospace-defense/greece-spend-25-billion-euros-part-multi-year-defence-plan-2025-04-02/

[61] Lefteris Papadimas, “Anti-drone system propels Greek plans for home-grown defence industry”, Reuters, 6/8/2025. https://www.reuters.com/business/aerospace-defense/anti-drone-system-propels-greek-plans-home-grown-defence-industry-2025-08-05/

[62] Alexia Kalaitzi, “Inside the brain of Greece’s cutting-edge drone hunter”, eKathimerini, 18/3/2026. https://www.ekathimerini.com/economy/1298409/inside-the-brain-of-greeces-cutting-edge-drone-hunter/

[63] Stavros Ioannidis, “SAFE: Αίτημα για έξι προγράμματα υπέβαλε η Αθήνα – Ποια είναι τα επόμενα βήματα”, Kathimerini, 9/1/2026. https://www.kathimerini.gr/politics/amyna/564012973/safe-aitima-gia-exi-programmata-ypevale-i-athina-poia-einai-ta-epomena-vimata/

[64] Ibid.

[65] Pantelis Velissaropoulos, “ΕΑΒ, drones, και anti-drones”, Kathimerini, 20/3/2026.

[66] Wes Rumbaugh, “Cost and Value in Air and Missile Defense Intercepts”, Center for Strategic & International Sudies, 13/2/2024.

[67] Ibid.

[68] Amoah, Bazilian and Lieutenant Matisek, “Over 11,000 munitions in 16 Days of the Iran War”, RUSI.

[69] Yehoshua Kalisky, Iky Hazan, “Innovative Systems for Neutralizing Drone and UAV Swarms”, The Institute for National Security Studies, 11/12/2025. https://www.inss.org.il/social_media/innovative-systems-for-neutralizing-drone-and-uav-swarms/

[70] Robert Tikkast, “A Decade-Long Struggle to Thwart Iran’s Drones Carries Warnings for the UK”, Royal United Services Institute, 25/3/2026. https://www.rusi.org/explore-our-research/publications/commentary/decade-long-struggle-thwart-irans-drones-carries-warnings-uk

[71] Stavros Ioannidis, “Greek Centauros anti-drone system joins Israeli missile shield “, eKathimerini, 2/2/2026. https://www.ekathimerini.com/economy/1294259/greek-centauros-anti-drone-system-joins-israeli-missile-shield/

[72] Katie Livingstone, “Novel interceptor drones bend air-defense economics in Ukraine’s favor”, DefenseNews, 5/3/2026. https://www.defensenews.com/global/europe/2026/03/05/novel-interceptor-drones-bend-air-defense-economics-in-ukraines-favor/

[73] “Ukraine war briefing: Kyiv deploys 200 anti-drone experts to Middle East”, The Guardian, 18/3/2026. https://www.theguardian.com/world/2026/mar/18/ukraine-war-briefing-kyiv-deploys-200-anti-drone-experts-to-middle-east

[74] Vitaly Shevchenko, “Ukraine signs deal with Saudi Arabia offering drone expertise”, BBC, 27/3/2026. https://www.bbc.com/news/articles/cx2r4wxdw3no

[75] Ibid.

[76] Vassillis Nedos, “Athens and Kyiv seal naval drone deal”, eKathimerini, 18/11/2025. https://www.ekathimerini.com/politics/foreign-policy/1287050/athens-and-kyiv-seal-naval-drone-deal/

Perspectives by ELIAMEP experts on Hungary’s forthcoming elections, analyzing their political significance and examining how the outcome may influence future developments within the European Union, as well as its internal balance and policy direction.

ELIAMEP is launching a new collection of Policy Papers titled The Iran reckoning: Four essays on a war the West was not ready for on the war on Iran, aiming to deliver concise and rigorous analysis of a critical contemporary geopolitical crisis. The papers examine the conflict’s strategic, legal, and economic dimensions, while assessing its implications for regional stability and the international order. 

The first policy paper of this collection; titled  “The bill will come due: The short, medium and long-term consequences of the Iran war- From oil shock to strategic realignment” argues that while the immediate energy shock has captured global attention, the conflict is generating deeper, structural damage to global food security, energy geography, and the Western security architecture that will persist for decades.

The 2026 Iran War has triggered a structural erosion of the global order, beginning with the immediate suspension of maritime insurance in the Strait of Hormuz that disrupted 20% of global petroleum, one-fifth of LNG trade, and one-third of the world’s seaborne fertiliser shipments. While Brent crude’s peak at $126 per barrel dominated headlines, there is a critical “analytical gap” regarding an impending food security crisis in the Global South, where the loss of agricultural inputs will manifest as compromised harvests and potential regional recessions within 6-12 months. This conflict has fundamentally compromised the 50-year “energy-for-security” compact between the U.S. and Gulf states, leading regional monarchies to perceive Washington more as a source of unpredictability than as a protector, and to accelerate “multi-alignment” security strategies and partnerships with China, India, and Russia.

• Immediate economic and logistics destabilisation. The conflict triggered a collapse of the maritime insurance and logistics systems in the Persian Gulf. Brent crude peaked at $126 per barrel, and while the release of 400 million barrels from strategic reserves provided a temporary cushion, these are “one-use buffers”.
• The fertiliser-food crisis nexus. A critical analytical gap exists regarding the disruption of agricultural inputs. Because agricultural cycles are inflexible, the current disruption will manifest as compromised harvests in 4-6 months and acute food insecurity in 6-12 months. Policy responses must prioritise emergency financing and the creation of strategic fertiliser reserves to mitigate recessions.
• Strategic realignment in the Gulf. The war has fundamentally compromised the energy-for-security compact that governed US-Gulf relations. Consequently, Gulf monarchies are accelerating multi-alignment strategies to secure strategic predictability.
• Long-­term structural shifts. The conflict is driving a permanent recomposition of global energy geography. Additionally, the crisis has transformed decarbonisation from an environmental objective into a strategic imperative to eliminate dependency.
• Policy recommendations for Europe. It is imperative that the EU links reconstruction funding to strategic conditionality to ensure they do not finance a stabilisation effort shaped by external actors without securing meaningful influence over the resulting regional order.

Read here in pdf the Policy paper by Dr Andréas C. Hatzidiakos, Research Fellow, ELIAMEP; Co-director of OPEWI (Europe’s War Institute).

WITHIN DAYS OF THE CONFLICT’S OPENING PHASE, the Joint War Committee[1] designated the Persian Gulf a high-risk zone, effectively suspending standard marine insurance coverage for commercial vessels and triggering force majeure clauses across thousands of shipping contracts. Tanker operators declined to route through an uninsured conflict zone. Charter rates for available tonnage outside the Gulf spiked to record levels. The commodity flows transiting the Strait of Hormuz – approximately 20 percent of global petroleum consumption and one-fifth of global LNG trade[2], alongside one-third of the world’s traded fertilisers[3] – were disrupted within days, not weeks.

The energy market response generated the headlines. Brent crude reached a peak of $126 per barrel – a level not seen since the 2008 energy crisis – representing a near-50 percent increase from pre-conflict levels within the space of four weeks, carrying immediate political visibility. What received far less attention was the second category of cargo: the ammonium nitrate, urea, and phosphate shipments[4] that underpin agricultural supply chains from South Asia to Sub-Saharan Africa[5], and whose disruption operates on a timeline measured not in trading days but in growing seasons. Less visible still is a third category of consequence – one that will not appear in any commodity price index – the accelerating reconfiguration of Gulf security partnerships. When a protective power becomes a source of instability, the states that depend on it do not wait for the conflict to end before drawing conclusions.

This is the analytical gap this article addresses. The most visible consequences of the 2026 Iran war are severe because they are immediate, tangible and measurable by the average consumer. They are not the most structurally significant. The deeper damage is accumulating in sectors that do not generate equivalent political urgency, at a pace the standard instruments of crisis management are not calibrated to track. The full cost of this conflict will not be presented for months – in some dimensions, for years. When it is, the figure will substantially exceed current estimates.

The immediate shock: energy, markets, and the limits of strategic reserves

The energy market response to the partial closure of the Strait of Hormuz was swift, severe, and entirely consistent with pre-conflict scenario modelling that had been available to governments for over a decade. Brent crude rose above $100 per barrel within days of the conflict’s opening phase. Gulf state oil production – representing approximately one-third of global supply – was immediately disrupted: not primarily through the physical destruction of extraction infrastructure, but through the rapid collapse of the insurance, logistics, and maritime crewing systems on which tanker operations depend. War-risk premiums rendered routine commercial voyages economically inviable within hours of the first engagements. The consequence was a de facto market-imposed embargo, operative before any formal blockade was declared.

The coordinated release of strategic petroleum reserves – approximately 400 million barrels mobilised through American and International Energy Agency frameworks – provided a temporary price cushion and a degree of political cover for affected governments. The limits of this instrument, however, are structural and must be acknowledged clearly: the strategic reserve is a one-use buffer, not a solution. Its drawdown buys weeks, not months. The only genuine resolution to the supply disruption is physical – the reopening of the strait to commercial traffic – and that outcome remains, as of this writing, contingent on a political or military resolution that has yet to materialise.

The immediate shock, considered in isolation, remains within the range of policy management. The problem lies in what follows.

The financial consequences extend well beyond the energy sector. The risk premium now embedded in global asset pricing – the persistent upward pressure reflecting the possibility of further escalation – will not dissolve with a ceasefire announcement. It becomes structural. Institutional investors are repricing long-term infrastructure exposure across the Gulf region. Shipping companies are restructuring route networks and procurement chains. Insurance markets are recalibrating their political-risk models for all Gulf-adjacent maritime corridors. These adjustments, once institutionalised, are not easily reversed. The immediate shock, considered in isolation, remains within the range of policy management. The problem lies in what follows.

The propagation effect: food, fertiliser, and the forgotten supply chain

The Persian Gulf is not solely an oil corridor. This fact – well-documented in commodity trade literature and agricultural economics – has received insufficient attention in the strategic commentary surrounding this conflict.

Α disruption to transit that begins today translates into compromised harvests within four to six months, and into a measurable food price crisis in global commodity markets within six to twelve months.

Gulf states account for approximately half of globally traded urea exports and roughly 30 percent of globally traded ammonia exports. Collectively, approximately one-third of global seaborne fertiliser trade – spanning nitrogen, phosphate, and sulphur compounds – transits the Strait of Hormuz[6]. The agricultural supply chain operates on a timeline that admits no flexibility: fertilisers must be applied at defined intervals within the growing cycle. A disruption to transit that begins today translates into compromised harvests within four to six months, and into a measurable food price crisis in global commodity markets within six to twelve months. The conflict began within that window. The agricultural consequences are already in motion.

The differential impact across economies is stark and deeply inequitable. For energy-exporting nations – the United States, Australia, Norway, Canada – the war represents a significant but manageable cost increase. For energy-importing emerging economies, the compounding effect of elevated energy prices and fertiliser scarcity constitutes a structural crisis. India, Pakistan, Bangladesh, and large portions of Sub-Saharan Africa and Southeast Asia face the simultaneous deterioration of energy affordability, agricultural input availability, and rising food prices[7]. Sub-Saharan Africa is particularly exposed: over 90 percent of the fertilisers used across the region are imported, and maise – the primary staple crop across much of the continent – is acutely dependent on nitrogen inputs now unavailable at predictable cost. For households already operating near subsistence margins, this convergence does not represent a policy challenge. It represents acute food insecurity. At the macroeconomic level, several of these economies face the conditions for recession.

By that point, the window for preventive action will have closed.

The markets and governments of developed economies are currently pricing in an energy shock. They have not yet adequately priced in a food shock. That misjudgement carries significant policy risk. The necessary responses – emergency agricultural financing for the most exposed economies, alternative supply routing for nitrogenous fertilisers, and the development of strategic fertiliser reserve mechanisms comparable to existing energy reserves – require lead times that the political calendar is not currently accommodating. The harvest data, when it arrives in autumn 2026, will confirm what the supply chain data already indicates. By that point, the window for preventive action will have closed.

The reshaping of Gulf security architecture

A consequential conversation is underway in Riyadh, Abu Dhabi, Doha, Kuwait, Muscat and Manama. It concerns whether the security architecture that has governed the Gulf for five decades continues to serve the interests of the states it was designed to protect. This conversation deserves more serious analytical attention than it has received.

The Gulf states did not choose this war. Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Oman are hosting American Western military assets, providing forward logistical infrastructure, and absorbing Iranian retaliatory strikes – against their desalination facilities, their port infrastructure, and the energy corridors their national economies depend upon – as a direct consequence of a decision taken in Washington without their prior consultation. The implicit architecture underpinning the US-Gulf relationship has, for five decades, rested on a mutual compact: Gulf states provided the United States with territorial access and preferential energy arrangements; in return, they received security guarantees against external aggression, principally from Iran. That compact was institutionalised through a dense basing architecture: Al Udeid Air Base in Qatar – CENTCOM’s forward headquarters, housing approximately 10,000 troops and the largest American installation in the Middle East – the Fifth Fleet headquarters in Bahrain, Camp Arifjan in Kuwait, and Al Dhafra Air Base in the UAE[8].

The United States is not the only Western power to secure a military foothold in the region – though the nature of those arrangements differs. France and the United Kingdom pursued explicitly contractual defence partnerships, negotiated as bilateral agreements rather than implicit strategic compacts. France has maintained a permanent base in Abu Dhabi (Camp de la Paix) since 2009, its first permanent overseas military installation in five decades, established under a formal Defence Cooperation Agreement with the UAE[9]. The United Kingdom formalised its regional presence through the 2019 UK-Oman Joint Defence Agreement, operating a Joint Logistics Support Base at Duqm – deliberately positioned outside the Strait of Hormuz – alongside long-standing training arrangements across the Gulf[10]. These European partnerships were built on treaty frameworks with defined mutual obligations, not on the implicit energy-for-security logic that has characterised the American relationship with the Gulf. That distinction now carries considerable weight. The implicit American compact functioned as long as the United States was perceived by its partners as a net provider of stability – a protective power whose presence reduced regional risk. That perception has been fundamentally altered by the 2026 Iran War. Washington is no longer seen, from Riyadh or Abu Dhabi, primarily as a guarantor. It is seen as a variable – a source of unpredictability whose strategic decisions can destabilise the region as readily as they can protect it.

The gap between the stated American commitment to Gulf stability and the observable consequences of American strategic decisions is now too large to paper over.

This contradiction has not appeared suddenly. Its roots are traceable across several decades of American Middle East policy. What the 2026 conflict has done is render it impossible to manage through the customary instruments of alliance diplomacy – reassurance language, bilateral security memoranda, arms sales, and summit-level consultations. The gap between the stated American commitment to Gulf stability and the observable consequences of American strategic decisions is now too large to paper over.

When the entity responsible for managing a principal risk becomes itself a primary source of that risk, rational actors diversify.

The logic that follows is not ideological. It is actuarial. When the entity responsible for managing a principal risk becomes itself a primary source of that risk, rational actors diversify. They do not necessarily abandon the relationship – the American security architecture remains too deeply embedded, and the alternatives too immature, for a clean break[11]. But they hedge, they build redundancy, and they cultivate alternatives. This is precisely what the Gulf monarchies have been doing, with increasing deliberateness, for the better part of a decade.

The 2023 Saudi-Iran normalisation agreement brokered by Beijing was not a rupture with Washington nor a diplomatic anomaly. It was a deliberate signal from Riyadh that the kingdom was prepared to pursue strategic relationships outside the framework of the American alliance architecture when doing so served its interests. It is a premium paid on a new insurance policy. The acceleration of defence partnerships with France, the United Kingdom, India, and China is not anti-American sentiment. It is portfolio management. Beijing does not impose governance conditions on its partners. It does not threaten sovereign wealth funds with secondary sanctions. It does not initiate regional military campaigns without prior consultation with affected neighbouring states. From the perspective of Gulf leadership calculating long-term regime and state security, Chinese partnership offers an attribute that American partnership has demonstrably ceased to provide: strategic predictability. China’s strategic objective is not to replace the United States as security guarantor – a role for which it currently lacks the regional military infrastructure – but to entrench itself as an indispensable defence-industrial partner, driving Gulf domestic manufacturing capacity and technology transfer while reducing Western leverage.

The architecture of multi-alignment – systematic hedging across major power relationships – was already a feature of Gulf strategic practice before this conflict. It will accelerate significantly in its aftermath.

Russia maintains active military and commercial relationships across the region. India, as the world’s most populous state and a significant energy importer with deep historical ties to Gulf economies, represents a partnership of growing importance to Gulf diversification strategies[12]. India has pursued a deliberate strategy of defence deepening with Gulf states, driven by its own energy dependency and its growing strategic competition with China[13]. At the same time, Pakistan is also positioning itself, by backing Saudi Arabia through a mutual defence cooperation agreement signed in September 2025, featuring a NATO-like article 5 collective defence clause. Turkey, formally a NATO member, has pursued its own Gulf relationships with a degree of strategic independence that pre-existing alliance frameworks have proven unable to constrain. The architecture of multi-alignment – systematic hedging across major power relationships – was already a feature of Gulf strategic practice before this conflict. It will accelerate significantly in its aftermath.

Water security has emerged as an underestimated strategic variable. The desalination facilities of the Arabian Peninsula supply the majority of drinking water for the populations of Kuwait, Qatar, Bahrain, the UAE, Saudi Arabia and Oman[14]. These installations are coastal, energy-intensive, and – as demonstrated in the current conflict – targetable by Iranian-affiliated forces operating with conventional munitions and drone systems. For states in which water supply depends overwhelmingly on desalination, the military targeting of this infrastructure is not a peripheral concern. It represents a direct threat to population welfare and, consequently, to state stability. The exposure of this vulnerability under the conditions of the American security umbrella will not be readily forgotten.

The Hormuz dilemma facing Gulf governments is structurally acute. Their dependence on the strait – for oil export revenues, for food imports, for the full range of consumer and industrial goods their economies require – is as great as that of any state on earth. And yet the political constraints operating on Gulf governments prevent any public acknowledgement of this dependency in the context of the current conflict, for fear of being perceived as taking a position against Washington or in favour of Tehran. Gulf states are, in effect, trapped in a conflict they did not initiate, whose costs they are absorbing, and whose resolution they cannot publicly advocate. Strategic entrapment of this kind, sustained over time, generates deep institutional resentment. And institutional resentment, in the strategic context, becomes the precondition for realignment.

The United States may succeed in its military objectives against Iran. If that outcome is achieved while permanently eroding the confidence of Gulf partner states in American reliability as a security provider, the strategic ledger will record a tactical success and a generational loss.

The long-term recomposition: energy routes, the transition, and American credibility

The structural consequences of the Hormuz disruption extend well beyond the Gulf region and will prove resistant to reversal once the underlying investment decisions have been made.

Asian energy consumers – China, India, Japan, and South Korea, which collectively absorb over 80 percent of the crude oil and LNG transiting the strait – are not adopting a passive posture while awaiting the strait’s reopening. China is accelerating overland pipeline imports from Russia and Central Asia, and has formally incorporated the Power of Siberia-2 pipeline through Mongolia into its 2026–2030 strategic development plan[15]. India’s four major state energy companies – Indian Oil, Bharat Petroleum, Hindustan Petroleum, and GAIL – are in active negotiations with Angola’s Sonangol for alternative LPG and LNG supply, while simultaneously deepening procurement agreements with Australian producers[16], whose delivery times to Indian ports are less than a third of those from the United States. Japan and South Korea signed a bilateral LNG cooperation and supply-chain resilience pact in March 2026, coordinating alternative sourcing and reducing single-supplier exposure, while Japan accelerates nuclear restarts as a structural hedge[17]. These are not emergency contingency measures. They are capital investment decisions with twenty-year operational horizons. Once the physical infrastructure is built and the long-term supply contracts executed, the strategic geography of global energy does not revert to its prior configuration simply because a ceasefire has been reached in the Persian Gulf.

The position of the United States in this dynamic is characterised by a sharp and consequential divergence between short-term commercial gain and long-term strategic cost.

The position of the United States in this dynamic is characterised by a sharp and consequential divergence between short-term commercial gain and long-term strategic cost. As the world’s largest oil and gas producer, the United States benefits commercially from elevated crude prices driven by Gulf supply disruption. American shale exports are reaching markets at a significant premium. In the near term, Washington is in the position of a major supplier monetising a crisis whose conditions it helped to create. For some constituencies within the current administration, this represents an acceptable or even desirable strategic outcome.

The longer-term calculation, however, runs in the opposite direction. The credibility of American maritime leadership – the foundational proposition that has underpinned the international trading order since 1945 – rests on the premise that the United States is both willing and able to maintain freedom of navigation in international waterways. The 2026 Hormuz crisis has placed that premise under serious strain. Not because of any demonstrated deficiency in American naval capability, but because the United States is now perceived, across a significant portion of the international community, as an actor capable of precipitating the maritime crisis it formally claims to prevent. This perception – once established in the institutional memory of governments, port authorities, shipping companies, and commodity markets – is not readily reversed by subsequent reassurances.

The energy transition is likely to emerge as one of the more durable unintended structural consequences of this conflict.

The energy transition is likely to emerge as one of the more durable unintended structural consequences of this conflict. European and Asian policymakers have, for over a decade, framed the decarbonisation agenda in predominantly environmental and climate terms. The political coalitions required to sustain that argument have been difficult to construct and prone to erosion under short-term economic pressure. The 2026 Hormuz disruption introduces a new and politically far more powerful argument into the policy calculus: dependency on Gulf hydrocarbons is a strategic liability, not merely an environmental one. The political consensus required to accelerate investment in renewable capacity, nuclear energy, grid storage, and demand-side efficiency – a consensus that has been frustratingly incomplete in the face of energy sector lobbying and short-term industrial interests – is now available in a form that no previous policy argument had been able to generate.

What Europe must do – and is not doing

Europe will not be insulated from the consequences of this conflict by the fact of its non-participation. The migration flows, energy market repricing, nuclear proliferation risk, regional fragmentation, and hybrid security threats that this war is generating do not terminate at the EU’s external borders. They will manifest in European capitals regardless of the decisions, or failures of decision, made in Brussels, Berlin, and Paris.

The G7 Foreign Ministers’ meeting of 26-27 March 2026 produced language, from several European participants, invoking the concept of a “new world order”. The impulse behind this formulation is understandable – the scale of the strategic disruption underway does carry the character of rupture. The formulation is, however, analytically imprecise in ways that have policy consequences. The foundational architecture established in 1945 – the United Nations Charter, the prohibition on aggressive war as an instrument of state policy, the principle that international peace constitutes a common good subject to collective security (not defence) – has not been formally abrogated. What has changed is something more specific: the recognition, now no longer deniable, that while the strategic tempo in international affairs continues to be set by Washington, Washington’s tempo is no longer reliably aligned with European interests, strategic priorities, or conceptions of international order.

Europe must now make choices it has postponed for a generation.

This is not, in fact, a new world. It is the world as it has been for a considerable period – one that European institutions and governments have consistently chosen not to engage with in its full complexity, because doing so would have required politically costly decisions about defence investment, strategic industrial policy, and the development of a European strategic autonomy and capacity. What this conflict has done is eliminate the space for continued deferral. The comfort of strategic ambiguity is no longer available. Europe must now make choices it has postponed for a generation.

The post-conflict reconstruction phase will represent the point at which European leverage is most concentrated and most actionable.

The post-conflict reconstruction phase will represent the point at which European leverage is most concentrated and most actionable. The economic reconstruction of a post-conflict Iran – or the stabilisation of a fragmenting one – will require financial frameworks, governance architecture, sanctions relief mechanisms, and diplomatic recognition processes that only the European Union, with its combination of market scale, institutional capacity and, above all, normative credibility, can provide at the necessary level. That leverage is real. It is also conditional: it exists only to the extent that Europe arrives at the negotiating table with a coherent, unified position, a defined set of political conditions, and both the institutional and political will to link its reconstruction contribution to outcomes that serve European strategic interests.

What European institutions cannot afford is to finance, yet again, stabilisation efforts shaped by other actors’ strategic objectives without securing meaningful influence over the political outcomes those efforts are intended to produce. 

What European institutions cannot afford – and what precedent from Iraq, Afghanistan, and Libya suggests remains the default – is to finance, yet again, stabilisation efforts shaped by other actors’ strategic objectives without securing meaningful influence over the political outcomes those efforts are intended to produce. The post-conflict order of the broader Middle East and Gulf region will be the defining strategic question of the next decade. The decisions made in the coming eighteen months regarding sanctions architecture, nuclear verification, Gulf security guarantees, and the political future of Iran will shape regional order for a generation – pending resolution of the conflict. If European engagement in that process is limited to the provision of reconstruction funding without strategic conditionality, the cost will be borne by European citizens for years without a commensurate return in security, stability, or influence.

[1] The Joint War Committee (JWC) is a body of senior underwriters from Lloyd’s of London and the International Underwriting Association (IUA) that assesses maritime conflict risk globally. It publishes periodically updated “Listed Areas” – zones requiring advance notification to insurers and attracting substantially elevated war-risk premiums, often negotiated on a single-voyage basis. Its designations carry no regulatory authority but function in practice as the industry standard: when the JWC lists a zone, standard hull war-risk coverage for transiting vessels is effectively suspended, with immediate systemic consequences for commercial shipping decisions. In March 2026, the Committee extended its Listed Areas to cover the Persian Gulf and Gulf states hosting US military assets, triggering the cascade of insurance and logistics disruptions described in this article.

[2] US Energy Information Administration (EIA), “Amid Regional Conflict, the Strait of Hormuz Remains Critical Oil Chokepoint”, Today in Energy, 16/06/2025.

[3] Carnegie Endowment for International Peace, “The Other Global Crisis Stemming from the Strait of Hormuz’s Blockage”, Emissary, 12/03/2026.

[4] The three primary fertiliser categories transiting Hormuz are nitrogenous fertilisers (urea and ammonium nitrate, derived from Gulf-produced ammonia), and phosphate-based fertilisers. Gulf states collectively account for 43-49 percent of global seaborne urea exports, approximately 25-30 percent of globally traded ammonia, and a significant share of phosphate exports. South Asia and Sub-Saharan Africa are disproportionately exposed: India sources over 40 percent of its urea and the majority of its ammonia imports from the region, while Sub-Saharan Africa – where fertiliser application rates are already among the world’s lowest – depends on Gulf states for approximately 25-35 percent of total fertiliser supply.

[5] See CSIS, “Chokepoint: How the War with Iran Threatens Global Food Security”, 10/03/2026.

[6] See above: Carnegie Endowment for International Peace, “The Other Global Crisis Stemming from the Strait of Hormuz’s Blockage”, Emissary, 12/03/2026.

[7] Reuters, “Which Economies Will Hurt Most from Iran War?”, 20/03/2026.

[8] Council on Foreign Relations, “U.S. Forces in the Middle East: Mapping the Military Presence”,  23/06/2025.

[9] The defence relationship between France and the United Arab Emirates is anchored in a bilateral Defence Cooperation Agreement signed on 18 January 1995 after two decades of close political and military ties. Under that agreement, France committed to the UAE’s defence in the event of external aggression, and the UAE granted France permanent military basing rights. The arrangement was formalised into a permanent military installation – Camp de la Paix, Abu Dhabi – inaugurated by President Sarkozy in May 2009. The base hosts between approximately 500 to 700 French Army, Navy, and Air Force personnel and is positioned to face the Strait of Hormuz directly, giving France a permanent operational footprint at the Gulf’s most strategically sensitive point. The partnership encompasses regular joint exercises, defence industrial cooperation – including the landmark 2021 order for 80 Rafale fighter jets, the largest single French arms export in history – and a mutual assistance clause that, in principle, obligates France to respond to a military attack on the UAE – which it did at the highest of the Hormuz crisis.

[10] The United Kingdom’s defence relationship with Oman is among the longest-standing bilateral security partnerships in the Gulf, rooted in historical ties predating Omani independence. It was substantially updated and formalised through the Joint Defence Agreement (JDA) signed in Muscat on 21 February 2019 by UK Defence Secretary Gavin Williamson and Omani Minister for Defence Affairs Badr Bin Saud, and ratified by Royal Decree 42/2019. The JDA provides the UK with long-term access to the Duqm Port Joint Logistics Support Base – a deep-water facility deliberately located south of the Strait of Hormuz, outside the primary Iranian threat envelope – and to the Omani-British Joint Training Area (OBJTA) near Duqm, enabling large-scale combined-arms exercises, armoured manoeuvres, and integrated air support training. In exchange, the UK committed £3 billion over ten years to Gulf regional security. A further annex agreement was concluded in 2023, refining access arrangements and implementation modalities. Unlike the US basing framework – which rests on an implicit energy-for-security compact – the UK-Oman arrangement is a formally ratified treaty with defined mutual obligations, placing it on a qualitatively different legal and political footing.

[11] China’s defence relationship with the Gulf has evolved from arms sales into a comprehensive strategic architecture. Saudi Arabia and the UAE both signed Comprehensive Strategic Partnership Agreements with Beijing – the UAE in 2018, Saudi Arabia in December 2022 during Xi Jinping’s state visit to Riyadh.

[12] The foundational instrument is the UAE-India Defence Cooperation Agreement (2003), which established frameworks for military training, naval cooperation, and maritime pollution control. That agreement was substantially upgraded on 19 January 2026, when UAE President Mohamed bin Zayed Al Nahyan’s state visit to New Delhi produced a bilateral Strategic Defence Partnership letter of intent, a $3 billion Indian arms procurement package, and a ten-year LNG supply contract between ADNOC Gas and Hindustan Petroleum.

[13] The rivalry between IMEC – the India-Middle East-Europe Economic Corridor, championed by the United States and its Western partners – and BRI – China’s Belt and Road Initiative, developed alongside Russia, Pakistan, and Iran – reflects a broader struggle to shape the arteries of global trade and influence. The current military conflict involving Iran risks directly threatening the strategic calculus underpinning both projects, as it disrupts Gulf energy flows and forces regional states to recalibrate their alignments. For India, such instability confirms the necessity to anchor Gulf partners – particularly the UAE and Saudi Arabia – within the IMEC framework, deepening New Delhi’s strategic and economic footprint in a region where China has also made significant inroads. Beijing, conversely, stands to lose a key BRI node and a critical energy supplier, compelling it to intensify its courtship of Gulf monarchies to preserve its supply chain resilience. As indicated by Zaki Laïdi and Yves Tiberghien in their article “Hedgers : les nouveaux non-alignés”, Le Grand Continent, 30/03/2026, over the past three decades, virtually eight countries studied (India, Indonesia, Vietnam, Brazil, Saudi Arabia, the UAE, South Africa, and Qatar) have reduced their trade dependence on the United States. All eight countries have massively expanded their trade ties with China, which is now the primary source of imports for six of them (accounting for between 17% and 39% depending on the country). This commercial shift illustrates the decline of American economic centrality to the benefit of Beijing across the Global South, a trend that the Trump administration’s trade war risks amplifying even further. The Iran war thus risks transforming the Gulf into a theatre of intensified Sino-Indian competition, where infrastructure investment, energy diplomacy, and security partnerships become instruments of geopolitical positioning.

[14] Gulf states supply over 90 percent of drinking water through desalination for Kuwait and Bahrain, 86 percent for Oman, 70 percent for Saudi Arabia, and over 99 percent of Qatar’s drinking water. See Arab Center Washington DC, “The Costs and Benefits of Water Desalination in the Gulf”, 12/04/2023.

[15] See Oxford Institute for Energy Studies, “Disruption in the Strait of Hormuz: Implications for China’s Energy Security”, Michal Meidan, March 2026. See also The Diplomat, “How the Iran War Could Boost Russia’s Role in Asia’s Energy Future”, 17/03/2026.

[16] See for example Business Today (India), “Why India Will Look at Australia, Russia over US for LNG”, 19/03/2026.

[17] See Energy Intelligence, “Gulf Crisis Exposes Japan, South Korea’s Transition Strategies”, 25/03/2026

Dimitris Kollias, Research Fellow at ELIAMEP, argues that Artemis II signals the consolidation of a new space age in which the Moon is becoming a strategic, economic, and geopolitical frontier shaped by rival US- and China-led blocs, expanding commercial power, and growing competition over resources, rules, and orbital infrastructure. He contends that Europe remains relevant but structurally constrained by fragmentation and slow institutional adaptation, even as space is increasingly tied to security, competitiveness, and digital sovereignty. For Greece, he argues, this shift creates an opportunity to build selective strategic relevance through Earth observation, secure communications, maritime awareness, civil protection, and the integration of satellite infrastructure with sovereign AI and data-processing capacity.

Read the ELIAMEP Explainer here.

Rapid advancements in the field of Artificial Intelligence (AI) are expected to deliver significant economic and productivity benefits. The EU, which risks returning to a low-growth path, would benefit from the development and adoption of AI systems. However, in almost all key metrics, the EU lags far behind the US and China in AI. To reverse this trend, Europeans must tackle the structural causes that have held back AI companies, including Single Market barriers and the lack of VC funding. Europeans should also focus their efforts on open-source AI leadership to boost business adoption. Greece would also benefit significantly from these EU-wide reforms. But at the same time, Greece will need to pursue its own vertical niche in AI in order to become an AI exporter.

• The capabilities of AI systems have improved significantly in the last decade. Today’s AI systems can process different types of information, such as text, video, audio, code, and solve complex reasoning challenges. 

• Due to these technical advances, AI systems can help businesses automate tasks, enhance human workers and deliver new services. This AI transformation could deliver a 7-15% increase in global GDP, in the next decade. 

• However, as the European Union (EU) lags behind the development and adoption of AI systems, it may lose out on the economic and strategic benefits that the technology provides. 

• The EU’s AI lag could be attributed to structural barriers that have prevented the creation and scaling of AI solutions. These include the barriers of the Digital Single Market, the lack of access to high-quality funding and the inability to translate Europe’s scientific excellence into concrete market outcomes. 

• The EU’s current approach to AI, which includes initiatives such as the AI Act and the AI Continent Action Plan, must be updated accordingly to address these structural challenges and provide effective incentives for the emergence of European AI frontrunners. 

• As part of the EU, Greece would benefit significantly from such reforms. At the same time, Greece’s limited resources mean that the country’s position in this field can only be improved by pursuing advantages in vertical AI domains, such as agriculture and climate resilience.

Read here in pdf the Policy paper by Giorgos Verdi, Policy Fellow at European Council on Foreign Relations (ECFR).

Technical advances in AI

The capabilities of AI systems have been progressing rapidly over the last decade. In 2017, AI exceeded human performance in both image and speech recognition. By 2022, the release of the AI system ChatGPT had captured the world’s attention with its ability to perform language-based tasks. The virality of ChatGPT’s release also showcased to the wider public that AI systems had achieved the capacity to perform some economically-valuable tasks.

Since then, AI development has been marked by further qualitative leaps. Today, cutting-edge AI systems are multimodal: they can process text, audio, images, video and computer code. They also showcase notable improvements in their ability to solve complex reasoning challenges by breaking down multi-step problems into intermediate steps. Leveraging these algorithmic innovations, AI systems achieved gold-medal performance in the International Mathematics Olympiad in 2025 and have surpassed PhD-level human experts in science tests.

Besides algorithmic innovations, improvements in AI capabilities have also been made due to the growth in computational resources and available training data. This correlation between more compute, data, parameters and model performance has been described by researchers as ‘scaling laws’. Under the current paradigm, developers are in need of more powerful computer resources and new data sets in order to train ever larger models and achieve new breakthroughs.

Despite these trends, AI development is still faced with certain limitations. AI systems often generate misleading outputs and fabricated data. The spatial capabilities of AI – the prerequisite for the execution of physical tasks – remain far from human level. AI systems also perform poorly in long-horizon planning and execution. This paradox has led researchers to characterise the status of the AI frontier as uneven or ‘jagged’. AI excels in domains where machine-readable data is available but underperforms in tasks that are unstructured or ambiguous.

Economic implications of AI

Technical advancements in AI systems can have a significant economic impact, both in the world and in Europe. AI can provide economic benefits by helping businesses to automate tasks, enhance human workers’ capabilities, and roll out new services. As a result, AI’s economic impact is expected to span multiple domains and industries. The OECD predicts that AI can be used in most industrial activities, from optimising machine systems to improving industrial research and development (R&D). AI could also boost automation in manufacturing, ensure timely and cost-effective maintenance, and guaranteeing stronger quality of products and processes. In healthcare, AI is already helping doctors to scan medical images in order to deliver faster and more accurate diagnosis. AI is also revolutionising drug discovery by extracting novel insights from complex biomedical data. In automotive, AI is used in driverless cars to recognise traffic signs and pedestrians.

AI-driven transformation across industries is then expected to drive economic growth. However, the magnitude of such growth has been contested. On one hand, Goldman Sachs predicts that AI could drive a 7% increase in global GDP (or almost $7 trillion) and lift productivity growth in the United States by 1.5% annually in the next decade. In a similar line, the McKinsey Global Institute predicts AI to increase global GDP by 1.2% annually and deliver an economic output of $13 trillion in the next five years. PwC’s estimates are even higher, with an expected increase to global GDP by 8-15%, in the next 10 years.

Other reports predict that AI will have a more modest macroeconomic impact. MIT Professor Daron Acemoglu estimates that AI will not lift global GDP more than 1-2% over the next decade with less than 0.1% annual gain in productivity. However, it must be noted that Acemoglu’s estimates rest on the assumption that only 5% of tasks can be performed more cheaply by AI systems than human workers. In turn, this estimate was based on a 2023 study when AI systems were much less capable. Finally, other approaches have tried to reconcile these differences and consider a scenario where AI systems raise US productivity by 0.5%. Under this assumption, real GDP per-capita could nearly be $7000 higher by 2035.

The uncertain impact of AI on economic growth can also be attributed to the ‘productivity paradox’ ingrained to technological transformations. For example, the productivity gains of electricity took 40 years to fully materialise after the first generating station was built by Thomas Edison. Similarly, information and communication technologies didn’t lead to expected productivity gains in the 1970s and 1980s. As Robert Solow described this productivity paradox in 1987: “You can see the computer age everywhere but in the productivity statistics”.

In order to explain why the productivity paradox occurs, researchers have argued that transformative technologies follow a ‘J-curve’ trajectory. The extensive investments which are required to integrate transformative technologies into organisations are often underestimated. Historically, there have been periods of considerable length in which unmeasured inputs are being built in order to complement the new transformative technology. For example, AI systems that are used to boost productivity also require investments in staff training, workflow redesign, data and compute infrastructure. These bottlenecks are likely to cause an initial dip in productivity – the downward slope of the J-curve. However, once these adjustments are made, firms tend to experience a productivity upswing.

If then, AI systems are to drive economic growth – albeit within a longer timeline – it could present a significant economic opportunity for the European Union (EU).

If then, AI systems are to drive economic growth – albeit within a longer timeline – it could present a significant economic opportunity for the European Union (EU). Since 2000, productivity in the Eurozone has been on average 0,5% lower each year than the United States (US). This is mainly due to productivity growth in the information and communication sector and in professional services being weaker in the EU. As these two sectors make strong use of technological innovations, this shows that the EU has been less able to make use of digital technologies. If this trend persists, the consequences could be dire for the EU’s prosperity. However, the development and adoption of AI systems in the EU could help reignite productivity growth.

Besides productivity, AI could also contribute to address several of the EU’s challenges. The EU is faced with a demographic challenge, as the populations of several EU Member States peaked prior to 2025 and have now started to fall. The European population is also ageing, creating generational imbalances. This trend will generate fiscal challenges, through pressures on pension spending and the effects on the tax base. AI systems, and their potential productivity benefits, can help offset some of the pressures that demographic trends will impose on the EU’s economy.

In addition, the EU has launched an agenda of military rearmament in the face of Russia’s increased aggression and the gradual retreat of the US from European security. To achieve this, the EU adopted ReArm Europe which aims to mobilise €800 billion of defence expenditures. AI systems can play a role in this endeavour as their integration within military forces promises to provide cost-effective solutions. A report by RAND, the American think-tank, estimates that AI solutions can save US Air Forces $25 million per month – only on the maintenance of A-10C aircrafts. Similarly, the integration of AI into French Ceasar artillery pieces could provide a 30% savings in ammunition. Overall, the military applications of AI systems are likely to extend the economic benefits of the technology beyond the civilian realm. As a result, AI systems can also offset some of the fiscal pressures that increased military spending presents to European governments.

All in all, the technical advances in AI systems promise to transform industries and provide productivity benefits. Even if the optimistic projections of experts are not realised, the EU would benefit significantly from the development and adoption of AI systems. The solutions to the EU’s major challenges – from its growth and demographic problems to rearmament – should take into consideration the novel and advanced capabilities of AI systems.

The EU’s challenges in AI

Despite the potential benefits of AI systems, the EU is faced with a series of challenges in their development and adoption. As a result, the EU and its Member States may end up missing on the advantages that the technology could provide.

…the EU lags behind both the United States and China in most metrics of AI development and innovation.

Firstly, the EU lags behind both the United States and China in most metrics of AI development and innovation. According to Stanford’s AI Index, the US developed 40 cutting-edge AI models in 2024. In the same year, China developed 15 while the EU developed 3 – all of them by the French company Mistral. In the same year, US AI companies attracted $109 billion in private investments, while EU AI companies attracted $14.9 billion. The EU also lags behind the US in terms of AI entrepreneurship: 1143 AI companies were newly funded in the US in 2024, compared to 335 in the EU.

China has also surpassed the EU in terms of scientific publications in AI with 23,695 related publications in 2024, compared to 10,055 papers published by EU scientists. In addition, China accounts for 69.7% of the world’s AI patents while the country also dominates in AI robotics, surpassing the rest of the world combined in installations. According to an MIT study, Chinese has also overtaken both American and European open-source AI models, in terms of worldwide popularity.

As a result of their distinctive advantages, the US and China are home to multiple companies that develop frontier AI models. The US boasts the presence of companies such as OpenAI, Google, Anthropic, xAI and Meta. Meanwhile, Chinese start-ups DeepSeek and Moonshot have released models that are on par with those of OpenAI, while companies Tencent and Alibaba have acquired world class capabilities.

…only one European company currently competes at the frontier of AI development: the French start-up Mistral.

As a result of the EU’s gaps, only one European company currently competes at the frontier of AI development: the French start-up Mistral. However, Mistral’s models have not yet matched or surpassed the performance of their American and Chinese counterparts. In addition, Mistral’s limited funding has put the survival of the company in question. While OpenAI’s market valuation reached $500 billion in October 2025, Mistral has reached a market valuation of $14 billion. As a result, there have been reports that US company Apple has explored the acquisition of Mistral. If such a deal was to be realised, then the EU would be left with no homegrown AI developers at the frontier.

Besides AI models themselves, the EU lacks capacity in various parts of the AI value chain. AI chips that are used to train AI models are designed by US companies Nvidia and AMD and manufactured in Taiwan by TSMC. AI data centres are also increasingly concentrated in the US which hosts 75% of the world’s AI supercomputers, according to some sources. The EU, on the other hand, hosts 2-5% of the world’s AI supercomputers.

Finally, the EU has fallen short of its objectives when it comes to AI adoption. Even when the EU imports AI models and capabilities from elsewhere, businesses seem reluctant to take advantage of its productivity benefits. According to the EU’s Digital Decade report, 18% of European small and medium-sized enterprises (SMEs) have taken up AI until 2025. However, the EU’s objective is for 75% of SMEs to take up AI until 2030. It is highly unlikely that the EU will reach its target. In the US, different sources have estimated SME AI adoption to be between 20% and 40%, due to methodological differences.

Slow adoption of AI means that the productivity dividends over the next few years could be lost.

These challenges in the development and adoption of AI will hinder the ability of the EU to take advantage of the economic benefits of AI. Slow adoption of AI means that the productivity dividends over the next few years could be lost. Lack of AI development capabilities also means that Europeans will have little control over the direction of the technology. In 2025, the Biden administration decided to limit the export of American AI chips to 18 EU Member States, including Greece. Practically, these restrictions would have meant that the majority of EU countries would be unable to acquire AI data centres. Although the Trump administration revoked President Biden’s decision, this incident showcased how a lack of indigenous AI development capabilities can leave European vulnerable to external shocks.

Lastly, the above metrics point towards a growing gap between the US and China on one hand, and the EU on the other. This means that the relative economic and military strength of Europe is likely to be diminished as the two superpowers take advantage of AI. Moreover, other middle powers, such as Saudi Arabia and the United Arab Emirates have made significant efforts to become more competitive in the technology and direct vast amounts of capital into AI capabilities. This trend is likely to put more pressure to the EU who finds itself competing with an ever growing amount of actors in the domain of AI.

The causes of EU’s AI lag

Even if the EU falls behind China in terms of AI publications, the bloc remains a world-leading centre for AI research, talent and universities. As a result, the EU’s AI lag is caused by its inability to translate scientific excellence into concrete market outcomes. In order to improve the EU’s position in AI, the structural reasons that have led to this situation must be understood.

One of the most common points of criticism against the EU’s digital policy has been its focus on imposing strict regulations and governance frameworks on innovators. In the 2019-2024 mandate, the European Commission adopted 93 pieces of legislation that were of relevance to technology innovators. According to Mario Draghi, these Regulations and Directives have been restrictive and inconsistent, and in turn, have hindered innovative companies in Europe at every stage of their growth.

Some experts have tried explaining the EU’s AI lag based on this argument. In 2024, the EU adopted the Artificial Intelligence Act, the world’s first law to regulate AI systems. The regulation seeks to protect consumers and citizens from the harms that high-risk AI systems impose. However, it could also impose high costs of compliance and may have driven AI innovators away from building models in the EU. According to some estimations, the costs of complying with the AI Act’s legal obligations for so-called ‘high-risk’ AI systems may reach the range of €193,000 and €330,000. Besides the AI Act, innovators are also faced with legal uncertainty stemming from other regulations.

…effective regulation can provide benefits for European AI businesses.

However, the EU’s regulatory approach to AI can also bring benefits to businesses and consumers. Firstly, adherence to strict legal standards can help boost consumer trust in AI. But if left unchecked, the risks that stem from the technology can deter its adoption. Thus, effective regulation can provide benefits for European AI businesses. Secondly, the EU’s initiative to legislate on AI harmonised rules across Member States and prevented the risk of regulatory fragmentation. Thus, the alternative to the EU’s AI Act would have likely been the creation of 27 different regulatory regimes, which would have imposed a higher burden on businesses.

In addition, the EU’s innovation lag cannot be attributed to regulation alone. Before 2016, the EU’s Single Market was not heavily regulated and was only governed by two pieces of legislation: the 2000 e-Commerce Directive and the 1995 Data Protection Directive. Despite the lack of digital regulations, the EU still failed to produce successful technology companies in that period. Most of the EU regulations commentators have criticised, such as the AI Act and the Digital Services Act (DSA) were adopted in the early 2020s. As a result, other structural causes should be examined to understand the EU’s inability to nurture frontrunners in AI and in digital technologies more broadly.

Columbia Professor Anu Bradford has argued that alternative factors, other than regulation, have held the EU’s digital and AI economy back. One of the most major impediments has been the lack of a European Digital Single Market. While some steps have been taken towards further integration, the European market remains fragmented for AI companies that require scale in order to grow. Companies are required to navigate 27 different legal regimes for businesses, including differences in labour laws and tax systems. According to the IMF, Europe’s internal barriers are equivalent to a tariff of 110% for services. That puts European start-ups in a disadvantage compared to their US and Chinese counterparts that begin their growth journeys in largely homogenous markets.

Another significant impediment has been Europe’s shallow and fragmented capital markets.

Another significant impediment has been Europe’s shallow and fragmented capital markets. Innovative companies in the US have benefited largely from the existence of a vibrant Venture Capital (VC) ecosystem, in which firms are more willing to invest in high-risk, high-reward technology start-ups. Whereas the US represents 52% of the world’s venture capital market, the EU only represents 5%. European companies also struggle to attract American VC investments, as geographical proximity plays a role in firms’ decisions, according to empirical data. As a result, European innovative companies have to rely on risk-averse banks in order to finance their operations.

Taken together, these alternatives variables provide a more comprehensive explanation of the EU’s AI lag. While the costs of complying to the EU’s digital regulation can be excessive, these laws also provide trust for consumers and certainty for businesses. At the same time, the EU’s internal fragmentation and the lack of VC funding are more likely to be responsible for the lack of European AI capabilities. Any effort to reverse Europe’s AI gaps must start by addressing these structural challenges.

The EU’s AI strategy and the way forward

Europe’s AI lag has prompted officials in Brussels to expand the EU’s AI strategy beyond product regulations and adopt new sets of measures to spur innovation. In April 2025, the European Commission adopted the AI Continent Action Plan to accelerate efforts across five domains: compute infrastructure, data, skills, and compliance. While the AI Continent Action Plan is a welcome step, it does not effectively address the root causes of the EU’s bottlenecks, as described above. Therefore, an additional set of policy measures will be required to improve the current approach and allow Europeans to reap the strategic and economic benefits of AI.

In the first quarter of 2026, the European Commission is expected to put forward a new proposal that will aim to tackle internal barriers for start-ups and lead to a more integrated Digital Single Market. This has been dubbed the ‘28th regime’ as it will establish a single and harmonised set of EU-wide rules that would allow innovative AI companies to scale, instead of having to deal with 27 different regimes. At the 2026 World Economic Forum, the President of the European Commission added that the proposal would allow anyone to register a company fully online and within 48 hours.

While these are steps in the right direction, it is not clear yet whether the initiative will take place via a Regulation or through a Directive. The European Parliament’s opinion to introduce a Directive is likely to lead to a fragmented transposition and kill the spirit of the policy. It is then important that the European Commission swiftly implements this idea as a Regulation.

For AI companies to scale across Europe’s 27 different markets, it is also urgent that they are able to raise private funding. The American VC ecosystem has benefited from leveraging institutional investments, such as those coming from pension funds and insurance funds. This model is challenging for the EU to replicate in the short-term as its pool of pensions is smaller. Member States could this aim to deliver attractive returns to pensioners and finance innovation by encouraging supplementary pension schemes through beneficial tax treatments or applying opt-out mechanisms.

However, Europe still benefits from a deep pool of insurance capital, which remains underexposed to VC. Member States should signal their political backing to encourage insurance funds and other institutional investors to rebalance their portfolios towards innovation. A mere 0.1% shift in asset allocation of insurers assets would channel an additional €10 billion into Europe’s VC ecosystem.

Besides market access and investments, innovators will benefit from regulatory certainty. Although the EU’s AI Act should not be held responsible for the bloc’s AI lag, it could still prevent the creation of new AI firms if its implementation is not done well. To this end, the European Commission introduced the Digital Omnibus on AI Regulation with the aim to simplify the AI Act and ease the burdens on innovators. However, this proposal has come under scrutiny from civil society organisations as it threatens to undermine critical safeguards, such as the protection of personal data. While the EU should pursue simplification, especially in compliance reporting requirements for SMEs, the removal of the AI Act’s safeguards could hurt the already declining consumer trust in AI systems.

But even if the above measures spur the creation of new AI firms, these innovators are expected to face some additional challenges. The EU’s limited compute capacity in AI, as described above, means that these companies will be forced to form a partnership with an American large company in order to access compute resource and train their models. In order to avoid these dependencies form consolidating, it then becomes urgent that the EU be able to offer its own compute resources to its aspiring frontrunners.

Here, the AI Continent Action Plan addresses this gap with the EU’s AI Gigafactories and AI Factories programme . The Gigafactories initiative specifically will receive €20 billion investments in order for each to contain 100,000 cutting-edge chips and help train large and complex AI models. However, industry representatives have expressed concerns that no more than 70 companies or consortia will be able to take advantage of such infrastructure. Therefore, it is crucial that these efforts are complemented by a concrete set of incentives for the creation of new AI start-ups and firms.

…there is room for European support to fund new breakthroughs and link the development of AI models to existing demand.

It then remains to be seen what sort of models European start-ups will build on top of this infrastructure. While the EU and its institutions should refrain from choosing champions, there is room for European support to fund new breakthroughs and link the development of AI models to existing demand.

In November 2025, France and Germany announced an upcoming Frontier AI Initiative that will be launched in Q1 2026, in collaboration with the European Commission. According to reports, it will create a nonprofit lab that will drive research which has either been overlooked or is not viable for market players to pursue. If done effectively, this work can be crucial as more and more experts have argued that the current paradigm of AI development is reaching its limits. The Frontier AI Initiative should pursue strategic bets on frontier AI, including bets on spatial and physical intelligence.

Finally, the EU should pursue better links between AI development and AI adoption in order to ensure that the technology is viable and that it yields concrete benefits for Europeans. In October 2025, the European Commission published the Apply AI Strategy which included sectoral flagship initiatives that aim to boost AI adoption across 10 industrial sectors. Moreover, the Apply AI Strategy promotes a ‘buy European’ approach for the public sector with a focus on open-source solutions. This last part is likely the most crucial component of the Strategy and should be extended to the private sector as well for the EU to fix its AI adoption gap.

The EU should set specific quotas for its AI funding instruments – whether the AI Gigafactories or investAI – to be dedicated to the development of open AI solutions.

Open-source AI systems and open weights AI systems grant users access to study how the system works and modify it for any purposes. As a result, they are highly customisable and cheaper that proprietary AI modes. An MIT study found that closed AI models cost users six times as much as open ones despite offering only moderate performance advantages. As a result, a proliferation of open AI models is likely to boost adoption within Europe’s low-resource actors, such as SMEs. In order to promote the development of European-made open AI models, and mitigate the surging popularity of Chinese open models, there is a need for concrete set of incentives that will encourage start-ups to follow this path. The EU should set specific quotas for its AI funding instruments – whether the AI Gigafactories or investAI – to be dedicated to the development of open AI solutions.

In conclusion, the way ahead for the EU’s AI strategy lies in breaking away from the false dilemma between regulation and accelerated innovation. The competitive dynamics between the US and China on AI have prompted some experts and industry representatives to push back against regulatory safeguards. More recently, the feud between the US Department of War and the AI firm Anthropic exemplified this debate, as the firm refused to drop its safety red lines over the use of its tools by the US military.

But as seen above, effective guardrails can boost trust and propel innovation forward. In contrast, an unregulated environment is likely to generate mistrust and public backlash. Five times as many Americans are concerned than are excited about AI, which has led to calls to slow down AI acceleration in the US. Even in the realm of defence, where safety red lines can be perceived as inherent weaknesses, the absence of guardrails can manifest as inefficient resource allocation, friendly fire incidents or the misidentification of targets. The EU should continue to pursue its trustworthy approach to AI development at the same time as new policies are implemented to boost innovation within that framework.

Greece’s AI challenges and prospects

As an EU Member State, Greece is facing many of the challenges mentioned above. As a smaller economy with a limited market of business and consumer customers, Greece would benefit from these broader reforms at the EU level. For example, while Greece is home to an impressive number of 188 AI start-ups, most of them are concentrated in early stages of funding. This trend aligns with the structural challenge that Europe faces in attracting late-stage investment and turning start-ups to scale-ups. As a result, Greece should promote relevant reforms at the EU-level. The upcoming Greek Presidency of the Council of the European Union in the second half of 2027 present a window of opportunity for the country to set the agenda on these points.

Besides EU-level reforms, much can be done at the national level in order for Greece to seize the opportunities of the AI revolution. It is noteworthy that at the 2023 NeurIPS – the world’s top AI conference – 11% of the top papers selected for an oral presentation had a Greek co-author. The selectiveness of NeurIPS indicates that Greece produces world-class AI researchers and developers. However, it is also the case that Greek AI talents often work and conduct research abroad. The main aim of Greece’s AI strategy should then be to become attractive to its own AI professionals and provide them with the necessary conditions that will turn Greece into an AI exporter.

The resource-intensive nature of AI development means that smaller countries can only improve their position through dominance of specific vertical AI industries. 

First of all, this would require that Greece finds and pursues its own distinct niche in AI. The resource-intensive nature of AI development means that smaller countries can only improve their position through dominance of specific vertical AI industries. To do this best, smaller countries need to use their national context to their comparative advantage. In 2024, the High Level Committee on AI published a Blueprint for Greece’s AI Transformation. While the document explores how Greece can enhance the business ecosystem, strengthen education, and support public administration, it refrains from defining and pursuing distinct advantages in niche areas of AI development within the private sector.

…as a significant agricultural producer within the EU, Greece could focus its limited resources on developing and exporting AI models in agriculture.

For example, as a significant agricultural producer within the EU, Greece could focus its limited resources on developing and exporting AI models in agriculture. This would empower Greek farmers through precision farming techniques and AI robots that can perform field work. It would also provide added value to Greek AI developers who would be able to collect high-quality data from the field and improve AI services in agriculture both in Greece and abroad. Initial support from the Greek Government and the EU may be required to help connect farmers to AI solutions and compensate for the lack of skills and trust. But as such solutions begin to scale, this market gap will likely be filled by the AI developers themselves who could become able to build AI solutions on-site and in close coordination with farmers.

Another example of a distinct niche that Greece could pursue is AI for climate resilience. AI systems can improve environmental monitoring and enhance early-warning systems for fires, heatwaves, draughts and water management. The development of Greek AI solutions that help predict such events can enhance preparedness and improve crisis relief for local communities. Moreover, Greek AI developers would be able to export their solutions to a number of public and private actors that face similar climate-related challenges, such as in Southern Europe, California or Australia.

Besides the relevance that these two AI niches hold for Greece, the country is also well-positioned to provide AI compute infrastructure to interested innovators. Greece will host one of the EU-funded AI Factories under the name ‘Pharos’ with the aim to accelerate AI innovation in health, the Greek language and culture and sustainable development. The project will be supported by a budget €30 million, over a period of 36 moths. Greek AI solutions in agriculture or in climate resilience should receive priority access to valuable computational resources through this initiative in order to encourage innovators to develop Greece’s niche.

Greece has the AI talent, and soon will acquire capabilities in AI compute infrastructure. Combined with the necessary reforms in the Digital Single Markets and in Europe’s VC ecosystem, this means that Greek AI innovators have the potential to become developers and even exporters of critical AI solutions. However, the current state of the AI competition forces smaller states to make targeted choices with their limited resources. Casting a wide net will stretch efforts thin and lead to suboptimal results. Instead, Greece should provide incentives for its talent to pursue excellence in one or two AI vertical domains.

Conclusion

AI may drive a significant economic transformation akin to the impact of the steam engine, the electric dynamo and the personal computer. But while past technological revolutions drove prosperity, they were not evenly distributed. The current characteristics of the AI landscape indicate that the European Union risks finding getting the short end of the stick. Without frontrunners that develop frontier AI systems and without businesses and workers that are able and willing to make use of AI, the economic benefits of the technology are likely to flow to the United States and China. Reversing this trend may be one of the most important challenges that Europeans face today. It will require tackling long-standing barriers and thinking creatively about the ways in which AI systems and applications can improve the lives of EU citizens. For an even smaller actor like Greece, this task seems daunting. In order to establish its presence in the AI revolution, the country will need to diagnose its strengths with honesty and hone a critical and unique niche in AI.

The policy brief by Ioannis Alexandris (Research Fellow, Wider Europe Programme – ELIAMEP & Researcher, think nea – New Narratives of EU Integration) and Dimitra Koutouzi (Defence Policy Analyst), “From Nuuk to Reykjavik: The High North’s geopolitical scramble and the consequences for the EU and its enlargement policy”, was prepared in the framework ELIAMEP’s initiative think nea – New Narratives of EU Integration, supported by the Open Society Foundations – Western Balkans.

This policy brief explores how the rapidly evolving geopolitical dynamics in the Arctic are intersecting with the European Union’s enlargement policy. Heightened strategic competition in the High North—combined with uncertainty surrounding the transatlantic security architecture—has reopened debates in Iceland about reviving its EU accession process. Against this backdrop, the brief examines how a potential Iceland track could reshape the EU’s broader enlargement agenda.

While Iceland represents a relatively “low-friction” candidate due to its deep regulatory alignment with the EU, its potential return to accession negotiations raises important questions about the coherence and credibility of the Union’s enlargement strategy. Progress with an advanced Nordic partner could generate political momentum for enlargement but may also risk overshadowing more politically complex accession processes in the Western Balkans and Eastern Europe. Countries that have waited over a decade in the accession queue may perceive accelerated progress for Iceland as evidence of a differentiated enlargement logic driven by geopolitical urgency rather than merit-based conditionality.

The brief therefore situates Iceland within the EU’s evolving enlargement landscape, highlighting how geopolitical considerations—including Arctic security, strategic autonomy, and shifting transatlantic relations—are increasingly shaping accession debates. Ultimately, it argues that the Union must balance strategic opportunities in the North Atlantic with the need to maintain credibility and fairness toward existing candidates, particularly in the Western Balkans. 

You can read the policy brief here.

Dr. Triantafyllos Karatrantos, Research Associate at ELIAMEP, analyzes the new European Union EU Counter-Terrorism Agenda, explaining how rapid changes in the digital environment, increasing online radicalization, and complex geopolitical developments make an adapted and strengthened strategy necessary.

In this context, the EU’s new institutional initiative aims to effectively address terrorism and violent extremism, both in the physical and digital domains, promoting a comprehensive and coherent response within the framework of the ProtectEU Internal Security Strategy.

Read the ELIAMEP Explainer here (in Greek).

The annual report prepared by Eda Gemi, Research Associate, ELIAMEP and Bledar Feta, Research Fellow, Wider Europe Programme, ELIAMEP for the OECD Network of International Migration Experts offers a comprehensive and analytically rich assessment of Greece’s migration landscape during 2024–2025, a period marked by moderated inflows, administrative modernisation, and a more securitised approach to border and asylum governance.

Drawing on the latest statistical data, legislative developments, and administrative practices, the report examines how Greece’s migration system is evolving amid demographic pressures, labour market needs, and heightened scrutiny over fundamental rights compliance. The analysis captures both quantitative trends and qualitative policy shifts, providing an authoritative overview of migration flows, legal residence, asylum procedures, integration policies, labour market participation, and citizenship acquisition.

You can read the full national report about Greece here.

You can read the 2025 edition of International Migration Outlook produced by OECD here.

Key themes explored in the report

• Migration flows and asylum trends: Arrivals surged in 2024 before moderating in 2025, while asylum applications declined and recognition rates fell. Persistent backlogs and a widening gap between arrivals and returns underscore structural imbalances. The period was further shaped by allegations of pushbacks and the temporary suspension of access to asylum procedures for specific categories of new arrivals.
• Legal residence and long-term settlement: The legally residing migrant population continued to expand, reaching 916,697 persons in October 2025. Naturalisation increased, particularly among second‑generation applicants, signalling deeper settlement patterns. Yet administrative delays and reliance on temporary certificates heightened precariousness for long-term residents.
• Labour market and integration: Migrant labour participation remained strong, with unemployment among foreign nationals dropping to 9.7% in Q3 2025. Integration governance consolidated further, especially for unaccompanied minors, while increasingly linking residence and protection to labour market participation, reflecting a shift toward conditional inclusion.
• Reception, enforcement, and border management: Island reception centre populations fell sharply, indicating decongestion. At the same time, enforcement intensified, particularly in return policy, while irregular stay apprehensions declined. These developments unfolded against a backdrop of growing domestic and international scrutiny.

A governance model at a crossroads

The period 2024–2025 emerges as a transitional yet tension‑filled phase in Greece’s migration governance, marked by a structural rebalancing between administrative consolidation and intensified enforcement. While arrivals moderated in 2025 after the sharp increase of 2024, pressures on the asylum system remain substantial, reflected in expanding backlogs, declining first‑instance recognition rates, and persistent disparities between arrivals and effective returns. Administrative digitalisation, procedural streamlining, and the expansion of selected legal and investment‑based migration pathways signal efforts toward institutional modernisation and closer alignment with EU standards. At the same time, a more restrictive and securitised orientation has taken hold, exemplified by the temporary suspension of access to asylum procedures for specific categories of new arrivals and the reinforcement of return enforcement mechanisms, developments that have heightened domestic and international scrutiny, particularly in light of allegations of pushbacks and broader concerns regarding compliance with fundamental rights obligations.

The legal residence framework continues to expand quantitatively, with growth in valid permits and consolidation of long‑term settlement patterns. Yet persistent delays in residence permit renewals and reliance on short‑term certificates have increased precariousness for long‑term residents, undermining legal certainty and stable socio‑economic integration. Integration governance has strengthened institutionally, especially for unaccompanied minors and other vulnerable groups, but the growing linkage between protection status and labour market participation reflects a shift toward conditional, economically driven inclusion.

Taken together, developments during 2024–2025 point to a migration governance model at a crossroads, where selective openness and administrative modernisation coexist with deterrence‑oriented measures and heightened enforcement. The long‑term sustainability of this evolving approach will depend on Greece’s ability to reconcile control objectives with procedural safeguards, social cohesion, and the protection of fundamental rights.