Secretary of the Treasury Scott Bessent in a meeting with President Donald Trump and Philippines President Ferdinand Marcos Jr., Jul. 22, 2025. (Official White House Photo by Daniel Torok)

1. As Iran renews attacks in the Middle East, Operation Economic Outcast marks a new stage in the conflict. But for the operation to succeed, Washington will need to get serious about enforcement.

• Status update: On August 30, U.S. forces struck Iranian rocket launchers on Larak Island, preempting an Iranian attempt to re-mine the Strait of Hormuz, days after President Trump stated that the U.S. Navy had finished clearing all mines from the strait’s international shipping lanes. The strikes were the first known U.S. military action against Iran since late July. Tehran retaliated with missile strikes on U.S. forces in Jordan and partners in the region. Still, Operation Economic Outcast remains the centerpiece of the administration’s Iran strategy. It aims to isolate Tehran from its remaining financial lifelines, starting with foreign banks.
• Economic Outcast in action: Treasury proposed a rule that would cut off five branches of Egypt’s Banque Misr in the UAE from the U.S. financial system, pending a 30-day public comment period. The five branches have processed about $1.8 billion for 103 suspected Iranian shadow banking fronts since 2024. They are part of a larger network Iran leverages to evade sanctions and access the U.S. financial system. “By acting against foreign banks that service this network, the Trump administration is applying a level of pressure rarely seen across administrations,” observes FDD’s Max Meizlish. The 30-day period also gives Egyptian and Emirati authorities a chance to address the misconduct before the rule takes effect.
• Turkey feels the heat: On September 4, Treasury moved from proposals to designations, blacklisting an Istanbul-based bank and two affiliates for routing Iranian oil revenue from China to Turkey and converting it into cash and gold. Banks tied to Iran will “continue to find out the hard way” that Washington is serious, warned Treasury Secretary Scott Bessent. The bank is small – two Istanbul branches, roughly $34 million in capital – but as Maleki notes, it grew 57% last year and multiplied its capital elevenfold. Ankara is on notice.
• Reforming the UAE: To bring Banque Misr into compliance, Treasury should press the bank’s UAE branches to close the implicated accounts and cooperate with further investigations into Iranian shadow banking networks, Meizlish tells us. The branches would also have to implement enhanced due diligence procedures for transactions that present an elevated risk of Iranian sanctions evasion. Treasury should apply these same standards UAE-wide, not just to Banque Misr. “Until Dubai undertakes substantial reforms to the permissive regulatory environment that has made it a magnet for illicit financial flows, these vulnerabilities will persist,” warns Meizlish.
• Target China next: Hong Kong is another major hub for Iran’s shadow-banking fronts, and Treasury should target one or more of the city’s banks with the same financial cutoff, explains Meizlish. Treasury should also add China’s Bank of Kunlun to the Specially Designated Nationals List. This designation would apply full blocking sanctions to the bank for facilitating Iranian business. It would also increase pressure on state-run China National Petroleum Corporation, the bank’s owner, to cut it loose and close off a key conduit for Iranian sanctions evasion, note Meizlish and FDD’s Janatan Sayeh.
• And Oman, too: Muscat is also complicit in Tehran’s sanctions evasion, explain FDD’s Ahmad Sharawi and Bridget Toomey. Iran’s U.S.-sanctioned Bank Melli and Bank Saderat remain operational in Oman and licensed by its central bank. Meanwhile, exchange houses in Muscat let customers hand over Omani rials and have the equivalent sum credited to accounts in Iran. Washington should give Muscat a firm deadline to shutter those banks and halt such transactions, the pair recommend. Oman should also revoke the licenses of entities backing designated Iranian airlines and petroleum networks. “If Muscat refuses or stalls, Treasury should begin imposing sanctions and correspondent-account restrictions on the Omani institutions involved,” Sharawi and Toomey conclude.
• Support Iranians in tandem: As Washington heaps financial pressure on Iran, the country’s economic outlook is cratering. This could rekindle internal turmoil, Sayeh and Meizlish note. If pressure fails to moderate Tehran’s negotiating stance, Washington should have a contingency plan to capitalize on renewed unrest, including ensuring that urban protest networks have sustained internet access, explains Sayeh. Congress can do its part by passing the FREEDOM Act (H.R. 6469 / S. 3360), the Iran Human Rights, Internet Freedom, and Accountability Act (H.R. 7622 / S. 3900), and the IRAN Act (H.R. 7380). These bipartisan bills would advance satellite internet connectivity for Iranians and ensure Tehran’s frequent blackouts can no longer isolate them from the world.

CIA Director John Ratcliffe speaking at Amazon Web Services Summit 2026 in Washington, D.C., Jun. 30, 2026. (@CIA via X)

2. With U.S. intelligence warning that Moscow may be preparing to escalate against NATO and nuclear threats resurfacing, the United States must send a clear message that NATO is united and help Ukraine keep Russia on the defensive.

• Threat against NATO: During CIA Director John Ratcliffe’s visit to Moscow last week, he reportedly warned Russia not to attack NATO member states. His trip comes after reporting on a U.S. intel assessment that Russian President Vladimir Putin could try to test NATO’s resolve with a limited assault on an allied country in the next few years. A weakening Russia may escalate to force a settlement on its terms. Moscow is already using hybrid warfare tools to test NATO’s cohesion, readiness, and political resolve.
• Russia has already started: Moscow has learned it can test NATO at its periphery without triggering a war, caution FDD’s Ivana Stradner and RADM (Ret.) Mark Montgomery. In the Baltic region, Russia has disrupted navigation systems, and spoofing incidents have misled Ukrainian drones into Baltic NATO airspace. Meanwhile, in Germany, three explosive-laden drones, resembling drones used by Russia in Ukraine, have been found around the Leipzig airport. On August 20, Romania said it destroyed a Russian-launched explosive-laden maritime drone near Europe’s largest offshore gas project, where hundreds of people were working. These incidents illustrate how Russia has been systematically probing European defenses and critical infrastructure while calibrating how far it can go without triggering Article 5.
• Building the pretext: To justify a possible attack on the Baltics, Russian officials are promoting the idea that the European states plan to launch an expanded hybrid war against Moscow, warn Stradner and Montgomery. Putin has also laid the “legal” groundwork, signing a law in May allowing Russia to deploy its military to protect Russian citizens detained or prosecuted overseas. “It gives the Kremlin a new legal justification for intervention in former Soviet states, and Russia’s neighbors should take notice,” caution Stradner and Montgomery.
• Nuclear threats, too: Beyond hybrid warfare, Russia is also engaging in nuclear saber-rattling. Last week, Moscow signaled that further escalation remains on the table, and some Russian officials reportedly discussed nuclear weapons as a last resort. But this is nothing new, Stradner lays out. Since its war on Ukraine began, Russia has drawn and redrawn nuclear red lines to keep Washington second-guessing its support for Kyiv. Ukraine’s partners have crossed them repeatedly to support Ukraine’s defense, and Moscow has not acted. “Putin’s latest nuclear threats are less a sign of strength than weakness. With the battlefield not delivering the victory he wants, he is trying to convince the West that he is negotiating from a position of strength,” she explains.
• Make Russia think twice: Russia is testing NATO, and it is time to start imposing costs, advise Stradner and Montgomery. To start, Washington should take troop reductions in Europe off the table. Instead, “Putin needs to hear one clear message: NATO is united,” the pair write. As for the alliance, NATO should adopt a clear readiness plan for the Baltics, defining escalation thresholds, deployable forces, and procedures for a rapid allied response. NATO members should also declassify Russian plans and intelligence to disrupt Moscow’s intentions, strengthen allied unity, and deny Russia the advantage of surprise, conclude Stradner and Montgomery.
• Help Ukraine hold Putin back: Washington can also impose costs on Moscow by helping Kyiv counter Russian ballistic missile attacks. These strikes are pounding Ukrainian cities as Kyiv runs perilously low on interceptor munitions, notes FDD’s John Hardie. One solution is for Ukraine to use Starlink-controlled drones to strike ballistic missile sites deep inside Russia, stopping launches before they begin, Hardie explains. But SpaceX and Starlink founder Elon Musk has so far denied Ukraine access to using the technology inside Russian territory. If the White House pressed Musk to lift that restriction, it could help Ukraine blunt Russia’s missile campaign and disrupt Moscow’s designs for Europe.

Secretary of State Marco Rubio meets with Kingdom of Saudi Arabia Foreign Minister Faisal Bin Farhan in Manama, Bahrain, Jun. 25, 2026. (Official State Department Photo by Freddie Everett)

1. The Trump administration transmitted a U.S.-Saudi nuclear cooperation agreement to Congress last week. If it takes effect, this deal could upend long-standing U.S. policy restricting the spread of nuclear fuel-making technologies.

• Here’s the deal: The agreement’s transmission to Congress triggered a mandatory 90-day review under Section 123 of the Atomic Energy Act (AEA). Energy Secretary Chris Wright signaled that the accord anticipates a preferential U.S. partnership to supply nuclear reactors and related services to Saudi Arabia. After a two-year joint study, the administration may also permit a Saudi-based, U.S.-operated plant for uranium enrichment, a principal method “for producing reactor fuel – or nuclear weapons,” notes FDD’s Andrea Stricker.
• Safeguards lacking: Washington departed from the norm for 123 agreements by not requiring Riyadh to adopt the International Atomic Energy Agency’s (IAEA) Additional Protocol (AP), explains Stricker. The AP enhances inspectors’ access to secret facilities and is critical to detecting possible weapons-related work. Instead, Wright says a special U.S.-Saudi-IAEA safeguards arrangement included in the U.S.-Saudi deal will suffice. But Washington is unlikely to have legal access to all potential undeclared Saudi sites of proliferation concern if Riyadh has already ruled out that access for the IAEA, adds Stricker.
• Risking wider proliferation: Beyond the AP’s absence, the accord may “undo decades of U.S. nonproliferation policy by triggering a race for fuel-making capabilities that puts additional states on the nuclear-weapons threshold,” cautions Stricker. The retreat could also embolden U.S. adversaries. If the United States abandons its opposition to spreading nuclear fuel-making technologies, Stricker warns that China and Russia may be more willing to offer enrichment or reprocessing incentives to partners unaligned with U.S. interests.
• Congress’s role: To counter these risks, Stricker writes, “Lawmakers should use the AEA’s 90-day review period to press the administration to renegotiate the deal to include a ban on enrichment and reprocessing,” the gold standard of 123 agreements. If the administration refuses, Congress could pursue a joint resolution of disapproval to block the accord as a last resort.

An aerial view of the Pentagon, Washington, D.C., May 15, 2023. (DoD photo by U.S. Air Force Staff Sgt. John Wright)

2. The Pentagon’s Economic Defense Unit (EDU) announced a $750 million offtake agreement with rare earth element producer Serra Verde last week, pre-committing to purchase key minerals as the United States works to break China’s minerals chokehold.

• Securing rare earths: The deal builds on the Development Finance Corporation’s (DFC) previous $565 million loan to Serra Verde. The one-two punch pairs production financing with guaranteed demand, giving new market entrants stability to challenge China’s 90% market share. Beijing has weaponized that dominance before with pending export controls on 12 of the 17 rare earths throughout 2025. Since then, Washington has moved to cut its reliance on China, including expanding DFC funding for rare earth projects and standing up the EDU. The unit lets the Pentagon issue grants, options, and purchase commitments alongside loans and investments to support defense purchases.
• Why is U.S. intervention needed? China has used unfair trade practices to build and maintain its monopolies in rare earths and shipping containers. In the former, it has flooded markets and crashed prices to drive foreign competitors to bankruptcy, including U.S. rare earth miner Molycorp in 2015. As a result, Western rare earth producers historically struggled to attract investor support, explain FDD’s Angela Howard and Daniel Swift. But U.S. national security requires that the U.S. defense industry be free from Chinese manipulation.
• More supply chain chokepoints: Other critical U.S. supply chains are just as exposed. Howard and Swift point to the pharmaceutical and shipping container supply chains specifically as at risk and requiring sustained U.S. policy commitments. For example, 41% of U.S.-approved active pharmaceutical ingredients are reportedly sourced solely from China. Potential Chinese restrictions on these exports, Howard and Swift warn, could cost lives.
• Coordinate the tools: Washington should apply the tools and experience it built for rare earths to other vulnerable industries, note Howard and Swift. They recommend the United States establish a central, codified pathway to coordinate its tools, enabling rapid adaptation to new threats and clear oversight of investments. That pathway should include “a systematic effort to track which tools and interventions have actually worked across critical minerals programs,” add Howard and Swift. This would allow future investments in other critical supply chains to build on evidence rather than repeat past errors.
• Lock in the EDU: Congress can help secure critical supply chains by codifying the EDU into law. Lawmakers have already appropriated $500 million for this mission, and the Pentagon has requested an additional $189 million for FY 2027. But the unit itself has no statutory foundation. Authorization would lock in its mission, clarify its interagency authorities, secure congressional oversight, and ensure the EDU survives across administrations. Read more here.