Geopolitics
Global Cooperation Barometer 2026: Why International Collaboration Isn’t Dead—It’s Just Evolving [WEF Report Analysis]
While 123 million people were forcibly displaced in 2024—the highest number on record—global cooperation metrics held remarkably steady. This paradox lies at the heart of the World Economic Forum’s Global Cooperation Barometer 2026, a comprehensive analysis that challenges our assumptions about international collaboration in an age of rising tensions.
The third edition of this landmark report, developed in partnership with McKinsey & Company, reveals a nuanced truth: global cooperation isn’t collapsing—it’s transforming. Traditional multilateral frameworks may be straining under geopolitical pressures, but smaller, more agile coalitions are emerging to fill critical gaps in trade, technology transfer, climate action, and even security.
This evolution represents what UN Secretary-General António Guterres calls “hard-headed pragmatism”—the recognition that cooperation makes sense when it delivers tangible mutual benefits, even in a fragmented world.
What is the Global Cooperation Barometer 2026?
The Global Cooperation Barometer is an annual assessment by the World Economic Forum and McKinsey & Company that measures international collaboration across five key areas: trade and capital, innovation and technology, climate and natural capital, health and wellness, and peace and security. Using 41 metrics indexed to 2020, the 2026 edition finds overall cooperation held steady despite geopolitical tensions, but its composition shifted dramatically—from large multilateral frameworks toward smaller, flexible coalitions based on aligned interests and pragmatic problem-solving.
After analyzing 41 distinct metrics across five essential pillars—trade and capital, innovation and technology, climate and natural capital, health and wellness, and peace and security—the report’s central finding is clear: cooperation is adapting to new realities rather than disappearing entirely.
The Surprising Resilience of Global Cooperation
The 2026 Global Cooperation Barometer tracks international collaboration from 2012 through 2024, with all data indexed to 2020 as a baseline. This methodology, endorsed by OECD economists, allows researchers to isolate trends that emerged before the COVID-19 pandemic and those accelerated by it.
The topline finding? Overall cooperation levels in 2024 remained virtually unchanged from 2023, despite an environment characterized by:
- Escalating trade barriers and protectionist policies
- Multiple active military conflicts across three continents
- Heightened mistrust between major economic powers
- Record levels of forced displacement
- Increasing restrictions on technology transfers
According to Børge Brende, President and CEO of the World Economic Forum, “The paradox is that, at a time of such rapid change, developing new and innovative approaches to cooperation requires refocusing on some of the basics—notably, doubling down on dialogue.”
Understanding the Methodology
The barometer’s rigor lies in its comprehensive approach. Each of the five pillars comprises two indices:
- Action Index: Measures concrete cooperative behaviors (trade flows, knowledge exchange, financial transfers)
- Outcome Index: Tracks results of cooperation (life expectancy, emissions levels, conflict casualties)
Data is normalized to account for economic growth and population changes, ensuring that trendlines reflect genuine cooperation shifts rather than simple expansion. For example, trade metrics are measured as a percentage of global GDP, while migration data is normalized to global population levels.
This methodology, reviewed by International Monetary Fund economists, provides an apples-to-apples comparison across vastly different domains—from pharmaceutical R&D cooperation to peacekeeping deployments.
The Composition Shift That Matters
While aggregate cooperation held steady, the composition of that cooperation shifted dramatically. Metrics tied to global multilateral institutions—those large-scale frameworks involving most of the world’s nations—declined sharply:
- UN Security Council resolutions fell from 50 in 2023 to 46 in 2024
- Multilateral peacekeeping operations dropped by 11% year-over-year
- Official Development Assistance plummeted 10.8% in 2024
- International Health Regulations compliance weakened
Simultaneously, cooperation flourished in areas where flexible, interest-based partnerships could operate:
- Cross-border data flows surged, with international bandwidth now 4x larger than pre-pandemic levels
- Services trade continued its five-year growth trajectory
- Climate finance reached record levels, approaching $1 trillion annually
- Foreign direct investment in strategic sectors (semiconductors, data centers, EV batteries) accelerated
This divergence reveals a fundamental shift: from universal frameworks to tailored coalitions. As McKinsey’s research demonstrates, cooperation increasingly follows geopolitical alignment, with partners choosing collaborators based on shared interests and values rather than institutional membership alone.
Trade and Capital: Reconfiguration Over Retreat
The trade and capital pillar reveals perhaps the most complex story in the entire report. On the surface, cooperation appears flat—neither advancing nor retreating significantly. But beneath this stability, tectonic plates are shifting.
The Great Trade Rearrangement
According to World Trade Organization data analyzed in the report, global goods trade grew slightly slower than overall GDP in 2024, leading to a marginal decline in trade intensity. More revealing than the volume, however, is the geographic redistribution underway.
McKinsey Global Institute research finds that the average “geopolitical distance” of global goods trade fell by approximately 7% between 2017 and 2024. Countries are trading more with geopolitically aligned partners and less with distant ones—particularly between the United States and China.
The numbers tell a stark story:
- US imports from China fell 20% in the first seven months of 2025 compared to the same period in 2024
- Developing countries’ share of manufacturing exports rose by 5 percentage points in 2024
- China represented over half of this growth, adding $276 billion in exports
- Trade concentration (measured by the Herfindahl-Hirschman Index) declined by about 1%, indicating slight diversification
“We’re witnessing not deglobalization but reglobalization,” explains Dr. Richard Baldwin, Professor of International Economics at the Graduate Institute Geneva. “Trade relationships are being rewired along lines of trust and strategic alignment.”
The Silent Surge in Services and Capital
While goods trade reconfigured, less visible but equally important flows accelerated. Services trade—encompassing IT services, professional services, travel, and digitally delivered offerings—continued climbing throughout 2024.
According to UNCTAD data, services trade growth was driven primarily by:
- Digitally delivered services: IT consulting, cloud services, software development
- Business services: R&D, engineering, professional services
- Travel services: Rebounding from pandemic lows, though not yet at 2019 levels
Foreign direct investment told a similar story. While overall FDI flows remained complex (influenced by “phantom FDI” in tax havens), greenfield investment announcements—representing real productive capacity—surged in future-shaping industries.
FDI Markets data reveals a striking trend: newly announced greenfield projects concentrated heavily in:
- Semiconductors: $89 billion in announced projects globally
- Data centers and AI infrastructure: $370 billion (up from $190 billion in 2024)
- EV battery manufacturing: $67 billion
- Critical minerals processing: $34 billion
These investments flowed predominantly between geopolitically aligned partners. Advanced economies, particularly the United States, attracted the lion’s share, while China’s portion of announced FDI inflows dropped from 9% (2015-19 average) to just 3% (2022-25).
The Multilateral Casualty: Foreign Aid
The sharpest decline in the trade and capital pillar came in Official Development Assistance. According to OECD tracking, ODA fell 10.8% in 2024, with only four donor countries exceeding the UN target of 0.7% of gross national income.
The 2025 outlook appears even bleaker. The OECD projects an additional 9-17% decline in ODA, driven by:
- Reduced humanitarian aid budgets
- Decreased refugee spending in donor countries
- Lower aid to Ukraine as military assistance shifts
- Domestic political pressures in major donor nations
This trend has profound implications for low and middle-income countries that depend on international assistance for health systems, education, and infrastructure development.
New Coalition Models Emerge
Despite these challenges, innovative cooperation frameworks are sprouting. The Future of Investment and Trade (FIT) Partnership, launched in September 2025, brings together 14 economies—including Singapore, New Zealand, Switzerland, and the UAE—to pilot practical trade cooperation mechanisms.
According to Brookings Institution analysis, such “minilateral” arrangements offer several advantages over traditional multilateral treaties:
- Speed: Smaller groups reach consensus faster
- Flexibility: Tailored agreements address specific needs
- Resilience: Less vulnerable to any single member’s withdrawal
- Pragmatism: Focus on mutual gains rather than universal principles
Other examples include the EU-Mercosur trade agreement (after a decade of negotiations), the ASEAN Digital Economy Framework Agreement, and bilateral critical minerals deals between the US and allies like Australia and Canada.
Innovation and Technology: The AI Race Drives Selective Cooperation
The innovation and technology pillar registered a 3% year-over-year increase—one of the strongest performances across all five domains. Yet this growth masks growing tensions over technology transfer, particularly in areas deemed strategically sensitive.
The Data Flow Explosion
International bandwidth capacity quadrupled between 2019 and 2024, according to International Telecommunication Union statistics. Cross-border data flows—measured as a percentage of total internet traffic—continued their upward trajectory, fueled by:
- Cloud computing adoption accelerating globally
- Remote work normalizing post-pandemic
- Streaming services expanding internationally
- AI model training requiring distributed datasets
Cisco’s annual internet report projects that global IP traffic will reach 4.8 zettabytes per year by 2027, with a growing share crossing international borders.
This digital connectivity enabled a corresponding rise in IT services trade. Software development, cloud services, and AI consultation increasingly operate as global markets, with talent and expertise flowing across borders despite physical restrictions.
The Strategic Technology Paradox
Even as general technology cooperation flourished, restrictions tightened on specific advanced technologies. The United States expanded export controls on:
- Advanced semiconductors and chipmaking equipment
- AI training systems above certain computational thresholds
- Quantum computing components
- Certain biotechnology applications
According to McKinsey research on export controls, these restrictions primarily target China but ripple across global supply chains, affecting companies and research institutions worldwide.
The paradox? Cooperation in cutting-edge technologies continues—but increasingly within aligned blocs. Examples include:
US-Aligned Technology Partnerships:
- US-India Initiative on Critical and Emerging Technology (iCET)
- US-EU Trade and Technology Council advancing AI safety standards
- US-Japan semiconductor research collaboration
- US-UAE framework on advanced technology cooperation
China-Led Technology Initiatives:
- 5G infrastructure partnerships across Southeast Asia and Africa
- AI research centers in Gulf states
- Data center investments in emerging markets
- Technology transfer agreements with Belt and Road countries
Foreign Affairs magazine describes this as “technological bifurcation”—not complete decoupling, but the emergence of parallel ecosystems with limited interconnection.
The Student Visa Squeeze
One concerning trend threatens long-term technology cooperation: declining international student mobility. After reaching record highs in 2024 (up 8% from 2023), international student flows appear to be contracting in 2025.
Data from major destination countries shows:
- United States: F-1 and M-1 student visas down 11% in Q1 2025
- United Kingdom: Student visa grants fell 2% year-over-year
- Australia: International student approvals dropped 64% (driven by new policy restrictions)
- Canada: Study permits declined amid new caps on international students
According to the Institute of International Education, this reversal could have long-term consequences for innovation. Historically, international students have contributed disproportionately to research breakthroughs, entrepreneurship, and cross-border knowledge networks.
Dr. Mary Sue Coleman, President of the Association of American Universities, warns: “When we restrict the flow of talent, we don’t just hurt international students—we diminish our own innovative capacity.”
The Productivity Question
Despite increases in most innovation metrics, one crucial outcome measure remained stubbornly flat: total factor productivity growth. The Conference Board’s data shows global productivity growth has stagnated for over a decade, raising questions about whether current cooperation patterns effectively translate into tangible economic benefits.
However, McKinsey Global Institute research suggests this may change. Generative AI could increase global productivity growth by 0.1 to 0.6 percentage points annually through 2040, but only if cooperation enables:
- Cross-border data access for model training
- International talent mobility for AI development
- Shared safety standards and governance frameworks
- Collaborative research on frontier applications
The question isn’t whether technology cooperation will matter—it’s whether current cooperation patterns will be sufficient to realize these gains.
Climate and Natural Capital: Deployment Rises, Outcomes Lag
The climate and natural capital pillar demonstrates both the promise and limitations of current cooperation patterns. Investment and deployment reached record levels, yet environmental outcomes continue deteriorating.
The Clean Energy Deployment Surge
Solar and wind capacity additions doubled between 2022 and 2024—from 300 to 600 gigawatts—according to the International Renewable Energy Agency. In the first half of 2025 alone, installations were 60% higher than the same period in 2024.
Remarkably, in the last 18 months, the world installed more solar capacity than in the previous three years combined.
International Energy Agency analysis attributes this acceleration to:
- Dramatic cost reductions: Solar module prices fell 90% over the past decade
- Global supply chains: Chinese manufacturing scale drove affordability
- Policy alignment: Domestic energy security goals converged with climate objectives
- Climate finance flows: Both public and private investment reached near $1 trillion annually
China accounted for two-thirds of solar, wind, and electric vehicle additions, but developing economies showed strong momentum. India became the world’s second-largest solar installer, while Brazil accelerated wind and solar deployment significantly.
The Natural Capital Challenge
While energy transition metrics improved, natural capital indicators stagnated or worsened:
- Marine protected areas: Growth stalled during 2023-24
- Terrestrial protected areas: Expansion slowed after steady progress
- Ocean Health Index: Continued gradual decline
- Biodiversity loss: Accelerated despite international commitments
The UN’s High Seas Treaty, reaching the required 60 ratifications in late 2025, offers hope. Entering force in January 2026, it creates the first legally binding framework for protecting two-thirds of the ocean beyond national jurisdiction.
Yet implementation remains uncertain, and the treaty faces the same multilateral pressures affecting other global agreements.
The Emissions Reality Check
Despite record clean energy deployment, global greenhouse gas emissions continued rising in 2024. Global Carbon Project data shows fossil fuel emissions reached approximately 37.8 billion tonnes of CO2 in 2024, up from 37.3 billion tonnes in 2023.
According to McKinsey Global Institute research, the energy transition is progressing at roughly half the speed needed to meet Paris Agreement goals of limiting warming to 1.5°C.
There is one encouraging trend: emissions intensity (emissions per unit of GDP) continues declining, demonstrating that economic growth can occur alongside emissions management—even if absolute reductions remain elusive.
Regional Climate Coalitions Take the Lead
As comprehensive global agreements prove challenging, regional cooperation is filling gaps:
European Union Initiatives:
- The Clean Industrial Deal (February 2025) aims to make decarbonization a competitive advantage
- The Net-Zero Industry Act accelerates manufacturing of clean technologies in Europe
- The Critical Raw Materials Act secures strategic inputs for the energy transition
- The EU-Central Asia Hydrogen Partnership (September 2025) creates new clean energy corridors
ASEAN Cooperation:
- The LTMS-PIP (Laos-Thailand-Malaysia-Singapore Power Integration Project) enables cross-border clean power trading
- Progress toward an integrated ASEAN Power Grid enhances energy security while enabling renewable deployment
- The ASEAN Community Vision 2025 and Master Plan on ASEAN Connectivity both reached target dates with mixed implementation
COP30 Outcomes: The UN climate conference in Brazil produced several commitments:
- Tripling of adaptation finance by 2035
- Launch of the Tropical Forests Forever Facility to boost investment in protected areas
- New mechanisms for loss and damage funding
Climate Policy Initiative analysis notes that while these commitments are significant, the critical challenge remains implementation—translating pledges into deployed capital and measurable emissions reductions.
The Just Energy Transition Shortfall
One area of cooperation that significantly underperformed expectations: the Just Energy Transition Partnerships (JETPs). These international financing mechanisms aim to assist emerging economies in transitioning to low-emission energy systems.
Despite commitments totaling $50 billion, only $7 billion had been delivered by June 2025—a 86% shortfall. According to World Resources Institute analysis, delays stemmed from:
- Bureaucratic complexity in mobilizing multilateral funds
- Competing domestic priorities among donor nations
- Difficulty coordinating between multiple financial institutions
- Recipients’ concerns about sovereignty and conditionality
This underperformance illustrates a broader challenge: while climate cooperation shows resilience in some areas (financing, trade, technology deployment), translating commitments into action remains difficult in the current geopolitical environment.
Health and Wellness: Resilient Outcomes, Eroding Support
The health and wellness pillar presents perhaps the most deceptive picture in the entire barometer. Overall cooperation appears stable—but this masks a dangerous erosion of the foundational support systems that enable positive health outcomes.
The Outcome Resilience
All major health outcome metrics improved in 2024, according to the Institute for Health Metrics and Evaluation:
- Life expectancy continued its post-pandemic recovery
- Child mortality (under-five) declined further
- Maternal mortality decreased in most regions
- Disability-adjusted life years (DALYs) improved globally
These improvements reflect long-term developmental trends, post-pandemic normalization, and the cumulative effect of previous investments in global health systems.
However, health experts warn these improvements may prove temporary if current trends in health cooperation continue.
The Development Assistance Crisis
Development Assistance for Health fell 6% to $50 billion in 2024—continuing a three-year downward trend. IHME projections suggest an additional $11 billion decline in 2025, largely due to expected cuts from US funding agencies (approximately $9 billion).
Major donor reductions include:
- United States: PEPFAR (President’s Emergency Plan for AIDS Relief) facing budget pressures; USAID tightening cost-sharing requirements
- United Kingdom: Continued retrenchment in global health spending amid domestic fiscal pressures
- Germany: ODA cuts affecting health assistance
According to World Health Organization officials, this creates a dangerous dynamic: bilateral health assistance increasingly focuses on direct service delivery (medicines, diagnostics, frontline care) while reducing support for health system infrastructure, training, and governance.
Dr. Tedros Adhanom Ghebreyesus, WHO Director-General, describes this as “robbing Peter to pay Paul—we’re treating today’s patients while dismantling the systems needed to care for tomorrow’s.”
The Multilateral-Bilateral Shift
A significant trend emerged in 2024: funding through multilateral channels (WHO, Global Fund, multilateral development banks) fell by approximately 20%, while bilateral country-to-country funding declined only 3%.
This shift toward bilateral assistance has several implications:
Potential Benefits:
- More direct accountability between donor and recipient
- Faster deployment to specific needs
- Reduced bureaucratic overhead
- Clearer metrics for impact assessment
Significant Risks:
- System-level costs (training, governance, infrastructure) go unfunded
- Recipients face increased burden on domestic budgets
- Coordination between different bilateral programs weakens
- Political considerations may override health priorities
- Smaller countries with less strategic importance receive less support
Pandemic Preparedness in Limbo
The WHO Pandemic Agreement, adopted in May 2025 after three years of challenging negotiations, represents both an achievement and a disappointment in health cooperation.
On one hand, the agreement marks the first binding global framework for pandemic response, addressing lessons from COVID-19 around:
- Equitable access to vaccines and therapeutics
- Information sharing during outbreaks
- Research collaboration and pathogen surveillance
- Capacity building in low-resource settings
On the other hand, the United States—the world’s largest economy and historically the leading contributor to global health—did not participate in the agreement. This absence raises questions about the framework’s practical effectiveness.
Dr. Jennifer Nuzzo, Director of the Pandemic Center at Brown University School of Public Health, notes: “Treaties create obligations on paper, but pandemic preparedness requires sustained investment, trust, and coordination—all of which are in short supply in the current environment.”
Regional Health Cooperation Gains Ground
As global multilateral frameworks face pressure, regional cooperation showed promising developments:
Africa:
- The African Medicines Agency held its second session in Kigali (June 2025), advancing pharmaceutical regulatory harmonization
- The Accra Compact aligned African governments on health sovereignty priorities
- South Africa’s Aspen Pharmacare expanded COVID-19 vaccine manufacturing for the continent
Caribbean:
- The Organisation of Eastern Caribbean States scaled a model to reduce insulin prices region-wide
- Negotiations advanced on a Caribbean pharmaceutical procurement alliance
Latin America:
- Brazil’s Butantan Institute partnered with other regional manufacturers on vaccine development
- The Pan American Health Organization (PAHO) strengthened regional disease surveillance
The Lancet, in a November 2025 editorial, described these developments as “pragmatic regionalism”—a recognition that health security increasingly depends on strong regional capacity rather than solely on global institutions.
The Healthspan-Lifespan Gap
One troubling trend that demands attention: while life expectancy continues rising, “health-adjusted life expectancy” (years lived in good health) lags behind. According to research published in JAMA Network Open, this means people are living more years with illness and disability.
This “healthspan-lifespan gap” varies significantly by geography and socioeconomic status, but it’s widening in most regions—suggesting that current health cooperation patterns, while extending life, may be less effective at ensuring those additional years are healthy and productive.
Peace and Security: The Pillar Under Greatest Strain
No pillar declined as sharply as peace and security. Every single metric tracked in this domain fell below pre-pandemic levels, reflecting an intensification of conflict and a weakening of multilateral conflict resolution mechanisms.
The Conflict Surge
The number of active conflicts increased in 2024, according to Uppsala Conflict Data Program. Major conflicts include:
- The ongoing Russia-Ukraine war (continuing into its third year)
- Israel-Hamas conflict in Gaza (beginning October 2023)
- Israel-Hezbollah hostilities (escalating in 2024)
- Civil war in Sudan (displacing 11.5 million people)
- Civil war in Myanmar (intensifying since 2021 coup)
- Intensified fighting in eastern Democratic Republic of Congo
Battle-related deaths remained near 2023 levels, with the Russia-Ukraine conflict accounting for over 40% of total fatalities.
The Displacement Crisis
Forcibly displaced people reached a record 123 million globally by the end of 2024, according to UNHCR. This represents an increase from 117 million in 2023 and 108 million in 2022.
The Sudan conflict alone displaced approximately 11.5 million people—the largest single-year displacement since Syria’s civil war peaked in 2013-2015.
Refugee flows strained hosting countries, particularly:
- Turkey (hosting 3.6 million Syrian refugees plus new arrivals)
- Pakistan (hosting Afghan refugees amid economic crisis)
- Uganda (hosting over 1.5 million refugees from multiple neighboring conflicts)
- Poland and other Eastern European nations (supporting Ukrainian refugees)
According to Internal Displacement Monitoring Centre, the costs of supporting displaced populations fall disproportionately on middle-income countries neighboring conflict zones—countries that often lack the resources for adequate support.
Multilateral Mechanisms Under Pressure
The decline in multilateral peace and security cooperation manifested in several metrics:
UN Security Council:
- Resolutions decreased from 50 (2023) to 46 (2024)
- Vetoes by permanent members blocked action on several major conflicts
- The ratio of resolutions to active conflicts declined significantly
- Until November 2025, no new peacekeeping operation had been mandated since 2014
Peacekeeping Operations:
- The ratio of multilateral peacekeeping operations to conflicts fell by approximately 11% year-over-year
- Personnel deployed to multilateral peace operations declined by more than 40% between 2015 and 2024
- Budget constraints disrupted operations, with the approved UN peacekeeping budget falling from $9.7 billion (2014) to $4.7 billion (2025)
Stockholm International Peace Research Institute attributes these declines to:
- Geopolitical tensions among major powers limiting consensus
- Donor fatigue and budget pressures in contributing countries
- Questions about peacekeeping effectiveness in complex civil wars
- Host country sovereignty concerns limiting mandate flexibility
The Cyber and Grey-Zone Threat
Beyond traditional kinetic conflict, 2024 saw intensification of cyberattacks and “grey-zone” activities—actions that fall below the threshold of open warfare but still inflict significant damage.
Verizon’s 2025 Data Breach Investigations Report documents surging cyber incidents across Asia, the Middle East, and Europe. High-profile attacks in 2024-25 included:
- Tata Motors’ Jaguar Land Rover halted production due to cyberattack (September 2025)
- Marks & Spencer faced up to £300 million losses from cyber breach (May 2025)
- Multiple critical infrastructure attacks across Europe
Physical infrastructure also came under attack through grey-zone operations:
- Sabotage of gas pipelines in Europe
- Damage to undersea internet cables in the Red Sea and West Africa (three major multi-cable outages)
- GPS jamming affecting civilian aviation
- Disinformation campaigns targeting elections in multiple democracies
Center for Strategic and International Studies analysis suggests these grey-zone activities are becoming the preferred tool for state and non-state actors seeking to achieve strategic objectives while avoiding direct military confrontation.
The Defense Spending Response
Countries responded to deteriorating security with increased defense budgets:
NATO:
- All 32 member states met the 2% of GDP defense spending target in 2025 (compared to fewer than 20 in 2024)
- The alliance raised its spending target to 5% of GDP for 2035 at The Hague Summit (June 2025)
Asia-Pacific:
- China continued double-digit defense budget increases
- Japan increased defense spending significantly, moving toward the 2% NATO target
- India expanded military modernization programs
- Australia boosted defense spending in response to regional tensions
European Union:
- The European Defence Agency reported increased spending across member states
- New EU defense industrial strategy launched to build autonomous capabilities
According to International Institute for Strategic Studies, global military expenditure reached approximately $2.4 trillion in 2024, representing roughly 2.2% of global GDP—the highest level since the early post-Cold War period.
Regional Peacekeeping Fills the Gap
Despite the decline in UN-led multilateral operations, regional bodies stepped up:
African Union:
- Led security transition in Somalia (ATMIS – African Union Transition Mission in Somalia)
- Deployed forces to eastern Democratic Republic of Congo
- Supported peacekeeping efforts in South Sudan
ECOWAS (Economic Community of West African States):
- Maintained presence in several West African nations
- Coordinated responses to coups and instability in the Sahel
Arab League and GCC (Gulf Cooperation Council):
- Mediation efforts in Yemen
- Coordination on security challenges in the Red Sea corridor
United States Institute of Peace research suggests regional organizations often have advantages in peacekeeping:
- Better understanding of local contexts and dynamics
- Greater perceived legitimacy among parties to conflicts
- Ability to act when great power politics block global action
- More flexible mandates and lighter bureaucracy
However, these operations also face significant challenges, including limited resources, potential conflicts of interest among regional powers, and questions about impartiality.
Emerging Bright Spots in Conflict Resolution
Despite the overall decline, some successful examples of cooperation emerged in 2024-25:
Türkiye’s Mediation:
- The Ankara Declaration (February 2025) led to de-escalation of tensions between Ethiopia and Somalia
- Turkish diplomacy facilitated technical talks and confidence-building measures
Armenia-Azerbaijan Progress:
- The two nations agreed on the text of a peace treaty with EU and US facilitation
- Steps taken to keep third-country forces off borders reduced immediate escalation risks
Israel-Hamas Ceasefire:
- After 15 months of conflict, Qatar and Egypt mediated a ceasefire agreement in January 2025
- While fragile, the agreement created space for humanitarian access and reconstruction discussions
These examples underscore a theme throughout the barometer: while large-scale multilateral frameworks struggle, tailored diplomatic efforts by committed mediators can still yield results.
The Rise of Minilateralism: From Global to Agile
The single most important trend across all five pillars is the shift from universal, rules-based multilateralism toward smaller, flexible, interest-based coalitions.
Defining the New Cooperation Landscape
Multilateralism traditionally involved:
- Near-universal membership (180+ countries)
- Comprehensive frameworks (covering many issues)
- Consensus-based decision-making
- Institutional permanence (UN, WTO, WHO, etc.)
- Rules-based order with dispute resolution mechanisms
Minilateralism (sometimes called “plurilateralism”) instead features:
- Small groups of like-minded countries (3-20 members)
- Focused agendas (addressing specific challenges)
- Streamlined decision-making (easier consensus)
- Purpose-built arrangements (dissolving when objectives met)
- Pragmatic cooperation based on mutual interests
According to Council on Foreign Relations analysis, minilateralism offers several advantages in the current environment:
- Speed: Smaller groups negotiate and implement faster
- Flexibility: Tailored solutions address specific needs without compromising for universal buy-in
- Resilience: Less vulnerable to any single member’s withdrawal or obstruction
- Effectiveness: Clear objectives and accountable membership improve outcomes
- Complementarity: Can coexist with and supplement multilateral frameworks
Examples Across the Five Pillars
Trade and Capital:
- Future of Investment and Trade (FIT) Partnership (14 economies)
- EU-Mercosur trade agreement (after decade of negotiations)
- ASEAN Digital Economy Framework Agreement
- US-Australia-Japan-India Quad economic cooperation
- Bilateral critical minerals partnerships (US-Australia, US-Canada, US-Japan)
Innovation and Technology:
- US-India Initiative on Critical and Emerging Technology
- US-EU Trade and Technology Council
- US-Japan semiconductor research collaboration
- US-UAE advanced technology cooperation framework
- Various AI safety research partnerships
Climate and Natural Capital:
- EU Clean Industrial Deal and regional decarbonization efforts
- LTMS-PIP Southeast Asian power grid integration
- EU-Central Asia Hydrogen Partnership
- Just Energy Transition Partnerships (despite underperformance, represent minilateral model)
Health and Wellness:
- African Medicines Agency regional pharmaceutical cooperation
- OECS insulin procurement collaboration (Caribbean)
- Accra Compact on African health sovereignty
- Various regional vaccine manufacturing partnerships
Peace and Security:
- African Union-led peacekeeping missions
- ECOWAS regional security coordination
- Türkiye-mediated bilateral negotiations (Ethiopia-Somalia, others)
- Quad security dialogue (US-Japan-Australia-India)
The Geopolitical Clustering Dynamic
McKinsey Global Institute research identifies a clear pattern: cooperation increasingly occurs within geopolitical blocs defined by shared values, security concerns, and economic interests.
Three broad clusters are emerging:
Western-Aligned Bloc:
- North America, Europe, developed Asia-Pacific (Japan, South Korea, Australia)
- Characterized by: democratic governance, market economies, security alliances (NATO, bilateral treaties)
- Deepening integration in technology, defense, critical supply chains
China-Aligned Bloc:
- China, Russia, some Central Asian nations, selective African and Latin American partnerships
- Characterized by: state-directed economics,alternative governance models, Belt and Road participation
- Growing integration in infrastructure, commodities, some technologies
Non-Aligned/Swing States:
- India, Brazil, Indonesia, Turkey, Gulf states, much of Africa and Latin America
- Characterized by: strategic autonomy, economic pragmatism, multiple partnerships
- Maintain relationships across blocs, optimize for national interests
Critically, these clusters are not rigid or exclusive. Many countries maintain relationships across boundaries, and cooperation patterns vary by issue area. India, for example, partners with the US on technology and security (Quad) while maintaining trade relationships with Russia and China.
The Dialogue Imperative
For this new cooperation landscape to function effectively, dialogue becomes more—not less—important.
As UN Secretary-General António Guterres emphasized in his September 2025 address to the General Assembly: “Taking steps forward to address global priorities can only happen if parties first talk with one another to find commonality.”
Yet dialogue quality has deteriorated. Too often, international engagements feature:
- Positioning statements rather than genuine exchange
- One-way communication designed to hold ground rather than find common ground
- Performative diplomacy focused on domestic audiences
- Tactical maneuvering instead of problem-solving
Effective dialogue in the minilateral era requires:
- Confidential channels: Away from public pressure and domestic political constraints
- Specific agendas: Focused on concrete problems with potential solutions
- Good-faith participation: Genuine willingness to find mutually beneficial outcomes
- Technical expertise: Subject matter experts alongside diplomats
- Follow-through mechanisms: Implementation plans with clear accountability
Harvard Negotiation Project research emphasizes that successful minilateral cooperation depends on participants separating people from problems, focusing on interests rather than positions, and generating options for mutual gain before deciding on specific approaches.
What the Shifting Cooperation Landscape Means for Global Business
The transformation in global cooperation patterns has profound implications for multinational corporations, investors, and business leaders navigating an increasingly complex environment.
The Corporate Sentiment Split
The Global Cooperation Barometer survey of approximately 800 executives across 81 economies revealed a striking divergence in perceptions:
- 40% reported that growing barriers in trade, talent, and capital flows hampered their ability to do business
- 60% said the effects were neutral or not substantially negative
This split suggests that business impacts depend heavily on:
- Industry: Technology and pharmaceuticals face more restrictions than services
- Geography: Companies operating between aligned partners less affected than those spanning geopolitical divides
- Business model: Digital platforms more adaptable than asset-heavy manufacturers
- Strategic positioning: Proactive adaptation mitigates negative effects
According to Harvard Business Review analysis, companies successfully navigating this environment share several characteristics:
- Geopolitical intelligence capabilities: Dedicated teams tracking regulatory changes, alliance shifts, and emerging restrictions
- Flexible supply chains: Multiple sourcing options and rapid reconfiguration ability
- Regional strategies: Tailored approaches for different geopolitical clusters
- Government relations excellence: Deep understanding of policy priorities and effective engagement
- Scenario planning: Regular war-gaming of geopolitical shocks and strategic responses
The Opportunity in Reconfiguration
While some business leaders focus on cooperation’s decline, others see opportunity in its transformation. McKinsey research identifies several emerging opportunities:
New Trade Corridors:
- Intra-ASEAN trade growing rapidly as regional integration deepens
- Africa-India trade expanding as both seek diversification
- Middle East-Europe connections strengthening (renewable energy, logistics)
- Latin American regional trade agreements creating larger effective markets
Strategic Industry Positioning:
- Semiconductor manufacturing expanding beyond East Asia (US, Europe, India investments)
- EV battery supply chains developing regional hubs (Europe, North America, Southeast Asia)
- Critical minerals processing diversifying away from China dominance
- Pharmaceutical manufacturing regionalizing for supply security
Services and Digital Growth:
- IT services demand surging as businesses digitize and adopt AI
- Professional services expanding as companies navigate complex regulatory environments
- Digital platforms less constrained by physical trade barriers
- Knowledge-intensive services benefiting from continued (if selective) talent mobility
Climate Transition Opportunities:
- $1 trillion+ annual climate finance creating massive market
- Clean technology manufacturing and deployment accelerating globally
- Energy transition requiring infrastructure investment across developing economies
- Carbon markets and climate services expanding
Building a Geopolitical Nerve Center
McKinsey research on geopolitical risk management recommends companies establish a dedicated “geopolitical nerve center”—a cross-functional team responsible for:
Monitoring and Intelligence:
- Track regulatory changes across jurisdictions
- Monitor geopolitical developments affecting operations
- Assess competitor positioning and strategic moves
- Maintain relationships with policy experts and government officials
Scenario Planning and War-Gaming:
- Develop detailed scenarios for potential geopolitical shocks (new sanctions, conflict escalation, alliance shifts)
- War-game company responses with senior leadership quarterly
- Identify trigger points for pre-authorized decisions
- Maintain updated playbooks for rapid response
Strategic Coordination:
- Align business unit strategies with geopolitical realities
- Coordinate government relations across regions
- Manage trade-offs between efficiency and resilience
- Balance short-term costs of adaptation with long-term risk reduction
Capability Building:
- Develop internal expertise on key geographies and issues
- Build relationships with external experts and advisors
- Train leadership on geopolitical risk assessment
- Foster cultural awareness and sensitivity
Companies that invested in these capabilities earlier are now outperforming. According to Boston Consulting Group analysis, firms in the top quartile of geopolitical preparedness showed 3-5 percentage points higher return on invested capital during 2022-24 compared to bottom-quartile peers.
Three Strategies for Navigating the New Cooperation Paradigm
As global cooperation evolves, leaders in both public and private sectors must adapt their approaches. Three strategies emerge from the barometer’s findings:
1. Match Cooperation Format to Specific Issues
Not all challenges require universal, multilateral solutions. Leaders should strategically choose cooperation formats based on:
Issue Characteristics:
- Technical problems with clear solutions: Small expert groups (e.g., technology standards)
- Economic opportunities with aligned incentives: Bilateral or regional trade agreements
- Security challenges with geographic concentration: Regional organizations
- Global challenges requiring universal participation: Reformed multilateral institutions (climate, pandemics)
Partner Alignment:
- High alignment: Deep integration possible (single markets, currency unions, defense alliances)
- Moderate alignment: Issue-specific cooperation (trade agreements, technology partnerships)
- Low alignment: Transactional engagement (commodity trade, specific projects)
Time Sensitivity:
- Immediate crises: Ad hoc coalitions of capable and willing actors
- Medium-term challenges: Purpose-built minilateral partnerships
- Long-term systemic issues: Institutional frameworks with staying power
The key is strategic flexibility—maintaining participation in multiple cooperation formats simultaneously, activating different partnerships for different challenges.
2. Strengthen Resilience Through New Organizational Capabilities
Both governments and businesses must build capabilities to thrive in a more fragmented cooperation landscape:
For Governments:
Intelligence and Foresight:
- Establish forward-looking analytical units tracking cooperation trends
- Maintain comprehensive mapping of existing partnerships and potential new ones
- Develop scenario planning for different cooperation futures
Diplomatic Agility:
- Train diplomats in minilateral negotiation techniques
- Empower smaller negotiating teams with flexible mandates
- Build rapid response capacity for emerging cooperation opportunities
Policy Coordination:
- Break down silos between trade, security, climate, and health policy
- Recognize interconnections across cooperation domains
- Develop whole-of-government strategies for key relationships
For Businesses:
Geopolitical Intelligence:
- Build dedicated teams monitoring regulatory and political developments
- Develop early warning systems for cooperation disruptions
- Maintain networks of advisors across key geographies
Operational Flexibility:
- Design supply chains with multiple sourcing options
- Maintain manufacturing and service delivery capacity in multiple regions
- Develop rapid reconfiguration capabilities
Strategic Relationships:
- Cultivate relationships with policymakers in key markets
- Participate actively in industry associations and multi-stakeholder forums
- Build trust through consistent engagement, not just during crises
According to McKinsey & Company research, companies that systematically built these capabilities showed higher revenue growth (2-4 percentage points annually) and lower volatility (15-25% lower earnings variance) compared to peers during 2020-24.
3. Pursue Public-Private and Private-Private Coalitions
Cooperation need not flow only through governmental channels. Innovative partnership models can accelerate progress:
Public-Private Coalitions:
These partnerships leverage complementary strengths:
- Government: Convening power, regulatory authority, patient capital, long-term perspective
- Business: Technical expertise, operational efficiency, innovation capacity, private capital
Successful examples include:
Minerals Security Partnership:
- Governments and leading mining/manufacturing companies
- Objective: Accelerate critical mineral projects
- Approach: Coordinated investment and market-making
- Result: Pipeline of projects moving toward financial close
Coalition for Epidemic Preparedness Innovations (CEPI):
- Governments, foundations, pharmaceutical companies
- Objective: Accelerate vaccine development for emerging threats
- Approach: Coordinated R&D funding and manufacturing capacity
- Result: Rapid COVID-19 vaccine development and future preparedness
Private-Private Coalitions:
When public policy moves slowly, businesses can self-organize:
The Resilience Consortium (World Economic Forum/McKinsey):
- Brings together businesses’ agility, MDBs’ capital mobilization capacity
- Focus on building resilience in critical supply chains
- Enables rapid coordination without waiting for government action
Industry-Specific Standards Bodies:
- Technology companies collaborating on AI safety standards
- Pharmaceutical companies coordinating on pandemic preparedness
- Logistics companies optimizing supply chain resilience
According to World Economic Forum research, effective public-private partnerships share common characteristics:
- Clear governance: Defined roles, decision-making processes, accountability
- Aligned incentives: Structure ensuring all parties benefit from success
- Measurable objectives: Concrete targets and transparent progress tracking
- Risk sharing: Appropriate distribution of risks and rewards
- Long-term commitment: Patience through inevitable implementation challenges
Looking Ahead: Cooperation’s Future in 2026 and Beyond
As we move deeper into 2026, several trends deserve close attention:
Pressure Points to Watch
US Policy Direction:
- Tariff policies and their implementation affecting global trade flows
- Foreign aid levels impacting health and development cooperation
- Technology export controls shaping innovation ecosystems
- Immigration policies affecting talent mobility
China’s Strategic Choices:
- Economic opening or further self-reliance emphasis
- Technology cooperation with developing economies
- Belt and Road Initiative evolution
- Role in multilateral institutions
European Union Cohesion:
- Internal political dynamics affecting unity
- Defense spending and security cooperation expansion
- Industrial policy and subsidy competition
- Enlargement and neighborhood relations
Emerging Economy Agency:
- India’s positioning between major powers
- Gulf states’ technology and economic partnerships
- African regional integration progress
- Latin American trade and political alignments
Multilateral Institution Reform:
- UN Security Council reform discussions
- WTO dispute resolution restoration
- World Bank/IMF governance changes
- WHO funding and authority
Reasons for Measured Optimism
Despite significant challenges, several factors suggest cooperation’s resilience:
Economic Incentives Remain Strong:
- Global supply chains still deliver efficiency gains
- Cross-border investment creates wealth
- International students and workers enhance innovation
- Trade benefits consumers through lower prices and greater choice
Technology Enables New Forms:
- Digital platforms reduce coordination costs
- Data flows enable distributed collaboration
- Remote communication makes distance less relevant
- AI could enhance translation and cross-cultural understanding
Shared Challenges Demand Collective Action:
- Climate change affects all countries
- Pandemics ignore borders
- Cybersecurity threats require coordination
- Economic instability ripples globally
Pragmatic Leaders Understand Value:
- Surveys show majority recognize cooperation benefits
- Business leaders adapt strategies rather than retreat
- Diplomats seek creative solutions within constraints
- Civil society maintains cross-border networks
The Adaptation Imperative
The central message of the Global Cooperation Barometer 2026 is neither pessimistic nor naively optimistic. Instead, it offers a realistic assessment: cooperation is under pressure but adapting.
The question isn’t whether countries and organizations will cooperate—they will, because they must. The question is whether they’ll adapt quickly and effectively enough to address urgent challenges while managing tensions.
As Børge Brende of the World Economic Forum notes: “Cooperative approaches are vital for advancing corporate, national and global interests. The barometer finds that, in the face of strong headwinds, cooperation is still taking place, albeit in different forms than in the past.”
The path forward requires:
- Dialogue: Open, constructive engagement to identify common interests
- Flexibility: Willingness to try new cooperation formats and partnerships
- Pragmatism: Focus on tangible outcomes rather than ideological purity
- Patience: Recognition that building trust and achieving results takes time
- Innovation: Creative approaches to long-standing challenges
Conclusion: Cooperation Evolving, Not Collapsing
The 2026 Global Cooperation Barometer paints a nuanced picture of international collaboration in an era of geopolitical fragmentation. While traditional multilateral frameworks face unprecedented strain, cooperation persists and evolves through smaller, more flexible coalitions.
Across trade, technology, climate, health, and security—the five pillars of global cooperation—we see common patterns:
- Multilateral mechanisms declining but not disappearing entirely
- Regional and minilateral partnerships filling gaps with agile, interest-based cooperation
- Economic incentives continuing to drive collaboration where mutual benefits are clear
- Outcomes holding steady or improving in some areas, deteriorating in others
- Adaptability emerging as the key to navigating uncertainty
For business leaders, this environment demands new capabilities: geopolitical intelligence, supply chain flexibility, strategic relationship management, and scenario planning. Companies that proactively adapt can find opportunity in reconfiguration rather than merely managing decline.
For government officials and diplomats, success requires matching cooperation formats to specific challenges, building diverse partnership portfolios, and maintaining dialogue even—especially—with those with whom disagreement runs deep.
For all stakeholders, the fundamental truth remains: many of today’s most pressing challenges cannot be solved by any country or organization alone. Climate change, pandemic preparedness, economic prosperity, technological innovation, and peace all require cooperative effort.
The shape of that cooperation may look different from the post-World War II multilateral order. It may be more fragmented, more pragmatic, more selective about participants and more focused on concrete outcomes. But cooperation itself—the human capacity to work together toward shared goals—endures.
As we navigate 2026 and beyond, the barometer’s message is clear: cooperation isn’t dying. It’s evolving. And our collective ability to adapt will determine whether that evolution leads to a more resilient, prosperous, and peaceful world—or to continued fragmentation and missed opportunities.
The choice isn’t between cooperation and isolation. It’s between rigid adherence to fading frameworks and creative adaptation to new realities. The data suggests pragmatic optimism: cooperation is down but not out, strained but not shattered, adapting even as it’s tested.
In this era of transformation, the question each leader must answer is not “should we cooperate?” but “how shall we cooperate most effectively?” The Global Cooperation Barometer 2026 provides essential data for answering that question wisely.
Methodology Note: This article draws primarily from the World Economic Forum’s Global Cooperation Barometer 2026 Third Edition, produced in partnership with McKinsey & Company. All statistics are sourced from the report’s 41 tracked metrics unless otherwise noted. Additional reporting includes interviews with policy experts, analysis of supplementary data sources, and review of academic literature on international cooperation.
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Analysis
Global AI Regulation UN 2026: Why the World Needs an Oversight Body Now
The machines are already choosing who dies. The question is whether humanity will choose to stop them.
In the early weeks of Israel’s military campaign in Gaza, a targeting system called Lavender quietly changed the nature of modern warfare. The Israeli army marked tens of thousands of Gazans as suspects for assassination using an AI targeting system with limited human oversight and a permissive policy for civilian casualties. +972 Magazine Israeli intelligence officials acknowledged an error rate of around 10 percent — but simply priced it in, deeming 15 to 20 civilian deaths acceptable for every junior militant the algorithm identified, and over 100 for commanders. CIVICUS LENS The machine, according to one Israeli intelligence officer cited in the original +972 Magazine investigation, “did it coldly.”
This is not a hypothetical future threat. This is 2026. And this is why global AI regulation under the United Nations — a binding, enforceable, internationally backed governance platform — is no longer a matter of philosophical debate. It is the defining policy emergency of our era.
Why the Global AI Regulation UN Framework Is the Most Urgent Issue of 2026
When historians eventually write the account of humanity’s encounter with artificial intelligence, they will mark 2026 as the year the world stood at the threshold and hesitated. UN Secretary-General António Guterres affirmed in early February 2026: “AI is moving at the speed of light. No country can see the full picture alone. We need shared understandings to build effective guardrails, unlock innovation for the common good, and foster cooperation.” United Nations Foundation
That statement, measured and diplomatic in tone, barely captures the urgency on the ground. From the rubble of Gaza to the drone corridors above eastern Ukraine, algorithmic warfare has become normalized with terrifying speed. The Future of Life Institute now tracks approximately 200 autonomous weapons systems deployed across Ukraine, the Middle East, and Africa Globaleducationnews — the majority operating in legal and regulatory voids that no international treaty has yet filled.
Meanwhile, the governance architecture intended to respond to this moment remains fragile and fragmented. Just seven countries — all from the developed world — are parties to all current significant global AI governance initiatives, according to the UN. World Economic Forum A full 118 member states have no meaningful seat at the table where the rules of AI are being written. This is not merely inequitable; it is dangerous. The technologies being deployed against human populations are outrunning the institutions designed to constrain them.
The Lethal Reality: AI Warfare and Human Safety in the Middle East
The Gaza conflict has provided the world its most documented and disturbing window into what AI warfare looks like when accountability is stripped away. Israel’s AI tools include the Gospel, which automatically reviews surveillance data to recommend bombing targets, and Lavender, an AI-powered database that listed tens of thousands of Palestinian men linked by algorithm to Hamas or Palestinian Islamic Jihad. Wikipedia Critics across the spectrum of international law have argued that the use of these systems blurs accountability and results in disproportionate violence in violation of international humanitarian law.
Evidence recorded in the classified Israeli military database in May 2025 revealed that only 17% of the 53,000 Palestinians killed in Gaza were combatants — implying that 83% were civilians. Action on Armed Violence That figure, if accurate, represents one of the highest civilian death rates in modern recorded warfare, and it emerges directly from the logic of algorithmic targeting: speed over deliberation, efficiency over ethics, statistical probability over the irreducible humanity of each individual life.
Many operators trusted Lavender so much that they approved its targets without checking them SETA — a collapse of human oversight so complete that it renders the phrase “human-in-the-loop” meaningless in practice. UN Secretary-General Guterres stated that he was “deeply troubled” by reports of AI use in Gaza, warning that the practice puts civilians at risk and fundamentally blurs accountability.
This is not an isolated case study. Contemporary conflicts — from Gaza, Sudan and Ukraine — have become “testing grounds” for the military use of new technologies. United Nations Slovenia’s President Nataša Pirc Musar, addressing the UN Security Council, put it with stark clarity: “Algorithms, armed drones and robots created by humans have no conscience. We cannot appeal to their mercy.”
The Accountability Void: Who Is Responsible When an Algorithm Kills?
The legal and moral vacuum at the center of AI warfare is not accidental — it is structural. Although autonomous weapons systems are making life-or-death decisions in conflicts without human intervention, no specific treaty regulates these new weapons. TRENDS Research & Advisory The foundational principles of international humanitarian law — distinction between combatants and civilians, proportionality, and precaution — were designed for human actors capable of judgment, hesitation, and moral reckoning. They were not designed for systems that process kill decisions in milliseconds.
Both international humanitarian law and international criminal law emphasize that serious violations must be punished to fulfil their purpose of deterrence. A “criminal responsibility gap” caused by AI would mean impunity for war crimes committed with the aid of advanced technology. Action on Armed Violence This is the nightmare scenario that legal scholars from Human Rights Watch to the International Committee of the Red Cross now warn about openly: not only that AI enables atrocities, but that it systematically destroys the chain of accountability that makes justice possible after them.
A 2019 Turkish Bayraktar drone strike in Libya created precisely this precedent: UN investigators could not determine whether the operator, manufacturer, or foreign advisors bore ultimate responsibility. TRENDS Research & Advisory That ambiguity, multiplied by the speed and scale of contemporary AI systems, represents an existential challenge to the international legal order.
The question “who is responsible when an algorithm kills?” cannot be answered under the current framework. And that is precisely why the current framework must be replaced.
The UN’s New Architecture: Promising, But Dangerously Insufficient
There are genuine signs that the international community understands what is at stake. The Global Dialogue on AI Governance will provide an inclusive platform within the United Nations for states and stakeholders to discuss the critical issues concerning AI facing humanity, with the Scientific Panel on AI serving as a bridge between cutting-edge AI research and policymaking — presenting annual reports at sessions in Geneva in July 2026 and New York in 2027. United Nations
The CCW Group of Experts’ rolling text from November 2024 outlines potential regulatory measures for lethal autonomous weapons systems, including ensuring they are predictable, reliable, and explainable; maintaining human oversight in morally significant decisions; restricting target types and operational scope; and enabling human operators to deactivate systems after activation. ASIL
Yet the gulf between these principles and enforceable reality remains vast. In November 2025, the UN General Assembly’s First Committee passed a historic resolution calling to negotiate a legally enforceable LAWS agreement by 2026 — 156 nations supported it overwhelmingly. Only five nations strictly rejected the resolution, notably the United States and Russia. Usanas Foundation Their resistance sends a signal that is impossible to misread: the two largest military AI developers on earth are actively resisting the international constraints that the rest of the world is demanding.
By the end of 2026, the Global Dialogue will likely have made AI governance global in form but geopolitical in substance — a first test of whether international cooperation can meaningfully shape the future of AI or merely coexist alongside competing national strategies. Atlantic Council That assessment, from the Atlantic Council’s January 2026 analysis, should be understood as a warning, not a prediction to be accepted passively.
The Case for an IAEA-Style UN AI Governance Body
The most compelling model for meaningful global AI regulation under the UN has been circulating in serious policy circles for several years, and in February 2026 it gained its most prominent corporate advocate. At the international AI Impact Summit 2026 in New Delhi, OpenAI CEO Sam Altman called for a radical new format for global regulation of artificial intelligence — modeled after the International Atomic Energy Agency — arguing that “democratizing AI is the only fair and safe way forward, because centralizing technology in one company or country can have disastrous consequences.” Logos-pres
The IAEA analogy is instructive precisely because it addresses the core failure of current approaches: the absence of verification, inspection, and enforcement. An IAEA-like agency for AI could develop industry-wide safety standards and monitor stakeholders to assess whether those standards are being met — similar to how the IAEA monitors the distribution and use of uranium, conducting inspections to help ensure that non-nuclear weapon states don’t develop nuclear weapons. Lawfare
This proposal has been echoed and refined by researchers published in Nature, who draw a direct parallel: the IAEA’s standardized safety standards-setting approach and emergency response system offer valuable lessons for establishing AI safety regulations, with standardized safety standards providing a fundamental framework to ensure the stability and transparency of AI systems. Nature
Skeptics argue, with some justification, that achieving this level of cooperation in the current geopolitical climate is extraordinarily difficult. But consider the alternative. The 2026 deadline is increasingly seen as the “finish line” for global diplomacy; if a treaty is not reached, the speed of innovation in military AI driven by the very powers currently blocking the UN’s progress will likely make any future regulation obsolete before the ink is even dry. Usanas Foundation We are, in the language of arms control analysts, in the “pre-proliferation window” — the last viable moment before these systems become as ubiquitous and ungovernable as small arms.
EU AI Act Enforcement and the Patchwork Problem
The European Union has moved further than any other jurisdiction toward binding regulation. By 2026, the EU AI Act is partially in force, with obligations for general-purpose AI and prohibited AI practices already applying, and high-risk AI systems facing requirements for pre-deployment assessments, extensive documentation, post-market monitoring, and incident reporting. OneTrust This is meaningful progress. It is also deeply insufficient as a global solution.
According to Gartner, by 2030, fragmented AI regulation will quadruple and extend to 75% of the world’s economies — but organizations that have deployed AI governance platforms are currently 3.4 times more likely to achieve high effectiveness in AI governance than those that do not. Gartner That statistic reveals both the potential of structured governance and the cost of its absence.
The EU’s rules, however rigorous, apply within EU member states and to companies seeking EU market access. They do not reach the drone manufacturers of Turkey, the autonomous targeting systems of Israel, the Replicator program of the United States Pentagon, or the algorithmic weapons being developed at pace in Beijing. The International AI Safety Report 2026 notes that reliable pre-deployment safety testing has become harder to conduct, and it has become more common for models to distinguish between test settings and real-world deployment — meaning dangerous capabilities could go undetected before deployment. Internationalaisafetyreport In a military context, undetected dangerous capabilities do not result in regulatory fines. They result in mass civilian casualties.
Comprehensive global AI regulation under the United Nations must transcend this patchwork. The model cannot be voluntary principles and national strategies stitched together by hope. It must be treaty-based, inspection-backed, and enforceable — with particular urgency around military applications.
The Policy Architecture the World Needs
The outline of what a viable global AI regulation UN platform would require is not, in fact, mysterious. The intellectual groundwork has been laid. What is missing is political will, specifically from the three states — the United States, Russia, and China — whose cooperation is structurally indispensable.
A credible architecture would include, at minimum:
- A binding treaty on lethal autonomous weapons systems, prohibiting systems that cannot be used in compliance with international humanitarian law and mandating meaningful human oversight for all others. The UN Secretary-General has maintained since 2018 that lethal autonomous weapons systems are politically unacceptable and morally repugnant, reiterating in his New Agenda for Peace the call to conclude a legally binding instrument by 2026. UNODA
- An Independent International AI Agency modeled on the IAEA, with authority to develop safety standards, conduct inspections of frontier AI systems, and verify compliance — particularly for dual-use applications with military potential.
- Universal inclusion of the Global South, whose populations bear a disproportionate share of the consequences of algorithmic warfare and AI-enabled surveillance, yet remain largely absent from the forums where the rules are being written. Many countries of the Global South are notably absent from the UN’s experts group on autonomous weapons, despite the inevitable future global impact of these systems once they become cheap and accessible. Arms Control Association
- A standing accountability mechanism for AI-related violations of international humanitarian law, closing the “responsibility gap” that currently allows commanders to deflect culpability onto algorithms.
- Real-time AI risk monitoring and reporting, with annual assessments presented to the UN General Assembly — building on the model of the Independent International Scientific Panel on AI already authorized for its first report in Geneva in July 2026.
None of this is technically impossible. The scientific consensus exists. The legal frameworks are available. The moral case is overwhelming.
Conclusion: Global AI Regulation UN 2026 — The Last Clear Moment
The Greek Prime Minister, speaking at the UN Security Council’s open debate on AI, made a comparison that deserves to reverberate through every foreign ministry and defense establishment on earth: the world must rise to govern AI “as it once did for nuclear weapons and peacekeeping.” He warned that “malign actors are racing ahead in developing military AI capabilities” and urged the Council to rise to the occasion. United Nations
Humanity’s fate, as the UN Secretary-General has said plainly, cannot be left to an algorithm. But neither can it be left to voluntary declarations, aspirational principles, and annual dialogues that produce no binding obligation. The deadly deployment of AI in active conflicts has already raised existential concerns for human safety that cannot be wished away by appeals to innovation or national security prerogative.
The architecture for a genuine global AI regulation UN platform exists in skeletal form. The Geneva Dialogue, the Scientific Panel, the LAWS treaty negotiations — these are the bones of something that could actually work. What they require now is not more deliberation. They require the political courage of the world’s most powerful states to subordinate short-term strategic advantage to the longer-term survival of the rules-based international order — and, more fundamentally, to the survival of human dignity in the age of the algorithm.
The pre-proliferation window is closing. 2026 is not a deadline to be managed. It is a moral threshold to be met.
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AI
The Price of Algorithmic War: How AI Became the New Dynamite in the Middle East
The Iran conflict has turned frontier AI models into contested weapons of state — and the financial and human fallout is only beginning to register.
In the first eleven days of the U.S.-Israeli offensive against Iran, which began on February 28, 2026, American and Israeli forces executed roughly 5,500 strikes on Iranian targets. That is an operational tempo that would have required months in any previous conflict — made possible, in significant part, by artificial intelligence. In the first eleven days of the conflict, America achieved an astonishing 5,500 strikes, using AI on a large-scale battlefield for the first time at this scale. The National The same week those bombs fell, a legal and commercial crisis erupted in Silicon Valley with consequences that will define the AI industry for years. Both events are part of the same story.
We are living through the moment when AI ceased being a future-war thought experiment and became an operational reality — embedded in targeting pipelines, shaping intelligence assessments, and now at the center of a constitutional showdown between a frontier AI company and the United States government. Alfred Nobel, who invented dynamite and then spent the remainder of his life in tortured ambivalence about it, would have recognized the pattern immediately.
The Kill Chain, Accelerated
The joint U.S. and Israeli offensive on Iran revealed how algorithm-based targeting and data-driven intelligence are reforming the mechanics of warfare. In the first twelve hours alone, U.S. and Israeli forces reportedly carried out nearly 900 strikes on Iranian targets — an operational tempo that would have taken days or even weeks in earlier conflicts. Interesting Engineering
At the technological center of this acceleration sits a system most Americans have never heard of: Project Maven. Anthropic’s Claude has become a crucial component of Palantir’s Maven intelligence analysis program, which was also used in the U.S. operation to capture Venezuelan President Nicolás Maduro. Claude is used to help military analysts sort through intelligence and does not directly provide targeting advice, according to a person with knowledge of Anthropic’s work with the Defense Department. NBC News This is a distinction with genuine moral weight — between decision-support and decision-making — but one that is becoming harder to sustain at the speed at which modern targeting now operates.
Critics warn that this trend could compress decision timelines to levels where human judgment is marginalized, ushering in an era of warfare conducted at what has been described as “faster than the speed of thought.” This shortening interval raises fears that human experts may end up merely approving recommendations generated by algorithms. In an environment dictated by speed and automation, the space for hesitation, dissent, or moral restraint may be shrinking just as quickly. Interesting Engineering
The U.S. military’s posture has been notably sanguine about these concerns. Admiral Brad Cooper, head of U.S. Central Command, confirmed that AI is helping soldiers process troves of data, stressing that humans make final targeting decisions — but critics note the gap between that principle and verifiable practice remains wide. Al Jazeera
The Financial Architecture of AI Warfare
The economic dimensions of this transformation are substantial and largely unreported in their full complexity. Understanding them requires holding three separate financial narratives simultaneously.
The direct contract market is the most visible layer. Over the past year, the U.S. Department of Defense signed agreements worth up to $200 million each with several major AI companies, including Anthropic, OpenAI, and Google. CNBC These are not trivial sums in isolation, but they represent the seed capital of a much larger transformation. The military AI market is projected to reach $28.67 billion by 2030, as the speed of military decision-making begins to surpass human cognitive capacity. Emirates 24|7
The collateral economic disruption is less discussed but potentially far larger. On March 1, Iranian drone strikes took out three Amazon Web Services facilities in the Middle East — two in the UAE and one in Bahrain — in what appear to be the first publicly confirmed military attacks on a hyperscale cloud provider. The strikes devastated cloud availability across the region, affecting banks, online payment platforms, and ride-hailing services, with some effects felt by AWS users worldwide. The Motley Fool The IRGC cited the data centers’ support for U.S. military and intelligence networks as justification. This represents a strategic escalation that no risk-management framework in the technology sector adequately anticipated: cloud infrastructure as a legitimate military target.
The reputational and legal costs of AI’s battlefield role may ultimately dwarf both. Anthropic’s court filings stated that the Pentagon’s supply-chain designation could cut the company’s 2026 revenue by several billion dollars and harm its reputation with enterprise clients. A single partner with a multi-million-dollar contract has already switched from Claude to a competing system, eliminating a potential revenue pipeline worth more than $100 million. Negotiations with financial institutions worth approximately $180 million combined have also been disrupted. Itp
The Anthropic-Pentagon Fracture: A Defining Test
The dispute between Anthropic and the U.S. Department of Defense is not merely a contract negotiation gone wrong. It is the first high-profile case in which a frontier AI company drew a public ethical line — and then watched the government attempt to destroy it for doing so.
The sequence of events is now well-documented. The administration’s decisions capped an acrimonious dispute over whether Anthropic could prohibit its tools from being used in mass surveillance of American citizens or to power autonomous weapon systems, as part of a military contract worth up to $200 million. Anthropic said it had tried in good faith to reach an agreement, making clear it supported all lawful uses of AI for national security aside from two narrow exceptions. NPR
When Anthropic held its position, the response was unprecedented in the annals of U.S. technology policy. Defense Secretary Pete Hegseth declared Anthropic a supply chain risk in a statement so broad that it can only be seen as a power play aimed at destroying the company. Shortly thereafter, OpenAI announced it had reached its own deal with the Pentagon, claiming it had secured all the safety terms that Anthropic sought, plus additional guardrails. Council on Foreign Relations
In an extraordinary move, the Pentagon designated Anthropic a supply chain risk — a label historically only applied to foreign adversaries. The designation would require defense vendors and contractors to certify that they don’t use the company’s models in their work with the Pentagon. CNBC That this was applied to a U.S.-headquartered company, founded by former employees of a U.S. nonprofit, and valued at $380 billion, represents a remarkable inversion of the logic the designation was designed to serve.
Meanwhile, Washington was attacking an American frontier AI leader while Chinese labs were on a tear. In the past month alone, five major Chinese models dropped: Alibaba’s Qwen 3.5, Zhipu AI’s GLM-5, MiniMax’s M2.5, ByteDance’s Doubao 2.0, and Moonshot’s Kimi K2.5. Council on Foreign Relations The geopolitical irony is not subtle: in punishing a safety-focused American AI company, the administration may have handed Beijing its most useful competitive gift of the year.
The Human Cost: Social Ramifications No Algorithm Can Compute
Against the financial ledger, the humanitarian accounting is staggering and still incomplete.
The Iranian Red Crescent Society reported that the U.S.-Israeli bombardment campaign damaged nearly 20,000 civilian buildings and 77 healthcare facilities. Strikes also hit oil depots, several street markets, sports venues, schools, and a water desalination plant, according to Iranian officials. Al Jazeera
The case that has attracted the most scrutiny is the bombing of the Shajareh Tayyebeh elementary school in Minab, southern Iran. A strike on the school in the early hours of February 28 killed more than 170 people, most of them children. More than 120 Democratic members of Congress wrote to Defense Secretary Hegseth demanding answers, citing preliminary findings that outdated intelligence may have been to blame for selecting the target. NBC News
The potential connection to AI decision-support systems is explored with forensic precision by experts at the Bulletin of the Atomic Scientists. One analysis notes that the mistargeting could have stemmed from an AI system with access to old intelligence — satellite data that predated the conversion of an IRGC compound into an active school — and that such temporal reasoning failures are a known weakness of large language models. Even with humans nominally “in the loop,” people frequently defer to algorithmic outputs without careful independent examination. Bulletin of the Atomic Scientists
The social fallout extends well beyond individual atrocities. Israel’s Lavender AI-powered database, used to analyze surveillance data and identify potential targets in Gaza, was wrong at least 10 percent of the time, resulting in thousands of civilian casualties. A recent study found that AI models from OpenAI, Anthropic, and Google opted to use nuclear weapons in simulated war games in 95 percent of cases. Rest of World The simulation result does not predict real-world behavior, but it reveals how strategic reasoning models can default toward extreme outcomes under pressure — a finding that ought to unsettle anyone who imagines that algorithmic warfare is inherently more precise than the human kind.
The corrosion of accountability is perhaps the most insidious long-term social effect. “There is no evidence that AI lowers civilian deaths or wrongful targeting decisions — and it may be that the opposite is true,” says Craig Jones, a political geographer at Newcastle University who researches military targeting. Nature Yet the speed and opacity of AI-assisted operations makes it exponentially harder to assign responsibility when things go wrong. Algorithms do not face courts-martial.
Governance: The International Gap
Rapid technological development is outpacing slow international discussions. Academics and legal experts meeting in Geneva in March 2026 to discuss lethal autonomous weapons systems found themselves studying a technology already being used at scale in active conflicts. Nature The gap between the pace of deployment and the pace of governance has never been wider.
The Middle East and North Africa are arguably the most conflict-ridden and militarized regions in the world, with four out of eleven “extreme conflicts” identified in 2024 by the Armed Conflict Location and Event Data organization occurring there. The region has become a testing ground for AI warfare whose lessons — and whose errors — will shape every future conflict. War on the Rocks
The legal framework governing AI in warfare remains, generously described, aspirational. The U.S. military’s stated commitment to keeping “humans in the loop” is a principle that has no internationally binding enforcement mechanism, no agreed definition of what meaningful human control actually entails, and no independent auditing process. One expert observed that the biggest danger with AI is when humans treat it as an all-purpose solution rather than something that can speed up specific processes — and that this habit of over-reliance is particularly lethal in a military context. The National
AI as the New Dynamite: Nobel’s Unresolved Legacy
When Alfred Nobel invented dynamite in 1867, he believed — genuinely — that a weapon so devastatingly efficient would make war unthinkably costly and therefore rare. He was catastrophically wrong. The Franco-Prussian War, the First World War, and the entire industrial-era atrocity that followed proved that more powerful weapons do not deter wars; they escalate them, and they increase civilian mortality relative to combatant casualties.
The parallel to AI is not decorative. The argument for AI in warfare — that algorithmic precision reduces collateral damage, that faster targeting shortens conflicts, that autonomous systems absorb military risk that would otherwise fall on human soldiers — is structurally identical to Nobel’s argument for dynamite. It is the rationalization of a dual-use technology by those with an interest in its proliferation.
Drone technology in the Middle East has already shifted from manual control toward full autonomy, with “kamikaze” drones utilizing computer vision to strike targets independently if communications are severed. As AI becomes more integrated into militaries, the advancements will become even more pronounced with “unpredictable, risky, and lethal consequences,” according to Steve Feldstein, a senior fellow at the Carnegie Endowment for International Peace. Rest of World
The Anthropic dispute, whatever its ultimate legal resolution, has surfaced a question that Silicon Valley has been able to defer until now: can a technology company that builds frontier AI models — systems capable of synthesizing intelligence, generating targeting assessments, and running strategic simulations — genuinely control how those systems are used once deployed by a state? As OpenAI’s own FAQ acknowledged when asked what would happen if the government violated its contract terms: “As with any contract, we could terminate it.” The entire edifice of AI safety in warfare, for now, rests on the contractual leverage of companies that have already agreed to participate. Council on Foreign Relations
Nobel at least had the decency to endow prizes. The AI industry is still working out what it owes.
Policy Recommendations
A minimally adequate governance framework for AI in warfare would need to accomplish several things. Independent verification of “human in the loop” claims — not merely the assertion of it — is the essential starting point. Mandatory after-action reporting on AI involvement in any strike that results in civilian casualties would create accountability where none currently exists. International agreement on a baseline error-rate threshold — above which AI targeting systems may not be used without additional human review — would translate abstract humanitarian law into operational reality.
The technology companies themselves bear responsibility that no contract clause can fully discharge. Researchers from OpenAI, Google DeepMind, and other labs submitted a court filing supporting Anthropic’s position, arguing that restrictions on domestic surveillance and autonomous weapons are reasonable until stronger legal safeguards are established. ColombiaOne That the most capable AI builders in the world believe their own technology is not yet reliable enough for autonomous lethal use is information that should be at the center of every policy debate — not buried in court filings.
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Analysis
How the Middle East Conflict Is Reshaping ASEAN & SAARC Economies
On November 19, 2023, Houthi militants seized a Bahamian-flagged cargo ship in the Red Sea. That single act of piracy — framed as solidarity with Gaza — triggered the most consequential maritime disruption to global trade since the 2021 Ever Given blockage. Two and a half years later, the Strait of Bab el-Mandeb remains a war zone in all but name, the Suez Canal handles barely a fraction of its former traffic, and the economies of eighteen nations stretching from Sri Lanka to the Philippines are absorbing cascading shocks they did not generate and cannot fully control. This is the story of how a distant conflict has become a near-present economic emergency across ASEAN and SAARC — and what it means for growth, inflation, remittances, and supply chains through 2028.
The Red Sea in Numbers: A Chokepoint Under Siege
The statistics are staggering. According to UNCTAD’s 2025 Maritime Trade Review, tonnage through the Suez Canal stood 70 percent below 2023 levels as recently as May 2025 UNCTAD, and the trajectory of recovery remains deeply uncertain. Container shipping has been devastated: traffic through the canal collapsed by roughly 75 percent during 2024 compared with 2023 averages, with no meaningful recovery through mid-2025 — data from July 2025 showing no recovery in container vessel transit through the canal, and Houthi attacks as recently as August 2025 making recovery unlikely soon Project44. The Suez Canal’s share of global maritime traffic has slipped from roughly 12 percent to below 9 percent — a structural shift that may not fully reverse even if hostilities cease.
The rerouting of vessels around Africa’s Cape of Good Hope adds 10–14 days to Asia–Europe voyages, pushing total transit times to 40–50 days. Freight rates between Shanghai and Rotterdam surged fivefold in 2024 Yqn. Rates between Shanghai and Rotterdam remained significantly higher than before the attacks began — up 80 percent relative to pre-crisis levels as of 2025. Coface UNCTAD notes that ship ton-miles hit a record annual rise of 6 percent in 2024, nearly three times faster than underlying trade volume growth. By May 2025, the Strait of Hormuz — through which 11 percent of global trade and a third of seaborne oil pass — also faced disruption risks. UNCTAD
The Asian Development Bank’s July 2025 Outlook modelled three Middle East scenarios. In its most severe case — a protracted conflict with Strait of Hormuz disruption — oil prices could surge $55 per barrel for four consecutive quarters. Asian Development Bank The Strait of Hormuz, through which roughly one-third of all seaborne oil and over one-fifth of global LNG supply passes (the latter primarily from Qatar), is a chokepoint of existential importance to every oil-importing nation from Dhaka to Manila.
The Oil Shock Transmission: How Energy Costs Hit 18 Economies
For most of 2025, Brent crude had traded in the $60–$74/barrel range, offering breathing room to energy-hungry emerging economies. That calculus shifted dramatically in early 2026. With fresh military action involving the United States and Israel targeting Iran, Brent broke above $100/bbl — roughly 70 percent above its 2025 average of $68/bbl — according to OCBC Group Research. European gas (TTF) simultaneously pushed past €50/MWh. OCBC
MUFG Research sensitivity modelling shows that every $10/barrel increase in oil prices worsens Asia’s current account balance by 0.2–0.9 percent of GDP. Thailand is the region’s most exposed economy (current account impact: -0.9% of GDP per $10/bbl), followed by Singapore (-0.7%), South Korea (-0.6%), and the Philippines. Inflationary effects are equally asymmetric: a $10/bbl oil price rise pushes annual headline CPI up by 0.6–0.8 percentage points in Thailand, 0.5–0.7pp in India and the Philippines, and 0.4–0.6pp across Malaysia, Indonesia, and Vietnam. MUFG Research Countries with fuel subsidies — notably Indonesia and Malaysia — absorb part of the pass-through fiscally, but at escalating cost to their budgets.
ASEAN: The Differentiated Exposure
ASEAN nations face wildly varying degrees of vulnerability. The Philippines sources 96 percent of its oil from the Gulf, Vietnam and Thailand approximately 87 percent and 74 percent respectively, while Singapore is more than 70 percent dependent on Middle Eastern crude — with 45 percent of its LNG imports arriving from Qatar alone. The Diplomat
The ADB’s April 2025 Outlook cut Singapore’s 2025 growth forecast to 2.6 percent (from 4.4% in 2024), citing weaker exports driven by global trade uncertainties and weaker external demand. Asian Development Bank The IMF revised ASEAN-5 aggregate growth down further to 4.1 percent in July 2025, versus earlier forecasts of 4.6 percent, with trade-dependent Vietnam (revised to 5.2% in 2025), Thailand (2.8%), and Cambodia most acutely affected. Krungsri
SAARC: The Remittance Fault Line
For the eight SAARC economies, the crisis is doubly coercive: higher energy import bills on one side, threatened remittance flows on the other.
India illustrates the tension most sharply. The country consumes approximately 5.3–5.5 million barrels per day while producing barely 0.6 million domestically, making it nearly 85 percent import-dependent. Petroleum imports already account for 25–30 percent of India’s total import bill, and every $10 oil price increase adds $12–15 billion to the annual cost. IANS News Historically, such episodes have triggered rupee depreciations exceeding 10 percent.
The remittance dimension is equally alarming. India received a record $137 billion in remittances in 2024, retaining its position as the world’s largest recipient. United Nations The 9-million-strong Indian diaspora in Gulf countries contributes nearly 38 percent of India’s total remittance inflows — roughly $51.4 billion from the GCC alone, based on FY2025 inflows of $135.4 billion. These workers are concentrated in oil services, construction, hospitality and retail: precisely the sectors most vulnerable to Gulf economic disruption. Oxford Economics estimates a sustained shock “would worsen India’s external position and could put some pressure on the rupee.” CNBC
Pakistan: Caught in the Crossfire
Pakistan’s total petroleum import bill reached approximately $10.7 billion in FY25, with crude petroleum imports of over $5.7 billion sourced predominantly from Saudi Arabia and the UAE. Its trade deficit has widened to approximately $25 billion during July–February FY26. Domestic fuel prices have already risen by approximately Rs55 ($0.20) per litre, reflecting the war-risk premium embedded in global crude markets. Profit by Pakistan Today
The remittance channel is equally fragile. Pakistan received $34.6 billion in remittances in 2024 — accounting for 9.4 percent of GDP — with Saudi Arabia alone contributing $7.4 billion (25 percent of the total), and the UAE contributing $5.5 billion (18.7 percent). Displacement Tracking Matrix An Insight Securities research note from March 2026 warns that geopolitical tensions involving the US, Israel, and Iran “have taken a hit on the security and stability perception” of Gulf economies, with the effect on Pakistani remittances expected to materialise with a lag. About 55 percent of Pakistan’s remittance inflows come from the Middle East, making the country particularly vulnerable. Arab News PK
For Pakistani exporters, shipping diversions around the Cape of Good Hope are extending transit times to Europe by 15–20 days, while freight rates on key routes could rise by up to 300 percent under war-risk classification. Profit by Pakistan Today
Bangladesh and Sri Lanka: Garments, Tea, and the Weight of Distance
Bangladesh’s vulnerability is concentrated in one devastating statistic: more than 65 percent of its garment exports — representing roughly $47 billion of an approximately $55 billion annual export economy — pass through or proximate to the Red Sea corridor. LinkedIn When Maersk confirmed on March 3, 2026, that it had suspended all new bookings between the Indian subcontinent and the Upper Gulf — covering the UAE, Bahrain, Qatar, Iraq, Kuwait, and Saudi Arabia — it confirmed that the escalating Iran crisis was no longer merely raising risk premiums; it was severing commercial flows entirely. The Daily Star
The garment sector cannot absorb air freight as a substitute: the BGMEA president notes that air freight costs have increased between 25–40 percent for some European buyers due to the Red Sea crisis, and some buyers are renegotiating contracts or diverting orders. The Daily Star As one garment vice president told Nikkei Asia, air freight costs 10–12 times more than sea transport — an instant route to negative margins. Bangladesh cannot afford order diversion at scale.
Sri Lanka’s exposure cuts across multiple arteries simultaneously. With over 1.5 million Sri Lankans (nearly 7 percent of the population) employed in the Gulf region, and the island recording a record $8 billion in remittances in 2025, any large-scale evacuation or Gulf economic contraction would shatter the fiscal stability the government has only recently achieved. Sri Lanka’s tea exports to Iran, Iraq, and the UAE — where the Iranian rial’s collapse has triggered a freeze in new orders — threaten the livelihoods of smallholder farmers across the southern highlands. EconomyNext
The Hormuz Wildcard: A Scenario That Could Rewrite Everything
Much of the analysis above rests on a scenario in which the Strait of Hormuz remains open. Should it be disrupted — even temporarily — the macroeconomic calculus transforms. Approximately 20 percent of global oil consumption transits the Strait daily, along with over one-fifth of the world’s LNG supply. Alternative land pipelines — Saudi Arabia’s East-West Pipeline and the UAE’s Abu Dhabi Crude Oil Pipeline to Fujairah — can offer some help, but their capacity represents barely one quarter of normal Hormuz throughput. MUFG Research
Under the ADB’s most severe scenario — a $55/barrel sustained oil shock — the impact on current account balances across ASEAN and South Asia would be severe. Current account deficits for the Philippines and India could widen above 4.5 percent and 2 percent of GDP respectively if oil prices were to rise above $90/bbl on a sustained basis. MUFG Research Pakistan, with minimal fiscal buffers, would face renewed currency crisis. India’s annual import bill would expand by roughly $82 billion relative to 2025 averages — approximately equal to its entire defence budget.
Silver Linings and Second-Order Winners
Crises reshape competitive landscapes. Vietnam’s electronics and apparel sector recorded export turnover of $4.45 billion in July 2025 — an 8.2 percent increase over June and 21 percent higher than the same month last year — driven partly by supply chain shifts away from China. Asian Development Bank Malaysia and Indonesia, as partial net energy exporters, benefit from elevated crude prices on the revenue side. Singapore, with a FY2025 fiscal surplus of 1.9 percent of GDP, has the deepest fiscal reserves in ASEAN to deploy energy transition support without macroeconomic destabilisation. OCBC
Thailand has launched planning work on its $28 billion Landbridge project — deep-sea ports at Ranong and Chumphon connected by highway and rail — as a potential alternative corridor to the Strait of Malacca. India is accelerating infrastructure at Chabahar Port, a corridor that bypasses Pakistani territory and opens Central Asian trade routes. The “friend-shoring” dynamic identified by the IMF is also accelerating: as Western supply chains reconfigure away from single-region dependence, ASEAN economies — particularly Vietnam and Indonesia — stand to attract manufacturing diversion from China that partially offsets the Middle East trade cost shock. Krungsri
China’s Shadow: The Geopolitical Dimension
No analysis of the Middle East’s economic impact on ASEAN and SAARC is complete without acknowledging Beijing’s role. China, which imports roughly 75 percent of its crude from the Middle East and Africa, has more at stake in Hormuz stability than almost any other economy. Yet Beijing has maintained studied neutrality, positioning itself as potential peacebroker while expanding bilateral energy security arrangements with Gulf states.
Meanwhile, China’s Belt and Road Initiative (BRI) port infrastructure — Gwadar in Pakistan, Hambantota in Sri Lanka, Kyaukpyu in Myanmar — is emerging as a hedging option for economies seeking to reduce Red Sea exposure. The IMF’s Regional Economic Outlook warns that geoeconomic fragmentation — the splitting of global trade into rival blocs — carries a potential output cost, with a persistent spike in global uncertainty producing GDP losses of 2.5 percent after two years in the MENA and adjacent regions, with the impacts more pronounced than elsewhere due to vulnerabilities including higher public debt and weaker institutions. International Monetary Fund
Outlook 2026–2028: GDP Drag Estimates and Divergent Trajectories
Baseline projections remain broadly positive for the region, underpinned by demographic dividends and resilient domestic demand. The World Bank’s October 2025 MENAAP Update projects regional growth reaching 2.8 percent in 2025 and 3.3 percent in 2026. World Bank The IMF’s October 2025 Regional Outlook projects Pakistan’s growth increasing to 3.6 percent in 2026, supported by reform implementation and improving financial conditions. International Monetary Fund ADB’s September 2025 forecasts show Indonesia at 4.9%, Philippines at 5.6%, and Malaysia at 4.3% for 2025. Asian Development Bank
But the scenario distribution has widened materially. In a contained-conflict baseline (oil averaging $75–85/bbl), the GDP drag for oil-importing SAARC economies is estimated at 0.3–0.7 percentage points annually through 2027 — painful but manageable. In a protracted Hormuz-disruption scenario, modelled GDP losses escalate to 1.5–3.0 percentage points for the most energy-dependent economies: Sri Lanka, Philippines, Bangladesh, and Pakistan. Currency pressures in that scenario could trigger sovereign debt rating downgrades for Pakistan (still under IMF programme) and Sri Lanka (still restructuring external debt).
Policy Recommendations for ASEAN and SAARC Governments
The foregoing analysis suggests a multi-track policy agenda structured across three time horizons:
Immediate (0–6 months)
- Strategic petroleum reserves: Economies with fewer than 30 days of import cover — Bangladesh, Sri Lanka, Pakistan, Philippines — should accelerate bilateral arrangements with GCC suppliers for deferred-payment oil stocking.
- Freight & insurance backstops: State-owned development banks in India, Indonesia, and Malaysia should establish temporary freight insurance facilities for SME exporters unable to access war-risk cover at commercial rates.
- Fiscal fuel-price buffers: Governments should resist immediate full pass-through of oil price increases to consumers in 2026 — the inflationary second-round effects of premature deregulation risk destabilising monetary policy just as disinflation was being consolidated.
Medium-Term (6–24 months)
- Trade corridor diversification: ASEAN and SAARC should jointly accelerate operationalisation of the India-Middle East-Europe Economic Corridor (IMEC) and Chabahar-Central Asia links to reduce exclusive dependence on the Suez/Red Sea routing for European-bound exports.
- Renewable energy acceleration: Each percentage point of fossil fuel imports replaced by domestic solar, wind, or nuclear capacity is a permanent reduction in geopolitical exposure. ADB Green Climate Fund allocations should be explicitly linked to energy import substitution targets.
- Remittance formalisation: Bangladesh, Pakistan, and Sri Lanka should extend incentive schemes to maximise remittance capture through official banking channels, maximising their foreign-exchange multiplier effect.
Long-Term (2–5 years)
- “Asia Premium” hedge architecture: A regional crude futures market, potentially anchored in Singapore, could provide more effective price discovery and hedging access to smaller economies that currently pay a structural premium above Brent.
- Supply chain friend-shoring with selectivity: ASEAN’s competitive advantage is best served by remaining in the middle of the US-China geopolitical competition rather than choosing sides definitively, attracting Western supply-chain investment without triggering Chinese economic retaliation through rare earth or intermediate input export controls.
- Multilateral maritime security: ASEAN and SAARC together represent a significant share of the global trade disruption cost. A formal joint diplomatic initiative requesting a UN-mandated naval security corridor for commercial shipping through the Red Sea and Gulf would add multilateral legitimacy to what is currently a US-led Western operation.
Conclusion: The Geography of Exposure
The Middle East conflict has delivered a masterclass in the hidden geography of economic exposure. Countries that share no border with Israel, Hamas, or Iran — countries that have issued no military guarantee and sent no troops — are nonetheless absorbing the full force of an energy price shock, a logistics cost spiral, and a remittance fragility that was structurally built into their growth models over decades.
Even if hostilities ceased tomorrow, the Red Sea crisis — now stretching into its third year as of 2026 — has tested the limits of global logistics. With Red Sea transits down up to 90 percent and Cape of Good Hope routing now the industry standard, companies face 10–14 extra days in transit, higher inventory costs, and sustained freight premiums of 25–35 percent. DocShipper The ceasefire declared in October 2025 barely shifted the dial. Shipping insurers remain risk-averse; carriers have rebuilt vessel schedules around the longer route.
What the crisis has done is clarify something that globalisation’s practitioners long preferred to obscure: deep economic integration produces deep interdependence, and deep interdependence produces deep vulnerability. The eighteen economies of ASEAN and SAARC are not passive bystanders in a conflict 4,000 miles away. They are, in the most material and measurable sense, participants in its economic consequences. The policy leaders who understand that soonest — and build the resilience architecture accordingly — will determine which countries emerge from the coming years stronger, and which emerge diminished.
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