Sunday, September 13, 2026

Foreign influence, covert activities within Malaysian politics and society



Murray Hunter


Foreign influence, covert activities within Malaysian politics and society


Clandestine operations, as was seen with the assassination of Kim Jong-Nam, do occur, but the public rarely becomes aware


Murray Hunter
Sep 12, 2026







MOST will remember the dramatic assassination of North Korean leader Kim Jong-Um’s half-brother Kim Jong-Nam at the Kuala Lumpur International Airport back in 2017.

The assassination was just like something out of a James Bond or Mission Impossible script.

It’s very rare that Malaysians are made aware of clandestine intelligence operations going on in Malaysia.

Malaysia, just like the rest of ASEAN, is a target for foreign soft power and intelligence operations.

These activities are undertaken by agents of various countries, focused on collecting intelligence, seeking political influence, assisting their nationals’ commercial activities, and disseminating information and propaganda.

These activities centre around the nation’s corridors of power, the defence establishment, the commercial arena, academic circles, and the public at large.

The objectives of undertaking intelligence and utilising various forms of soft power include;

· Influencing Malaysia’s defence and foreign policies

· Undertaking political, economic, and commercial information gathering,

· Gaining commercial advantages and furthering commercial interests,

· Influencing Malaysian citizens both culturally and religiously, and

· Observing their own diaspora.

Clandestine operations, as was seen with the assassination of Kim Jong-Nam, do occur, but the public rarely becomes aware.

Just as the Malaysian External Intelligence Organisation (MEIO) reportedly has more than 1,000 operatives overseas, foreign agencies have their own operatives; many are housed at foreign embassy complexes. In addition, there are sponsored or paid operatives who operate freelance within Malaysia, usually on an ad hoc basis.

Some of these foreign agents are clearly identifiable and here on an official basis, while others can be fairly easily spotted and identified.

External attempts to influence Malaysians in politics and business began in the 1950s with both the Colombo Plan and the Fulbright Student Program, which were sophisticated attempts to guide and influence Malaysian post-independence students into thinking favourably towards Britain and the United States.

Since those early days, many nations have carried out and sought to influence Malaysia.

The United States

The International Republican Institute (IRI) President Daniel Twining claimed the US played a role in the victory over UMNO in 2018, a political party that held power for 61 years.

The United States has long been involved in attempting to influence politics and society within Malaysia.

The US has a large intelligence capability housed within its embassy in Jalan Ampang. There are also a number of unofficial satellite offices around the country.

The allegations made by the PAS leader Tan Sri Abdul Hadi Awang are not new or confined to Malaysia.

Back in 2023, the US embassy in Bangkok was also accused of meddling in the affairs of Thai politics through its support for Move Forward, which won the popular vote in the 2023 and 2026 general elections.

From Twining’s omission, it can be assumed similar operations have occurred in Malaysia.

Most US funding into Malaysia came through the now-defunct USAID and the National Endowment for Democracy (NED), and its affiliates.

The US long considered Malaysia a strategic partner in the fight against communist expansion during the Cold War.

However, over the last decade Malaysia has sought to improve bilateral relations with Beijing, abandoning its Cold War stance. This has concerned the US State Department in its pivot to Asia.During the lead-up to the 2018 general election, the NED reportedly directly and indirectly funded many pro-democracy, human rights, anti-corruption NGOs, and liberal leaning news portals.

In 2022, the NED, through INVOKE Taiwan, is alleged to have funded the expansion of Datuk Seri Rafizi Ramli’s election analytics firm INVOKE.

This was the primary reason the MACC raided the INVOKE offices in 2022.

In a 2022 NED country report, the organisation reported that it had directly spent USD 1.6 million on operations in Malaysia.

The NED had financed local academics and journalists.

Through affiliates like the Centre for International Private Enterprise (CIPE), a number of local think tanks have been financed.

There are numerous relationships between the NED, its affiliates, and local organisations and political parties in Malaysia.

One has to delve a little bit into the sources of funding of these organisations, much of which is on public record.





China


The major objective of China is to influence Malaysian foreign policy towards Chinese interests.

China had a very close relationship with Malaysia during the Datuk Seri Najib Razak era, which stepped back slightly under Tun Dr Mahathir Mohamed.

It’s yet to be seen how close Malaysia will be to China under Datuk Seri Anwar Ibrahim.

Nevertheless, China has a massive intelligence presence in Malaysia, probably only second to the United States.

China’s equivalent to the NED is the CCP United Front Work Department (UFWD). However, the UFWD is much more hands-on than the NED.

The UFWD is much more involved in grassroots activities, particularly through the Malaysian Chinese communities.

China influences local Chinese media through networking with the owners and journalists, and providing content.

Chinese diplomats in Malaysia also write frequent Op-eds.

Confucius Institutes in several Malaysian universities teach Chinese language, culture and history.

They have been criticised in a number of Western countries for providing a slanted view of China.

This is disputed by Chinese scholars.

The UFWD is alleged to have close ties with the MCA, and assists in the funding of several cultural and business programs across the country.

The UFWD has cultivated politicians, journalists, and academics over the years, facilitating visits to China.

China’s influence in Malaysian politics and society is a very scantily studied area, which needs much more attention.

Saudi Arabia

Saudi Arabia has extensively focused on and propagated the spread of its Islamic doctrines in Malaysia over the last 30 years. This is partly dakwah and partly an attempt to stem the spread of the Muslim Brotherhood’s influence in Malaysia.

There is a proxy war between two Islamic doctrines in Malaysia today.

Saudi Arabia funds Islamic schools, sends teachers, assists in the building of mosques, and provides scholarships to Saudi Arabia for students to study Islam.

More controversially, an organisation dubbed the Alumni, made up of Islamic graduates, primarily from the MENA region, is provided with a monthly allowance to spread the word of Islam within their workplaces in an apolitical manner. Members of the Alumni exist within the civil service, military, schools, universities, and top echelons of government.

Thailand

There is a lot of uncorroborated evidence of Thai security forces running clandestine operations in Malaysia against political opponents and criminal elements.

There was a dead body of a Malaysian national, Zahri Bin Abdullah, floating in the Kolok River, which runs along the Thai-Malaysian border back in 2023.

The Royal Thai Army claims Zahri was a member of the BRN youth insurgency wing. Zahri had been a resident of Rantau Panjang, a town on the Malaysian side of the border, for many years.

News reports indicate Thai security personnel in three cars came across the border, abducting Zahri in the open.

His tortured body was found in the Kolok River. This incident was reported in the Thai media, but largely unreported in Malaysia.

World Economic Forum (WEF)

The WEF has an agenda to centralise governments and introduce policies that favour a centralised approach to solving world problems. A number of local politicians are members of the WEF.

These include Tengku Zafrul Tengku Abul Aziz, Hannah Yeoh, Syed Saddiq Syed Abdul Rahman, Datuk Seri Mustapa Mohamed, Khairy Jamaluddin, and entrepreneur Vijay Eswaran.

AirAsia, Khazanah, Astro, Axiah, and CIMB are corporate members.

Khairy Jamaluddin was elected vice president of the WHO World Health Assembly and was instrumental in pushing for WHO recommendations on public health emergencies to be mandatory for governments to follow.

Malaysia has hosted at least four major WEF events in the region, and WEF economic policies such as Industry 4.0 have been incorporated into Malaysia’s national policy.

There is much foreign influence on Malaysia’s government and society from many quarters.

The examples above come from publicly available information. Under the surface, there could be much more.





Anwar Ibrahim and strategic independence

There is, however, an important distinction between foreign powers attempting to influence Malaysia and actually controlling Malaysian policy.

Whatever one’s domestic political view of Anwar Ibrahim, his foreign policy since taking office provides little evidence that Malaysia under his leadership is simply following the agenda of any particular power bloc.

If anything, his positions have sometimes irritated almost everybody.

Anwar has maintained good relations with Washington and Europe while being one of the Muslim world’s most outspoken political leaders on Gaza and sharply criticising Western support for Israel. At the same time, Malaysia continues to engage economically and diplomatically with the United States.

He has strengthened relations with China and recently reaffirmed Malaysia’s longstanding One China policy — including a position on Taiwan strong enough to provoke a public rebuke from Taipei — yet Malaysia continues to describe peaceful resolution and Malaysian national interests as central to its policy.

Nor has closer engagement with China prevented Anwar from expanding Malaysia’s relationship with India. Narendra Modi’s February 2026 visit produced an extensive strengthening of the Malaysia–India Comprehensive Strategic Partnership, covering defence, security, semiconductors, trade, technology and other areas.

At the same time, Anwar has been willing to engage Russia when much of the Western world has sought to isolate Moscow.

Malaysia has characterised this engagement not as choosing Russia over the West, but as exercising the country’s longstanding strategic autonomy.

Malaysia is simultaneously developing relations across South Asia. Anwar has strengthened ties with India while maintaining Malaysia’s relationships elsewhere in the region, including Bangladesh, whose new Prime Minister Tarique Rahman chose Malaysia for his first official bilateral visit abroad in June 2026.

There is a pattern here.

Washington cannot reasonably claim Anwar as its man. Neither can Beijing. Neither can Moscow, New Delhi, nor Brussels.

Indeed, Anwar himself has described Malaysia’s approach very simply: friendship with the major powers does not mean surrendering Malaysia’s principles or national interests.

That does not mean foreign governments will stop attempting to influence Malaysia. They will not. Every serious power pursues its interests.

But influence attempted is not necessarily influence achieved.

Malaysia’s present foreign policy increasingly resembles the traditional ASEAN instinct of strategic autonomy: talk to America, trade with China, engage Russia, deepen relations with India and the rest of Asia, disagree with the West when necessary, agree with it when Malaysian interests coincide, and refuse to be permanently placed inside anybody else’s geopolitical camp.

For a relatively small trading nation sitting at one of the world’s most strategically important crossroads, that may not merely be independence.

It may be a necessity. – September 10, 2026


***


Two M'sian PMs stand out very well on the international stage, namely, PMX and Najib.


Three more Indonesian volcanoes erupt amid heightened volcanic activity





Three more Indonesian volcanoes erupt amid heightened volcanic activity


Saturday, 12 Sep 2026 | 3:04 PM MYT


A drone view of Anak Krakatau volcano documented by a team from the Center for Volcanology and Geological Hazard Mitigation (PVMG) on Sept. 5, 2026. (Courtesy: Geological Agency)


MEDAN: Three volcanoes erupted around the country on Friday, spewing ash into the sky and underscoring heightened volcanic activity across the archipelago, following the eruptions of Mount Sinabung and Mount Anak Krakatau earlier this month.


The Center for Volcanology and Geological Hazard Mitigation’s (PVMG) MAGMA site reported on Friday that the eruptions involved Mount Semeru in East Java, Mount Ili Lewotolok in East Nusa Tenggara (NTT) and Mount Ibu in North Maluku.

The eruptions occurred at different times and lasted from 41 to 187 seconds, detik.com reported.


The 1,325-metre Mt. Ibu is in West Halmahera Regency on the Halmahera Islands. The volcano erupted twice on Friday morning.

The first eruption at 8:56 a.m. Eastern Indonesia Time (WIT), two hours ahead of Jakarta, was recorded on a seismograph with a maximum amplitude of 18 millimetres and a duration of 41 seconds.

The second eruption at 8:58 a.m. WIT had a maximum amplitude of 28 mm and lasted 45 seconds.

Visually, however, the eruptions were not observable.


Earlier, Mt. Ibu erupted at 12:49 a.m., with a maximum amplitude of 28 mm and a duration of 48 seconds. A 400-metre grey ash column was seen above its summit.

The ash column was thick and headed northwest.

In NTT, Mt. Ili Lewotolok also erupted twice.

The first eruption was recorded at 7:09 a.m. Central Indonesia Time (WITA), which is one hour ahead of Jakarta. The seismograph recorded a maximum amplitude of 28 mm and a duration of 48 seconds.

There was also a grey ash column of about 600 m above its 1,449-metre summit.

The second eruption was recorded at 8:02 a.m. WITA.

Earlier, the 1,429-metre Mt. Ili Lewotolok in Lembata Regency on Lembata Island had three eruptions after midnight, at 12:57 a.m. WITA, with a maximum amplitude of 40 mm in 70 seconds.

The second eruption at 2:08 a.m. WITA had a maximum amplitude of 40 mm in 63 seconds. A grey ash column of some 500 m was visible above its summit.

The third eruption at 2:21 a.m. WITA had a maximum amplitude of 40 mm in 94 seconds. A thick grey and black ash column was seen heading west.

On Java Island, Mt. Semeru on the borders of Malang and Lumajang regencies also erupted in the early hours of Friday at 12:26 a.m., 4:27 a.m., 5:05 a.m. and 6:16 a.m.

The first three eruptions were not observable visually. The fourth eruption reached a maximum amplitude of 23 mm at 187 seconds.

Mt. Sinabung in Karo Regency, North Sumatra, erupted on Aug. 31 after a five-year hiatus, while Mount Anak Krakatau in the Sunda Strait erupted more recently on Sept. 4, following an eruption on July 2.

Meanwhile, authorities in Karo regency have returned 650 evacuees to their homes in batches after Mt. Sinabung showed reduced activity recently.

In the first batch, 418 evacuees from Jambur Arih Ersada and Losd evacuation posts in Sukatepu village returned to Kuta Tengah village in Karo regency on Monday.

Military and police personnel assisted the evacuees, consisting of 210 males and 208 females.

Karo Disaster Mitigation Agency (BPBD) executive director Juspri M. Nadeak said the evacuees were returned to their homes following a meeting of the Karo regency disaster response task force.

The meeting was chaired by Military District (Kodim) 0205/Tanah Karo commander Lt. Col. Robert Panjaitan, who is also task force chairman.

Robert was accompanied by task force vice chairman who is also Karo Police chief, Adj. Sr. Comr. Pebriandi Haloho, Karo regency secretary Gelora Kurnia Putra Ginting and Juspri.

Juspri said on Monday that the meeting decided evacuees from Kuta Tengah village could return home because the village is no longer included in a red zone.

“The PVMBG narrowed down the recommended danger zone from a radius of five to six kilometres in the south and southeast direction,” he said.

One evacuee, Nande boru Ginting, said she was happy to return home after evacuating for about one week to Jambur Aris Ersada.

She said that she always followed the government’s direction when there is an eruption.

“When Mt. Sinabung erupted, we were told to evacuate; we duly evacuated,” she told The Jakarta Post on Monday. “Now that we are allowed to go home, we are very happy.”

Nande said that during the evacuation, together with her husband and four children, she always tended her vegetable fields, located near her house in Kuta Tengah village.

“During the eruption, vegetables in my field were covered with volcanic ash and had to be immediately cleaned,” she said. “Otherwise, my cabbages, tomatoes and chillies would die.”

Mt. Sinabung monitoring post head Armen Putra said the volcano’s activity had declined with fewer eruptions and seismic activity, and the danger zone was reduced from 6 km to 5 km.

“The red zone, however, remains at 3 km,” he told the Post on Monday. “We have recommended allowing evacuees to return home because Sinabung’s activities have reduced.”

Armen said seismic activities had also reduced, with no observable eruption because the summit was covered by haze.

“The returning refugees, however, must remain vigilant because the volcano alert status remains at Level III siaga [alert],” he said. “Mt. Sinabung still has the potential to erupt again.” - Jakarta Post/ANN

Asean must prepare for China's new strategic Pinglu Canal — Phar Kim Beng






Asean must prepare for China's new strategic Pinglu Canal — Phar Kim Beng



Summary

  • The article emphasizes the strategic significance of China's Pinglu Canal, which serves as more than just infrastructure by reorienting southwestern China toward Southeast Asia.
  • It creates a shorter maritime route, enhancing economic ties between China and ASEAN by providing direct access to Southeast Asian waters.
  • The canal is poised to reshape trade routes, thus cultivating economic and strategic partnerships, but ASEAN must strategically improve its connectivity to capitalize on emerging opportunities without over-relying on China.
  • Collective action and infrastructure development across ASEAN are required to optimize the benefits of this new economic geography.


First Published: Sunday, 13 Sep 2026 5:22 PM MYT



SEPTEMBER 13 — China’s Pinglu Canal should not be understood simply as another impressive piece of infrastructure.

For Asean, it represents something potentially much larger: the gradual geographical reorientation of southwestern China towards Southeast Asia.

The 134.2-kilometre canal in Guangxi connects China’s inland river system with Qinzhou and the Beibu Gulf, opening a substantially shorter maritime route for goods originating in western and southwestern China.


Its location is particularly significant.


The Beibu Gulf, known internationally as the Gulf of Tonkin, lies beside Vietnam.

Once vessels emerge from the canal, they are already facing maritime Southeast Asia.


That changes economic geography.

For decades, much of China’s industrial development was associated with its eastern seaboard: Guangdong, Fujian, Zhejiang, Jiangsu and Shanghai.

The great ports of eastern China connected the country to Japan, South Korea, North America and the wider world.

The Pinglu Canal points in another direction: south.

China is increasingly developing its southwestern provinces and autonomous regions with Southeast Asia in mind.

The canal is designed to accommodate vessels of up to 5,000 tonnes and is expected to reduce the inland shipping distance from southwestern China to the sea by approximately 560 kilometres compared with routes that previously depended on access through Guangdong.

This is not a trivial logistical adjustment.

Transportation costs shape trade.

Trade shapes investment. Investment gradually reshapes strategic relationships.

Asean therefore needs to understand the Pinglu Canal as part of a much larger transformation.

It forms an important component of China’s New International Land-Sea Trade Corridor, which links inland economic centres such as Chongqing and Chengdu through western and southern China towards the Beibu Gulf.

The canal consequently gives parts of inland China something they have historically lacked: more direct and economical access to Southeast Asian waters.

Vietnam will feel this transformation first because of geography.

But it would be a mistake for Malaysia, Singapore, Thailand, Indonesia and the rest of Asean to regard the canal merely as a China-Vietnam matter.



Asean therefore needs to understand the Pinglu Canal as part of a much larger transformation. — Picture via Pinglu Canal Group



Once ships enter the Beibu Gulf, the maritime routes naturally extend towards the wider South China Sea and Southeast Asia.

Singapore and Malaysia sit further down these commercial arteries. Thailand is developing its own logistics ambitions.

Vietnam possesses a long coastline and increasingly important manufacturing centres. Indonesia remains the largest economy in Asean.

The canal could therefore reinforce the economic integration already taking place between China and Asean. That presents enormous opportunities.

Asean companies could gain better access to China’s enormous western hinterland.

Agricultural commodities, minerals, intermediate goods and manufactured products could move in both directions more efficiently.

Western Chinese provinces that previously appeared distant from Southeast Asia could effectively become part of Asean's immediate economic neighbourhood.

But infrastructure is never strategically neutral.

Ports, railways, highways, pipelines and canals do more than transport commodities. They reorganise economic space.

When trade routes change, centres of economic gravity can change with them.

Asean must consequently avoid two opposite mistakes.

The first would be to portray the Pinglu Canal automatically as a Chinese geopolitical threat.

Such thinking would be simplistic. Asean desperately needs infrastructure, connectivity, investment and more efficient supply chains.

China is Asean’s largest trading partner, while Asean has become China’s largest trading partner. Greater physical connectivity between the two can generate considerable prosperity.

The second mistake, however, would be equally serious: pretending that the canal has no strategic implications whatsoever.

It clearly does.

The Pinglu Canal gives China another means of orienting its enormous inland economy towards Southeast Asia.

Together with rail connections through Laos, expanding ports around the Beibu Gulf and extensive transportation networks across southern China, a new north-south economic geography is taking shape.

Asean should prepare accordingly.

The response should not be containment. It should be connectivity.

Asean needs better ports, stronger railway networks, more efficient customs procedures and deeper interoperability between national logistics systems.

The Asean Connectivity agenda must become physical rather than rhetorical.

Malaysia has particular reasons to pay attention.

Port Klang, Port of Tanjung Pelepas, Penang Port and the wider logistics infrastructure of the country should position themselves to capture increasing flows between western China and maritime Southeast Asia.

The same applies to Singapore, whose extraordinary success has always depended partly on anticipating changes in maritime geography before others do.

Vietnam faces an even more immediate strategic calculation.

A major Chinese commercial artery is emerging close to its northern maritime approaches.

Hanoi will naturally welcome the economic opportunities while simultaneously examining the longer-term consequences for trade patterns, ports and strategic geography.

This is precisely why Asean should discuss the Pinglu Canal collectively rather than leaving individual member states to react separately.

China thinks in corridors.

Asean must learn to think in networks.

A corridor concentrates movement between particular points. A network distributes opportunities across numerous economies.

Asean’s task is therefore to connect China’s new southern-facing infrastructure with an increasingly integrated Southeast Asian transportation system without becoming excessively dependent on any single external economy.

This is where Asean’s polytropous character becomes useful.

The region does not have to choose between China, Japan, South Korea, India, the European Union or the United States. It can deepen economic relationships with all of them while strengthening its own internal connectivity.

Indeed, the arrival of the Pinglu Canal should accelerate Asean’s determination to build stronger intra-Asean infrastructure.

Otherwise a peculiar situation could emerge: China may become increasingly efficient at connecting with Southeast Asia while Southeast Asian countries remain comparatively inefficient at connecting with one another.

That would weaken Asean’s centrality far more than any diplomatic disagreement.

Strategic geography is ultimately shaped by movement — of ships, goods, capital, technology and people.

The Pinglu Canal is creating a new direction of movement.

Southwestern China is moving closer to Southeast Asia economically even though the physical geography has not changed.

Asean should welcome the opportunities but understand the strategic consequences. China has built a canal towards the sea.

That sea leads directly towards Southeast Asia.

Asean must make sure that when the new economic currents begin flowing southward, the region possesses enough connectivity, resilience and strategic foresight to navigate them on its own terms.



* Phar Kim Beng is a professor of Asean Studies, and director at the Institute of International and Asean Studies, International Islamic University Malaysia.

More Borneo seats needed, but Fadhli says adding 'Malay belt' constituencies more critical








More Borneo seats needed, but Fadhli says adding 'Malay belt' constituencies more critical


Published: Sep 13, 2026 5:33 PM


PAS information chief Ahmad Fadhli Shaari has argued that any increase in parliamentary seats for Sabah and Sarawak should also address representation in the east coast states and other parts of Peninsular Malaysia.

“More critically, this applies to seats in the east coast states or the ‘Malay belt area’, where, during the increase in seats for the 2004 general election, these states did not enjoy increases in the same way as the west coast,” he said in a statement.

An analysis of constituency malapportionment in Peninsular Malaysia by electiondata.my shows that disparities on the east coast largely involve seats that are over-represented, meaning they have fewer voters than the peninsular average.

Eleven of Pahang’s 14 parliamentary seats are classified as over-represented, along with four of Kelantan’s 14 and two of Terengganu’s eight.


A further eight seats in Kelantan and four in Terengganu are considered “balanced”.


In contrast, the Malaysia Agreement 1963 states that Sabah and Sarawak should have one-third (33 percent) of parliamentary seats. Currently, it is at 25 percent.


Fadhli, who is also Pasir Mas MP, said PAS supported increasing Sabah and Sarawak’s parliamentary representation in principle.

“An increase in parliamentary seats is necessary; we acknowledge that. But it is needed not only in Sabah and Sarawak, but also in the peninsula,” he said in a statement today.


His remarks came after Putrajaya said last Friday that it had agreed to amend the Federal Constitution to give Sabah and Sarawak a higher proportion of parliamentary seats.



Prime Minister Anwar Ibrahim said the proposal was among the key decisions of the Malaysia Agreement 1963 Implementation Action Council and had earlier received cabinet approval.

Roadblocks

Fadhli raised two potential hurdles to implementing the proposal - securing sufficient support in Parliament and completing the electoral redelineation process.

“Adding seats is a good and practical move, but it requires a constitutional amendment with a two-thirds majority in Parliament.

“Without negotiations for additional seats in many locations in the peninsula as well, do you think it will pass easily? If PN and BN decide not to support it, can it pass?” he asked.

He also questioned whether the proposal could be completed before the next general election, noting that the previous redelineation exercise involved consultations between the Election Commission (EC) and political stakeholders.



“Do you think this promise to increase parliamentary seats can be implemented before the 16th general election without the EC conducting any negotiations with stakeholders? It is not easy, and it is not something that can be done in a month or two,” he said.


Political posturing

Fadhli then accused Anwar of making a politically convenient promise to Sabah and Sarawak, describing the announcement as a “high-quality performance”.

He alleged that it was intended to retain the support of the two Borneo states should BN withdraw from the federal government.

“The real purpose of this promise is to ensure that Sabah and Sarawak continue supporting the Madani government if BN decides to leave the government,” he claimed.

Despite his criticism, Fadhli said PAS would support additional seats if the exercise was fair and went through proper consultation.

“PAS has no problem agreeing if the increase in seats is fair to everyone and goes through the proper discussions,” he said.

How will the US-Iran war end?

 


How will the US-Iran war end?

How will the US-Iran war end?

Iran and the US agreed to a ceasefire in June, and this was followed by an MoU. But none of this has led to real peace.

worldviews

Last week, US Treasury secretary Scott Bessent launched an “economic D-Day” programme, intended to cut Iran off from all trading partners. So far, this intensified economic blockade has only contributed to an escalation of the US-Iran war, rather than moving it towards a conclusion.

That probably will not change, because China is unwilling to cooperate. And this is the reality that US policymakers must now face: Most possible paths to lasting peace run through China.

Wars end because one side gives up, or because influential people on both sides grow tired of the losses and want to move on, or because a powerful third party imposes peace. Seen through this lens, the US-Iran conflict could last for a long time.

Hardliners on both sides are now deeply entrenched. Iran is not about to surrender, the US will not risk a full-scale invasion, and China, the only third party with enough clout to make a difference, seems inclined just to watch. Bessent’s economic isolation campaign is unlikely to prove decisive without the support of Iran’s most important trading partner.

If China continues to do business with Iran, the current Iranian leadership will most likely survive. Any US threats against China remain non-credible, given China’s leverage over the supply of critical minerals needed by the sectors driving economic growth in the US and other major countries. No critical minerals means no computer chips—and no AI-led investment boom for the US.

Iran and the US agreed to a ceasefire in June, and this was quickly followed by a memorandum of understanding (MoU). But none of this has led to real peace.

Iran is still effectively limiting passage through the Strait of Hormuz, and the US is still turning away most vessels associated with Iran. The MoU looked good on paper, but it was never fully implemented by either side.

When the US and Israel attacked Iran in late February, and Iran responded by closing the Strait of Hormuz, some strategic thinkers believed that China would press for a quick resolution of the conflict, primarily because, until recently, as much as 60% of its oil imports passed through the Strait of Hormuz.

Advertisement
Advertisement

But this turned out to be a miscalculation. China had more than 1.2 billion barrels—200 million above its usual reserves—when the conflict began, and still holds more than 1.15 billion barrels today.

At the same time, the disruption and increase in global oil prices have accelerated demand for renewables and electric vehicles, which has helped China’s exports.

Ironically, these sectors are the same ones in which China has huge excess capacity. In that sense, the current crisis has postponed the financial losses in these sectors.

Overall, China turned out to be one of the least sensitive countries to the current crisis. This should be an important consideration in any future calculations by US policymakers and rules out instability in the Middle East as part of the toolkit for containing China.

The main loser from this war is the broader Middle East. The world economy is learning how to survive with oil and gas exports from the region at around half of their prewar level.

Of course, it is a relatively costly adjustment, but the longer this crisis continues, the less sensitive the world economy may become to disruptions in the Middle East. This may not be good news for the region’s oil-exporting countries, and they are likely to lose market share over the medium term.

Countries in the region, especially Saudi Arabia, the United Arab Emirates, and Qatar, have also learned that reliance on US security may not work as well as they thought.

Saudi Arabia is trying to increase its reliance on other regional allies, while Qatar and the UAE are talking directly with Iran and using economic incentives to buy some security for themselves. These shifts support the argument that regional economic integration must be part of the solution to the current impasse.

At first glance, more diplomacy by regional players may strengthen the case for the US washing its hands of the issue and leaving the problem to Iran’s neighbours.

But it is very hard to see how the nuclear issue would be addressed in this scenario, and without addressing that concern about Iran, it may be very hard to make any long-term plans or even achieve partial economic integration in the region.

The only stable solution to this crisis is one that involves China and increases economic integration in the region, as well as addressing the nuclear issue by integrating Iran’s programme into a regional civilian electricity production supply chain led by China.

Chinese president Xi Jinping is due to visit Washington at the end of September. Perhaps the US-Iran conflict can be resolved in the context of a broader discussion with President Donald Trump. Or perhaps China will be content to watch and wait.

Simon Johnson, a 2024 Nobel laureate in economics and a former chief economist at the International Monetary Fund, is a professor at the MIT Sloan School of Management. Amir Kermani, professor of finance and real estate at the Haas School of Business at the University of California, Berkeley, is a research associate at the National Bureau of Economic Research.