Israel Seeks to Limit Entry at Gaza's Rafah Crossing

The European Commission announced a proposal Friday to suspend its €93 billion ($109.19 billion) package of retaliatory trade measures against the United States for an additional six months. The move extends a temporary truce beyond its current February 7 expiration date.

Background of the Trade Measures

This significant trade package was originally formulated in the first half of last year amid tense trade negotiations between the EU and the U.S. The measures were put on hold for an initial six-month period after both sides reached a joint statement on trade in August 2025, signaling a de-escalation.

Renewed Tensions and a Path Forward

The retaliatory package recently regained attention after U.S. President Donald Trump threatened to impose new tariffs on eight European countries during Washington's efforts to acquire Greenland. The EU's pre-planned measures were seen as a ready-to-deploy response had the U.S. tariffs been implemented.

With the immediate threat now removed, the focus is shifting back to cooperation. "With the removal of the tariff threat by the U.S. we can now return to the important business of implementing the joint EU-US statement," explained Commission spokesman Olof Gill.

However, Gill stressed that the suspension is not a permanent cancellation. The measures can be reactivated if the situation changes. "Just to make absolutely clear -- the measures would remain suspended, but if we need them at any point in the future, they can be unsuspended," he stated.

The Reserve Bank of India (RBI) has announced a plan to inject over $23 billion into the banking system, deploying a powerful combination of bond purchases, foreign exchange swaps, and repo operations to manage mounting market pressures.

Under the leadership of Governor Sanjay Malhotra, the central bank has increasingly used liquidity injections over the past year. These measures are designed to reinforce its interest rate cuts and counteract the tightening effects of its interventions to support the Indian rupee.

A Three-Pronged Liquidity Strategy

The RBI's plan consists of three distinct actions scheduled over the next few weeks:

• 90-Day Repo Operation: A 90-day variable rate repo (VRR) for 250 billion rupees ($2.7 billion) will be conducted on January 30, marking the first time the RBI has offered a cash infusion of this duration.

• FX Swap Auction: A three-year, $10 billion USD/INR buy/sell swap auction is scheduled for February 4.

• Bond Purchases: The central bank will buy 1 trillion rupees of government bonds in two equal tranches on February 5 and February 12.

This latest round of bond purchases follows 3 trillion rupees in buying during December and January, bringing the total for the fiscal year to a record 5.7 trillion rupees.

Navigating India's Monetary Trilemma

The central bank's intervention comes as it grapples with a classic "monetary trilemma"—the challenge of simultaneously supporting the currency, anchoring borrowing costs, and allowing the free movement of capital.

Recent weeks have seen a sharp rise in Indian bond yields, driven by heavy government borrowing needs. Concurrently, the rupee has come under significant pressure, hitting a record low of 91.9650 against the dollar on Friday amid outflows from foreign portfolio investors and weakness in the stock market.

Market Reaction and Expert Outlook

Market participants and economists see the RBI's announcement as a necessary step to restore stability.

"The announcement was much needed and has come in line with expectations and should lead to some reversal in yields," commented a trader at a state-run bank.

Gaura Sen Gupta, chief economist at IDFC First Bank, distinguished between the different tools being used. "The durable liquidity measures were expected to ensure that system liquidity rises to RBI target levels of 0.6% to 1% of net demand and time liabilities," she explained, referring to the bond purchases. "The VRR is transient liquidity provided to ensure that overnight rates remain contained."

Sen Gupta anticipates further action, forecasting an additional 1 trillion rupees in bond purchases in March. This would push banking system liquidity to approximately 0.9% of net deposits, well within the RBI's target range.

Ukrainian and Russian negotiators are preparing for two days of high-stakes talks in Abu Dhabi, with the territorial status of Ukraine's eastern Donbas region emerging as the primary obstacle to ending the four-year war. The talks, scheduled to begin Friday, come as Ukraine faces increasing pressure from the United States to secure a peace deal.

Figure 1: Ukrainian President Volodymyr Zelenskyy has identified the territorial dispute over Donbas as a key priority for the Abu Dhabi negotiations.

President Volodymyr Zelenskyy confirmed that the Donbas issue would be the top priority. "The question of Donbas is key," he stated in a media chat. This follows a meeting with U.S. President Donald Trump at the World Economic Forum in Davos, which both leaders described as positive.

The Battle for Donbas Dominates Negotiations

The core of the conflict lies in Russia's demand that Ukraine cede its entire eastern industrial area of Donbas. This has been a major stumbling block in efforts to end the war that began with Russia's full-scale invasion in February 2022.

Specifically, Russian President Vladimir Putin insists that Ukraine surrender the 20% of the Donetsk region it still controls, an area of about 5,000 square kilometers (1,900 square miles). President Zelenskyy has consistently refused to give up land that Russia has failed to capture on the battlefield.

Kremlin spokesman Dmitry Peskov reiterated Russia's position on Friday, calling the demand for Ukraine to yield the Donbas "a very important condition." A source close to the Kremlin indicated that Moscow is operating under the "Anchorage formula," which it claims was agreed upon between Trump and Putin. Under this interpretation, Russia would control all of Donbas while freezing the current front lines in other parts of eastern and southern Ukraine.

Donetsk is one of four regions Russia claimed to annex in 2022 following referendums that Kyiv and Western nations have rejected as illegitimate. While most of the world recognizes Donetsk as part of Ukraine, Putin maintains it is "historical" Russian territory.

Trilateral Talks Mark a Diplomatic Shift

Zelenskyy noted in Davos that the Abu Dhabi meetings would be the first trilateral talks involving Ukrainian, Russian, and U.S. mediators since the war began.

The delegations reflect the high-level nature of the discussions:

• Ukraine: Led by Rustem Umerov, secretary of the National Security and Defence Council.

• Russia: Led by Admiral Igor Kostyukov, head of Russia's military intelligence agency.

This format follows previous diplomatic engagements, including a face-to-face meeting between Russian and Ukrainian delegations in Istanbul last year and talks involving U.S. and Russian delegations in Abu Dhabi in November.

Security Guarantees and Financial Disputes

Beyond the territorial conflict, two other critical issues are on the table: security guarantees for Ukraine and the fate of frozen Russian assets.

Ukraine Seeks US Security Pact

President Zelenskyy announced that a deal on U.S. security guarantees for Kyiv is ready and is merely awaiting a date and location for President Trump to sign it. Ukraine has long sought strong security commitments from Western allies to prevent future invasions should a peace deal be reached.

The Fight Over Frozen Russian Assets

The two sides remain far apart on financial reparations. Russia has proposed using nearly $5 billion of its assets frozen in the United States to fund the recovery of Russian-occupied territories within Ukraine.

Ukraine, with backing from European allies, demands that Russia pay reparations for the damages caused by the war. Zelenskyy dismissed Russia's proposal as "nonsense."

"Of course, we will fight (to use these assets for Ukraine), and it is absolutely fair regarding the use of all frozen assets (by Ukraine)," he added.

Peace Talks Amidst Escalating Attacks

The diplomatic efforts are taking place against a grim backdrop. Ukraine is currently enduring the harshest winter of the war, with Russia launching heavy missile and drone strikes against its energy infrastructure. These attacks have caused widespread power outages and left hundreds of thousands in Kyiv and other cities without heat in freezing temperatures.

Ukrainian officials argue that Russia's escalating attacks on its energy grid prove that Moscow has no genuine interest in peace. For its part, Russia states it is seeking a diplomatic solution but will continue to pursue its objectives through military means as long as a negotiated settlement is not achieved.

UK Prime Minister Keir Starmer’s visit to Beijing next week, the first by a British leader since 2018, aims to reset relations and rebuild trade after years of tension. High-level business dialogues are planned, and a meeting with Chinese President Xi Jinping is anticipated, signaling a clear push to thaw diplomatic ties.

This move follows the UK's controversial decision to approve a new Chinese "mega-embassy" in London. Despite opposition from community groups and even within Starmer’s Labour party over security concerns, the project was greenlit. Critics speculate the approval was timed to build goodwill ahead of the visit, highlighting a complex dynamic.

But focusing on embassy politics and diplomatic handshakes misses a more significant challenge: China’s invisible economic leverage. This influence, built through deep commercial ties and dependencies, is far harder to detect and counter than overt political moves.

How Economic Ties Become a Geopolitical Weapon

In recent years, China has consistently used economic pressure to achieve its geopolitical goals. Countries like Australia, Lithuania, and South Korea have faced trade restrictions and market access bans after enacting policies Beijing opposed.

This economic statecraft ranges from export controls on critical rare earth minerals to threats of economic fallout. China's party-state system provides a powerful toolkit for this strategy, giving Beijing formal and informal control over Chinese companies, including private ones. National security laws even compel these firms and their employees to assist state intelligence services upon request, both at home and abroad.

This interdependence creates security risks that extend beyond sensitive sectors. The core vulnerabilities include:

• Operational Control: Gaining access to and influence over critical infrastructure.

• Data Extraction: The ability to collect and aggregate sensitive data.

• Supply Chain Chokepoints: Creating dependencies in key industrial supply chains.

The Green Transition: A New Front for UK Vulnerability?

The UK government has identified its green transition as an area for partnership with China, but this creates significant new risks. China dominates global supply chains for electric vehicles, batteries, and renewable energy components, potentially creating major dependencies for the UK's future energy system.

Security concerns are mounting over China's manufacturing dominance in Internet of Things (IoT) modules, which are embedded in products like solar panels and wind turbines. This equipment could create backdoors for remote disruption or data theft, an alarming prospect as these technologies become integrated into critical national infrastructure.

China is already the primary supplier of solar panels to the UK. Now, it is making inroads into the wind energy sector. While the UK has traditionally relied on European and US suppliers, leading electricity provider Octopus Energy recently finalized a deal with Chinese manufacturer Ming Yang Smart Energy. This agreement will bring the first Chinese-made turbines to the UK. As the country races to meet climate targets amid rising costs, low-cost Chinese providers will become increasingly attractive, embedding their technology deeper into the national grid.

Building a More Resilient UK Strategy

To its credit, the UK has taken some steps to address economic security. The National Security and Investment Act 2021 gives the government powers to scrutinize and block high-risk foreign investments. Strategies for supply-chain resilience and critical minerals have also been introduced.

However, these measures remain fragmented. The UK still lacks a clear, holistic framework for economic security with defined red lines for cooperation with China. Responsibility is spread across different government departments, resulting in an inconsistent and uncoordinated approach.

While a complete economic decoupling from China is neither feasible nor wise, the UK must adopt a more strategic, long-term view to manage the risk of Beijing weaponizing economic ties.

Key Steps for a Coherent Policy

• Formalize Coordination: The government could create a new permanent interdepartmental cabinet committee focused on economic security or expand the role of the Economic Security Advisory Service to actively coordinate policy across departments.

• Strengthen Public-Private Engagement: Key vulnerabilities often lie within the private sector. Experience from allies like Australia shows that relying on companies to self-regulate security is not enough. The government must provide systemic support and ensure compliance is properly resourced and enforced.

• Align with Partners: The UK should deepen its alignment with like-minded partners, including the EU, Australia, Japan, South Korea, and Canada. Multilateral forums like the G7+ and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) can be used more effectively to advance collective economic security goals.

As Starmer prepares for his trip to Beijing, the UK's relationship with China is firmly back in the spotlight. Beyond the immediate goal of a diplomatic thaw, London must prioritize developing a coherent and coordinated strategy to manage the profound risks of economic interdependence.

U.S. President Donald Trump has triggered a wave of anger in the United Kingdom by suggesting that troops from NATO allies avoided frontline combat during the war in Afghanistan. The comments, made during an interview at the World Economic Forum in Davos, have strained relations with key American partners.

Trump Questions Allies' Battlefield Commitment

Speaking with Fox News on Thursday, Trump voiced doubts about whether NATO would defend the United States if requested, describing it as "the ultimate test."

"I've always said, will they be there if we ever needed them and that's really the ultimate test and I'm not sure of that," Trump stated. "You know, they'll say they sent some troops to Afghanistan, or this or that, and they did, they stayed a little back, a little off the front lines."

A "Raw" Reaction From the United Kingdom

The remarks landed with particular force in the U.K., which has been a steadfast U.S. military ally for decades. Following the September 11, 2001 terrorist attacks, then-Prime Minister Tony Blair famously declared that the U.K. would "stand shoulder to shoulder" with America.

The U.K.'s contribution to the subsequent U.S.-led campaign in Afghanistan was substantial:

• Over 150,000 British troops served in the conflict, the second-largest contingent after the U.S.

• A total of 457 British service members died during the campaign.

The response from British political and military figures was swift and sharp. U.K. Defense Secretary John Healey said, "Those British troops should be remembered for who they were: heroes who gave their lives in service of our nation."

Ben Obese-Jecty, a lawmaker and former captain in the Royal Yorkshire Regiment who served in Afghanistan, called the comments disheartening. He said it was "sad to see our nation's sacrifice, and that of our NATO partners, held so cheaply by the president of the United States."

The Irony of Article 5: NATO's Sole Use Was for the U.S.

Trump's assertion that NATO countries might not support the U.S. overlooks a critical piece of the alliance's history. The only time NATO’s mutual defense clause, Article 5, has ever been invoked was in support of the United States after the 9/11 attacks. This article obligates all members to come to the aid of an ally under threat.

"When America needed us after 9/11 we were there," noted Martin Tamm Andersen, a former Danish platoon commander.

Denmark, another key ally, suffered the highest per capita death toll among coalition forces in Afghanistan, with 44 soldiers killed. An additional eight Danish soldiers died in Iraq.

Part of a Pattern in Trans-Atlantic Tensions

This is not the first time Trump has publicly questioned the commitment of NATO allies. His latest remarks follow a week of escalating tensions over his stated desire to seize Greenland, a semiautonomous territory of Denmark.

Trump had threatened to impose tariffs on European nations that opposed his ambitions, raising questions about the future of the alliance. While he later appeared to step back after a meeting with NATO Secretary-General Mark Rutte, where they discussed a "framework" for Arctic security, the episode has damaged trans-Atlantic relations.

"The Ultimate Insult": A Mother's Call for Accountability

For some, the president's words were a personal affront. Diane Dernie's son, Ben Parkinson, suffered catastrophic injuries in 2006 when his British Army Land Rover hit a mine in Afghanistan.

She described Trump's comments as "the ultimate insult" and called on British Prime Minister Keir Starmer to confront him directly over the issue.

"Call him out," she urged. "Make a stand for those who fought for this country and for our flag, because it's just beyond belief."

The Trump effect

Farage in Davos

Davos isn’t entirely about politics

A day of resistance

What Davos tells us now

Source: Theguardian