Media review: U.S. Economic War on Iran Is Forging a Parallel Global Financial Order

Media review: U.S. Economic War on Iran Is Forging a Parallel Global Financial Order

    Friday, August 28, 2026   No comments

The United States' decades-long campaign of economic warfare against Iran—characterized by extraterritorial sanctions, SWIFT exclusion, and the weaponization of dollar dominance—has produced an outcome that Washington neither anticipated nor desired. Rather than isolating Tehran, these measures have become the single greatest catalyst for the construction of alternative financial infrastructure now competing with SWIFT, Visa, Mastercard, and the correspondent banking system. From Russia's SPFS messaging network to China's CIPS clearing system, from the mBridge multi-CBDC platform to pan-African settlement rails, a parallel architecture is emerging that promises to restore national sovereignty over monetary policy, reduce the rents extracted by Western intermediaries, and enable bilateral and regional trade outside Washington's jurisdiction. This article examines the current state and potential of these systems, the billions in savings they offer participants, and the specific elements that are transforming them from emergency workarounds into genuinely reliable and attractive alternatives.

I. The Sanctions Paradox: When Weaponization Begets Diversification

The logic of U.S. sanctions against Iran has always rested on a simple premise: control the plumbing of global finance, and you control the behavior of nations. By threatening to sever access to SWIFT, freezing dollar-denominated assets, and imposing secondary sanctions on foreign banks, Washington sought to make compliance with American foreign policy the price of participation in the global economy.

But this strategy contains a fatal paradox, one that economists and historians are now documenting in real time. Washington cannot both weaponize the dollar system and maintain universal trust in it. These two objectives are in direct conflict. The erosion is slow—percentage points per decade rather than per year. But it compounds.

Iran has been the laboratory for this paradox. Cut off from correspondent banking, excluded from SWIFT, and denied access to Visa and Mastercard networks, Tehran was forced to build or adopt alternative rails. The result was not capitulation, but innovation. Iran linked its SEPAM interbank messaging system to Russia's SPFS, integrated its Shetab card network with Russia's Mir system, and became an early adopter of yuan-denominated trade settlement. Each tanker forced to pay in yuan, rupees, or rials—or to reroute at higher expense—chips away at the petrodollar architecture.

The significance extends far beyond Iran. Every nation watching Tehran's experience has drawn the same conclusion: over-reliance on U.S.-dominated financial infrastructure is a strategic vulnerability. The current de-dollarization push is different from anything in the past 80 years of dollar dominance precisely because these are not the actions of enemies—they are the actions of allies and partners who have watched the United States weaponize the dollar-based financial system, and have quietly concluded they need to reduce their exposure to it.

II. The Hidden Tax: How Western Financial Infrastructure Siphons Wealth

To understand the appeal of alternatives, one must first understand the cost of the status quo. The traditional cross-border payment system—built on SWIFT messaging, correspondent banking chains, and card networks dominated by Visa and Mastercard—functions as a sophisticated rent-extraction mechanism.

A typical SWIFT transfer costs $15–$50 in sending bank fees, plus $10–$30 per intermediary correspondent bank, plus $5–$20 in receiving bank fees, plus a foreign exchange markup of 0.5–3% above interbank rates. Settlement takes three to five days, during which capital is trapped in transit and subject to counterparty risk. For low-value remittances, the World Bank estimates the average cost of sending money across borders at 6.26%—a punitive levy on migrant workers sending earnings home.

For developing countries, the burden is structural. African companies historically used correspondent banks—often outside Africa—to settle payments between two African currencies in a third currency, usually dollars or euros. This created foreign exchange and liquidity requirements for individual central banks, while Western intermediaries captured fees at every hop. The Pan-African Payment and Settlement System (PAPSS) estimates that this correspondent banking dependency costs African businesses $5 billion annually in transaction costs alone.

The card network duopoly adds another layer. Visa and Mastercard together control the vast majority of global card purchase transactions, with interchange fees, scheme fees, and FX spreads embedded in every cross-border purchase. For nations with currencies outside the dollar-euro axis, this represents a persistent drain of national wealth into Western financial institutions.

III. The Architecture of Alternatives: A Survey of the New Financial Infrastructure

The alternative systems emerging in response to sanctions pressure can be grouped into four functional categories: wholesale messaging and clearing, central bank digital currency platforms, national and regional card networks, and integrated payment ecosystems.

A. Wholesale Messaging and Clearing: SPFS and CIPS

SPFS (System for Transfer of Financial Messages) was created by Russia's Central Bank in 2014, following the annexation of Crimea and Western threats to disconnect Russia from SWIFT. It allows participating banks to exchange standardized payment instructions using formats broadly compatible with SWIFT's MT messages. After the 2022 Ukraine escalation, the Kremlin pushed to internationalize SPFS, onboarding banks in Belarus, Armenia, Kyrgyzstan, and critically, Iran.

In January 2023, the central banks of Iran and Russia signed an agreement connecting their national interbank communication systems—Iran's SEPAM and Russia's SPFS—enabling about 700 Russian banks to exchange financial messages with Iranian banks, plus 106 non-Russian banks from 13 other countries. The U.S. Treasury's Office of Foreign Assets Control (OFAC) has explicitly warned foreign financial institutions about sanctions risks for joining SPFS, acknowledging that sanctioned Iranian banks have joined SPFS to retain financial connectivity given restrictions on using SWIFT.

CIPS (Cross-Border Interbank Payment System), launched by the People's Bank of China in 2015, represents a more ambitious challenge. Unlike SWIFT, which is purely a messaging network requiring separate correspondent banking arrangements, CIPS combines payment messaging and settlement in a single system, settling directly in renminbi and removing the need for the dollar as an intermediary currency.

The growth has been extraordinary. In 2024, CIPS processed 8.2169 million transactions totaling RMB 175.49 trillion ($24.47 trillion), increases of 24.25% and 42.60% year-over-year respectively. By June 2025, CIPS had 176 direct participants and 1,514 indirect participants across 110+ countries. Monthly volume in June 2026 alone reached 810,563 transactions settling RMB 18.21 trillion ($2.67 trillion).

B. Central Bank Digital Currencies: Project mBridge

Project mBridge is perhaps the most technically sophisticated alternative to emerge. It is a multi-central bank digital currency (mCBDC) platform shared among participating central banks and commercial banks, built on distributed ledger technology to enable instant cross-border payments and settlement.

The project began in 2021 as collaboration between the BIS Innovation Hub, the Bank of Thailand, the Central Bank of the UAE, the People's Bank of China, and the Hong Kong Monetary Authority. Saudi Arabia joined in 2024. The BIS formally exited the project in late 2024, leaving the participating central banks to continue operations independently—an important signal that the platform is transitioning from experiment to operational infrastructure.

By early 2026, mBridge had processed RMB 470 billion ($69 billion) in cumulative cross-border transactions, with more than 95% denominated in renminbi. The platform is now reportedly ready for commercialization and considering incorporation in Hong Kong. Its significance extends beyond speed—cross-border CBDC payments that once took days now settle in seconds—but to sovereignty: it allows trade settlement without passing through correspondent banks or the dollar-centric SWIFT network.

C. BRICS Pay and the Interoperability Vision

BRICS Pay represents an attempt to stitch national systems into a coherent alternative network. Rather than creating a single supranational currency—which founders on questions of monetary sovereignty and Chinese yuan dominance—the current approach focuses on interoperability.

The envisioned system would link Brazil's Pix, India's UPI, China's CIPS and UnionPay, and Russia's SPFS into a cross-border network where each currency remains fully sovereign. What changes is the infrastructure that allows them to interact. A prototype tested in Moscow in October 2024 demonstrated capacity for 20,000 transactions per second.

As of March 2026, BRICS Pay remains in pilot phase, with planned rollout beginning with foreign tourist payment access in BRICS nations, expanding to CIS countries and the Middle East, with broader BRICS+ integration by year-end. The realistic path is not replacement of SWIFT but interoperability between national payment rails, not a single replacement currency.

D. National and Regional Card Networks

The card payment layer is where alternatives have achieved the deepest market penetration:

UnionPay has become the world's second-largest card network by purchase transaction volume, capturing 33.15% of global brand-card purchase transactions in the first half of 2024—behind only Visa at 38.66%. With over 250 million cards issued outside mainland China across 83 countries, acceptance in 183 countries and regions, and 99 countries supporting UnionPay mobile payments, it has evolved from a domestic Chinese system into a genuine global challenger. The shift toward international transactions has been steep: roughly 0.5% of UnionPay transactions occurred outside China in 2015, compared with about 43% in 2025.

Mir (Russia) and Shetab (Iran) illustrate how bilateral integration can function under sanctions. Russia's Mir system, launched in 2014 after Visa and Mastercard suspended services in Crimea, now has over 475 million cards issued and represents over 75% of all domestic transactions in Russia. In November 2024, Iran and Russia linked their national payment systems, enabling Iranian citizens to withdraw rubles from Russian ATMs using Shetab-linked cards, and Russian Mir cardholders to make payments in Iran. The third and final phase of integration—allowing Iranians to make purchases at Russian stores using Shetab cards—is expected to be finalized in 2026.

Mada (Saudi Arabia), launched in 2015 to replace the older SPAN system, has become the backbone of the Kingdom's digital payments boom. It operates as a national switch enabling cross-border transactions and instant settlements, primarily in Saudi riyals. In the context of Saudi-China currency swap agreements and the kingdom's growing trade with BRICS nations, Mada represents a strategic national asset that could interoperate with alternative clearing systems.

Meeza (Egypt) demonstrates how national schemes drive financial inclusion. With over 40 million cards issued—representing more than 55% of all payment cards in Egypt—and processing over 1.02 billion transactions annually totaling approximately $26.74 billion, Meeza has created a domestic payment ecosystem that reduces reliance on international card networks. Critically, Meeza cards do not require a traditional bank account; Egyptians need only a national ID to obtain a prepaid card, bringing the unbanked into the digital economy.

RuPay (India) and UPI (Unified Payments Interface) form India's two-track strategy. While RuPay provides domestic card network independence, UPI has expanded internationally to eight countries including Singapore, UAE, France, and Mauritius, with 20+ target countries by 2029. India's digital rupee (e-Rupee) has processed over 1.3 million wholesale transactions in early 2026, primarily for interbank settlements and government payments, laying groundwork for cross-border CBDC integration.

Verve (Nigeria), Africa's first and largest domestic payments scheme, has issued over 70 million cards in Nigeria alone and expanded acceptance to 21+ African countries. It has achieved merchant acceptance with global platforms including Google, YouTube, Spotify, Netflix, and Uber, allowing Nigerian consumers to access international services in local currency.

Girocard (Germany) and BC Card (South Korea) represent advanced economy alternatives that preserve domestic payment sovereignty. Girocard operates across approximately 1.344 million terminals in Germany and has overtaken cash as the highest-turnover payment method at German checkouts. BC Card, South Korea's largest payment processor, has begun experimenting with foreign-currency stablecoin payments, completing a pilot in October 2025 that allowed overseas digital wallet users to make payments at Korean merchants using stablecoins converted to BC's digital prepaid cards.

E. Regional Integration: PAPSS, Onafriq, and M-Pesa

PAPSS (Pan-African Payment and Settlement System), launched in January 2022 by Afreximbank and the African Union, enables near-instant cross-border payments in local currencies across 15 operational countries including Nigeria, Ghana, Kenya, and Zambia. By connecting central bank RTGS systems and netting out daily balances, PAPSS eliminates the need for African trade to be intermediated through European or American correspondent banks. In February 2026, Kenya's Pesalink instant payment network partnered with PAPSS, enabling 80+ Pesalink participants to connect with 160+ PAPSS banks for 24/7 local-currency cross-border transfers.

Onafriq operates as the leading pan-African payments network, connecting businesses to 43 African markets through a single API, with access to nearly 1 billion mobile wallets, 500 million bank accounts, and 2,000 cross-border payment corridors. Its infrastructure bridges traditional banking and mobile money, enabling gig worker payouts, remittances, and B2B settlements across fragmented markets.

M-Pesa, Kenya's mobile money pioneer, was named among the Top 100 cross-border payment platforms for 2026 by FXC Intelligence, reflecting its evolution from domestic peer-to-peer transfers to a genuine cross-border rail.

IV. Sovereignty, Trade, and Savings: The Three Pillars of Attraction

The alternative financial infrastructure offers three interconnected benefits that explain its accelerating adoption.

National Sovereignty

For nations facing sanctions or merely seeking strategic autonomy, control over payment rails is synonymous with sovereignty. When the U.S. can sever a country's access to SWIFT or pressure Visa and Mastercard to suspend service—as happened to Russia in 2022—monetary policy independence becomes illusory. The alternative systems restore the ability to clear and settle payments according to national law rather than Washington's extraterritorial dictates.

PAPSS explicitly addresses this by enabling payments in local currencies, reducing the need to convert African currencies to the US dollar or euro for intra-African trade and helping central banks optimize liquidity management and reduce exposure to dollar fluctuations. Similarly, mBridge's governance framework is tailored to its unique decentralised nature, with each participating central bank operating a validating node.

Bilateral and Regional Trade

The alternatives are explicitly designed to facilitate trade between nations that Washington seeks to separate. The Iran-Russia SPFS-SEPAM linkage allows financial institutions in both countries to open letters of credit or process money orders and bank guarantees without SWIFT. The Mir-Shetab integration removes restrictions for electronic payments and opens a new chapter in economic and cultural cooperation.

For BRICS nations, the appeal is quantitative. BRICS members currently represent 35.4% of the world economy and around 45% of the global population. Enabling these nations to trade in their own currencies without dollar intermediation unlocks trade volumes currently suppressed by transaction costs and sanctions risk.

Cost Savings: Reclaiming Billions

The economic case is compelling. Consider the arithmetic:

PAPSS targets $5 billion in annual savings for African businesses by eliminating correspondent banking chains.

mBridge reduces cross-border payment costs by eliminating multiple intermediary banks and their associated fees. A typical SWIFT transfer can accumulate $15–$50 in fees per intermediary; mBridge settles peer-to-peer in seconds.

Stablecoin and blockchain rails cut cross-border costs to roughly 0.5% on-ramp/off-ramp with pennies in-network fees, compared to 2–4% FX spreads plus wire fees in traditional banking.

Domestic card networks like Meeza and Verve retain transaction fees within national economies rather than remitting them to Visa and Mastercard's U.S.-based revenue pools.

For Iran specifically, the savings are existential. By settling energy trade in yuan rather than dollars, Tehran avoids the full architecture of U.S. financial surveillance and the 3–5% effective tax imposed by dollar intermediation. Russia's experience after 2022 demonstrated that redirecting hydrocarbon flows toward eager buyers in Asia—primarily China and India—bypassing the dollar-dominated payment system resulted in energy revenues that soared far beyond pre-sanction levels despite reduced volumes.

V. Elements of Reliability: What Makes These Systems Attractive

For alternative financial infrastructure to transition from emergency workaround to genuine competitor, it must satisfy several criteria. The current generation of systems is meeting these tests in ways that previous attempts did not.

1. Technical Resilience and Speed

The new systems are built on modern architecture. mBridge uses a bespoke blockchain—the mBridge Ledger—compatible with the Ethereum Virtual Machine, enabling real-time peer-to-peer settlement. CIPS processes transactions in real-time. PAPSS settles intra-African payments instantly rather than in 3–5 days. BRICS Pay's prototype demonstrated 20,000 transactions per second.

2. Multi-Currency and National Currency Settlement

Unlike SWIFT, which ultimately funnels most transactions through dollar correspondent accounts, the alternatives prioritize settlement in national currencies. BRICS Pay's core design principle is trade in national currencies—reduce FX risk and dependency. mBridge allows direct foreign exchange transactions between participating CBDCs without dollar conversion. CIPS settles directly in RMB.

3. Governance Decentralization

The most credible alternatives avoid single-point control. mBridge's governance framework was created specifically to match its unique decentralised nature, with rulebooks tailored to multi-jurisdictional operation. BRICS Pay is developing DAO governance for transparent decision-making.

4. Regulatory Compliance and Trust

Paradoxically, the alternatives are investing heavily in compliance to build trust. BRICS Pay emphasizes full AML/KYC, regulators-aligned architecture. PAPSS is compliant with global regulatory standards and overseen by African central banks. Onafriq maintains ISO 27001, CMML3, PCI DSS, and SOC2 certifications. This compliance investment is essential: the systems must be clean enough to avoid the stigma of sanctions evasion while robust enough to resist political pressure.

5. Interoperability Rather Than Replacement

The smartest strategy is not to challenge SWIFT head-on but to route around it. As BRICS Pay's developers state: BRICS Pay does not replace SWIFT, Visa, or Mastercard. It offers a parallel, compatible option—giving businesses and individuals choice in how they transact globally. This interoperability-first approach reduces switching costs and allows gradual migration.

6. Financial Inclusion

National schemes like Meeza and Verve demonstrate that alternative infrastructure can reach populations excluded by Western systems. Meeza's no-bank-account-required model and Verve's penetration of Nigeria's unbanked sectors create constituencies with a vested interest in domestic payment sovereignty.

VI. The Uncertain Road Ahead: Challenges and Potential

Despite remarkable progress, these alternatives face significant hurdles. SWIFT still connects over 11,000 institutions across 200+ countries with decades of regulatory integration. The dollar remains the dominant invoicing currency for global trade. Network effects are powerful: merchants accept Visa and Mastercard because consumers carry them; consumers carry them because merchants accept them.

Yet the trajectory favors the alternatives for several reasons. 

First, U.S. aggression is not abating—it is expanding. The Iran war and associated sanctions have shaken confidence in the dollar among allies, not just adversaries. France has repatriated 129 tons of gold from the Federal Reserve. Canada has announced a $25 billion sovereign wealth fund to reduce U.S. economic dependence.

Second, the alternatives are compounding. Each new participant in CIPS, each new country accepting Mir cards, each new mBridge transaction builds network effects for the alternative ecosystem. Iran's integration with SPFS and Mir creates a template that other sanctioned or sovereignty-minded nations can replicate.

Third, the cost differential is widening. As blockchain rails mature and CBDC platforms scale, the 6.26% average remittance cost and 2–4% FX spreads of traditional banking look increasingly indefensible. For a company moving millions across borders monthly, the difference between SWIFT and blockchain rails translates into millions annually.

Fourth, the regulatory environment is shifting. The U.S. GENIUS Act and Europe's Instant Payments Regulation are forcing even Western systems to modernize, but they also legitimize the technological approaches—stablecoins, real-time settlement, ISO 20022 messaging—that underpin the alternative infrastructure.

The Architect of Its Own Competition

The United States set out to isolate Iran through financial warfare. In doing so, it has inadvertently become the architect of the most significant challenge to its own financial hegemony since Bretton Woods. The alternative systems catalogued here—SPFS and CIPS for wholesale clearing, mBridge for CBDC settlement, UnionPay and Mir for card payments, PAPSS and Onafriq for regional integration, BRICS Pay for multilateral interoperability—are not merely workarounds for sanctioned states. They are becoming the preferred infrastructure for a growing cohort of nations that value sovereignty over convenience and cost savings over habit.

The irony is profound: by demonstrating that access to the dollar system is conditional on political obedience, Washington has taught the world to diversify. By extracting billions in correspondent banking fees and FX spreads, Western institutions have created the economic incentive for their own displacement. And by disregarding international law in the application of extraterritorial sanctions, the U.S. has undermined the very trust that made its financial infrastructure the global standard.

These alternative systems will not replace SWIFT or Visa tomorrow. But they no longer need to. By offering reliable, cheaper, sovereign-compliant alternatives in an increasingly multipolar world, they have crossed the threshold from protest platforms to permanent fixtures. The economic war on Iran did not break the resistance of its target. It broke the monopoly of its author.

The U.S. Debt Trajectory Is a Global Civilizational Crisis

The U.S. Debt Trajectory Is a Global Civilizational Crisis

    Thursday, August 20, 2026   No comments

In August 2026, the gross federal debt of the United States crossed the $40 trillion threshold. This is not merely a domestic accounting milestone. It is a consequential event for the global economic order. The United States has accumulated this debt within a financial system in which the dollar remains the principal international reserve currency and U.S. Treasury securities remain among the central assets of global finance. Consequently, the fiscal trajectory of the United States cannot be treated as an exclusively American problem.

The more important question, however, is not whether the national debt has reached $40 trillion. It is what the trajectory beyond $40 trillion reveals about the structure of the American state.

Current projections indicate that the problem extends well beyond 2028. The Congressional Budget Office projects federal debt held by the public to rise from roughly 101 percent of GDP in 2026 to 108 percent in 2030 and approximately 120 percent by 2036. Under its longer-term projections, debt held by the public could reach approximately 175 percent of GDP by 2056 if current-law fiscal conditions persist. Gross federal debt, which includes debt held by government accounts as well as debt held by the public, is projected to reach approximately 169 percent of GDP by 2055. These are not predictions that a crisis must occur at a particular date. They are projections of what follows if the underlying fiscal configuration remains substantially unchanged.

The distinction matters. A debt crisis is not produced by a single number. It emerges when a system becomes increasingly dependent upon mechanisms that sustain its present operation while simultaneously weakening its capacity to adapt. The significance of the $40 trillion threshold therefore lies less in the number itself than in what the number reveals about the system producing it.

The Ibn Khaldunian Lens: Systemic Growth and Civilizational Misalignment

The fourteenth-century polymath Ibn Khaldun developed an account of political and economic life that understood states not as permanent and self-sustaining entities but as components of larger social formations. Political authority depends upon social cohesion, productive activity, institutional capacity, and the ability of a political order to maintain the material foundations of its own existence.

A central concept in Ibn Khaldun's analysis is ʿasabiyya, commonly translated as group solidarity or social cohesion. Political authority can expand when a society possesses sufficient cohesion to mobilize resources, organize collective action, and sustain institutions. Yet expansion itself creates new pressures. As political structures become wealthier and more elaborate, the institutions created to serve the collective order can increasingly become ends in themselves. Consumption expands. Administrative structures become more expensive. The ruling order becomes more dependent upon established patterns of extraction and expenditure. Eventually, the institutional apparatus may become increasingly sophisticated while its underlying social and productive foundations become increasingly strained.

Read through Ibn Khaldun's lens, this offers an important way of understanding the American fiscal problem.

The issue is not simply that the United States has borrowed too much. It is that the political and economic system has developed mechanisms through which borrowing can repeatedly postpone the consequences of structural imbalance. Debt makes it possible to preserve existing commitments without immediately reconciling expenditures with revenues. Political institutions therefore receive an incentive to protect present outputs while transferring an increasing portion of the cost into the future. This is a form of systemic misalignment.

The conceptual system of fiscal responsibility says that expenditure should ultimately remain compatible with the productive capacity and revenue-generating capacity of the state. The operational system, however, increasingly permits political actors to preserve existing commitments through continuous borrowing. The result is a widening distance between the principles by which the system describes itself and the mechanisms through which it actually operates.

The Leadership Paradigm: The Normalization of Leverage

The structural problem is intensified when political leadership treats leverage not primarily as a liability but as an instrument of expansion.

This should not be understood as a phenomenon belonging exclusively to one administration or political party. The American debt trajectory is the cumulative product of decisions made across successive administrations and Congresses. Pandemic expenditures, tax policy, entitlement growth, defense commitments, economic downturns, and rising interest costs have all contributed to the present configuration.

The significance of the current leadership environment lies elsewhere. When a political culture already accustomed to deficit financing embraces a philosophy in which borrowing is routinely treated as an instrument of economic or political leverage, the distinction between productive borrowing and structurally dependent borrowing becomes increasingly difficult to maintain.

Debt can finance productive investment. A state can rationally borrow to construct infrastructure, develop productive capacity, respond to emergencies, or finance investments whose future economic returns exceed their costs. But debt can also finance consumption, institutional expansion, political promises, or the servicing of previously accumulated debt. These forms of borrowing are not economically equivalent.

The danger arises when borrowing ceases to function primarily as a bridge to future productive capacity and instead becomes part of the mechanism required to preserve the present configuration. At that point, debt becomes systemic rather than merely financial.

The Mechanics of Acceleration

Three structural pressures deserve particular attention. 

The Revenue-Expenditure Mismatch

The first is the persistent gap between federal revenues and expenditures. 

CBO projects a federal deficit of approximately $1.9 trillion in fiscal year 2026, rising to approximately $3.1 trillion by 2036. The deficit is projected to remain historically large even under assumptions of continued economic growth. CBO estimates that deficits average about 6.1 percent of GDP over the 2027–2036 period, compared with a historical average of approximately 3.8 percent over the preceding half-century.

This is significant because the problem cannot be explained simply by recession. A fiscal system that generates large deficits even when unemployment remains relatively low and the economy continues to grow has developed a structural imbalance.

The issue is therefore not merely insufficient economic growth. It is that the political system has become accustomed to expenditure commitments that exceed its sustainable revenue structure.

Defense, Geopolitical Commitments, and the Cost of Power

The second pressure is the cost of maintaining global military and geopolitical commitments.

 The United States possesses an unusually expansive global security architecture. Military expenditures, overseas commitments, strategic competition, and emergency operations all require substantial resources. In periods of geopolitical conflict, these expenditures can rise rapidly.

Yet military expenditure should not be isolated from the broader fiscal system. A state can maintain a large military establishment only by allocating sufficient productive resources to sustain it. When defense commitments are financed through borrowing rather than through current revenues or corresponding economic growth, military power becomes partially dependent upon future fiscal capacity. This creates a paradox.

The United States uses economic and financial power to sustain its geopolitical position, but the continued expansion of that geopolitical position can itself increase the fiscal burden upon the economic system supporting it. Power therefore becomes both an output of the system and a source of additional demand upon the system.

The Interest Loop

The third and potentially most consequential pressure is interest.

As the debt stock expands, the government must devote an increasing share of its resources merely to servicing previously accumulated obligations. CBO projects net interest costs to rise from approximately 3.3 percent of GDP in 2026 to 4.6 percent in 2036 and approximately 5.4 percent by 2055. This is more than an accounting problem.

Interest creates a feedback loop. Borrowing increases debt. Higher debt increases interest obligations. Higher interest obligations increase the deficit. A larger deficit requires additional borrowing. Additional borrowing increases the debt stock upon which future interest is calculated.

The system can therefore enter a reinforcing feedback process in which an increasing portion of new borrowing exists because of obligations generated by earlier borrowing.

That is the more meaningful definition of a debt spiral.

 The critical question is not whether the United States can technically continue borrowing. As the issuer of the world's principal reserve currency, it possesses extraordinary borrowing capacity. The question is how much of the state's future fiscal capacity must increasingly be devoted to preserving the financial structure created by its past decisions.

Beyond 2028: The Trajectory Becomes the Story

The year 2028 should therefore not be treated as the endpoint of the analysis.

Even if the United States reaches 2028 without a conventional debt crisis, the underlying trajectory will remain consequential. CBO's projections indicate that debt held by the public would rise from approximately $32.1 trillion in 2026 to $36.1 trillion in 2028, $40.3 trillion in 2030, $47.6 trillion in 2033, and $56.2 trillion by 2036.

The significance of these numbers is not that the United States will necessarily experience collapse at any of these points. It is that each successive increase narrows the range of fiscal choices available to future governments.

A government with modest debt can respond to a recession, war, financial crisis, natural disaster, or technological disruption by borrowing substantially more. A government already carrying historically large debt has less room to respond without increasing interest costs, raising taxes, reducing expenditures, monetizing debt, or relying upon stronger-than-expected economic growth.

Debt therefore affects not only the present fiscal position but the future adaptive capacity of the state.

This is where the problem becomes systemic.

The danger is not simply that debt becomes large. The danger is that the state becomes less capable of responding to unexpected events because an increasing share of its resources is already committed to obligations inherited from the past.

The 2030s: From Fiscal Pressure to Institutional Constraint

The 2030s may therefore represent a qualitatively different phase of the problem.

By 2030, CBO projects debt held by the public to exceed the previous postwar record as a percentage of GDP. By 2036, it reaches approximately 120 percent of GDP under current-law assumptions. At the same time, interest costs rise substantially, while spending on Social Security and major health programs continues to increase as the population ages.

This creates a difficult political configuration.

The largest spending pressures are concentrated in programs with millions of beneficiaries. The largest revenue sources are politically sensitive. Defense commitments are difficult to reduce without geopolitical consequences. Interest payments cannot simply be eliminated through legislation. And economic growth, although capable of improving the ratio, cannot by itself easily overcome persistent structural deficits.

The result is a system in which nearly every major adjustment imposes significant political costs on some constituency.

The longer the adjustment is postponed, the more constrained the eventual choices become.

This is precisely the type of cumulative process that a systems perspective helps illuminate. No individual decision needs to produce collapse. Each decision can appear rational when considered separately. The systemic danger emerges from their interaction over time.

The 2050s: When Debt Becomes a Structural Condition

The longer-term projections make the issue even more consequential.

Under CBO's long-term baseline, debt held by the public reaches approximately 175 percent of GDP by 2056. Net interest costs rise to roughly 5.4 percent of GDP by 2055. Gross federal debt reaches approximately 169 percent of GDP by that year.

These figures should not be interpreted as a timetable for national collapse. Long-range projections necessarily contain substantial uncertainty. Economic growth could be stronger or weaker than projected. Interest rates could change. Congress could alter taxes or spending. Technological changes could transform productivity. Demographic trends could differ. And future governments could undertake reforms that fundamentally alter the trajectory.

But the uncertainty does not eliminate the significance of the projection.

It demonstrates what happens when the existing configuration is allowed to reproduce itself.

In systems terms, the question becomes whether the American political economy can generate enough new productive capacity, revenue, and institutional adaptation to offset the reinforcing dynamics of debt and interest.

If it cannot, debt ceases to be merely a financial measurement. It becomes part of the structure of the state itself.

The Global Dimension

The illusion that this is solely an American problem is particularly dangerous because the U.S. Treasury market occupies a foundational position within the global financial system.

Central banks, commercial banks, pension funds, investment institutions, corporations, and governments around the world hold dollar-denominated assets or conduct transactions through dollar-based financial infrastructure. Consequently, changes in U.S. fiscal conditions can transmit through interest rates, exchange rates, capital flows, commodity prices, and international credit markets.

The transmission mechanism, however, is more complicated than a simple claim that American debt automatically causes global collapse.

The dollar's reserve status gives the United States an extraordinary privilege. Strong global demand for dollar assets allows the United States to borrow at a scale that would be difficult for most other states to sustain. Treasury securities are deeply embedded in international financial markets and continue to function as a central reserve and collateral asset.

But that privilege also creates a systemic responsibility.

If investors begin demanding persistently higher compensation for holding U.S. government debt, the consequences do not stop at the Treasury. Higher Treasury yields can influence mortgage rates, corporate borrowing costs, asset valuations, and international capital flows. Countries and corporations that borrow in dollars can face higher financing costs. Emerging economies can be particularly vulnerable when global capital moves toward higher-yielding or safer dollar assets.

The United States therefore occupies an unusual position: its fiscal decisions are domestic decisions with international transmission mechanisms.

The Reserve-Currency Paradox

This produces a deeper paradox. The dollar's global position allows the United States to sustain a level of borrowing that would otherwise be extraordinarily difficult. Yet the same privilege can reduce the immediate pressure to correct the underlying imbalance.

The system's strength can therefore conceal the source of its vulnerability.

This is a classic systems problem. A stabilizing mechanism can, under certain conditions, become a mechanism that permits instability to accumulate.

The global demand for dollars and Treasury securities provides the United States with exceptional fiscal flexibility. But if that flexibility is repeatedly converted into additional borrowing without corresponding structural reform, the very mechanism that postpones adjustment can increase the eventual scale of adjustment required.

The question is therefore not whether the dollar will suddenly cease to be the world's reserve currency.

The more important question is whether confidence in the institutional and fiscal foundations supporting that currency will gradually weaken.

Reserve-currency status is not merely a monetary privilege. It is a form of institutional trust.

Ibn Khaldun and the Problem of Systemic Completion

This returns the analysis to Ibn Khaldun. Ibn Khaldun's enduring contribution is not a simple prediction that civilizations rise and fall according to a fixed timetable. His deeper contribution is an analysis of how institutions can become increasingly detached from the conditions that originally made them viable.

A political order may continue to display extraordinary military power, financial sophistication, technological capacity, and institutional complexity even while the relationships supporting those achievements are becoming increasingly strained.

This is where the concept of systemic completion becomes useful as a contemporary analytical extension of Ibn Khaldun's thought.

A system approaches completion when its mechanisms become highly optimized for reproducing its existing configuration but increasingly incapable of adapting to changing conditions.

The problem is not that the system stops working. The problem is that it works too well at reproducing the conditions that eventually constrain it. 

Debt-financed government spending can preserve political commitments. Political commitments can preserve institutional stability. Institutional stability can preserve the political incentives for continued borrowing. Continued borrowing can postpone the reforms necessary to alter the structure.

The system therefore becomes increasingly effective at maintaining itself—and increasingly dependent upon maintaining itself. That is a dangerous form of stability. 

The Real Crisis Is Adaptive Capacity

The deepest issue, then, is not the $40 trillion figure. It is adaptive capacity.

A wealthy and technologically advanced society can carry enormous levels of debt if its productive capacity, institutions, demographic structure, and fiscal system remain capable of supporting that debt. Conversely, a smaller debt burden can become dangerous when a state loses the capacity to adapt.

The relevant question is therefore: Can the American political system change before the cost of maintaining its existing configuration becomes greater than its capacity to finance that configuration?

That question cannot be answered by looking only at the next budget cycle.

It requires examining the interaction among debt, interest, taxation, entitlement spending, military commitments, economic growth, demographic change, political incentives, and the international role of the dollar. That interaction is the crisis.

Beyond the $40 Trillion Threshold

The crossing of the $40 trillion threshold should therefore be understood as a warning about trajectory rather than as an isolated milestone.

The United States remains extraordinarily wealthy, productive, innovative, and institutionally powerful. It is not on the verge of inevitable economic collapse. The dollar remains the world's dominant reserve currency, and Treasury securities remain central to global finance. These strengths give the United States considerable room to address its fiscal problems. But capacity to borrow is not the same as capacity to borrow indefinitely.

The projections beyond 2028 make this distinction increasingly important. Debt held by the public is projected to rise substantially through 2036 and, under current-law assumptions, to approximately 175 percent of GDP by 2056. Interest costs rise alongside it. These numbers do not constitute a prophecy of collapse. They reveal the consequences of leaving the underlying configuration substantially unchanged.

From an Ibn Khaldunian perspective, the danger lies in the growing distance between institutional power and the productive and social foundations required to sustain that power.

The United States has accumulated extraordinary financial, military, technological, and institutional capacity. The question is whether those capacities remain mutually reinforcing or whether they increasingly begin to consume the resources required to maintain them.

A civilization does not become vulnerable merely because it possesses great wealth or carries substantial debt. It becomes vulnerable when the systems responsible for preserving its accumulated wealth and power become increasingly dependent upon mechanisms that reduce their ability to adapt. That is why the American debt trajectory deserves to be understood as more than a fiscal problem.

It is a test of whether a political and economic system can recognize the limits of its own expansion, reorganize its priorities, and restore alignment between its productive foundations and its institutional ambitions. The $40 trillion threshold is therefore not the crisis. It is a visible marker on the trajectory toward one. 

The real question is whether the United States will treat it as a warning—or merely as another number to be financed.

Media Review: Will AI Make Work Optional?

Media Review: Will AI Make Work Optional?

    Sunday, July 26, 2026   No comments

An Ibn Khaldunian Response to the Myth of the Post-Work Society

Each new technological revolution has inspired predictions about the end of work. The industrial revolution promised liberation from physical labor. Computers were expected to eliminate paperwork and usher in an era of leisure. Today, artificial intelligence has given rise to an even more ambitious claim: that work itself will become optional.

This assertion is repeated with increasing confidence by technology executives, futurists, and investors. Some envision a future in which AI performs virtually all productive labor while human beings receive a universal income, freeing them to pursue creativity, recreation, or personal fulfillment. It is an appealing vision. It is also, upon closer examination, conceptually confused.

The confusion arises from treating employment and work as though they were the same thing.

They are not.

Employment is a social institution. Work is an ontological reality.

This distinction, articulated with remarkable clarity by Ibn Khaldun more than six centuries ago, exposes the central weakness in the contemporary narrative surrounding artificial intelligence.

According to Ibn Khaldun, all value originates in work. Human prosperity does not emerge from money, markets, or ownership alone. Rather, every form of wealth traces its origin to productive activity. Agriculture, manufacturing, construction, transportation, education, governance, and commerce all create value because they involve work. Money merely records and facilitates the exchange of that value. In this framework, money is not wealth itself. It is a store of the value created by work. The implications of this principle are profound. 

Artificial intelligence may indeed perform an increasing share of productive activities. Machines may design buildings, diagnose diseases, write software, conduct scientific research, and manufacture goods with minimal human intervention. None of this abolishes work. It merely changes the system performing it.

The work has not disappeared. It has shifted from one productive system to another.

This observation reveals the first conceptual error in the claim that AI will make work optional. If an AI system produces a bridge, writes a legal brief, or discovers a new medicine, those outcomes remain the products of work. They are events produced by a system operating through energy over time. Work continues to exist because every event remains the consequence of work performed by some system.

What disappears is not work. What may disappear is human employment. This distinction fundamentally changes the discussion. Once employment is separated from work, a much more difficult question emerges.

If AI performs the productive work, who receives the value created by that work?

The popular answer is that society will simply redistribute the resulting abundance through universal income or some similar mechanism. However, this answer quietly assumes the very conclusion it must prove. Where does the money come from?

The answer cannot be "from AI." Artificial intelligence does not own itself. Robots do not collect profits. Algorithms do not pay taxes. Every productive AI system is owned by someone—individuals, corporations, governments, or investment funds. Consequently, the economic value produced by AI flows first to its owners. This is not speculation. It is precisely how modern economic systems already operate. The irony is difficult to ignore.

Many of the strongest advocates of a post-work society owe their extraordinary fortunes to institutions that rigorously protect private ownership of productive capital. Their wealth was accumulated because existing legal and economic systems reward ownership, investment, and capital appreciation. Those same institutions have produced some of the greatest concentrations of wealth in history.

If these ownership structures remain unchanged, AI will not eliminate inequality. It will likely magnify it. The contradiction is obvious. One cannot simultaneously celebrate an economic system that concentrates the returns to ownership while assuming that its future outputs will somehow be distributed equally to everyone. Technology does not produce redistribution. Institutions do. The question therefore is not whether AI can create abundance. The question is whether those who own the productive systems will willingly surrender a substantial portion of the value generated by those systems. History offers little reason for such confidence.

Indeed, one need only consider the incentives facing the owners of advanced AI. If enormous productive capacity generates unprecedented profits, the rational response within existing institutions is to reinvest those profits, acquire additional productive assets, expand market dominance, and increase future returns. Nothing in contemporary capitalism naturally converts concentrated ownership into universal prosperity. To assume otherwise is not economic analysis. It is wishful thinking.

 This is precisely where Ibn Khaldun's analysis proves remarkably contemporary. His insight was never merely that people must work. His deeper claim was that work is the source from which all economic value ultimately flows. Whenever value becomes detached from productive contribution and instead accumulates primarily through institutional mechanisms that bypass work, societies begin to experience structural distortions. Wealth becomes increasingly concentrated, productive incentives weaken, social cohesion deteriorates, and political instability follows.

The real challenge is whether societies can redesign their institutions so that the value generated by increasingly autonomous productive systems continues to circulate in ways that preserve economic participation, social legitimacy, and political stability.

That is an institutional question—not a technological one.

Artificial intelligence may become one of the greatest productive tools humanity has ever created.

But no technology, regardless of its sophistication, abolishes the fundamental principle that value originates in work.

Six centuries ago, Ibn Khaldun recognized this principle with extraordinary clarity. Today, as the world imagines a future beyond work, his insight deserves renewed attention.

 AI changes who—or more precisely, what—performs productive work. It does not eliminate the necessity of work as the source of value.

The future is not post-work

The future is a struggle over who owns the systems that perform the work, who receives the value those systems create, and whether our institutions continue to recognize that money is not wealth itself, but only a representation of work already performed.

The dream that AI will make work optional mistakes a transformation in the organization of production for the disappearance of production itself. It confuses employment with work, ownership with creation, and technological possibility with institutional reality. The machines may change. The principle does not: Work remains the foundation upon which every event—and every civilization—ultimately rests.

Media Review: UAE and Iran reportedly hold first high-level security talks since start of US-Israeli war on Islamic Republic

Media Review: UAE and Iran reportedly hold first high-level security talks since start of US-Israeli war on Islamic Republic

    Thursday, June 11, 2026   No comments

Senior national security officials from the United Arab Emirates (UAE) and Iran held a face-to-face meeting this week for the first time since the start of the US-Israeli war on Iran in late February, Bloomberg claims. The report has not been independently verified. 

Bloomberg reported that the UAE's leadership is seeking stability to protect major economic ambitions, including billions of dollars in investments in oil production and artificial intelligence infrastructure.

Iran also views the relationship as strategically important, as the UAE was among its largest trading partners before the war and served as a key channel for sanctioned Iranian oil exports.

According to sources cited by Bloomberg, Abu Dhabi's latest outreach was driven by a growing realization that, while it views the Iranian government as an enemy, it is unlikely to be removed from power.

The report noted that the UAE has been hit harder by Iranian attacks than any other Gulf state since the war began and had previously taken the region's most aggressive stance toward Tehran. 

However, it now appears to be following Saudi Arabia and Qatar, both of which have also come under attack but have increasingly turned to diplomacy and de-escalation efforts with Iran.

Oil Blending, the Hormuz Crisis, and US-Iran Tensions Impact China's Economy

Oil Blending, the Hormuz Crisis, and US-Iran Tensions Impact China's Economy

    Thursday, May 28, 2026   No comments

In the high-stakes arena of global energy, molecules matter as much as missiles. A specialized blending recipe—mixing Venezuela's ultra-heavy crude with Iran's light condensates—has quietly underpinned a sanctions-evading supply chain that fed China's industrial engine for years. Now, with US military operations against Iran underway and the Strait of Hormuz effectively closed, that delicate chemical equilibrium has shattered. This article explains the science behind the geopolitics, the current crisis, and what it means for the world's second-largest economy.

Part 1: The "Paste" Problem and the Iranian Solution

Venezuela's Orinoco Challenge

Venezuela's Orinoco Belt holds some of the world's largest proven oil reserves—but with a catch. The crude is "extra-heavy," with an API gravity of just 8–10°, making it as thick as tar. Loaded with sulfur, metals, and asphaltenes, it cannot flow through standard pipelines or be processed in conventional refineries without significant upgrading.

Iran's Critical Role: The Thinning Agent

Enter Iran. For years, Tehran exported light crude and gas condensates—highly volatile, low-density hydrocarbons that act as natural solvents. By blending roughly three barrels of Venezuelan heavy crude with one barrel of Iranian light crude, the industry created Merey 16, a medium-sour blend highly prized by Asian refineries, particularly China's independent "teapot" refiners.

This wasn't just chemistry—it was clandestine commerce. The supply chain operated as an illicit loop: Iran provided the thinning agents, Venezuela supplied the heavy feedstock, and China served as the primary buyer, helping both sanctioned nations bypass Western financial controls.

Why This Blend Matters to China

Chinese teapot refineries—smaller, privately owned facilities—thrived on discounted sanctioned crude. Iranian oil was historically sold at a significant discount to benchmark prices to compensate buyers for sanctions risk. Payments were often settled in renminbi via China's Cross-border Interbank Payment System, avoiding traditional Western financial networks and oversight.

Part 2: The Crisis Unfolds – US Operations and Hormuz Closure

February–May 2026: Escalation Timeline

• Late February 2026: US and allied forces launch major combat operations against Iran, targeting nuclear infrastructure and military sites in multiple cities.
• Early March: Iran's Islamic Revolutionary Guard Corps announces the closure of the Strait of Hormuz, threatening attacks on any vessel attempting passage.
• April–May: Despite fragile ceasefire negotiations, the strait remains effectively restricted. Daily oil throughput has plummeted to a fraction of normal levels.
• War risk insurance premiums have surged dramatically, and tanker spot rates have more than doubled as commercial carriers avoid the region.

Why Hormuz Matters

Approximately twenty percent of global oil trade and significant LNG volumes pass through the narrow strait. For China, the stakes are acute: roughly forty percent of its crude imports and a substantial portion of its LNG transit this chokepoint. The closure has immediately triggered a global supply shock and forced rapid rerouting of maritime trade.

Part 3: Impact on China's Economy – Short-Term Pain, Strategic Adaptation

Immediate Supply Shock

China imported up to 1.4 million barrels per day from Iran in late 2025—representing a significant share of its total crude imports and the vast majority of Iran's exports. With Iranian production and exports collapsing due to infrastructure damage and shipping halts, China faces an immediate shortfall in discounted crude.

Teapot refineries in Shandong province—historically reliant on cheap Iranian and Venezuelan barrels—are particularly exposed. Many have been forced to seek replacement crude at higher market prices, squeezing already-thin refining margins and forcing temporary capacity cuts.

Price Pressures and Inflation Dynamics

While global crude benchmarks have hovered near elevated levels amid the crisis, China's domestic inflation picture remains complex. Standard economic modeling suggests a sharp oil price increase could reduce China's GDP growth by roughly half a percentage point. However, China is currently experiencing deflationary pressures and modest wage growth, which may partially insulate it from the cost-push inflation affecting Western economies. The government also faces constrained fiscal room to subsidize consumers, given existing deficit targets.

Strategic Buffers: Reserves and Diversification

China is not without defenses:

• Strategic and commercial oil reserves total an estimated 1.3–1.4 billion barrels, covering roughly four months of imports.
• Russian pipeline supplies provide overland diversification, though capacity is near maximum and competing global demand limits spare volumes.
• China has accelerated clean energy investments and reached its wind and solar deployment targets years ahead of schedule, structurally reducing long-term oil dependence.

The Bigger Picture: Export Competitiveness and Geopolitical Positioning

Paradoxically, the crisis may offer China relative advantages:

1. Export competitiveness: If energy-driven inflation weakens European and US manufacturing more severely than China's, Chinese exports could gain market share.
2. Diplomatic leverage: China's role as a potential mediator between regional powers could elevate its geopolitical standing.
3. Strategic observation: Real-time monitoring of naval operations in the Gulf provides valuable intelligence should tensions escalate in other maritime regions.

However, risks remain significant. A prolonged Hormuz closure could disrupt Chinese exports to the Middle East, which grew rapidly amid shifting trade patterns. Additionally, a global demand slowdown triggered by energy shocks could reduce appetite for Chinese manufactured goods, exacerbating domestic industrial overcapacity.

Part 4: The US Interest – Heavy Crude and Refining Economics

While the US is a major producer of light, sweet shale oil, its refineries—particularly on the Gulf Coast—are optimized for heavy crude inputs. Blending Venezuelan heavy oil with domestic light grades allows refiners to maximize yields of high-value products like diesel, jet fuel, and petrochemical feedstocks.

By disrupting the Iran-Venezuela-China loop, US policy aims to:

• Replace a sanctions-evading supply chain with Western-controlled alternatives
• Optimize US refining capacity and profit margins
• Reduce China's access to discounted crude that subsidizes its industrial competitiveness

The strategy carries inherent risks, nonetheless. Prolonged disruption in the Hormuz threatens global oil prices, potentially harming US consumers and allies dependent on Middle Eastern energy, while accelerating global efforts to reduce dollar-denominated oil trade.

Chemistry, Conflict, and Calculated Adaptation

The recent US-Iran conflict and Hormuz closure represent more than a military confrontation—they are a stress test of the intricate chemical and commercial networks that power the global economy. For China, the immediate challenge is replacing millions of barrels per day of discounted crude while managing inflationary pressures and supply chain disruptions.

China's response, still, reflects a broader strategic reality: in an era of fragmented energy markets, resilience comes not from dependence on any single supplier, but from diversification, stockpiling, technological advancement, and diplomatic flexibility. The blending recipe that once linked Caracas, Tehran, and Beijing may be disrupted, but the chemistry of adaptation continues.

As ceasefire talks proceed and shipping lanes remain contested, one truth endures: in the 21st century, energy security is written not just in barrels per day, but in molecules, markets, trade routes, and the delicate balance of power that governs them all.

What will emerge after this crisis is likely a different world with new maps of control and new silk roads that will continue to transform the world.